UK Banks and Building Societies write off £20 million pounds a day

Thrugelmir

December 2010 - Debt Statistics

Total UK personal debt

Total UK personal debt at the end of October 2010 stood at £1,452bn. The twelve-month growth rate increased 0.1% to 0.8%. Individuals owe more than what the whole country produces in a year.
Total lending in October 2010 rose by £1.3bn; secured lending increased by £1.0bn in the month; consumer credit lending increased by £0.3bn(total lending in Jan 2008 grew by £8.4bn).
Total secured lending on dwellings at the end of October 2010 stood at £1,236bn. The twelve-month growth rate remained at 0.8%.
Total consumer credit lending to individuals at the end of October 2010 was £216bn. The annual growth rate of consumer credit increased 0.4% to 0.6%.
UK banks and building societies wrote off £9.9bn of loans to individuals in the last 12 months to end Q3 2010. In Q3 2010 they wrote off £1.83bn (£740m of that was credit card debt). This amounts to a write-off of £20.10m a day.
Average household debt in the UK is ~ £8,556 (excluding mortgages).

15% of income to serice debt, and thats at current interest rates. If rates were to rise to more normal levels what would the impact be?

Britain's interest repayments on personal debt were £65.0bn in the last 12 months. The average interest paid by each household on their total debt is approximately £2,580 each year. According to PwC the average household will need to spend approximately 15% of net income purely to service the interest payments arising from this debt

.

Full report link.

http://www.creditaction.org.uk/assets/PDF/statistics/2010/december-2010.pdf

Masomnia

'£8,556 (excluding mortgages).' That's staggering.

purch

According to PwC the average household will need to spend approximately 15% of net income purely to service the interest payments arising from this debt

At a time when we have the lowest interest rates in the history of interest rates.

Anyone got a bucket of sand, I can stick my head into :eek:

Loughton_Monkey

purch wrote: »

At a time when we have the lowest interest rates in the history of interest rates.

But with typical interest of 16.9%, you have to be desperate!

If you exclude the handful of people who have perhaps been 'forced' to max out the plastic because of a specific 'emergency', then I can never work out which is the most 'criminal'. 1. Consistantly to spend more than your income, or 2. Having decided to do so, to pay 16.9% for the privilege.

This was, of course, not easily achieved in, say, the 40's/50's who despite their poverty, perhaps had more brains. One wonders if they had had pawnbrokers on every street corner, whether it might have been the same. I doubt it though.

Thrugelmir

Loughton_Monkey wrote: »

But with typical interest of 16.9%, you have to be desperate!

The general level of debt is the issue not just the rate of interest charged.

chewmylegoff

Thrugelmir wrote: »

December 2010 - Debt Statistics
15% of income to serice debt, and thats at current interest rates. If rates were to rise to more normal levels what would the impact be?

the way this is written suggests that the interest payment that represents 15% of income includes mortgage interest. so, on average people are only spending 15% of their income servicing their mortgage and any other debt (before capital repayments).

i think all this demonstrates is that a lot of people don't have mortgages, or have paid off the majority of their mortgage! £2,500 debt payment per year for a household including mortgage interest is sod all really.

if you wanted to understand the possible impact of rising interest rates you would need these figures to be broken down into useful segments, so you could look specifically at the people who spend the largest % of their income on interest.

Really2

Thrugelmir wrote: »

]15% of income to serice debt, and thats at current interest rates. If rates were to rise to more normal levels what would the impact be?

Depends what you call normal,
base rate may be 0.5% but a decent fixed rate is 5.99%. (3 year fix 10% deposit)

Personal loans are 8.9%+

These are virtually the same as when the base rate (if not more) was around 5%.

So the in reality the base rate has had little effect on the cost to service except those lucky ones on trackers.

Graham_Devon

Really2 wrote: »

Depends what you call normal,
base rate may be 0.5% but a decent fixed rate is 5.99%. (3 year fix 10% deposit)

Personal loans are 8.9%+

These are virtually the same as when the base rate (if not more) was around 5%.

So the in reality the base rate has had little effect on the cost to service except those lucky ones on trackers.

These rates you use are for new loans. For those with the debt listed in the OP, most will already have it, and loads are on SVR's now, and personal loans will have been taken out in the past at 6% rates etc, not the rates that are available for new debt, today.

LilacPixie

Masomnia wrote: »

'£8,556 (excluding mortgages).' That's staggering.

i actually expected it to be higher.

Really2

Graham_Devon wrote: »

These rates you use are for new loans. For those with the debt listed in the OP, most will already have it, and loads are on SVR's now, and personal loans will have been taken out in the past at 6% rates etc, not the rates that are available for new debt, today.

dry hump time

15% of income to serice debt, and thats at current interest rates. If rates were to rise to more normal levels what would the impact be?

I read that as current rates???

But lets do your scenario,

A) mortgage, they paid higher before then so why would that cause extra stress, no one is predicting a 5% base any time soon. (surly a like for like comparison is relavent, they wont be on SVR forever and indeed were not in the past in your scenario.)
you are saying personal loans are irrelevent then as they have not been effected.

I stated the rise to normal levels, would that not require taking out new loans, eg remortgage or now loan?

Graham_Devon

Really2 wrote: »

dry hump time


I read that as current rates???

But lets do your scenario,

A) mortgage, they paid higher before then so why would that cause extra stress, no one is predicting a 5% base any time soon.
you are saying personal loans are irrelevent then as they have not been effected.

I stated the rise to normal levels, would that not require taking out new loans, eg remortgage or now loan?

I shall reply once.

1. Current rates do not only take into account new products. You have given rates for new products. Current rates include all products, new loans, people on old trackers, people on SVR's etc.

2. I never said personal loans are irrelevant, ever. Dunno where you get that from, as I included them in my post, stating 3 years ago you could get them at 6%.

3. A rise to "normal" base rate levels would not require taking out new loans for rates to change, unless you are suggesting all those on trackers and SVR's will not be hit and will stay on current levels if base rates rose to 5%.

I only picked up on your post because it was misleading to suggest rates people pay now and no different to rates when base rates were higher. You based it on new loans available now, rather than the debt people hold now, which is totally misleading.