UK Debt - How long will it take to pay off.

  • by Graham Bond
  • 10 May, 2017

Levels of borrowing reach new levels

A report has just been published about UK Debt. The typical person in Briton can expect to become free of debt at the age of 69. This is 12 years later than they hope to. The report by the Centre of Economics and Business Research showed the extent of the debt crisis in the UK.

People typically hope to clear their debts by the time they reach 57, but the truth is that they are more likely to still have debt at the age of 65, the age most people would like to consider retiring.

The reality is that they are likely to have hit their 69th birthday before they have paid off all their loans. This research confirms the data obtained by the Office for National Statistics (ONS) data on uk debt.

The UK adult population are now having to wait later in life to become “debt-free” Someone aged between 16 and 24 years old now could be aged 74 by the time they can celebrate becoming debt-free, the report found. Rising property prices lead to bigger mortgage debts.

Throughout the UK there are regional variations, for example a home owner in the North East could become debt free aged 57, whereas households in London will not celebrate their debt-free birthday until around 20 years later - at the age of 77.

The report confirms that householder tend to be over optimistic about the time it takes to repay the debts they have. Consumer research suggests that most people feel they could be debt free by the age of 50. In reality for most people this is very optimistic

The report concluded that most people are in fact aged 64 before non-mortgage debts are cleared.

UK Debt. Is it out of Control?

For the younger age group 18 to 24 year olds, the report paints a dim future. This group are the most optimistic about paying off debt early, have the highest amount of debt per person on average and will not pay off non mortgage uk debt till the age of 66.

When mortgages are taken into account, households containing people aged 35 to 44 years old tend to be the most indebted, the report found, owing £87,800 typically, as the average age of a first time buyer is 31 and most households have mortgages and other financial commitments at this age.

How to help yourself

Whilst it shows a big problem there are ways to improve the situation from a personal perspective. Having a structured   financial plan   to repay debt and consistently reviewing income and expenditure on an ongoing basis is the key to reducing debt. A review of expenses such as Gas, Electricity, Water and other regular bills can help.

Long term cash flow planning can really help you to focus on the future and how to plan in the short, medium and long term.

Obtain impartial advice from an independent financial planner that will help you focus on what is important not just now, but in the future. An alternative is to contact the   Citizens Advice Bureau

If you want to find out more about cash flow planning, please contact us.

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by Graham Bond 08 Jan, 2018


November saw the Bank of England raise interest rates to 0.5 per cent, marking the start of the policy-normalisation process. The autumn budget came later in the month and contained significant downgrades to growth forecasts for 2017-2022. The gloom was somewhat offset in December, when a deal was reached between the UK and the EU, putting an end to a tumultuous first phase of Brexit negotiations. On the continent, October saw the European Central Bank extend a less generous version of its quantitative easing programme while keeping interest rates on hold.

In the US, expansionary tax reforms were passed by Congress and the House of Representatives, leading the Federal Reserve to raise its growth forecasts for 2017 and 2018 to 2.5 per cent, shortly after raising interest rates by 0.25 per cent. The reforms include a cut to corporate tax from 35 to 21 per cent. The quarter also saw US President Donald Trump nominate Jerome Powell as Janet Yellen’s successor. He will take over as Chair of the Federal Reserve in February.

In October, Japanese Prime Minister Shinzo Abe secured a strong mandate for his hard line against North Korea with a convincing majority. Elsewhere in Asia, after what was deemed President Trump’s successful tour of the continent, North Korea launched its most powerful missile ever - allegedly putting the entire US in range.


The last three months have seen little in terms of concrete developments to move markets, yet markets remain buoyant. For the first time in years, however, we are seeing accelerating growth almost uniformly across the globe. The global picture has generally been one of falling unemployment levels and low inflation. This is a slightly curious phenomenon, as high employment would be expected to stoke demand, but can perhaps be explained by low wage growth.

The exceptions to this are the US and the UK. The US has been raising interest rates for some time, and the UK has recently raised rates for the first time in years. This, in some ways, is also curious as raising rates would generally signify strong growth activity. In the US, however, growth is expected to slow whilst the UK is experiencing a period of high inflation and growth falling much faster than expected, as the fallout from the EU Brexit referendum and an impasse in the subsequent negotiations begin to bite. Overall, changes for asset allocations are modest, with a slight move away from the UK into other equities. The prospects for property have decreased as higher rates generally put pressure on capital values.



·         Japan: There is a Bank of Japan meeting on January 22-23. An outlook report will be published the same day. The next meeting will be on March 8-9.

·         US: Federal Open Market Committee meetings will take place on January 30-31 and March 20-21. February 3 will see Jerome Powell take over from Janet Yellen as Chair of the Federal Reserve..

·         Europe: There is a European Central Bank meeting on January 25 with a press conference later in the day. The 2018 Russian presidential election takes place on March 18.

·         UK: Monetary Policy Committee announcements with minutes are scheduled for February 8 and March 22. An inflation report will be published on February 8. Talks on a trade deal between the UK and the EU are currently expected to begin in March, the same month that a two-year EU Brexit transition deal is expected to be agreed.

