Consumers now owe £196 billion collectively, increasing by 41% from last year, whilst those aged 18 to 34 have seen their debts almost double in the same period, according to new research from MoneySuperMarket.
With 66% of UK adults admitting they currently have some form of unsecured borrowing, the comparison site found people are racking up even more debt than last year, when the amount borrowed came to £139 billion or £4,412 on average each.
Now the average amount people owe on unsecured credit is £5,898 each, a 34% increase since last year, either on a credit card, personal loan, overdraft, store card or finance agreement.
50% of Brits owe money on a credit card, while 23% are in debt through their overdraft and 12% have taken out a personal loan.
The research shows the younger generation aged 18 to 34 have seen their debts almost double within a year from £5,446 to £10,058 on average – an 85% increase. Meanwhile 35 to 54 year olds owe £5,211 (an increase from £4,298 in 2014). Those aged over 55 years are the only age group to see their debt decrease within the past year – from £3,107 to £2,528 on average each.
Men have also relied more on credit than women in the last 12 months, and currently owe £7,509, whereas women owe £4,139. Last year, the average individual amount owed by each gender was £4,821 and £3,899 respectively.
Consumer spending is clearly on the rise, as 47% of those in debt owe more money than they did last year. 21% of these did not owe any money last year but now have debts of £1,015 on average. 45% owe the same or less than they did last year.
“This research begs the question whether the economic recovery being celebrated by politicians is simply based on a rapidly climbing debt time-bomb,” said Dan Plant, spokesperson at MoneySuperMarket.
“Not only are personal debts up by 40% across the board – with under 35s worryingly seeing what they owe more than double in just a year – they are being paid off more slowly than a year ago. This suggests the British public may be robbing Peter to pay Paul, with the increased consumer spending we’ve witnessed just a by-product of this – which would be hard to sustain. It was borrowing at excessive levels that was one of the contributing factors to the economic crisis so we must hope we aren’t witnessing a repeat of mistakes of the past.”
Only 36% of borrowers think they will pay off their debts within a month, with a further 24% expecting it to be cleared within a year. However, 14% of borrowers think they will be saddled with the debt for two to five years, slightly up on the 13% who felt that way last year.