UK households may be sitting on a debt timebomb

Shocking new figures from Aviva reveal that household debt in the UK soared 40% in just six months; the average debt now stands at £13,520, a climb of £4,000 from £9,520 last summer. The rise in the figure, which does not take into account mortgage debt, is "painting an uncertain picture for the family purse in 2016", says Aviva's Louise Colley, adding that "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". Last week, housing charity Shelter warned that almost a quarter of rent or mortgage paying parents in the UK are being forced to cut back on winter heating and clothing to meet housing costs. 

After years of tightening our belts, we went crazy with credit cards and overdrafts this year. But the average family is now sitting on a time bomb

Household debts have soared by more than 40% in the past six months alone, new figures suggest.

The average family is now lumbered with £13,520 of personal debt, up sharply from £9,520 last summer, according to insurer Aviva.

The amount includes everything from credit cards and overdrafts to personal loans, store cards and money borrowed from family. Importantly, it excludes mortgages.

The discovery comes as campaigners warn of potential debt time bomb when interest rates eventually start to rise.

Average debt by region Source: Aviva

Figures out earlier this month showed Brits went on pre-Christmas borrowing binge, as debts rose at the fastest rate for nearly a decade.

Bank of England data out showed households now owe £178.2billion on unsecured credit, after taking on an extra £1.5billion in November.

The 8.3% year-on-year rise was the biggest since February 2006, and above the £1.2billion average for the first 10 months of 2015.

Louise Colley, managing director for protection at 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 – particularly those who have spent heavily over the Christmas period – need to ensure they are still fully prepared to manage debt repayments, as well as other monthly outgoings, should rates go up.”

It came as Royal Bank of Scotland warned investors to brace themselves for a “cataclysmic year” ahead.

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In a note to its clients, the bank predicted stock markets could crash by a fifth.

Its advice was: “Sell everything except high quality bonds.”

The gloomy outcome comes after stock markets suffered the worst start to a year since 2000.

Fears over a slowdown in China’s powerhouse economy, and concerns over the country’s debts, have spooked investors.

However, a sharp fall in share prices came to abrupt end yesterday, with a jump in the FTSE 100 index of Britain’s biggest companies.

The RBS note also predicted oil prices could halve to $16 (£11) a barrel, in a further boost to motorists and the wider economy.

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However, the oil price crash - from a peak of $115 a barrel - has crippled the offshore industry.

BP yesterday announced 4,000 job losses, around 600 from its North Sea operations.