Personal debt to hit £2.6trillion

Bleak financial outlook in PwC report

HOUSEHOLD debt will soar by more than a third to £2.6trillion within five years, a report out today predicts.

Accountancy firm PwC reckons Brits will be left owing that figure by 2023 – costing more than £100billion a year in interest payments.

The financial crisis which erupted a decade ago saw banks rein in their lending, resulting in household debt to income levels falling.

But rock bottom interest rates and rising property prices mean it is on the up again, storing up a potential debt timebomb.

PwC’s report says household debt – everything from mortgages to student loans and car finance – stood at £1.9trillion at the end of 2017. It predicts this could jump 37% by 2023.

According to the study, debt repayments will rise from £66bn in 2017 to £104bn, or as much as £125bn if the Bank of England base rate rises to 3%.

Mike Jakeman, senior economist at PwC, said: “Households with ‘problem debt’ are disproportionately concentrated among those with low incomes.

“These households are particularly vulnerable to rate increases, with around 60% of low-income households that face difficulties servicing their debts doing so because of higher repayment costs, rather than falling incomes.”

Total UK debt will leap from £5.1trillion to £6.7tr, predicts PwC, or 260% of the country’s annual economic output. Of that, the amount owed by non-financial companies is forecast to rocket 41% to £2.4tr.

That’s double the increase in central government debt which the report predicts will grow 20% to £1.8tr.

The report says the big unknown is Brexit, with a “smooth” exit from the EU likely to see borrowing rise faster.