The UK in recent years has seen a massive growth in the levels
of personal debt and thanks to increases in secured loans
corresponding to a strengthening of the housing market; it does
not appear to be slowing down. Recent figures from Creditaction
show that since the end of 1993, when debt levels were around
the £400bn level, they have now risen to an astounding £1148bn,
and it is growing at a rate of 10.2% per annum, or £100bn over
the last year alone. Mortgage loans currently make up
about 83% of the total personal debt level following a 10.3%
(£956.3bn) increase over the past year. Both the Bank of England
and the Royal Institution of Chartered Surveyors (RICS) have
reported a pick up in the property market compared with the
previous 12 months. The RICS have seen increases in mortgage
approval figures, as well as the number of prospective buyers
making enquiries. A spokesman for RICS, commenting on the
housing market, stated they believed, "2006 will see the first
annual rise in activity since 2002, after three consecutive
years of decline". International property consultant, KingSturge
(
http://www.kingsturge.co.uk/) is more cautious however,
predicting a modest 3% UK residential growth in 2006, while
chief economist for the Halifax, Martin Ellis, stated, "Another
year of below trend economic growth and the continuing high
level of house prices in relation to earnings... should curb
housing demand and prevent a renewed bout of high house price
increases in 2006". This will come as good news for the many
first time buyers who are struggling to get onto the first rung
of the property ladder. Consumer unsecured lending
over the past 12 months has risen by 9.8%, which is less than
the rate of secured loans. According to Bank of England figures,
this represents a slight drop in monthly credit card spending
levels from October to November. Growing fears about abilities
to repay the debts are seen to have been a major contributing
factor in the slowdown. According to Experian three in four
Britons worry about financial pressures during the festive
season with 20% still paying off the debts accrued over
Christmas six months later. The Creditaction report
has however indicated that overall average consumer borrowing
through credit cards, motor and retail finance deals, overdrafts
and unsecured personal loans, rose to £4,121 per UK adult by the
end of November 2005. The average UK household debt was
approximately £7,776 (excluding mortgages) and £46,491 including
mortgages, with the average sum owed by each UK adult at
approximately £24,636 each (including secured loans).
The means of making payments in shops has also seen changes,
with debit cards now overtaking credit cards as the most favored
card method to account for two thirds of all plastic payments.
The switch to debit cards means that shoppers gain tighter
control of their spending without wracking up greater debts.
There is still more that can be done to reduce unnecessary
expenses however, with the average credit card APR at 15.75%.
This is about 11% higher than the base rate, and much higher
than many widely available cards as shown on the financial
comparison site
Moneynet
.co.uk. Following on from a history of increasing
personal insolvency rates in the UK, with the period from July
to September being the worst on record, the recent figures make
for welcome reading. However whilst the current trend seems to
be progressing towards a more responsible attitude to personal
debt from both lenders and borrowers, there is still much work
and education that needs to be done. Disclaimer:
All information contained in this article, is for general
information purposes only and should not be construed as advice
under the Financial Services Act 1986. You are strongly
advised to take appropriate professional and legal advice before
entering into any binding contracts.
About the author:
Author: Michael Hanna
About Michael
Michael is a keen writer, and internet marketer living in
Scotland:
Contact details:
E-mail: samqam@googlemail.com Phone: 0131 561 2251
Michael's Website:
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