However there is also some perception about consumer level debts. There's much talk of businesses and households paying off debts, this may not be quite as accurate as it is first read.
In reality, consumers and individuals are not paying off what they owe. Previously there was some hope that this was to start happening when mortgage rates fell sharply in 2008 and 2009. At this time a small selection of those whom had outstanding debts and which found they were in a position to do so used the opportunity to pay extra off their mortgages. Soon after however these same consumers returned to form and began borrowing again to spend.
Looking at the decrease of debts we see that large portions are due to banks writing off debts rather than people actually being able to repay them. Sources suggest that the total of personal/consumer debt stood at £1,461billion in November 2008 and £1,452 billion in November 2011.
This shows that debt is effectively being reduced, great news! However; this number doesn’t include debts written off by the banks, which adds nearly £27 billion. If this is taken into consideration, as money doesn’t just disappear because it is written off, so adding these bank write-offs consumer debt actually increased by more than £18 billion.
2011 (a) –before bank write offs.
2011 (b) – including the write offs.
The same sources suggest that Britons are still letting their credit card debt continues to grow or at the very least remain unpaid, the total of this kind of debt had risen from around £53 billion to over £56 billion over the same time period and this isn’t even considering a staggering £13 billion which card companies have had to write off. Once more if we add this effect into the equation we see that the credit card debt has gone up by some £16 billion. Now imagine that statement on the doormat!
Having now considered these unseen and ignored debts the picture doesn’t look as good. Debts are not only still going up but consumer debts are also shifting across to become financial sector company debt; those written off debts have higher ramifications. It may be that these debts become unavoidably soaked into the increasing state debts as the state once again burdens the weight of the struggling banks.
The future doesn’t look any brighter either, UK debt is set for another explosion. According to the Office of Budget Responsibility, personal debt will grow by nearly 50% from £1.5trillion today to £2.12trillion by 2015. This means that If you are in debt right now… IT could be getting much worse soon.
For help with your finances or if you wish to talk about outstanding debts, contact us to day. Jackson Partners offer free advice with no obligation to enter into any of our paid service.
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*source (Save Our Savers – S.O.S).
