2015 ended with mixed news regarding borrowing for the New Year.
Figures released by the Bank of England show that in November, consumers owed lenders over £178bn on credit cards and loans. That monthly increase, just before the run up to Christmas, was the largest increase of personal debt since February 2008, and compares sharply with a rise of just £1.2bn in October. This rise in consumer credit (and debt) mirrors the High Street. Spending soared over the same period, with retail sales volumes rising by 5% in November compared to the same time in 2014.
However, the Bank of England figures means that the average household now has borrowed money or debt of £2,759 – before mortgages are taken into consideration.
Although such sales and spending is very good for the High Street (and therefore the economy), there is quite clearly an issue regarding borrowing for many households. Many in the UK might see more debt related issues if this pattern continues further into 2016.
According to Joanna Elson, Chief Executive of the Money Advice Trust (which also runs National Debtline) “these figures confirm that we do need to keep a watchful eye on the huge growth in consumer credit we are now seeing… Increased borrowing is to be expected in an economy that is recovering – but such steep rises in borrowing in recent months are a cause for concern.”
This comes amidst an unprecedented low number of households saving. ONS statistics indicate that the last quarter of 2015 saw households saving only average of 4.4% of their income. This is the equal lowest ratio the ONS has seen for 50 years. Howard Archer, the chief UK economist at IHS Global Insight stated his concern that “this will fuel concern that consumers are borrowing more and saving less to finance their spending, which is likely a consequence of relatively high consumer confidence and extended low interest rates.” Taken all together, this trend is very worrying.
If you are one of those affected by such debt, the important thing is not to worry or panic. Seek professional financial advice regarding debt: even consider approaching your Bank or Building Society for assistance. Many financial advisers agree to avoid borrowing further to pay off borrowed money; it is a essentially a vicious cycle which becomes hard to control, and harder to break. Further, every financial expert agrees to avoid at all costs payday lenders.
If in debt, remember that there are charities around that can offer financial support and assistance. Further, the leading advisory charity Citizen’s Advice at thier numerous Citizen’s Advice Bureaux nationwide, or similar agencies, can assist with managing your debt.
Whilst not worrying too much, do not be too relaxed about debt either. Manage that debt carefully, and resolutely. Some advisors suggest to select one particular debt to focus on, and put every spare pound you have towards paying that debt: such aggressive action can be helpful, and will reduce that particular debt quickly. It is very worthwhile revisiting and examining the expenses in your lifestyle, and seeing what you can cut back on to help manage that debt.
Further, once out of debt, focus on saving regularly. Most financial advisers vocally recommend saving – even if it is just a little bit regularly. That will build up- and will prevent you from falling back into debt. Above all, acknowledge that you have a problem with debt – and seek advice and help to manage that debt. That is often the first key step in tackling debt.
Although the High Street may be benefiting from consumer spending and debt – the consumer and household is definitely not. Acknowledge and tackle any debt you may have early on this New Year, to prevent it from becoming a serious problem to your finances.