One in eight households were over-indebted in 2014 which amounts to 3.2 million people compared to one in 10 (2.5 million) in 2012.
The young, self-employed and low-income families have been hardest hit after turning to expensive forms of credit such as credit card, personal and payday loans.
Problem debt is defined as having to spend 25% or more of monthly gross income on unsecured debt repayments (credit card debts, loans and overdrafts) that are not mortgage or rent payments.
Frances O’Grady, TUC general secretary, said: “Rising household debt is not the sign of a healthy economy. People raiding their piggy banks and borrowing more than they can afford is what helped drive the last financial crash.
“The fact that more and more are getting into problem debt is particularly worrying given the prospect of interest rates going up.
“We need a wages-led recovery that works for everyone not another debt-fuelled bubble.”
In 2012 2% of 18-34 year olds with unsecured borrowing were over-indebted, but by 2014 that figure rose by10%.
People who took out payday loans in 2014 typically spent 30% of their income repaying them, up from 12% in 2012.
Mike O’Connor, chief executive of StepChange Debt Charity, said the figures sadly come as little surprise.
He added: “These findings should serve as a stark warning that problem debt is an issue that requires urgent attention. At StepChange Debt Charity we have seen enormous increases in the numbers of people accessing our services. In 2014 alone we helped nearly 600,000 people deal with serious debt problems, an increase of 56% since 2012. While the average unsecured debt we see is about £15,000.
“Temporary financial difficulties can strike almost anyone at any time. We need better protections for people who fall into debt to ensure that temporary difficulties do not become long-term intractable debt problems. People need help to get back on their feet. And we need better incentives and mechanisms to help people save and insulate households from debt problems when inevitable changes in circumstances happen.
“Earlier this year the government announced its plan to consult on proposals that would give those people seeking help with their debts ‘breathing space’, through guaranteed freezes on interest and charges and a halt on enforcement action when they commit to taking action to tackle their debt. We hope the new government will commit to ensuring that this review goes ahead.”
