The UK’s level of personal debt decreased by 30 per cent in 2023 after plummeting by more than £10,000 per person, according to latest data.
Figures published in money.co.uk’s annual debt index show the average UK adult’s debt has gone from £34,566 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.
Despite reduced levels, more than three in five people (63%) will still start the new year with some level of debt. However, this is down from 80 per cent year on year.
Despite nearly six in ten 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 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.”
Geographically, residents of Belfast have the most debt, averaging £58,582, considerably more than those in London
Credit card debt is most common, with a third carrying some into the new year. Personal loans and overdrafts 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 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 adults’ debt is from the past two years, with over seven in ten 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, rising food costs and mortgage rates.
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 of the nation’s monthly wages go towards paying debt off, with just 16 per cent or £291 going into savings, the report found.
Lucinda said: “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.”
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