Money News
The average amount of unsecured debt works out at almost £8,800 per adult in the UK (CreditAction figures). Together we have accumulated almost £5.5 billion in credit card debt (spurred on by more than 60 lenders offering hundreds of different credit cards ).
According to Equifax research, 50% of 18-25 year-olds already have over £5,000 of short term debt. Of those in the same age group with mortgages, 33% have borrowed more than 5 times their salary. The Council of Mortgage Lenders reports that first time home buyers now relinquish an average of 18.3% of their gross income (average £34,902) in mortgage interest repayments, the highest proportion since 1991 when the base rate was 10.5%.
Should we be overly concerned if the redness of our financial situation moves from a delicate pink to a deep crimson? Arguably, so long as you're in a position to afford the repayments comfortably and this situation is guaranteed to continue, then no level of debt can be viewed as too much.
However, personal and financial circumstances can unexpectedly change; an illness or redundancy robs you of your income, say, or the household piggy bank is suddenly halved by a relationship breakdown.
With too many people given too much leeway with credit relative to their incomes it is not surprising that debt levels have soared. Some 75% of credit cardholders have ongoing debt and pay around 17% interest for this privilege; rates go up to 20% for a cash withdrawal from a credit card account.
READ MORE: Controlling your debt - Is there a debt crisis?
10 May 2007 © Moneyextra.com
Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.