Leading debt management firm Harrington Brooks has today called for the next Government to implement a national action plan on personal debt, as it revealed the results of its first indebtedness index, a new barometer mapping the cause of personal debt across the UK.
- Over commitment as a reason for indebtedness rises from 43 per cent to 57 per cent.
- Lack of income as a cause for indebtedness falls from 27 per cent to 18 per cent.
- Increased expenditure has decreased in significance as a cause from 17 per cent to 13 per cent.
Of those that provided reasons, over commitment was by far the biggest cause for people falling into financial difficulty in Q4 2014, with 57 per cent of Harrington Brooks’ customers citing this as the reason that they got into debt. This represents a 14 per cent rise from the Q3 2014 figure of 43 per cent – suggesting that the problem is only getting worse.
The index also shows a number of other interesting trends. The number of people falling into debt as a result of income reduction has fallen from 27 per cent to 18 per cent, a sign that the recent rise in wage growth, as announced by the Office of National Statistics, is starting to pay dividends in people’s back pockets.
Moreover, increased expenditure as a reason for indebtedness has also fallen from 17 per cent to 13 per cent, supporting the argument that the recent fall in inflation to 0.3 per cent means that the cost of living has become more manageable.
Matthew Cheetham, Chief Executive of Harrington Brooks, commented on the new figures:
“The trends revealed by the indebtedness index raise a number of interesting points. Over commitment is a rising problem across society, but incremental increases in lending and spending often go and noticed until it becomes too late with individuals suddenly unable to make the minimum interest repayments on purchases or loans. It is important that, as a society, we are not judgemental but instead recognise how incredibly easy it can be to lose track of one’s money.
Clearly, to continue to borrow when under financial stress is not the answer and therefore it is important that the individuals are able to identify the problem and seek advice in the early stages, before the problem gets out of control.”