The latest money and credit report issued by the Bank of England has been released which shows a sharp increase in the level of unsecured credit taken by UK households. In January 2016, households obtained a further £1.56 billion of unsecured loans (which includes loans, credit card and store card spending) up 9.1% on the figure for January 2015 and up 45% from £1.1 billion in the previous month.
To put this in context, with the exception of November 2015 this is the highest level of consumer borrowing since June 2005. The total level of unsecured debt owed by UK households now stands at £63.8 billion in respect of credit cards and £115.7 billion on other loans (excluding mortgages).
Many economists are now expressing concerns of a new consumer debt bubble with some calling on the Bank of England to intervene by raising interest rates to cool lending.
The real question prompted by these latest figures is whether consumers are taking on more debt because they feel optimistic about the future and are taking advantage of historically low interest rates to buy luxury goods; or whether stagnating wages have left them feeling the squeeze, causing them to resort to credit cards and loans to pay for necessities?
As households become increasingly burdened by debt, it is inevitable that the number of people entering into formal insolvency processes will increase, particularly if, as some predict, interest rates do rise. The decision for anybody struggling with debt is where to turn and which solution will be the right solution?
As licensed Insolvency Practitioners, Poppleton & Appleby are perfectly placed to provide that advice and we are proud of our track record in getting people through their debt problems through carefully structured Individual Voluntary Arrangements (‘IVA’).
It is extremely rare that we would recommend for anybody to enter into a Debt Management Plan (‘DMP’) as they generally offer no debt forgiveness, interest on the debt may not be frozen and creditors are not prevented from taking recovery action against a debtor in the same way that they would be under an IVA. It’s also the case that DMPs typically last for around 8 years – substantially longer than most IVAs.
Anybody who is in full time employment, owns their own property and feels like their debt levels are becoming unmanageable should contact Stephen, Allan, Jonathan or Matthew for a free, no-obligation review of their finances. Similarly, those who are subject to a Debt Management Plan and who feel that it isn’t working for them, should also make contact without delay.