Middle class borrowers sitting on a £198bn debt timebomb

Anne-Marie Moody earns more than £35,000 a year as an accountant, owns her own home and doesn’t splash out on luxury holidays or designer clothes.

On paper, you’d expect the 44-year-old to have a firm grasp on her finances. You certainly wouldn’t think she could be sitting on a mountain of debt.

Yet, over the past decade, she has built up £30,000 on more than 12 credit cards.

Every time she hit one card’s spending limit, she took out another. And because she only made the minimum repayments each month, the debt just grew and grew.

Anne-Marie was coasting along until 18 months ago, when she wanted to move to a bigger home and found her credit file said her rating was ‘poor’. That meant her dream move was off the cards.

Ticking: In total, families are sitting on £198 billion of unsecured debts on credit cards, car finance and overdrafts, Bank of England figures show

‘I realised I was paying £700 a month in minimum payments on my cards, but £600 of that was interest,’ she says.

‘If all the banks had turned around and asked for their money back, I would have been in serious trouble.’

Britain is on the brink of a debt crisis — and stories such as Anne-Marie’s are the tip of the iceberg.

Debt charities say swathes of the country are living on the never-never, where one false move could plunge them into ruin.

And it isn’t just poorer households who are at risk. Charities say doctors, teachers and finance workers are among those deep in the red, having had cheap credit thrown at them for years by the banks.

The debt charity StepChange says most of the people who approach it for help are employed. Some have senior roles, while one in five own their own home.

In total, families are sitting on £198 billion of unsecured debts on credit cards, car finance and overdrafts, Bank of England figures show. That’s the highest level since 2008, the year the banks collapsed.

And, rather than paying down their debts, many are piling on more.

Credit card debt is rising at its fastest pace since 2006. Spenders put £606 million on plastic in April alone.

And, crucially, few borrowers have a buffer in place to protect themselves in case their bills rise or their circumstances change without warning.

A survey of 1,000 people for Money Mail by researchers Consumer Intelligence found almost half of adults worry about debts.

Scraping by: Lynn Laing  fell into debt after her cancer diagnosis,

Scraping by: Lynn Laing  fell into debt after her cancer diagnosis,

One in four of those with incomes above £50,000 said they failed to clear their credit card balance every month, while around one in five has had to borrow money from friends or family over the past three years.

The Money Advice Service says the signs that someone is struggling with debt are ‘difficult to spot’, often because the extent may be hidden due to embarrassment or because the person is unaware that they are living on the edge.

Rising inflation is only exacerbating the situation. Latest figures show that shop prices are climbing at a rate of 2.9 per cent a year, but wages are only going up by 1.7 per cent.

There is also renewed talk of an interest rates hike, which would push up mortgage bills. Last week, the Bank of England voted 5-3 in favour of keeping rates on hold at 0.25 per cent, which was the closest we’ve come to a rate rise since 2007.

It follows a 0.25 percentage point increase in the U.S.

Former pensions minister Baroness Ros Altmann says banks must take some responsibility for the predicament. 

She accuses firms of setting a ‘debt trap’, where middle-class workers such as Anne-Marie are lured in by eye-catching offers and then stung later on.

For example, many credit cards now have a 0 per cent introductory interest rate that lasts up to 43 months. When the offer ends, customers are charged as much as 39.9 per cent.

Anne-Marie is now tackling her debts before it’s too late. She’s closed the credit cards with the highest rates, cut back on frivolous spending and paid off £18,000 over the past year-and-a-half, leaving £12,000 outstanding.

However, charities say vast numbers of people in similar situations are burying their heads in the sand. 

Anne-Marie, from Essex, says: ‘I never thought of my debts as a problem, and didn’t really imagine a day when I would actually have to pay them off.

‘It was not under control — I’d just bounce money from one card to another. When I finally forced myself to look at exactly what I owed last year, I realised what a mess I’d got myself into.’

Lenders insist they have strict checks to make sure customers don’t fall too deep into debt — but that hasn’t stopped teacher Jamie Roberts, 31, racking up £22,000 of borrowing on credit cards, a car loan and an overdraft.

Jamie, from Wellington, Shropshire, is another middle-class professional trying to repair his battered finances before interest rates rise.

He earns £37,000 a year as a head of department at a secondary school, where he is also the Duke of Edinburgh’s Award co-ordinator.

His troubles started when he took out a credit card to buy a £1,000 car to get him to his first teaching job.

It had an APR of 18 per cent and, as he was unable to pay off the full balance, his debt quickly spiralled.

Jamie says the limits on his credit cards were often automatically increased, which lulled him into a false sense of security.

By 2013, he owed £18,000 on two credit cards, an overdraft and car loan. He then consolidated his debts with a personal loan with HSBC.

But the bank charged him interest at 18 per cent and, as the years passed, Jamie realised that he was trapped in a debt cycle, only ever paying the interest and never reducing what he owed. 

Reckless: Credit card debt is rising at its fastest pace since 2006. Spenders put £606 million on plastic in April alone

Reckless: Credit card debt is rising at its fastest pace since 2006. Spenders put £606 million on plastic in April alone

With his total debt at £22,000, he finally visited HSBC last month to renegotiate his loan. 

It was then that he discovered he was being charged almost three times the bank’s lowest rate for new customers — 6.6 per cent. 

HSBC agreed to match this.

Jamie, who teaches health and social care, has suspended his work pension contributions while he gets his finances back on stable ground.

‘Banks offer great introductory rates on credit cards for new customers and that’s their prerogative,’ he says. ‘But then, they’ve got you.

‘I should own a house by now, and have a nice car and go on nice holidays, but instead, I don’t have any savings in the bank. It’s my fault, really. I should have kept my eye on the rates. If I could go back to when I was 21, I would never have taken out that credit card.’

