Consumers in the United Kingdom are taking on ever higher levels of debt but they appear to be leaving the plastic at home, according to a report from the accounting and consulting firm PriceWaterhouseCoopers.
The total indebtedness of United Kingdom consumers was more than $2.7 trillion in June, a rise of 9.5 percent from the same period a year ago. Most of the increase was driven by secured loans, such as mortgages, rising 11.3 percent in the year to June 2007. Secured debt in the U.K. in June accounted for about 84 percent of total outstanding debt.
Unsecured loans, such as through credit cards and store cards, have seen little growth, rising just 1.1 percent in the year to June 2007, and 2.4 percent in the previous year to June 2006.
The amount of total unsecured loans outstanding to consumers may have reached “a natural ceiling” in the U.K. of around $414 billion, according to “Precious Plastic 2008: Consumer Credit in the UK” from PriceWaterhouseCoopers. This total has grown two percent or less in each of the last two fiscal years ending in June, after growing at rates of around 10 percent through the first half of this decade.
Outstanding credit card balances fell to $134 billion in June of 2007, compared with $137 billion in the same period in the previous year. One reason for this is the already high overall indebtedness of the U.K. consumer, according to the report. The ratio of household debt to annual income is now around 160 percent, a rise of about 50 percent since the start of this decade to 2007.
During that same period the percent of consumers classified as insolvent rose from 0.08 percent to 0.27 percent.