In Focus Collections
Michelle Highman Chief executive, the Money Charity
According to our December Money Stats, in October 2016, for the first time people owed £1.508tn. Average total debt-per-household, including mortgages, was £55,855. Total interest repayments on personal debt over a 12-month period was£50.831bn, an average of £139m per day. The average household pays £1,883 in annual interest. Per person that is £1,007 – 3.82% of average earnings. For the first time, outstanding consumer-
credit lending was £190.13bn at the same date. Per household, that is an average consumer-credit debt of £7,024 or £3,765 per adult. Total credit-card debt was £66.2bn, or £2,452 per household. To put this into context, we found, if we take the average credit-card balance, it would take 25 years and six months to repay if the consumer made only the minimum repayment.
Selected conclusions from the Red Discussion Group
lWe talked about the insolvency figures, which do not necessarily give a full picture. There is a huge amount of data available, but it just not accessible and the industry needs to get its head around the fact that it should be available, otherwise policy based on only partial data will be misinformed. lWe must focus on the financially distressed segment of society. Within that, there is a tendency to look at the figures and say ‘oh, the insolvency trends are going down and there are fewer people in financial difficulty overall now’. In the debt-advice sector, that is not what we are seeing. People might be
really struggling without going into a formal debt plan. Over recent years, we have seen an increase in the number of people coming to us because they are funding what are, essentially, everyday living costs, by credit. lWe had mixed views on affordability and the extent to which lenders have, or have not, improved their affordability checks. We would all agree that there have been improvements over the past few years, but there was a question as to whether there was more that industry could do. lWe considered the FCA’s approach to vulnerability and particularly the extent to
which consumers would welcome better use of flags to identify vulnerability, and how far the industry should go on that and whether there should be more consistent practices. We discussed that the answer would be not just the identification of vulnerability, but also a focus on the capability of individuals. lWe had an interesting challenge from some of the group on the consistency of available debt advice. l Some members of the group had strong views on the current infrastructure around credit reporting. It has been the same for some time and some thought that it was not robust enough to deal with things into the future. Trying to deal with issues with notices of correction was a fundamental challenge. l There was a consideration that lenders needed to be more granular in what they do. If someone goes into a default it does not matter whether they are in an IVA or a debt plan, they go into the same bucket. It is not the fault of the agencies – they report what they get – the lenders need to be a bit more clever with the analysis so that the score starts to segment it out.
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www.CCRMagazine.co.uk January 2017
Mortgages At October 2016, outstanding mortgage lending stood at £1.318tn, and the estimated average outstanding mortgage for the 11.1m households with mortgage debt was £11,899. The average mortgage interest rate was 2.71%. So households with mortgages would pay an average of £3,225 in mortgage interest over the year. According to the CML, gross mortgage
lending totalled £20.6bn. Looking at the proportion of mortgage
arrears that are greater than 1.5% of the loan balance, there has been a very steady fall since 2009 until we get to this year, where the last two quarters of the data that we have – quarters one and two of 2016 – saw a significant tick up. So mortgage arrears are potentially on the rise again.
Insolvencies and bankruptcies Every day, on average 42 people are made bankrupt, 71 DROs granted, and 151 IVAs entered. In the 12 months ending Q3 2016, one in 515 adults became insolvent. Also, 2,489 consumer county court judgments were issued every day in the six months to the third quarter of 2016.
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