U.K. unsecure household debt keeps climbing. Britain sees surge in credit card borrowing

Britain experiences a surge in credit card borrowing and experts are saying that the trend is likely to continue and unsecure household debts will continue to climb.

The Trade Union Congress released a report showing that unsecured debt per household will reach a record high of £13,900 this year. According to their analysis, these debts are projected to rise reaching £14,300 next year and £15,400 by 2020.

But the rise of household debts points to the ongoing living crisis in the U.K. as wages are still worth around £20 per week less than before the financial crisis a decade ago.

And official figures from the ONS show that real wages are now falling again.

According to TUC experts, all political parties should be concerned about the growth in household debt. The party that will win the upcoming election will inherit an economy which relies heavily on household spending for growth but it should be taken into account the fact that debt is now much higher than in pre-crisis period.

County Court debt judgments against consumers have risen 35% in England and Wales, and the Bank of England is investigating concerns about unsecured lending to households.

And all this puts the entire U.K. economy at risk, says TUC.

“The surge in household debt is putting the economy in the danger zone, says TUC General Secretary Frances O’Grady,”We’ve got this problem because wages haven’t recovered. Credit cards and payday loans are helping to prop up household spending for now, but millions of families are running on empty.”

O’Grady also has some advice for the future government that should concern itself with how to raise wages in the public sector and also provide sustainable economic growth. Special considerations should be given to those parts of the country where well-paid jobs are rare.

“The next government must act urgently to deliver the higher wages Britain needs for sustainable growth. They must boost the minimum wage, and end pay restrictions for public servants like nurses, firefighters and midwives,” said O’Grady.

“A lot more government support is needed for the parts of Britain where well-paid jobs are in short supply. Communities that lack good jobs today could thrive tomorrow if they get proper investment in training, transport links, broadband and decent housing.”

The TUC analysis comes after the Bank of England releases its May Inflation Report which also underlined, as a potential development, the high import prices which will weigh down on household growth.

At the end of last year, the Bank of England also highlighted in a report that household debts have been high relative to wages and that consumer credit has been growing rapidly. It also warned authorities that a further rise in unemployment could double the number of vulnerable households.

All this led Bank governor Mark Carney to issue a warning at the beginning of 2017 saying that while consumer spending could help power the economy during the Brexit uncertainty, rising prices and a weaker pound will have a great effect on real household incomes.

Unsecured consumer credit includes credit cards, car loans and second mortgages.

The same trend in consumer credit has been registered in the U.S. where the total consumer debt rose to $12.73 trillion, more than before the credit card bubble. Here to authorities have warned about the potential of creating another bubble that could make household vulnerable.