Brits say debt below £15,000 not worth worrying about

Interest rate rises are having no effect on borrowers’ confidence according to the latest Personal Credit Index survey from CreditExpert.co.uk, the online credit report monitoring service from Experian. People are proving more comfortable than ever before with high levels of debt.

Remarkably, approximately six million Britons would only start worrying about their debts - excluding their mortgage - if they passed £15,000. This includes one in 20 (5 per cent or 1.4 million people) who would only start to be concerned if their debts exceeded £50,000. Even so, getting into the red is still seen by many as a major social taboo, with one in five (18 per cent) citing bankruptcy and one in 10 (11 per cent) getting into debt as their most socially embarrassing life event – well ahead of being caught using illegal drugs or getting a divorce.

The findings come as consumer confidence reaches an annual high with CreditExpert’s Personal Credit Index showing a three point rise in the last quarter to 100 – a figure last seen in April 2006. This rise in confidence could be seasonal, with the Spring weather, longer days and two council-tax free months playing a part, as well as recovery from the post-Christmas spending binge.

“The fact that so many Brits are happy with unsecured borrowing of at least £15,000 may seem shocking on first sight, but the ‘credit comfy’ generation seems to have become anaesthetized to the real implications of mounting debt. While many still see big debt as socially unthinkable, the reality is that an increasing number are finding it difficult to gauge when debt tips over to being unmanageable. With the current rise in interest rates, many will find that debt they blithely ignored is in danger of spiralling out of control,” says Jim Hodgkins, Managing Director of CreditExpert.co.uk.

The Index, which is based on survey data from Ipsos MORI in April 2007, tracks consumers’ current credit confidence and future expectations on a quarterly basis. It also reveals:

The percentage of people with credit or loans who say they are ‘very comfortable’ with their borrowings has jumped from 29 per cent in January to 41 per cent

More than half (54 per cent) of all adults are comfortable with their level of borrowing, a six point rise on the previous Index

Confidence has risen in the South, Midlands and London but Scotland and the North have seen a dip – dropping four points to 97

Midlands most confident

The Midlands has seen a surge of confidence in the latest Index. In September 2006 the region was experiencing a low level of confidence, rating just 92, but this has risen sharply to 109 in the last two quarters, the highest Index score to date.

Although not rising to the extent of the Midlands, London and the South’s credit confidence has also increased. London climbed five points from 92 to 97 and the South from 90 to 98. This could be attributed to record City bonuses received by those living in or commuting to London.

The North of England is the only region that has experienced a confidence drop, dipping three points from 101 to 98. The change may be linked to house prices rising in the region, previously an issue that primarily affected home buyers in the South.

The year in retrospect and future predictions

April 2006 and April 2007 saw periods of high credit confidence. Excessive Summer holiday spending last year might have been responsible for pushing the Index down to 98 in the Autumn and hikes in household bills in November 2006 further affected consumer confidence, with the Index falling to 95. Expected increases in tax, interest rates and inflation could see the Index drop over the next three months.

“This wave of the Personal Credit Index has provided us with the best insight yet, as we are able to see year on year change. The recent upturn in confidence seems to be driven by optimism fuelled by the approaching Summer and possibly the relief, for many, at the end of the financial year,” said Jim Hodgkins.

“To help you stay on top of your financial situation an online credit report monitoring service such as CreditExpert will provide a summary of your credit status and alert you to any changes in your credit report. You can get a free 30 day free trial at www.creditexpert.co.uk.”