Household debt surpasses £2tn for first time

Around 80% of this secured is against properties – with a total outstanding secured debt of £1,619bn – having grown by 4.1% in the previous year.  

Meanwhile, the total amount of unsecured debt now exceeds £400bn - equating to a record high of £14,300 per household, with unsecured debt having grown by almost £900 per household in the past year alone, at an annual growth rate of 7.2%.  

These findings come from the professional services firm’s Strategy and UK Consumer Confidence report, which also shows UK consumers struggle to answer basic financial multiple-choice questions, despite 88% of consumers reporting they felt confident or very confident in making financial decisions.  

PwC UK’s strategy and UK financial services lead Simon Westcott said: “With inflation continuing to reduce how far the money in people’s pockets will go, plus household debt now exceeding £2tn for the first time, we wanted to understand how consumers are feeling about managing their personal finances.  

“Whilst financial decisions can feel daunting to some people, we found that 88% of consumers feel confident or very confident in making such decisions, suggesting relatively high levels of financial literacy.  

“However, there appears to be a disconnect between these confidence levels and consumers’ actual understanding of everyday financial products with just 37% of people correctly estimating the value range for a mortgage, and 31% for a personal loan. 

“The figures are startling as it’s clear that a good understanding of financial products, and how they work, can boost resilience, and somewhat mitigate against compounding pressures inflicted by high inflation. 

“As our data shows, it’s imperative that firms, regulators and government work together to boost financial literacy levels and help empower individuals to save and invest.” 

The data also revealed a steep decline in consumers’ confidence in their ability to access credit, falling back to the same level as in 2013 and only marginally above the 2009 level. As well as this, almost a third of people expect their pay to be frozen or decline in the next year.  

PwC UK’s leader of financial services Isabelle Jenkins said: “What the data seems to be showing is that across the board the combination of higher mortgage payments, bills, transport and food shopping will have necessitated a tightening of budgets. 

“Worryingly for some this may have meant a real cut to spending or even measures such as opting out of a pension or long-term savings plan. 

“For most borrowers, credit performs an important function, smoothing income and expenditure, which, if affordable, can be beneficial.  

“However, it is critical that we keep an eye out for borrowing “red flags". There are ways in which consumers can get support from your lender who should be able to provide help tailored to your circumstances.  

“With only around a quarter (26%) of consumers seeking advice or information from financial institutions such as banks, compared to a larger number who turn to friends and family (39%) or internet search engines (38%) it’s clear more need to be done so that more people to feel confident to seek advice.”