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Peer2Peer Finance News | February 18, 2019

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Personal lending growing four times faster than wages

Personal lending growing four times faster than wages
Emily Perryman

THE VALUE of outstanding personal loans in Britain is rising four times faster than wages, new analysis reveals.

Households had outstanding loans (excluding student loans, credit cards and payday lending) worth £37bn in 2016-17, according to statistics from 10 of the UK’s biggest banks and building societies.

This figure has risen by £7bn, or 25 per cent, from 2013-14, according to UK Finance.

In comparison, the typical full-time worker has seen their pay increase by 6.5 per cent over the same period.

The BBC England Data Unit calculated that the £3.7bn owed on personal loans is equivalent to £1,384 per household.

Read more: OECD calls for borrowing caps to tackle consumer debt

Regions that have seen the lowest increases in median pay for full-time workers have also seen the largest increases in unsecured personal loans.

More than half of postcode areas in Britain have seen unsecured lending amounts increase by more than 25 per cent.

The biggest rise occurred in the St Albans postcode area (AL), where unsecured lending rose by an average of 43 per cent.

A spokesperson for UK Finance said its members were committed to lending responsibly and always undertake a thorough risk assessment of a customer’s finances whenever they apply for credit.

It comes after the Bank of England expressed concerns about the rise in consumer credit and increased the capital that banks must set aside for losses.

Consumer credit – credit cards, personal loans and motor finance – rose by 10.3 per cent in the 12 months to April 2017, which the central bank warned was “markedly faster than nominal household growth”.

Read more: SME lending growth hits two-year low while consumer borrowing rebounds