UK consumers are not worried they will not be able to manage their debt situation despite household debt having exceeded the £1trn mark, says Nationwide.
Latest findings by the natiowide Building Society shows 95% of consumers say they have enough money to pay their mortgages each month, whereas only 2% say they are regularly struggling.
Nationwide’s survey suggests 74% usually have enough money to make the repayments on their borrowings with 11% regularly facing difficulties.
Current economic climate as well as low unemployment figures seem to have lifted consumers' confidence, with 71% saying they are optimistic about the numbers of jobs currently available, the survey suggests.
Nationwide’s executive director Stuart Bernau says: “Our research shows consumers remain confident about their ability to manage debt, but are also wary about taking on more unsecured debt in the future.
"Underpinning this confidence is the current economic climate and employment situation."
But while consumers remain confident about handling debt, they are also showing signs of taking a slightly cautious stance.
Recent interest rates rises alongside another hike in rates widely expected to be seen this coming Thursday are putting a dampener on people’s appetite for borrowing.
Bernau says: "The warning voiced by Mervyn King and recent interest rate rises do seem to be causing consumers to think carefully about their borrowing and how they intend to repay debts in the future."”
Nevertheless, a further increase in interest rates is unlikely to cause any major harm as a recent survey by the FSA suggests rates have to reach 6.5% before a larger number of borrowers would become affected.
Nationwide's survey also found that over four in ten (42%) people with a loan other than a mortgage plan to reduce their debts within the next six months.
This result differs significantly compared with a recent research conducted by Sainsbury's Bank, which suggests the number of 'lifestyle' loans have tripled compared with last year.
The banks estimates around £203m will be taking out in personal loans for 'lifestyle' purposes this year. This will include financing cosmetic surgery, divorce settlements and paying for home improvements.IFAonline
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