The National Situation

Consumer Debt

Consumer debt has spiralled in recent years and average household debt in the UK, according to Credit Action, is approximately £58,000. Total UK consumer debt, according to the same organisation, was £1.46 trillion at the end of March 2010. That’s almost £1,500 trillion, or £1.5 million million; a mind-numbingly large number. To put it in perspective, it is slightly more than the UK’s total income (GDP), which was £1.396 trillion in 2009 according to the Office of National Statistics (ONS).

As Credit Action’s website succinctly puts it:

“Individuals owe more that what the whole country produces in a year”

The trend of increasing personal indebtedness, a by-product of our consumer culture, certainly contributed to the financial crisis.

Mortgage Debt

Most personal debt is, at least in the UK, secured mortgage debt. Levels of home ownership have traditionally been higher here than in most other European countries. It has always been considered that mortgage debt is safe debt; that was true for as long as the housing market continued its customary rise but at times of recession in the housing market, mortgages have led and will lead more and more borrowers into negative equity, where their property’s value falls below the amount borrowed. Whenever these conditions apply, then mortgage debt certainly does have to be factored into the equation.