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‘Debt noose tightening’ around UK households

Households struggling with interest payments

Elderly woman in debt

Consumers are finding it hard to meet their debt commitments

UK households are finding their debt commitments harder to meet, according to new research from the Consumer Credit Counselling Service (CCCS).

This is despite the fact that average household debt levels are actually decreasing.

The rising price of essentials

The figures in the CCCS’ latest Consumer Debt and Money Report highlight how the rising price of essential items is making households suffer.

At the end of last year, the average UK household was found to be paying almost £200 a month in interest payments on credit card and other debt. That’s nearly a quarter (23.8%) of available income.

This is up 0.1% on the third quarter of 2011, despite the fact that average interest payments actually fell by £2. This is because the rising price of essential items outweighed wage increases, meaning that leftover income was reduced.

Regional and age differences

The report also found that middle-aged and elderly people in particular will be increasingly affected by debt problems. It predicts that CCCS’s share of clients over the age of 45 will have risen from 28% back in January 2005 to around 48% in December 2014.

In regional terms, the highest demand for CCCS debt counselling currently occurs in London and the North West of England.

However, the fastest increases in need for debt help were found in Wales, and in certain highly urbanised areas – including those in Yorkshire and the Humber. These have all seen double-digit increases in demand for advice.

The effects of the crisis

In the UK as a whole, the demand for debt advice is forecast to remain high, and to rise further in the coming years as unemployment worsens. 

The need for debt advice services is expected to hit another peak in 2014, as a result of the lasting problems caused in the aftermath of the financial crisis.

Where to find debt help

If you’re struggling with debt repayments, speak to an impartial and independent debt advice organisation run by a charity. There are several that should be able to help, including the CCCS, National Debtline and Citizens Advice.

Which? believes people with financial problems should never use fee-charging debt management companies. The fees these firms charge typically equate to around 17% of a customer’s monthly repayments.

We’re also concerned that some companies are offering high commission payments to other companies for receiving referrals.

The debt advice charities listed above, on the other hand, will provide a more comprehensive and impartial service, free of charge.

More on this…

  • Call the Which? Money helpline – if you have debt concerns then speak to one of our advisers
  • Reasons to avoid debt management firms – why you should avoid paying for debt advice
  • Reduce your debt – ten ways to pay off your debts in 2012
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