Section 8: Debt and High Cost Lending

UK Average Debt Statistics 

Table 8.1

Oct-19 Oct-18 Annual Change
Average household debt in the UK (excluding mortgages) £8088 £7,926 +£162
Average household debt in the UK (including mortgages) £59,840 £59,288 +£552
The average amount owed per UK adult £31,569 £30,965 +£604
The average amount owed per UK adult as a % of average earnings 111.70% 113.00% -1.30%
Average consumer borrowing per UK adult £4267 £4,140 +£127
Estimated outstanding mortgage per household w/ mortgage debt £131,383 £125,860 +£5523
Source: The Money Charity, December 2020

Average household debt in the UK (excluding mortgages) was £8088 in October 2019. The figure has increased by £162 on the previous year. Average household debt in the UK (including mortgages) was £59,840 in October 2019. The figure has risen by £552 on the previous year.

The average amount owed per UK adult (including mortgages) was £31,569 in October 2019. The figure has risen by £604 on the previous year. The average amount owed per UK adult (including mortgages) was 111.70% of average earnings,slightly down by 1.3 percentage points on last year.

Average consumer borrowing per UK adult (including credit cards, motor and retail finance deals, overdrafts and unsecured loans) was £4,267 in October 2019, up £127 on the previous year. It is estimated that the average outstanding mortgage per household that carry mortgage debt was £131,383 in October 2019, this is up £5,523 on the previous year.

Total Value of the High Cost Lending Market

Table 8.2

2016 2009 2016-2009 change
UK £14.8bn £7.5bn +£7.3bn
Leeds estimate* £178m £90m +£88m
Sources: OFT Review of high cost credit, 2010 and FCA Review of high cost credit, 2017

*the Leeds estimate is calculated based on ONS midyear population estimates 2016 for 18+ adults

The total value of the high cost credit sector has almost doubled since 2009.  Nationally the sector was valued at £7.5bn in 2009 and grew to £14.8bn by 2016. Using Leeds population figures, it is estimated that the high cost credit sector in Leeds was valued at £178m. The value of the sector is broken down further in Table 8.4.

Market Breakdown of the High Cost Lending Sector

Table 8.3

 Sub-sector Value of the high cost lending market – sub sectors
UK adults Leeds Estimate*
Catalogue credit £4.0bn £48,000,000
Retail finance £6.0bn £72,000,000
Store card £0.7bn £8,400,000
Payday £1.1bn £13,200,000
Home credit £1.1bn £13,200,000
Rent-to-own £0.5bn £6,000,000
Other running account £1.0bn £12,000,000
Guarantor £0.3bn £3,600,000
Logbook £0.1bn £1,200,000
Total £14.8bn £177,600,000
FCA Review of high cost credit, 2017

*the Leeds estimate is calculated based on ONS midyear population estimates in 2016 for 18+ adults

The high cost credit sector is made up of a variety of high cost products such as payday loans, rent-to-own stores, store cards etc as displayed in this table. The total sector was valued at £14.8bn in the UK in 2016 and this figure has been broken down further by sub-sector. For example, £1.1bn worth of payday products were sold to customers across the UK, of which £13.2m is estimated to have been sold in Leeds. The rent-to-own sector was worth £500m in the UK, £6m of which is the estimated value of the market in Leeds. Retail Finance and Catalogue Credit are the largest sub sectors of high cost credit, worth a combined £10bn in the UK and 120m in Leeds

Proportion of Adults with outstanding high cost credit debt

Table 8.4

2016 FCA Prop of UK adults Total no of people with outstanding high cost credit debt
  UK adults Leeds Estimate
Catalogue credit 14.7% 7.6m 90,690
Retail finance 10.2% 5.3m 62,928
Store card 3.7% 1.9m 22,827
Payday 3.1% 1.6m 19,125
Home credit 3.1% 1.6m 19,125
Rent-to-own 0.8% 0.4m 4,935
Other running account 0.6% 0.3m 3,702
Guarantor 0.2% 0.1m 1,234
Logbook 0.1% 0.1m 617
Total 36.5% 18.9m 225,182
FCA Review of high cost credit, 2017

*the Leeds estimate is calculated based on ONS midyear population estimates 2016 for 18+ adults

The FCA estimate that 14.7% of UK adults have outstanding debts on catalogue credit.  This is approximately 7.6m UK adults, when the same proportion is applied to the Leeds over 18 population, it can be estimated that 90,690 Leeds adults have outstanding catalogue debts. 3.1% of UK adults have outstanding payday debts, estimated to be affecting 19,125 Leeds adults.

StepChange Clients – Arrears on selected essential household bills

Table 8.5 

Arrears type 2019  2018 Annual Change 18/19
Average arrears amount Clients in arrears % of clients Average arrears amount Clients in arrears % of clients No % change
Council Tax £1,146 66,302 30% £1052 70,582 30% -4280 0%
CCJs £1,951 5593 18% £1717 5715 17% -122 1%
Electricity £825 42,392 17% £736 41,953 16% 439 1%
Gas £661 23,109 13% £559 22826 12% 283 1%
Mortgage £2977 7810 17% £2946 8951 18% -1141 -1%
Rent £1084 44,386 21% £998 48184 21% -3798 0%
TV License £103 16,569 8% £84 15243 17% -1326 0%
Water £804 48,961 24% £730 51947 23% -2986 1%
Hire Purchase £990 13,179 23% £926 13060 21% 119 2%
Source: StepChange Yearbook Statistics on Personal Debt 2019, March 2020

Clients that contact the debt charity, StepChange on average have a debt of £1,146 owing to council tax. Nationally 66,302 clients contacted Stepchange about council tax debts in 2019. Council tax arrears make up just over 30% of all StepChange clients in arrears. The proportion of clients with council tax arrears has remained the same since 2018.

The average amount owed by clients with electricity arrears was £736 in 2018. This increased to £825 in 2019. The number of clients with electricity arrears grew by 1% from 2018 to 2019. The number of clients with TV license arrears has increased by 1326 between 2018 and 2019, however the percentage of clients seen with TV license arrears has reduced by 9%.

StepChange Debt type, proportion of clients

Table 8.6

National UK Data 2019 2018 2017 Annual Change 2018-2019
Credit Card 69% 68% 67% 1%
Overdraft 46% 47% 50% -1%
Personal Loan 48% 47% 46% 1%
Catalogue 35% 34% 35% 1%
Payday Loan 17% 18% 17% -1%
Store Card 13% 12% 12% 1%
Home Credit 6% 7% 8% -1%
Source: StepChange Yearbook Statistics on Personal Debt 2019, March 2020

In their 2019 Yearbook, 69% of clients calling into StepChange had credit card debts, 46% had overdraft debts and 17% had payday loan debts.

StepChange Debt type, average value

Table 8.7

National UK Data 2019 2018 2017 Annual Change 2018-2019
Personal loan £9034 £8601 £8332 £433
Credit card £7635 £7671 £7690 -£36
Catalogue £2114 £1971 £1,939 £143
Overdraft £1490 £1510 £1,607 -£20
Home credit £1694 £1626 £1,592 £68
Payday loan £1917 £1755 £1,519 £162
Store card £1291 £1184 £1,108 £107
Source: StepChange Yearbook Statistics on Personal Debt 2019, March 2020

When clients called into StepChange in 2019, the average debt owed on their personal loan was £9034, the average owed on credit cards was £7,635 and the average owed on Payday loans was £1,917. Home Credit, Payday Loan and Store Card average debt figures have all seen a rise since 2018.