Total household financial debt rises by £12 billion
According to a study from the Office for National Statistics, total household financial debt rose by 11 per cent between April 2016 and March 2018 compared to the previous two years.
The ONS’ debt survey is conducted every two years and therefore the most recent figures were compared with the data collected between April 2014 and March 2016.
Over this period, total household financial debt rose from £107 billion to £119 billion.
According to the ONS, this rise was largely driven by increased hire purchase debt, which rose by £6 billion, and student loan debt, which rose by £7 billion.
Total household debt, which stood at £1.29 trillion in the period between April 2016 and March 2018, is calculated by adding financial debt and property debt. Property debt is calculated by the amount owed through mortgages and equity releases.
Average household financial debt rose by nine per cent, to stand at £9,400. This was also true for median financial debt, which grew 12 per cent to £4,500.
The study also assessed the proportion of debt to assets among different sections of society.
The study found that the poorest 10 per cent of households have debts which are three times larger than the value of their assets.
On the other hand, the total wealth of the richest 10 per cent is 35 times larger than their debt.
As a proportion of total household debt, the poorest 50 per cent of households account for 36 per cent and four per cent of households were assessed to have “problem debt.”
In the report, “problem debt” is defined as a household with “liquidity problems only, solvency problems only or both liquidity and solvency problems.”
Responding to these findings, Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The figures are skewed slightly by the £32 billion of student debts – which the majority of graduates will never pay back in full.
“However, even excluding that, we’re carrying £87 billion in loans, credit cards, hire purchase agreements, overdrafts and arrears.”