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Mortgage Debt In The UK Increases by £0.03 Trillion

11 Dec 2019
Approx Reading time: 3 minutes
  • Wealth Asset Survey indicate that household debt in the UK has reached £1.28 trillion
  • Almost 90% of the total household debt is from mortgage debt
  • Household financial debt has also increased with student loans and hire purchase agreements contributing significantly

According to the latest Wealth Assets Survey, mortgage debt has been growing in the UK. The survey indicates that total household debt in the UK is around £1.28 trillion, and over 90% is property debt. It comes at the back of reports that the proportion of new mortgage approvals in the UK has slowed.In September, new mortgage lending dropped to anew six month low, which an indication that the property market had slowed.

Mortgage debt increased to £1.16 trillion

Property debt, which comprises equity release secured on property and mortgages, was around £1.16 trillion. About £119 billion of the debt was financial debt accounting for 9% of total debt in the UK. Usually, financial debt comprises of personal loans, credits cards as well as all other non-mortgage debt.

Over the two years between 2016 and 2018, total property debt increased by around £0.03 trillion from £1.13 trillion. As a result, this is a reflection of the increase in the number of households with mortgage debt. Also, it shows how debt levels in the UK have been on the rise. According to the survey, around 9.2 million households had property debt increasing from 9.1million.

Financial debt grew by 11%

The amount of financial debt increased with student loans contributing significantly. It is because most graduates will never repay their student loans in full, according to Hargreaves Lansdown analyst Sarah Coles. However, even without student loans, the total household finance debt could still be high. Total household financial debt increased by 11% between 2014 and 2016. Student loans debt increased by £7 billion in the period while hire purchase debt also grew by £6 billion. For instance, overdraft, arrears, credit cards, loans, and hire purchase agreements accounted for around £87 billion in debts.

The Office of National Statistics conducted the Wealth and Assets Survey that it undertakes typically after two years. Therefore the latest figures were from April 2016 until March last year. According to the data provided, debt has household debt has been increasing in real terms in the previous few years, from 2012 to 2014. The increase in total property and financial debt was a result of an increase in levels of indebtedness and households with debt.

Median property debt up 5%

The median mortgage debt between 2016 and 2018 was approximately £96,000 after adjusting for inflation. However, this is 5% more than the property debt reported between 2014 and 2016 when the median debt was £91,600.

Looking at the debt level is vital in seeing the distribution of debt and how the levels change over time. Equally, it is vital in determining how the debt is burdening households. In the Wealth and Assets Survey, around 7% saw their property debt as a heavy burden. Around 30% of households considered it somewhat of a burden. The survey examined households that have not fallen behind in their mortgage.

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Rebecca White

Rebecca White is chief editor at Rebecca has an extensive amount of knowledge on financial subjects including short-term loans & debt consolidation in the UK and USA. Rebecca has wrote for many publishers such as Debt Secret, My Money, VL and more.