Britons heading for debt crisis, says KPMG

Fears that consumers are buckling under the weight of their debt were stoked yesterday after a survey revealed that nearly one-fifth of Britons owe up to £40,000 - excluding their mortgage repayments.

Nearly one-in-four people resort to loans or rely on their credit cards to cover day-to-day living expenses, such as paying an electricity bill, according to the report published by the accountancy firm KPMG.

The findings, which come just days after figures showed that homeowners borrowed an extra half-a-billion pounds against the value of their property in the first half of the year, will add to fears that Britons are racking up too much debt.

Out of the 2,000 adults surveyed, 16 per cent said that they had amassed debts of between £10,000 and £40,000, while just over half the people questioned disclosed that they owed up to £10,000, excluding mortgage borrowing.

"Current debt trends seem unsustainable in the long-term and people need to take action now," Carolyn Steppler, a KPMG adviser, said.

Worries about missing loan repayment deadlines stop nearly one-in-six people from sleeping at night, while 15 per cent of people said their debts were spiralling out of control.

Ms Steppler warned that the "worrying trend" for people to opt for credit and loans to top up their incomes could become a "huge burden" if the economy stalls. "Many people may struggle to pay back these loans," she added.

Although mounting debt incites panic among some, most people prefer to adopt the ostrich approach with 45 per cent admitting that they failed to read their bank and credit card statements regularly. And more than a third said they either had no idea or only a rough idea how much interest they were paying on their debt.

But there was some good news. Fewer than one-in-10 people questioned thought their debts would be a burden for more than five years, with 22 per cent of respondents planning to work overtime, change jobs or seek a promotion to clear their slates.

And one-in-10 Britons planned to slip further down the debt slope by consolidating their borrowings into one loan.