Lowest Interest Payments on Debt for over a Decade

9th July 2014

Today the UK's leading financial capability charity The Money Charity releases its Debt Statistics, giving an overview of the financial situation in the UK. http://themoneycharity.org.uk/debt-statistics/

Borrowers in the UK are paying less interest on their debt than at any point in the last decade despite record levels of lending by banks and building societies, analysis by The Money Charity has revealed.

Based on the latest figures from the Bank of England, households would repay an average of £2,218 in interest over 12 months on mortgage, credit card, and other consumer borrowing - the lowest since December 2003.

The total interest paid by UK borrowers over a year would be £58.6bn - the last time this was so low was February 2004. Since then outstanding lending has increased by over 50%, but low interest rates mean the cost of borrowing is cheaper than it has been for years.

Mortgage-holders are paying less interest than at any point since April 2004, even though levels of outstanding mortgage debt have jumped by 58% since then. Credit card interest payments are the lowest since December 2009, while interest on other consumer credit is at a record low.

The welcome news for borrowers is down to historically low interest rates; mortgage interest rates are at their lowest since records began in 1998, credit card rates are lower than at any point since March 2007, while the last time other consumer borrowing attracted lower interest rates was December 2010.

Michelle Highman, Chief Executive of The Money Charity comments:

"This month's debt statistics paints a particularly perilous picture of the UK. Despite outstanding debt having increased by over 50% in the last 10 years the amount we are paying in interest hasn't risen. Despite this, many families in the UK are only just managing to make ends meet, indicating that any rate increase could tip them over the edge.

It's obviously very easy in a time of record low interest rates to be lulled in to a false sense of security that you can afford to take on more debt. But as rises in interest rates seem increasingly likely, it's crucial when taking on debt that you think through, not just whether you can afford the repayments now, but will you be able to do so in the future. Particularly for mortgages, even a small rate increase can have a significant impact on the numbers involved and on your ability to repay.

Creating a budget is one of the best ways to help manage your money in order to tackle debt and rein in your spending. The Money Charity has a range of free tools and resources to help you get on top of your money (themoneycharity.org.uk). If you worried about keeping up with your debts, seek advice from one of the free and independent organisations available, including StepChange Debt Charity (0800 138 1111)."

Latest figures include:

£54,701: average household debt (including mortgages) in May, up from £54,631 in April
£6,080: average household debt (excluding mortgages) in May, up from £6,064 in April
£160 million of interest was paid every day on personal debt in May
£1.557 billion: daily value of all plastic card purchases in April
1,348 people were made redundant every day between February and April
791,000 people had been unemployed for over a year, between February – April
Every 5 minutes 12 seconds someone was declared bankrupt or insolvent
£1.445 trillion was the value of outstanding personal debt at the end of May, up from the same period last year
£65.24: the cost to fill a 50 litre tank with unleaded petrol in June 2014
71 properties are repossessed every day
You can get the full picture at http://themoneycharity.org.uk/debt-statistics/