UK

Voluntary debts - mortgages

Within the UK, figures for debt are astonishing. In a country that favours home ownership rather than renting, for many people their largest debt is a mortgage.

Recent figures show that the average property price in the UK is £117,398 – and in London is approximately £183,00, and with many people borrowing up to 90% of the value of the property, that is a huge amount of debt.

Recent estimates suggest that mortgage debt in the UK is around £1,375 billion. That's the equivalent to £53,950 for every family in the country.

Credit cards

For many people, another form of ‘voluntary' debt is credit card debt. That is, they buy things on credit card and pay the bill at a later date.

Statistics show that there are about 55 million credit cards in use in the UK, with total debt on them in the region of £740 billion!

Add to that the fact that many people have loans to pay for items such as cars, holidays or home improvements and the figure goes up to £140 billion.

Of course, not everyone chooses to go into debt – for some people it is the only way they can pay their bills.

Student debts

Another increasing common form of debt in the UK is student debt. In the past, students going to college and university used to receive a government grant to pay their living expenses (course fees are still paid for by the government).

In England and Wales, that no longer happens, so students have to take out loans to pay for their food and accommodation.

While some students receive help from their families, for many they will face an average debt of around £12,000 when they graduate in 2002, and this is likely to increase over time.

Debts make money!

Debts can make money, as the ‘futures' market in London proves. The details are complex, but basically a bank agrees to buy an asset, such as a company's debt or some bonds, at a fixed point in the future for an agreed sum.

Whilst the value of the asset may fall, of course it rarely does, as the banks employ experts to work out the risks involved.

To make sure they don't lose money, they ‘hedge' the risk, by selling an opposite ‘future' to someone else. This trading currently earns the banks around $1 trillion a year.