Debt problems worsening, says Bank of England

A Bank of England report has revealed consumers are getting into greater problems with personal debt, with more people having unsecured borrowing and many struggling to meet repayments.

The annual Household Finances survey was contained in the Bank’s Quarterly Report and it noted around a quarter of households have problems meeting repayments, something that could lead to many being in a position to benefit from individual voluntary arrangements.

And this may increase as 52 per cent of people have unsecured borrowing, the study noted, while at the same time observing many people have not altered their financial habits to reflect the changes in the economic situation.

Reflecting on the overall situation, the publication stated: “The UK economy has begun to recover over the past year but households’ financial positions remain under strain.”

One reason it identified for this is that, while the Bank of England base rate is low, only mortgage holders are tending to benefit from it.

By contrast, many are unable to get low-cost credit and are therefore resorting to expensive lenders charging very high repayment rates, something that could be contributing to the problems suffered by many.

The issue of such debts – through doorstep and payday loans – has been raised by Walthamstow MP Stella Creasy.

She recently described to the Guardian how she had persuaded ministers in the coalition government to include such credit in their review of charges, which hitherto had focused on Conservative and Liberal Democrat manifesto pledges to look at credit and store card rates.

By Amy White