Brits owe 23,000 each on average

Total indebtedness on secured and unsecured lending stood at 1.1 trillion at the end of this June – around 23,000 for each adult.

A report from Pricewaterhouse Coopers also shows people who enter into individual voluntary arrangements owe an average of 60,000 to 11 creditors on credit cards and other unsecured borrowing.

This year has seen record levels of IVAs. PricewaterhouseCoopers examined 1,257 IVAs registered in July and found 75% of debtors say their difficulty is a result of living beyond their means rather than unavoidable events such as divorce or unemployment, commonly assumed to be the primary causes of bad debts.

But Richard Thompson, partner at PricewaterhouseCoopers, says: “All the big clearing banks have now agreed to share data on borrowing levels and account operation. At present it is estimated that 6% of consumers owe more than their entire gross salary on unsecured debt. We expect the commitment to positive data sharing to cut the number of cases of extreme over-borrowing.”

Tim Hague, director of BM Solutions, says: “In the past few years consumer confidence has been high as a result of low interest rates, low inflation and low unemployment levels. All this led to increased consumer spending.

“But all the recent indicators would suggest that consumers are now keen to cut their levels of unsecured debt.

“It should be remembered that research has shown there are many reasons people find themselves in financial difficulties and as an industry we should strive to provide a service to those who are on the road to recovery while being careful not to further fuel indebtedness.”