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CCR2 Credit Risk Information


Some up, some down


There is a significant difference between the performance of public and private finances


Michelle Highman Chief executive, The Money Charity michelle @themoneycharity.org.uk


Considerable improvements in UK public- sector finances should be weighed alongside signs of concern for household finances, according to the September 2018 Money Statistics, produced by ourselves.


Budget surplus A dramatic improvement in the UK’s public-sector finances has been seen over the year to July 2018, with the government running a current budget surplus of £7.8bn and borrowing only for investment purposes. Some investment was, in fact, funded by


the current budget surplus. Overall, public sector net debt (excluding


RBS and debt to Bank of England) has reduced by £31bn in the year to July 2018.


Stark contrast But the picture for households makes for a stark contrast, with households plunging deeper into debt, borrowing for both housing and consumption. Total net lending to individuals and housing associations increased by £46bn in the year to July 2018, taking total net debt per household to £58,658. Meanwhile consumer credit increased by


£11.9bn (5.9%) over the year, an increase of £227.94 per UK adult, while the average student debt in England, for the latest student cohort to begin repayments, reached £32,220. With high interest rates on consumer debt,


such as an average 18.35% for credit cards, UK borrowers paid an estimated £138m per day in interest in July 2018.


28 With households taking on more debt,


this suggests that they expect to be able to service and pay down their debt out of future income growth. However, real wages have barely increased


in the year to July 2018 and are still below the level they reached before the 2008 crash, despite unemployment being at the low level of 4%.


Total net lending to individuals and housing associations increased by £46bn in the year to July 2018, taking total net debt per household to £58,658


People need to avoid compound interest Signs of financial stress can already be


seen, with 301 people per day being declared insolvent or bankrupt in April to June 2018, and Citizens Advice Bureaux in England and Wales dealing with 2,397 new debt problems every day in August 2018.


Mixed bag The current outlook is truly a mixed bag with so much uncertainty looming in the bigger picture. With tight household budgets and


stagnant incomes, the need for financial capability has never been greater as households may be vulnerable to any downturn in the economy.


www.CCRMagazine.com


traps, shop around for the best deals and avoid running up debts that may be difficult to service in the future. Other key points from the September


Money Statistics included: l Average first-time buyer deposits are equivalent to 94% of the average salary, nearly a whole year’s income, while private renters pay 34% of their income in rent on average. l It costs an average of £23.61 per day for a couple to raise a child from birth to 18, and £28.48 for a lone parent family. l In August 2018, cash machines were used an average of 94 times a second across the UK. CCR2


October 2018


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