Debt repayment level hits record high

Rising costs of borrowing during the last year, utility bill increases and spikes in the price of petrol are all believed to have contributed to the gradual squeeze on household incomes nationwide, suggests the accountancy experts.

Despite the increasing proportion of earnings that is now spent on servicing debt, many consumers have opted to borrow money to maintain their disposable income levels, the most recent research shows.

John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said: “While the high-level macro-economic indicators have continued to look reasonably healthy, many households have faced a squeeze on their finances.

“Looking ahead, we expect rising debt service costs to contribute to slower consumer spending growth over the next two to three years,” he added.

Earlier this year, accountancy firm KPMG predicted that a record number of people in the UK will enter into an Individual Voluntary Arrangement (IVA) during 2007.