Unsecured consumer credit grows at fastest rate in more than 11 years
As the UK credit binge approaches levels unseen since the 2008 financial crash, this should set alarm bells ringing for residential landlords to get their affairs in order and safeguard their rental income as soon as possible.
The latest figures from the Bank of England show unsecured consumer credit, which includes credit cards, car loans and second mortgages, grew by 10.8% in the year to November to £192.2 billion.
Put into perspective; in September 2008, the month that Lehman Brothers collapsed and the banking crash triggered a worldwide recession, the level of UK consumer credit debt hit a peak of £208bn.
Debt charities are now warning that this excessive rise in debt levels will leave thousands of families vulnerable to higher levels of inflation and changes in income from wage cuts, divorce or redundancy.
As well as record numbers of renters finding themselves in council tax arrears, a soaring number of private tenants are being driven into debt as they battle rent rises across the country.
Worryingly, one in three British adults bought Christmas food or presents on credit in 2016 with National Debtline stating that there’s been a notable spike in calls to its helpline over the holiday period too. Furthermore, debt charity StepChange say the number of renters contacting them with difficulty paying off debt in the four years to 2015 more than doubled – rising by 139% !
Its head of policy, Peter Tutton, said: “Levels of outstanding borrowing are approaching the 2008 peak, and the growth rate of net lending is at its highest since 2005. Alarm bells should be ringing.
“Previous experience shows how such increases in the levels of borrowing can leave households over-indebted and vulnerable to sudden changes in circumstances and drops in income that can pitch them into hardship.
“Lenders, regulators and the government need to ensure that the mistakes made in the lead-up to the financial crisis are not repeated and that there are better policies in place to protect those who fall into financial difficulty.”
New figures from the Council of Mortgage Lenders also reveal that the number of buy to let landlords struggling to pay their mortgage has hit a 2 year high, where mortgage arrears amongst landlords increased by 6%, from 4,700 to 5,000, between July and September last year.
This is a severe warning to all residential landlords in the UK that they need to start protecting their assets and rent yields. This can be done by simply accessing an effective rent guarantee and legal expenses insurance policy.
Landlords and Agents should visit www.rentsafeuk.co.uk for further information.