Britons are in twice as much debt as they think they are
Britons owe twice as much as they think they do
Wednesday, 18 Jul 2007 13:36
Britons are in twice as much debt as they think they are, new figures show.
When asked to estimate how much money they owed when they combine credit cards, overdrafts, and personal loans the average UK adult said they owed £5,251, research from Mintel finds.
However, according to official Bank of England figures the average amount owed is £10,300 per person - meaning Britons are heavily underestimating how much they owe.
A different picture emerged when mortgage holders were asked how much of their loan they had outstanding. Mortgage holders estimate they have £92,200 left to pay back before they own their homes outright. This is almost identical to the Bank of England figure of £95,000.
"While Brits do seem to have a good grasp of their mortgage borrowing, they are wildly underestimating the amount of money they owe on credit cards and loans," said Toby Clark, senior finance analyst at Mintel.
"Clearly, it is a lot easier to keep an eye on a single mortgage, than it is to juggle a couple of credit cards, a personal loan, a car loan and maybe even an overdraft as well."
The Mintel research also shows a wealth divide when it comes to why people are borrowing money.
Lower income families (households with an income of less than £15,499) tend to take on debt to keep their heads above water, while richer families borrow to invest.
High-income earners are more likely to borrow to pay for a house (63 per cent compared to 15 per cent), buy a second home (13 per cent against one per cent), or pay for their children's university education (nine per cent against two per cent) or for school fees (seven per cent against two per cent).
Lower earners borrow for more mundane matters including bringing up children (29 per cent compared with 21 per cent of higher earners), taxes (11 per cent against six per cent) and regular commitments such as phone bills (11 per cent against four per cent).