Annual interest payments reach £93bn

by Gill Montia

Story link: Annual interest payments reach £93bn

A survey by uSwitch estimates that interest payments made by UK adults rose by £12.7 billion in 2007, to a record £93 billion a year.

The research suggests that rising bills have left many households finding it difficult to cope with the cost of debt.

According to the price comparison website, the average annual interest bill per household (including mortgage interest payments) stands at £3,744, an increase of £517 (or 16%) on 2006.

Total personal debt in the UK, including credit cards, personal loans, overdrafts and mortgages, is estimated to be around £1.35 trillion and nearly one in four respondents admitted that the repayments on their current debts are unmanageable.

Meanwhile, around 6% of those questioned have had their credit card, overdraft or loan limits reduced in the past six months.

The research also found that 38% of respondents who had applied for a credit card in the past six months had been turned down and 19% reported that their application for a personal loan had been rejected.

Families struggling with the additional costs of Christmas will not necessarily find that the Bank of England’s December cut the base rate will be reflected in their interest payments.

Many credit card and mortgage providers have not yet passed the 0.25% reduction on to their customers.

Mike Naylor, of uSwitch, is advising those with large debts to take immediate action to reduce interest payments, such as consolidating debts into a single unsecured loan.