A spokesman for HSBC says: ‘The interest rate we offer is based on an assessment of each customer’s financial circumstances at the time of applying for a loan.’

Charities say it only takes a divorce, illness or redundancy to push borrowers into bankruptcy.

A spokesman for StepChange says: ‘Income shocks can leave people unable to manage and relying on credit to cope, or make previously affordable debts unmanageable.’

Cancer, for instance, costs patients an extra £570 a month on average. As well as unpaid leave from work, they face travel costs to and from hospital appointments, an increase in heating bills after treatment and paying for extra support with cleaning and childcare.

Lessons: Teacher Jamie Roberts owes £22,000

Lessons: Teacher Jamie Roberts owes £22,000

Three in four workers say they’d be unable to find an extra £570 a month, a study by insurer Canada Life found. Yet almost 1,000 people a day are diagnosed with cancer.

Lynda Thomas, chief executive at charity Macmillan Cancer Support, says: ‘At a time when thousands of families are struggling to make ends meet, a cancer diagnosis can be the straw that breaks the camel’s back, sending them into financial freefall.’

Lynn Laing, 56, still owes £3,000 in mortgage arrears seven years after taking time off work for cancer treatment. 

She and her husband Charles relied on her income as a medical receptionist at a GP surgery to pay the mortgage on their three-bedroom home, where they live with their 18-year-old son.

But after being diagnosed with breast cancer in 2010, Lynn, from Edinburgh, was unable to work for 14 months while she underwent surgery, chemotherapy and radiotherapy.

Her employer paid her for the first four months of treatment. After this, she relied on statutory employment and support allowance.

Macmillan Cancer Support arranged a grant to cover two months of Lynn’s mortgage payments.

Despite this, she soon racked up £7,000 of mortgage debt. Lynn also fell into £3,000 of council tax arrears and was unable to pay an electricity bill.

Years later, she admits she is still struggling financially and has had to take out a debt repayment plan to clear a personal loan.

‘Our situation shows how you can be getting by each month and then something happens that pushes you over the edge,’ she says.

‘It was a nightmare. At one point, we were facing eviction and we had to beg the bank to reconsider.

‘It is still causing us a lot of stress, and we’re still paying back the debts.’

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, says: ‘While most people are able to handle their loans now, if the economy suffers and jobs are cut and pay squeezed, these debts could become significantly more difficult to repay.

‘Whether you own your own home or rent, whether you work as a doctor or a cleaner — it doesn’t take too many months to fall behind if your income suddenly drops.’


Whatever you do, don’t bury your head in the sand. The sooner you take action to get debt under control, the easier it will be.

If you are paying interest on credit card debt, switch whatever you owe on to a 0 per cent balance transfer card.

This will mean that every penny you repay will go towards clearing your debts, instead of simply helping to line your bank’s coffers.

Try to pay more than the minimum repayment each month, even if that means you have to cut back on spending elsewhere.

If you have money in savings accounts earning a paltry rate, you may be better off using this cash to clear any expensive debts.

Avoid payday loan companies at all costs. Their rates are extremely expensive and using them can damage your credit score. If you are worried about money or debt, speak up. 

Tell your bank if you think you’re about to miss a payment or exceed your overdraft limit. You may be able to come to an arrangement with them until you’re back in control, and so avoid doing any harm to your credit score.

There are also many debt charities that can help with advice and support. Call StepChange on 0800 138 1111, the Debt Advice Foundation on 0800 043 4050 or the Money Advice Trust on 0808 808 4000.

Macmillan Cancer Support can give guidance on which benefits cancer patients can claim and offer financial support — call 0808 808 00 00.

Age UK also offers free advice, targeted towards older people who are struggling with debt — call them on 0800 169 65 65.

And MoneySavingExpert has a helpful guide to managing problem debt here.

IT manager Alex Newport, 34, discovered the fragility of his situation when his partner was made redundant.

Alex was working for Barclays bank on £40,000 a year and owned a three-bedroom home in Northamptonshire.

But the sudden loss of his partner’s income meant Alex had to pay for his groceries and household bills and those of his partner — who owned a separate home — as well as the mortgage.

Alex admits he was already living beyond his means, with £25,000 of debt on four credit cards and two personal loans. Within a year, he was in £40,000 of debt, maxed out on four credit cards and had hit the £3,000 overdraft limit on his bank account.

He then began missing repayments.

‘When I told family and friends, they were surprised I hadn’t asked for help earlier — but I felt uncomfortable telling people,’ he says. ‘Speaking to my boss about it was the hardest part.’

With help from his employer and StepChange, he negotiated a repayment plan with his creditors and hopes to be debt-free by 2020.

The consumer watchdog is so worried about rising debt levels that it has proposed new rules to help.

The Financial Conduct Authority estimates that around one in five UK adults — 3.3 million people — are in what is called ‘persistent’ debt.

It has told lenders to contact these customers after 18 months and propose a plan to help them repay their outstanding balance.

The Bank of England has also launched a review into whether lenders are dishing out credit too readily.

Earlier this month, former City minister Lord Myners said: ‘Should the Bank of England be worried about the growth in consumer credit? Yes.

‘The quality of lending is declining, and the capacity of people to meet their commitments is declining.’

Joanna Elson says that struggling borrowers should get help before it’s too late: ‘Friends and family members are key players in the fight against problem debt. 

‘Struggling to cope with your finances can be lonely, and support from friends and family can be invaluable.

‘The best thing you can do for a friend or loved one in this situation is to make sure they access the free debt advice they need — at National Debtline, we know that the earlier this happens, the better.’


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