Despite often being described as dreamers who spend recklessly, almost two-in-three British Millennials have modest and traditional life goals. These include starting a family, reducing their debt burden and gaining a foothold on the property ladder.
Some of these goals may appear increasingly unobtainable, however, with more than six million Britons now believing that they will never be debt free. There’s some evidence to support this assertion too, with recent research suggesting that the average person in the UK currently owes £8,000 on top of their mortgage debt.
In this article, we’ll address the state of the average household debt in the UK, while asking whether this situation is likely to improve any time soon.
How Household Debt has Risen in the UK
The study, which was commissioned by Comparethemarket.com, also revealed that 62% of respondents were worried about their levels of personal debt.
Almost a quarter were also struggling to make ends meet, as the combination of high inflation (2.5%) and stagnant earnings continues to minimise disposable incomes throughout the whole of the UK.
The current macroeconomic climate in the UK has certainly contributed to rising household debt levels, which have increased incrementally since the great recession. Following the financial crash of 2009, households were forced to borrow more in order to cope with the fall-out, while lenders strived to increase accessibility and aid their customers through the type of bad credit products featured here.
However, the subsequent economic recovery has not materialised in the UK, causing households to become increasingly reliant on borrowing as their earnings have stalled and the cost of living has continued to rise.
What Does the Future Hold for Households and Consumers in the UK?
The recent study also revealed that households are becoming increasingly indebted over time, with around 10% of respondents claiming that they had maxed out an existing credit card.
A similar number confirmed that they have been overdrawn during the past 12 months, with their earnings increasingly incapable of covering mounting costs and rising interest repayments.
Perhaps the most concerning aspect of this is that one-third of those interviewed told researchers that they were already planning to take on additional debt, either in the form of credit cards, loans or financing agreements. Others also confirmed that they wanted to take out mortgages in the next year or so, although this may not be possible depending on the nature of their finances.
The worry here is obvious, as taking on additional debt will exacerbate the current issues and cause the overall household burden to increase nationwide. Not only this, but households will find themselves facing increased interest repayments as the Bank of England’s base rate continues to rise, making it harder for them to repay their original debt over time.