The on-going economic crisis has forced more people to turn to unsecured lenders, such as instant short term loans companies, to help them make ends meet.
Bank of England analysts said recently that unsecured borrowing, that is loans not secured against a property, rose by a massive £629 million in September. Between August and September this year, the number of payday advances and other unsecured loans rose to £208.6 billion.
Howard Archer, an economist at HIS Global Insight, said the new data suggests an increase in the number of people who are stress borrowing; meaning that rising inflation is forcing them to take out short term loans in order to finance day-to-day living. Furthermore, increased unemployment and low wage increases are compounding consumer’s difficulties.
However, unsecured consumer debt is still extremely low compared to levels seen in the past, he added. There are indications to suggest that consumers have little appetite to take on new loans, while many people would prefer to concentrate on clearing their debts.
Consumer confidence is low and continues to fall and this is reflected in the desire to get better grip on household finances in case the economy and jobs market take a turn for the worse.
Meanwhile, the ONS has released figures showing that financially vulnerable people now spend more of their income on VATable products and services than they did twenty-five years ago, adding to the already severe pressure they are under to survive.