Consumers worried about credit drought

UK credit customers are worried about credit running dry in the future but are still prepared to borrow, according to a survey.

The survey, from PricewaterhouseCoopers (PwC), found one in five of UK credit customers are worried about the future availability of credit, with 27 per cent concerned about their ability to repay debts in the future.

While the majority of UK consumers still feel comfortable with their current levels of debt, 16 per cent are already struggling to repay their current debts.

However, very few are considering options to restructure their debt - suggesting UK consumers generally feel that they will be able to grin and bear the current situation, PwC said.

The report also revealed UK households now borrow £1.5 trillion - an average debt of approximately £40,000 per adult of working age - more than double the level in 2000.

Unsecured debt continues to rise at six per cent despite the fall in mortgage approvals, showing people are still prepared to spend and borrow, PwC said.

Richard Thompson, partner and head of consumer finance at PwC, said: "After years of easy credit, access to this is drying up.

"The survey shows that some people are still prepared to borrow despite the tough market conditions, rising unemployment, a depleted housing market and the increasing sense that they will be unable to repay debt in the future. This clearly spells tough times for both consumers and lenders alike."

PwC is also now seeing financial institutions increasingly taking the lead to protect their assets by applying to the court for a charging order – a means of converting unsecured lending, which is in default, to secured debt.

Charging orders are up from 10,000 in 2000 to 97,000 in 2007, a 45 per cent increase on 2006.

At the current rate, banks are applying to the court for over 500 charging orders against customers' properties every working day, PwC said.