Borrowers in the UK are paying less interest on their debt than at any point in the last decade despite record levels of lending, analysis by The Money Charity has revealed.
The financial capability charity released its Debt Statistics report today, giving an overview of the financial situation in the UK.
Based on the latest Bank of England figures, households would repay an average of £2,218 in interest over 12 months on mortgage, credit card, and other consumer borrowing – the lowest since December 2003.
The welcome news for borrowers is down to historically low interest rates. Mortgage interest rates are at their lowest since records began in 1998, credit card rates are lower than at any point since March 2007, while the last time other consumer borrowing attracted lower interest rates was December 2010.
But while it looks like good news for consumers, Money Charity chief executive Michelle Highman said the statistics painted a “perilous picture” for the country.
Many families are only just making ends meet, and any rate increase could tip them over the edge, she said.
“It’s obviously very easy in a time of record low interest rates to be lulled in to a false sense of security that you can afford to take on more debt.
“But as rises in interest rates seem increasingly likely, it’s crucial when taking on debt that you think through, not just whether you can afford the repayments now, but will you be able to do so in the future.”
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