British workers spent their entire January pay packets on simply serving the interest on their debt, according to a new report published yesterday.
According to the financial advice website www.unbiased.co.uk, 1 February was this year's "Debt Freedom Day", meaning the average consumer failed to make a dent in their debt before yesterday.
Consumer debt levels have reached record highs of more than £1.3 trillion this year. However, unsecured debt, such as personal loans and credit cards, has fallen slightly over the past two years, ensuring that this year's Debt Freedom Day came six days earlier than in 2006.
Consumer debt levels have become a major economic concern in the UK over the past few months, in the light of a string of interest rate rises.
Sir John Gieve, the Bank of England's deputy governor, yesterday admitted to a committee of MPs that the Bank was continuing to keep a close eye on consumer debt. In response to a question about whether rising household debt posed a risk to financial stability, Sir John replied: "It is always on our radar."
This week the Financial Services Authority said that personal debt levels were among the biggest risks to financial stability in the UK over the coming year. It said that while the evidence was that most people were managing, there was a risk that a sudden deterioration in employment levels or further sharp rises in interest rates could tip many households over the edge.
The Insolvency Service will today produce statistics showing the number of people who filed for bankruptcy or took out Individual Voluntary Arrangements (IVAs) last year. The numbers are expected to show another sharp rise, after figures for the third quarter showed insolvencies in England and Wales leapt an annual 55.4 per cent to a record 27,644.Reuse content