Welsh households had the least financial debt in 2008/10

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The key points are: 

Between 2006/08 and 2008/10 the percentage of individuals considering their financial debt a burden has increased by 1.9 percentage points to 49.4%. 

In 2008/10:

• The combined financial debt of households in Great Britain was £94.7 Billion.

• Just over half (51.0%) of households had financial liabilities.

• For households with financial debt, over half owed at least £3,200; households in the South East had the highest median financial debt (£4,200), whilst households in Wales had the lowest (£2,000).

• Individuals living in the least wealthy households were 13 times more likely to report that their financial debt was a heavy burden, than those living in the wealthiest households.

• The least wealthy 10% of households had over £4 worth of financial liabilities for every £1 held in financial assets.
  

Welsh households had the least financial debt in 2008/10

Introduction

This story focuses on the financial liabilities of households in Great Britain, examining both the self-reported burden of this debt and the characteristics of those households with debt. Mortgage debt will form the focus of a later story.

Financial liabilities include credit and store cards that are not settled each month, overdrafts and all forms of fixed term loans. In 2008/10, private households in Great Britain had financial liabilities of an estimated £94.7 billion; an increase of 10.3% from £85.9 billion in 2006/08. Just over half (51.0%) of households in 2008/10 had some financial debt compared with 49.9% of households in 2006/08. For those households with financial debt, the median amount being borrowed has increased from £2,800 in 2006/08 to £3,200 in 2008/10. 

Table 1: Household Financial Liabilities, Key Figures: Great Britain, 2008/10

Source: Wealth and Assets Survey - Office for National Statistics

Notes:

1. Median excludes households without financial liabilities

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Financial Liabilities – a Heavy Burden?

The percentage of individuals reporting financial debt as a burden has increased between the two waves of the survey. In 2006/08, 47.5% of individuals living in households in financial debt reported their debt as either a heavy burden or somewhat of a burden, compared with 49.4% of individuals in 2008/10; an increase of 1.9 percentage points. 

Between the two waves of the survey there was an increase in those reporting their debt as a heavy burden. In 2006/08, 16.2% of individuals considered their debt a heavy burden; a percentage which rose to 18.0% in 2008/10 (Figure 1).

Figure 1: Self-reported Burden of Financial Debt, Great Britain, 2006/08, 2008/10

Source: Wealth and Assets Survey - Office for National Statistics

Notes:

1. Excludes individuals living in households without financial liabilities

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Financial Debt Burden by Total Household Wealth

In 2008/10, individuals living in the least wealthy households were 13 times more likely to report their debt as a heavy burden, than those living in the wealthiest households (Figure 2). Over two out of five individuals (40.9%) living in the least wealthy households reported their repayments of debt as a heavy burden. In contrast, less than one in thirty individuals (3.1%) living in the wealthiest 10% of households rated their debt repayments with a similar severity of burden.  Combining those who reported their debt as either “somewhat of a burden” or “a heavy burden”, three quarters of individuals living in the least wealthy households (75.2%) found their financial debt a burden compared with fewer than a quarter of individuals (23.0%) living in the wealthiest households.

Figure 2: Self-reported Burden of Financial Debt, by Total Household Wealth: Great Britain, 2008/10

Source: Wealth and Assets Survey - Office for National Statistics

Notes:

1. Excludes individuals living in a household without financial liabilities.

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The Extent of Financial Liabilities

Financial assets, such as money held in current or savings accounts, can be used to offset any financial liabilities that households may have. Therefore, to understand the burden of financial debt, it is important to compare the positive financial wealth held by households, with their liabilities.

For the least wealthy 10% of households, 82% of overall financial wealth was negative (Figure 3). That is to say, the least wealthy 10% of households had over £4 worth of financial liabilities for every £1 held in financial assets. Even for those households in the second wealth decile, the value of financial borrowing exceeded their financial assets.  

 

Figure 3: Financial Assets and Financial Liabilities, by Total Household Wealth, Great Britain, 2008/10

Source: Wealth and Assets Survey - Office for National Statistics

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Financial Liabilities by Region

In 2008/10, households in Wales had the lowest median financial liability (£2,000) (Figure 4) and the second lowest percentage of households with liabilities (45.7 %). London had the highest percentage of households with at least one form of financial liability (54.6 %). The region with the highest median value of financial liabilities was the South East (£4,200).

Median household financial liabilities increased for every region except London between 2006/08 and 2008/10. For the whole of Great Britain, the median increase of financial debt was £400; a rise of 14.3%. The regions with the greatest increase over the two years were the North West and the East Midlands, which increased by £1,000. This represents a rise of 41.7% and 33.3% respectively between 2006/08 and 2008/10.

