Family debt levels up 48%

25 January 2012

The average UK family now owes £7,944 in unsecured debt, up 48% from £5,360 this time last year.

This debt accounts for 32% of the average annual household income (£24,792).

The figures, from Aviva's latest Family Finances report, highlight significant levels of borrowing on credit cards, personal loans, overdrafts and store cards. Credit card debt accounts for the largest portion of unsecured debt, with households owing £2,314 on average, followed by £1,739 on personal loans and £775 on overdrafts.

Louise Colley, spokesperson for Aviva, says borrowing money has become a fact of life for many: "Families are now used to living with a certain level of debt; however, it has continued to increase over the last 12 months.

"As long as people are able to service their debts they remain manageable, but borrowings can be another layer of pressure on a family's finances," Colley adds.

The survey also reveals that while average household income has risen slightly over the past year, the increases are not enough to keep pace with inflation. A typical family's income has increased by 4% over the past quarter, while inflation is currently 4.2%.

Over a longer timeframe, the average household's annual income has increased by 7% and now stands at £2,066 a month. In comparison, the average childless couple has seen a 10% annual increase in their earnings, now bringing home around £2,220 a month.

TV beats life insurance

Aviva's report also shows that there are more families (50%) paying for a monthly satellite TV package than there are paying for life insurance (40%).

In addition, more UK families have taken out pet insurance and mobile phone insurance than they have critical illness cover or income protection.

Colley warns families against making cutbacks on essential financial products such as life insurance: "By choosing to bury their heads in the sand and ignore these subjects, people potentially risk making a bad situation worse."

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