·         Other Data: The Office for National Statistics is set to release its UK productivity bulletin for July to September on January 5. The UK consumer price inflation bulletins for December, January and February will be released on January 16, February 13 and March 20 respectively. The US Census Bureau will release its US International Trade in Goods and Services reports for November, December and January on January 5, February 6 and March 7 respectively.


Most Likely:EU Brexit sentiment will continue to drive UK sterling, which in turn will move large-cap exporters. Recent positive developments, with Brexit talks moving into the second round, mean further UK sterling strength from here is limited, so large caps will close the gap with recent outperforming smaller and medium sized companies. Coming off the back of recent strength, we would expect oil and commodities to trade sideways from here, which is profitable and positive for stocks within these sectors.

Worst Case: Chinese de-levering will halt demand in commodities and oil, which will result in price weakness and falls in those large sectors. Further EU Brexit posturing may weaken UK sterling (with exporters doing relatively better) as real wages continue to fall and inflation bites. Any sustained imported inflation will raise short term rates dragging income stocks lower.

Best Case: Sustained progress in EU Brexit talks encourages businesses back into capital investment that, at long last, begins to stimulate growth. Stronger UK sterling is a drag on exporting stocks in this scenario - expect domestics to outperform like in 2016. Softer Chinese monetary policy will be positive to commodities and oil stocks as OPEC cuts are maintained.


Most Likely: It is likely there will be no changes to interest rates and inflation will start to fall. This means that losses on cash will narrow in real terms. Inflation will remain above target if the significant depreciation of the pound following the Brexit vote has not yet had its full effect on consumer prices. However, it should come down from the 3.1 per cent reached in the year to November, barring any significant currency movements.

Worst Case: While interest rates are put on hold, inflation could rise, pulling real returns further into negative territory. One likely explanation would be a depreciation of the pound following a breakdown in Brexit talks. This would raise import prices for UK firms and it is likely that they would pass some proportion of their increased costs onto consumers, as they have done since the Brexit vote.

Best Case: For cash savers is that inflation falls while rates are raised by 0.25 per cent in January, meaning that losses narrow in real terms. A rise in the price of UK sterling would be the most likely explanation. Any consequent fall in inflation would raise real returns to cash. However, it seems likely they would remain negative even in this best-case scenario.


Most likely: The economic backdrop is supportive and moderate growth looks set to continue in 2018 across Europe, Japan and the US. Despite late-cycle dynamics in the US, short-term recession risk is low - wages and rates have room to rise before it becomes problematic for the economy. Japan is in the ‘sweet spot’ of the economic cycle, allowing the best of corporate Japan to perform well.

Worst case: Markets could price in regulatory uncertainty around data privacy and anti-trust, derailing the technology rally. Risk of new elections in Germany may lead voters towards right-wing populist party AFD (‘Alternative for Germany’), which has thrived on dissatisfaction with established parties, leaving European equities vulnerable. Slowing buybacks and dividend growth with little margin improvement, may imply unspectacular returns for Japanese equities.

Best case: US earnings could see a boost, with the largest beneficiaries being banks, airlines and oil refiners resulting from proposed tax cuts. European equities should benefit from continuing profit margin expansion, low inflation and falling stockmarket correlations. Japanese equities should benefit from healthy earnings and progressive corporate reform.


Most Likely: The market’s view of EU Brexit is likely to determine the course of gilt yields over the next quarter. When a deal or a softer Brexit looks more likely, yields are likely to rise; whereas when a ‘no-deal’ or ‘hard’ Brexit looks more likely, yields are likely to fall as domestic inves­tors seek the safety of government bonds. Slight gains in corporate bonds are likely as the UK is unlikely to tip into recession.

Worst Case: A collapse of the Conservative government and a new election could lead to Labour’s Jeremy Corbyn either leading in the polls or winning the vote by the end of the quarter. This would lead to an expectation of much greater public spending and a weaker economy, which could lead to gilts selling off as international investors flee and domestic investors look to diversify. Corporate and high-yield bonds would also do badly in this environment.

Best Case: For gilts, the best case would be a collapse in the EU Brexit talks and a severe downturn in UK economic data, both of which should lead to risk-aversion and higher demand for safe-haven assets. For corporate and high-yield bonds, the best case would be the opposite, which would lead to lower default risks and higher corporate bond prices.


Most Likely: Emerging markets are likely to make positive returns this quarter, although less than they saw in 2017 as valuations in the market start to normalise following a strong period. South Africa is likely to have a strong quarter thanks to the results of the ANC leadership election in December, while Brazil is likely to lag as the president is unlikely to succeed in getting pension reform through before elections. Local factors are likely to become critical to returns in each country.

Worst Case: A global downturn, led by the US, could lead to serious headwinds for the region. The US dollar would likely rise, which would be mostly negative for emerging market economies, while investors would seek out the safety of developed world government bonds and equities.

Best Case: If the developed world continues to grow slowly and rate rises are delayed, then emerging markets are likely to remain in favour. The whole region could become more richly-valued if equity markets in the developed world are sluggish while economic growth is steady, encouraging investors into the developing region.


