Unsecured family money owed set to rise by 9.4% this yr, TUC says

UK households are anticipated to rack up further unsecured money owed of greater than £1,600 this yr, together with on loans and bank cards, as the price of dwelling disaster continues to chew, in line with a TUC evaluation.

The TUC mentioned its evaluation confirmed that unsecured family debt – together with loans and bank cards however excluding mortgages and, for this train, pupil loans – was heading in the right direction to extend by 9.4%, or £1,660, in actual phrases on common per family this yr.

It added that this was the most important annual rise in money phrases since data started in 1987.

The commerce union physique mentioned its findings made a mockery of presidency claims that “the plan is working” to chop inflation and scale back the strain on family funds.

The TUC’s knowledge coincided with official figures exhibiting {that a} report variety of individuals in England and Wales took out a debt reduction order (DRO) – a type of insolvency whereby people can get their money owed written off – in Could.

The TUC mentioned it used official debt knowledge and Workplace for Price range Accountability forecasts to supply its evaluation.

Throughout the price of dwelling disaster, some borrowing prices have hit report highs, piling the strain on shoppers as greater housing, vitality and meals payments drive households to place extra on credit score and take out loans.

On 31 Could, the Bank of England revealed that the efficient rates of interest on overdrafts and bank cards elevated by 55 and 20 foundation factors, to 22.76% and 21.46% respectively. The efficient price on new private loans to people, in the meantime, rose by 62 foundation factors to 9.01%.

The TUC mentioned that polling carried out for it by YouGov final month confirmed that tens of millions of individuals continued to wrestle with the price of dwelling.

Greater than 4 in 10 of these surveyed mentioned that they had reduce on necessities reminiscent of meals and utility spending this yr, whereas 60% mentioned that they had diminished non-essential spending, together with eating out and leisure.

A couple of fifth of respondents to the ballot of greater than 2,000 individuals mentioned that they had fallen behind on family payments in current months.

The TUC has estimated that UK staff are heading in the right direction for “almost twenty years of misplaced dwelling requirements”, with actual wages not forecast to get well to their 2008 stage till 2026. It claimed the common employee would now be £14,700 higher off if their pay had saved up with pre-crisis actual wage development traits since 2008.

Final month, when it emerged that UK inflation had fallen to 2.3% in April, its lowest stage for nearly three years, Rishi Sunak said: “That is proof that the plan is working and that the tough selections now we have taken are paying off.”

However Paul Nowak, the TUC basic secretary, mentioned its findings “present how out of contact this Conservative authorities is with individuals’s struggles”.

Figures from the Insolvency Service confirmed that the variety of DROs taken out by people reached a brand new report month-to-month excessive of three,716 – up 8% on the earlier report set in April 2024.

A DRO is an answer to assist individuals take care of private money owed they can’t pay, and they’re seen by some as a low-cost different to chapter.