When it comes to debt, it appears that wealthier households carry the largest burden, according to data from the Institute for Fiscal Studies (IFS).
The think tank found that just under half (47%) of UK households hold at least some unsecured consumer debt.
And while the amount of unsecured debt fell steadily after the financial crisis, it has been creeping up again since 2014. As of April 2017, consumer debt in the UK amounted to just over £200 billion.
The IFS says 43% of this debt comes in the form of credit cards, 25% is from store cards, while 21% relates to hire purchase debt, such as personal contract purchases for cars. Overdrafts account for around 5% of the total consumer debt in the UK.
Over 60% of this unsecured debt is held by households with above-average incomes, and more than half of households with unsecured debts have more than enough financial assets to pay them off.
However, at the other end of the scale, one in 10 households has more than £10,000 of unsecured debt, and that of those who earn the lowest average income, more than one in three (35%) has more debt than their total financial assets. In addition, 16% of those on the lowest incomes are in arrears on their debt repayments. This compares to just 7% of all households.
The difference between age groups is also stark. More than 70% of 20- to 24-year-olds hold some unsecured debt. Over 50% have debts of more than £1,000. But this figure drops sharply to less than 40% of 60- to 64-year-olds holding some debt. See the table below for the distribution by age group:
Source: IFS, January 2018.
‘Debt a real problem for a significant minority’
David Sturrock, a research economist at the IFS and an author of the report, comments: “Most unsecured debt is held by high income households who look able to manage it, and more than half of those with debts have enough financial assets to pay them off.
“But debt looks like a real problem for a significant minority of those on low incomes, who are not keeping up with bills and/or spending high fractions of their disposable income on debt repayment. Headline numbers are no guide to the scale of ‘problem debt’: distinguishing between debts that are entirely appropriate and those that look unmanageable is crucial.”