UK homes to have debts of £10,000 by 2016, says PwC

The average UK household will have unsecured debts of £10,000 by the end of next year, according to accountancy firm PricewaterhouseCoopers (PwC).

The figure includes spending on credit cards, bank borrowing and student loans, but excludes mortgages.

It would be the largest amount in cash terms that consumers have been in debt.

However, a survey conducted alongside the report suggested that most consumers are confident about paying off those debts.

One reason for such confidence may be the continuing low level of interest rates, which means that borrowing is cheap.

According to PwC, unsecured borrowing increased by £19.7bn last year, or 9%.

It said the average household owed “close to £9,000” in 2014.

The most recent report from the Bank of England put the figure at £8,000.

‘Squeeze’

One reason for the increase is the amount of money being borrowed by students.

Nearly half of the increase – 46% – was accounted for by student loans.

Borrowing on credit cards was responsible for 22% of the rise, with the rest from other sources, such as loans and overdrafts.

The PwC report said that even though most people were in control of their debts, that could be tested when interest rates eventually rose.

It warned that the size of debts in relation to household income could exceed its peak, which occurred in 2008, just before the financial crisis.

“Consumers could begin to feel squeezed once again,” said Simon Westcott, a director in PwC’s financial services business.

As far as secured lending is concerned, the Bank of England has previously said that a sudden rise in interest rates could leave more than 600,000 families vulnerable to a rise in mortgage rates.

However, it said in December that overall household debt levels were below the long-term average.

Source: www.bbc.co.uk