Friday, 29 December 2006

Less saving and more debt

I see many stories about how personal debt is increasing in the UK. The Office for National Statistics confirms this in this section of their site. From the 2nd quarter of 2004 until the 4th quarter of 2005 the levels of gross saving was going up. Since the beginning of this year it's gone down by a certain amount each quarter - which is worrying, considering spending is on the increase.

If people save less, they won't be able to afford as many things that they want - it's simple logic. If people still want to get things - they'll then get loans. However, if saving is going down - how can you repay the loans? I certainly can't answer that question.

The following quote is from Credit Action:
"Total UK personal debt has exceeded £1 ¼ trillion and at the end of October 2006 it stood at £1,268bn. The growth rate increased to 10.4% for the previous 12 months which equates to an increase of ~ £110bn.

Total secured lending on homes has exceeded £1 trillion (£1,000 billion) and at the end of October 2006 it stood at £1055.9bn. This has increased 11.3% in the last 12 months."
Yes, there's an increasing population - that would affect total debt figures. However, it is still very worrying that it's going into the trillions. This graph show debt statistics for the UK since the end of 1993. It shows not only that there is a massive increase in consumer borrowing, but also that there's a fairly large increase in borrowing using a credit card.

There are definitely a lot of people who can repay debts, but with the increases in lending highlighted above, there's will probably be an increase in the already large amount of people who can't cope with debt.

I'm really worried about this and I hope the population realise that heavy borrowing isn't going to solve anything and that they should save before they spend.


MattJ said...

It's a tricky one Dave, I was definitely a Debt monkey for many many years. I am still heavily in debt but have made it infinitely more managable and, despite my recent overspends, am managing to squirrely things away recently.

there's a good quote 'Debt isn't bad - bad debt is bad'. Basically you have to be intelligent about what you borrow. I took out a fairly large loan last year at a low interest, fixed rate, in order to clearmy other debts and have that one fixed payment. Not one of those ropey TV ones that charge you 20% per annum - I got 5.6% through Direct Line. This way, I am out of my overdraft, have very little on cards and have one payment per month for the next few years.

After that its just the student one, whcih si the cheapest mooney you'll ever get if you're lucky enough to be able to save it.

I dont have apension yet which is a slight worry but I've just staretd the hosue purchase scheme at work - 8% of my base salary every month for 2 years. If I find a house, the company match my contribution in order to put towards a deposit. After that Year 1 - 3 - top up my salary by 8%
Year 4 - 6%
Years 5&^ - 4%

This is in place of a pension scheme. It's the only chance I am taking - offsetting the financial security of a future home with what will ultimately be a fairly naff salary. i can rejoin the pension after the purchase plan and pretty sure I dont have to go through the whole purchase plan right to year 8!

Anyway, point is, it's all about managing the debt if you find you have to go into debt. I am in no more debt now than I was this time last year but then I had no money to sepnd at teh end of the month, this way it is far better managed and I can budget more effectively.

This was a great help to me :