Britons become debt free 12 years later than they expect, report finds

Average household debt is up 18 per cent since the financial crisis in 2007

Britons take 12 years longer than they think they will to pay off their debts, according to a report by the Centre for Economics and Business Research.

On average, people in the UK get rid of credit cards, overdrafts and other forms of unsecured debt by the time they are 64. By the time they are 69, they have paid off their mortgages to become completed debt free.

That’s 12 years later than people anticipate, Cebr said after surveying thousands of UK adults under commission from Zopa, a perr to peer lending platform.

The picture for young people is particularly bleak. Those aged between 18 and 24 said they expected to be free of unsecured debt by the age of 38, when in reality it will take them until the age of 66 to clear their debts if they do not become homeowners, and 77 if they do.

The debt burden varies by location. Those in the North East can expect to become debt free at the age of 57, while Londoners wait 20 years longer, until they are 77.

The research also showed that the average debt held by households is up 18 per cent since the financial crisis in 2007.

The Office for Budget Responsibility has said it expects households to have debts worth 167 per cent of their income by 2020, exceeding the levels of household debt seen before the financial crisis.

Household debt is getting worse predominantly among the lowest paid, despite claims by George Osborne that the UK’s economic recovery is not fuelled by debt.

Real wages fell between 2010 and 2014, underemployment – where people want to work more hours than they are offered – rose, and jobs became less secure with the rise of self-employment and zero-hours contracts.

That’s a problem for workers, but it’s also a problem for the economic recovery of the UK.

A major development in UK household balance sheets in the decade before the financial crisis was the build-up of household debt, the Bank of England has said.

“George Osborne is right to warn of a dangerous cocktail of threats facing the British economy. He should have owned up to the fact that rising household debt is a poisonous ingredient in the mix,” said Madeleine Ellis-Petersen, part of the social policy team at the New Economics Foundation.

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