Figure 4: Median Household Financial Liabilities by Region: Great Britain, 2006/08, 2008/10

Source: Wealth and Assets Survey - Office for National Statistics

Notes:

1. Median excludes households without financial liabiltiies

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Financial Liabilities by Age 

The 2008/10 survey estimated that the households with the largest burden of financial debt were those where the head of the household was aged between 25 and 34 (Figure 5). Nearly three quarters (73.9%) of such households had some financial liability. Households with a head aged 25 to 34 also owed the most. For those with some financial debt, over half owed at least £4,300. In contrast, households with a head aged 65 or over had the lowest proportion with some financial liability (18.9%), with half of these households with a liability owing £1,100 or more.

The largest increase in the percentage of households with liabilities was in the 25 to 34 year old age group. In this age group, there was an increase of 3.1 percentage points to 73.9% in 2008/10. Of households with financial liabilities, those with a household head aged 16 to 24 had the largest increase in median financial liability of £1,000 from 2006/08 to 2008/10. This age group also had an increase in the percentage of households with liabilities, of 2.6 percentage points to 73.6%.

Figure 5: Median Household Financial Liabilities, by Age of Household Head: Great Britain, 2006/08, 2008/10

Source: Wealth and Assets Survey - Office for National Statistics

Notes:

1. Median excludes households without financial liabiltiies

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Financial Liabilities by Household Type

In 2008/10, the following three household types had the highest percentage with financial liabilities: lone parent households with dependent children (73.7 %); married/cohabiting with dependent children (69.1 %); and married/cohabiting with non-dependent children (67.1 %) (Table 2).While lone parents with dependent children households had the highest percentage with liabilities; they had amongst the lowest median financial liability, with a median of £1,600. Married/cohabiting households both under State Pension Age (SPA) with no children had the greatest median financial liabilities (£5,500) in 2008/10.

Household types with at least one person over SPA were the only ones to have less than half of households with some form of liability. These include: single households over SPA (16.6 %); couples over SPA (18.2 %); and married/cohabiting with one over SPA and one under (32.2 %) in 2008/10. These types of households also had the lowest median financial liability with £700, £1,100, and £2,000 respectively.

The household type with the greatest increase in the percentage with financial debt was lone parent with only non-dependent children; an increase of 4.0  percentage points over the two years between 2006/08 and 2008/10. The largest change in median financial liabilities between the two waves of the survey was seen for the household type married/cohabiting under SPA with no children, which saw an increase of £1,000.

Table 2: Median Household Financial Liabilities, and Percentage of Household with Liabilities, by Household Type: Great Britain, 2006/08, 2008/10

Table notes:

1. Source: Wealth and Assets Survey, Office for National Statistics
2. Mean and median exclude households without financial liabilities

Related Statistics

To date, the Wealth and Assets Survey has released major reports and short stories for the first two waves.

Wealth in Great Britain: Main results from the Wealth and Assets Survey Wave 1: 2006/08

Wealth in Great Britain: Main results from the Wealth and Assets Survey Wave 2: 2008/10, Part 1

Wealth in Great Britain: Main results from the Wealth and Assets Survey Wave 2: 2008/10, Part 2

Wealth in Great Britain: Main results from the Wealth and Assets Survey Wave 2: 2008/10, Part 3

Wealth of the Wealthiest Households, Great Britain, 2008/10

An article looking in more detail at poverty and social exclusion in the UK and EU was published by ONS on the 16th January 2013.

Poverty and Social Exclusion in the UK and EU - 2005-2011

Background notes

1. The current story focuses solely on the financial aspect of a household’s debt. Property debt will form the focus of a future story. 
2. Information on wealth and liabilities is as reported; it has not been adjusted for inflation, nor have results been equivalised to reflect differences in household size and composition.

3. The Wealth and Assets Survey (WAS) is a longitudinal survey conducted by the ONS which aims to address gaps identified in data about the economic well-being of households. It gathers information on, among others, level of assets, savings and debt; saving for retirement; how wealth is distributed among households or individuals; and factors that affect financial planning. The survey is currently in its fourth wave of interviewing and to date has released a number of major reports and short stories [please see the related statistics tab].

4. Some analysis presented herein considers financial debt by total household wealth. To aide interpretation, the current story has sorted households into ascending order based upon their total household wealth and then divided them into ten groups of equal size (deciles). 
5. Within the current story only median values are presented. The median is the value of the middle item when data are arranged in ascending order. If the number of items is even the median is the average of the middle pair of values. Where the distribution of financial liabilities is unequal, the median gives a better measure for the whole population. The mean, which provides the arithmetic average, is likely to be influenced by high values so it does not reflect the experience of most individuals. The mean values are available within the background tables.
6. For some topics it is necessary to select one person in the household to indicate the characteristics of the household more generally. WAS uses the household head or household reference person (HRP) for this purpose. The HRP is defined as follows:
   • in households with a sole householder, that person is the HRP
   • in households with joint householders the person with the highest income is taken as the HRP
   • if both householders have exactly the same income, the older is taken as the HRP.
7. No statistical significance testing was performed as part of the analysis for the present article.

8. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

   The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

   Designation can be broadly interpreted to mean that the statistics:

   • meet identified user needs;
   • are well explained and readily accessible;
   • are produced according to sound methods; and
   • are managed impartially and objectively in the public interest.

   Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.