A steep rise in debt since last summer 2015 has put more households under financial pressure, new research shows.
Income and saving levels dropped during the second half of 2015 with family incomes lower than they were five years ago.
Family household debt has risen by 42% in the last six months to the highest level seen for two-and-a-half years as family incomes and savings habits stall, Aviva’s latest Family Finances Report reveals.
Average family debt – excluding mortgage borrowing – now stands at £13,520, up from £9,520 six months earlier in summer 2015.
The typical family income has also dropped for the first time since July 2012 with a 4.8% fall since summer 2015.
Louise Colley, managing director, protection, Aviva said: “The alarming levels of rising household debt, along with a recent reduction in income and savings levels, paints an uncertain picture for the family purse in 2016.
“With the possibility that the Bank of England could raise interest rates this year, families who have grown accustomed to cheaper credit need to ensure they are still fully prepared to manage debt repayments, as well as other monthly outgoings, should rates go up.”
Colley said the low inflation rate has eased pressure on the family finances, but this cannot be relied on indefinitely.
“It leaves family finances precariously balanced, with the Office for Budget Responsibility forecasting that household borrowing will continue to increase every year until 2019/20 – a warning that must not be ignored.”