According to Bank of England statistics, household debt in the U.K. has increased by seven percent in just five years. The government is lowering the national debt while citizens are moving in the opposite direction, prompting many to search online for debt relief organizations. Unfortunately, the average household spends more money that it takes in. The problem has accelerated in the last few years due to factors like higher taxes and mounting credit card debt. The issue affects U.K citizens in all income ranges but is taking the hardest toll on those who earn the lowest wages.
Individual Debt Is Skyrocketing
The Office for National Statistics estimates that the country’s total shortfall could be about £25 billion. That is nearly a quarter of the entire NHS budget. Most of the overspending was paid for with borrowed money. The problem has become an upward spiral that is fueled by the fact that many citizens have already used their savings. To make matters worse, wage growth has stalled at the same time inflation has increased.
Several Factors Are Contributing to Rising Debt
At the core of the U.K.’s household debt problem is a dramatic increase in both secured and unsecured debt. There are more loans, overdrafts, second mortgages and credit card debt. Citizens have taken out a record number of first mortgages and auto loans. In addition, many households have multiplied debts because they are in arrears on monthly bills. Many are having an especially hard time keeping up with increased council taxes.
Debt Severely Impacts Low-Income Households
British anti-poverty groups like StepChange report that many households are unable to repair debt problems no matter what they do. Many need to go further into debt just to make ends meet. According to the ONS, the country’s poorest citizens are suffering the most. Statistics show that, in 2017, low-income households, spent, on average, about two-and-one-half times their income.
There is a debt problem in the United Kingdom, and it is taking a toll on the country’s poorest citizens. The core of the problem is that U.K. citizens are spending more than they make and borrowing to make ends meet. Low wages and inflation are two important contributing factors.