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Consumer Credit Debt on the rise ?

Journalist: Newsteam, Newsteam

ended 01. December 2023

According to The Money Charity, recent November stats report, Consumer Credit Debt At the end of September 2023, outstanding consumer credit lending was £218.5 billion, increasing by £1.1 billion on the revised total for the previous month and £13.2 billion more than in September 2022. Within the total, outstanding credit card debt came to £67.6 billion, an increase of 8.7% (£5.4 billion) in the year to September 2023. Credit card debt averaged £2,409 per household and £1,272 per adult. A credit card on the average interest rate would take 26 years and 6 months to repay, making only the legal minimum repayments (interest plus 1% of the outstanding balance) each month. The minimum repayment in the first month would be £67 but would reduce each month. If £67 were paid every month, the debt would be cleared in 4 years and 11 months

  • Are you seeing more customers reliant now more than ever before on Credit cards and Loans ?
  • Are you seeing more debt consolidation cases coming through ?
  • Whats your outlook on unsecured debts for 2024 

10 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
I am seeing more customers reliant now more than ever before on credit cards and loans. This is likely due to a number of factors, including the rising cost of living, and increased availability of credit. I am also seeing more debt consolidation cases coming through. This is because many people are struggling to keep up with their monthly payments, and they are looking for ways to reduce their debt.

My outlook for unsecured debts for 2024 is uncertain. On the one hand, interest could rise, which could make it more difficult for people to afford their debt payments. On the other hand, the economy is expected to continue to grow, which could lead to higher wages and more disposable income. Ultimately, the level of unsecured debt in 2024 will depend on a number of factors, including the economy, interest rates, and consumer behavior.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
We are seeing an increase in enquiries relating to consolidating debt, with some actual indebtedness eye-watering. People from all walks of life are getting in touch about managing their debts, and ways to alleviate some of the monthly payment stress. Some leave it far too late, having started to miss payments and fall behind or default the account altogether. The implications for these people can be long-lasting, with the knock-on effects of higher cost of credit, mortgages or being denied access to credit at all. Looking at the Money Charity report, the increases show that people are becoming more reliant on credit to survive, and fear it will only get worse in 2024 as we wade through the current problems with cost of living and interest rates.
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Craig Fish
Director at Lodestone Mortgages
This data is of no surprise at all as we hear more and more reports daily of people facing serious financial struggles due mainly to the 'rate shock' from increased mortgage payments. The resulting significant increase in mortgage payments has exacerbated the cost of living crisis and as such people are having to rely on credit to be able to live on a day-to-day basis. In the worst of cases, there are reports of people using credit to make their mortgage payments. Whilst we are now witnessing mortgage rates decreasing, they are still significantly higher than previously and with more than a million mortgage holders coming off ultra-low fixed rates during 2024, sadly, this number is likely to get worse.
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Justin Moy
Managing Director at EHF Mortgages
The general lack of remortgaging opportunities has certainly hit those who are habitual consolidators of debt to their mortgage. Also, the availability of special offers and 0% deals has meant that unsecured debt has become sticky and not being repaid anywhere need the normal patterns. This will unfortunately continue into 2024 as we deal with higher mortgage rates and other household costs, it is worth speaking to your Mortgage Broker about secured loans and other consolidation options if affordable.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
It is no surprise that with the cost of living and jumps in mortgage payments more and more households are relying on credit cards and help from family to get through month to month. However, there is only so long that the build-up of debt can last before something breaks, which we are also seeing with the increases in arrears and debt management plans.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
Credit Cards, when used wisely could be of immense value and could even potentially help reduce the overall cost of borrowing. Smart consumers will do well to utilise those long 0% interest rates on offer to put aside capital for spending on essentials, which can be repaid over a long period (with little to no cost), often lasting 2-3 years. One can borrow off a credit card at incredibly attractive rates while stashing away the equivalent cash balance in a high interest savings account (currently chart toppers pay a whopping 6% interest pa). But only go down this path if you are financially savvy and will never miss your repayment dates (otherwise you end up in a web of atrocious interest costs, penalties and charges). This method is not for the faint-hearted though, as anyone trying to arbitrage the cost of their borrowing against their savings interest must have rock-solid discipline and determination.
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Rowan Frayling
Managing Director at J Finance
With borrowing on credit cards and loans still seemingly readily available it is unsurprising that consumers are choosing to borrow when their income may not be stretching as far as it was 6-12 months ago. We are seeing more reliance within our client bank and more enquiries for consolidation of these debts. As one would expect, care should be taken when taking an unsecured debt and securing it against the property and stretching the term from perhaps a few years to a few decades, however for many, it is imperative that they reduce their monthly outgoings and consolidation will appear attractive.
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James Bull
Mortgage Broker at JB Mortgages
As the housing market stagnates and people are opting to stay and remortgage instead of moving house, a large proportion of remortgages are including an element of debt consolidation. This trend is expected to continue going into 2024. There are many lender criteria to consider around this like debt-to-income ratios. max loan to value, lender affordability criteria. Specialist advice in this area is essential as these cases do not fit with every lender.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
When the going gets tough, people often rely on using unsecured credit. With a proliferation of extended 0% terms for balance transfers, doing the credit card shuffle is commonplace for those whose credit score will allow them to take advantage of this. Sadly that only lasts so long. Unless you have a plan to pay down debt, balances can continue to creep up until the payments become unsustainable. Once your credit profile goes down from excellent, to good and then fair, the options available go down with it. Then what? At the end of the honeymoon rate, credit cards are expensive. Debt consolidation loans can then seem like the answer. Without a plan to increase income and decrease outgoings many are left with the stark reality that you can't borrow your way out of debt. Given where we are now, I feel this is the next big challenge. The insolvency practitioners will be having a field day in 2024.
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Graham Cox
Director at Bridging Hub
Unsecured debt certainly seems to be on the rise, as born out by the 8.7% annual increase in total credit card borrowing, the most insidious form of unsecured lending. It's hardly surprising, given the cost of living crisis. And with house prices falling, and mortgage rates much higher, homeowners can't necessarily rely on a debt consolidation remortgage to pay it all off. We could be storing up big problems for the future.