According to the latest data, the UK’s level of personal debt decreased by 30% in 2023 after plummeting by more than £10,000 per person. The figures published today in money.co.uk’s annual debt index show the average UK adult’s debt has gone from £34,566 down to £24,264 over the past 12 months.
Following a period of uncertainty amid the cost of living crisis, experts say the data indicates a degree of economic recovery and renewed financial stability. Although levels have reduced, more than three in five people (63%) will still start the new year with some level of debt. However, this is down from 80% year on year.
Despite nearly six in ten (59%) people being worried about debt going into the new year, experts say reduced debt levels could provide many with a springboard to save in 2024.
Lucinda O’Brien, expert at money.co.uk savings accounts, said, “The substantial decrease in personal debt, averaging £10,000 less per adult over the past year, reflects a general improvement in economic conditions and financial stability, suggesting a partial rebound to the cost of living crisis.
“However, despite an overall reduction, it’s important to note that a significant majority of people (63%) will still enter the new year with some level of debt. While this is a notable improvement from last year’s figures, it means millions of people are still struggling.”
Credit card debt is most common among UK adults, with a third (33%) carrying some into the new year. Personal loans (16%) and overdrafts (14%) follow as the most common forms of debt.
Those with credit card debt owe an average of £9,547, the report found, with fewer than three in ten (29%) paying off the full amount each month.
When it comes to total debt, those aged 25-34 have the highest levels with an average of £38,461, more than £20,000 of which is owed to their credit card provider, followed by the youngest demographic aged 16-24, averaging £31,644 of total debt.
The oldest age group surveyed (55+) have the lowest average debt, at £9,658, according to the data.
The report also shows almost a quarter of the nation (24%), which equates to around 10 million people, has taken out at least one extra credit card or loan this year to help pay off debt incurred amid the cost of living crisis.
Geographically, residents of Belfast have the most debt, averaging £58,582, considerably more than those in London, where the average level of personal debt stands at £34,350. At the other end of the scale, Brighton residents have the lowest levels – averaging £6,441.
Almost six in ten (59%) adults’ debt is from the last two years, with over seven in ten (71%) saying at least some of their debt is a result of the cost of living crisis. According to the data, this has primarily been driven by an increase in utility costs (29%), rising food costs (27%) and mortgage rates (10%).
On average, those whose finances have been impacted by the cost of living crisis are £396 worse off per month, or £4,752 a year.
On average, around a quarter (24%) of the nation’s monthly wages go towards paying debt off, with just 16% or £291 going into savings, the report found.
Lucinda added, “In light of the annual debt index’s findings and ahead of the new year, now is an opportune time to assess your finances, especially in terms of savings. Reduced debt levels can make it more viable to allocate a portion of income to savings.
“Take some time to research the best savings account for you, assess your monthly ingoings and outgoings, and establish a savings goal to identify how much you are able to put away each month.
“Even a small savings pot can help provide increased financial stability, meaning you’re less likely to rely on buy now, pay later schemes or credit card purchases, which could contribute to debt in 2024.
“If you’re financially secure and have a long-term savings goal, putting money away for something like a property, then consider a fixed rate savings account. This could provide you with the best returns on your savings, although your funds can’t be accessed immediately.
“If you’re at the beginning of your savings journey and may need to withdraw the money at short notice, like in case of an emergency, then an instant access account may be best for you. These savings accounts offer competitive rates and immediate access to your funds.”
For more information and guidance on saving and reducing personal debt, visit www.money.co.uk/savings-accounts.
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