Research from consumer and business analyst MindMetre found that the majority (59%) confirm that they have good reason to feel less worried as they report that their levels of debt have fallen compared to last year.
But they are not resting on their laurels, as the survey shows that UK consumers are planning to reduce their personal debt even further.
In particular 60% say they will focus on shrinking their high-interest-rate credit card debt, 52% will focus on reducing their mortgage, usually representing the largest source of personal debt and 44% report they intend to reduce other forms of unsecured debt such as student loans, other loans and overdrafts.
Rising house prices and consumption are signs that the UK economy is picking up, however household debt, including mortgage debt, was recently reported to have reached a record high.
In addition to this, the warning by the Office for Budget Responsibility (OBR) that wage growth in the UK is not expected to return to the norm for another two years, combined with rising house prices and wage stagnation this may result in may result in an erosion of people’s savings.
Moreover, if borrowing continues to grow disproportionately to wages, it may become very difficult for people to eventually pay back what they owe.
Paul Lindsell, managing director at MindMetre Research, said: “This research reveals that the public is optimistic about their personal finances and in particular that personal debt worries are decreasing.
“But, as Britons report that they have reduced their debt, official statistics warn that increasing house prices and low wage growth may drive up borrowing.
“This would defeat the repayment objectives voiced by large part of the population and drive savers, who have already been suffering from low interest rates, to dip into their nest eggs.
“Should inflation and borrowing continue to rise, the Bank of England may well decide to raise interest rates making it suddenly much harder for borrowers to pay back their loans.
“Unless wage growth recovers, borrowing growth in the UK can only be viewed with concern and the hope that respondents really do manage in their aim to pay back some of their existing debt.”
