The result of austerity and rising costs of energy bills and rent, will by December make families in debt most likely to hit a 5 year high. In fact loans and credit cards aren’t the biggest problem. The situation is grave for families laden with piling debt are suffering real hardships. About 1.6m UK households are living in extreme debt, according to a report by the TUC, which says official figures underestimate the intense burden of repayment on many families and individuals. However, in identifying the types of debt that are throwing household finances off course, it said 'smaller but trickier' bills are overtaking large scale loans.
Half of callers to National Debtline are now struggling to repay debt of £5,000 or less – up from just 22% in 2008. These smaller levels of debt are proving difficult to repay due to an increase in 'broken budgets' – where the money coming in is simply not enough to cover essential spending. It follows a report in August that found four in 10 households have just £7 a day left after factoring in essential monthly bills.
Families with debt pose risk to the entire British economy. Debt-ridden households 'risk a new credit crisis': Bank of England’s dire warning over mortgage lending, credit cards and car finance deals. Lenders were heading for a ‘spiral of complacency’ as low interest rates encouraged potentially catastrophic borrowing binges. In a stark warning that Britain could be heading for another major financial crisis ten years on from the last, the Bank’s director for financial stability, Alex Brazier, said there were ‘signs of boundaries being pushed’ by banks now offering riskier mortgages.
The problem is growing fastest among the working poor, people with jobs but insufficient pay to stay financially afloat. OECD figures show that UK real wages fell by 10.4% between 2007 and 2015, making the task of keeping up debt repayments harder. The government must give priority in its economic plan for higher wages. What is needed is a return to proper annual pay rises and a higher national minimum wages to tackle this problem. This dire situation is also putting a lot of pressure of food banks throughout the country.
Baldev Sharma
Rayners lane, Harrow