Most Likely: Pressure from the EU Brexit negotiations eases following a late-hour divorce deal being struck. Not much change is expected in the UK as companies wait for clarity. Income should continue to drive returns, with disparity among sectors. Capital values might compress a little but should remain localised, with London offices being the most at risk. Low to mid-single digit returns are the most likely outcome for the asset class.

Worst Case: Rapidly-rising rates are a threat to property markets as they reduce the yield gap between bonds and property, and make the asset class less attractive. This is a risk for US real estate investment trusts (REITs) in particular, as the US Federal Reserve shows confidence in the strength of the economy’s growth. In the UK, fundamentals have not changed but a stalemate in EU Brexit negotiations, or any sort of bad news, will likely depress investors further.

Best Case: In the UK, early progress on a new trade agreement with the EU would lift investor sentiment and help companies plan for office-space requirements. This would be supportive of capital values. Low interest rates for longer also support the attractiveness of the asset class, and Europe is well positioned in this respect.

A PDF copy of the market commentary is available here


by Graham Bond 27 Sep, 2017

By now, you’ve probably heard the news: Your own behavioural biases are often the greatest threat to your financial well-being. As investors, we leap before we look. We stay when we should go. We cringe at the very risks that are expected to generate our greatest rewards. All the while, we rush into nearly every move, only to fret and regret them long after the deed is done.

by Graham Bond 13 Sep, 2017

August is traditionally a quiet month as people go on holiday, factories close and parliament takes a break. Sadly, this year was dominated by terrorist atrocities in Barcelona, and by an increasingly combative rhetoric from North Korea that culminated in the firing of a missile over Japan. This brought about a heightened demand for perceived “safe-haven” assets, whilst the price of gold surged to an eleven-month high and reached its highest level since President Trump’s election in November 2016.

Weather has dominated the headlines, with Tropical Storm Harvey hammering Texas and the US Gulf Coast. This was followed by Hurricane Irma, bringing devastation to the Caribbean, Florida and beyond. Jose and Katia are the latest to bring havoc of what is still the beginning of the tropical season.


The FTSE 100 Index rose by 0.8% during August. The only real change we may see to the pound over the coming months, is the removal of the old circular coin in mid-October! it continues to struggle again the EURO and USD.

UK equity markets rose over July, although the overall performance of large companies was eclipsed by that of mid-caps. While the blue-chip FTSE 100 Index rose by 0.8%, the FTSE 250 Index rebounded from a poor June to end July 2.3% higher.

Royal Bank of Scotland (RBS) reached an agreement with the US Federal Housing Finance Agency over the mis-selling in the US of high-risk mortgage products before the financial crisis. RBS will pay US$4.75 billion to settle the case. Elsewhere, payment processor and fellow FTSE 100 constituent Worldpay confirmed that it was to be taken over by US payment processor Vantiv.

The UK economy posted quarterly growth of 0.3% for the second quarter of the year, compared with first-quarter growth of 0.2%. Growth in the services sector was boosted by a strong contribution from the UK retailing and film industries. The International Monetary Fund (IMF) downgraded its forecast for UK economic growth in 2017 from 2% to 1.7%, citing “weaker-than-expected activity” in the first quarter.

Having fallen by 1.2% in May, retail sales volumes rebounded in June, rising at a monthly rate of 0.6%. Sports retailer Sports Direct revealed a drop of almost 59% in full-year profits, which were weighed down by a period of bad publicity and the effects of the pound’s weakness. Sterling rallied to its highest level against the US dollar since September 2016 during July.

Supermarket retailers Sainsbury’s reported a stronger-than-expected sales increase during its first quarter, but sounded a warning note over the impact of mounting inflationary pressures. The UK’s annualised rate of consumer price inflation eased unexpectedly in June, falling from 2.9% in May – its highest level since June 2013 – to 2.6%, and posting its first drop since October 2016. The decline was primarily caused by a fall in motor fuel prices, and the news went some way towards alleviating pressure on the Bank of England (BoE) to consider tightening monetary policy.

The rate of unemployment in the UK fell to its lowest level since 1975 in the three months to May, declining to 4.5%. However, wage growth continued to lag inflation: average earnings (excluding bonuses) rose at an annualised rate of 2%. Moreover, once inflation was stripped out, real weekly wages fell at an annualised rate of 0.5%, stoking concerns about the possible impact on economic growth.

UK equity indices generally rose during July, although medium-sized companies generally performed better than their larger counterparts. Over the month, the FTSE 250 Index rose by 2.3%, while the blue-chip FTSE 100 Index climbed by 0.8%. Meanwhile, the FTSE 250 Index’s yield fell from 2.71% to 2.65% during July, and the yield on the FTSE 100 Index eased from 3.84% to 3.80%. In comparison, the yield on the ten-year gilt edged down from 1.33% to 1.29% over the month.

Support services and construction firm Carillion issued a profit warning and announced the suspension of its dividend pay-out. Elsewhere, HSBC Holdings announced a new share buyback of up to US$2 billion, taking its buyback total to US$5.5 billion. According to HSBC’s CEO, Stuart Gulliver, the company has paid “more in dividends than any other European or American bank” over the past 12 months.

UK Investment dividend pay-outs hit a new second-quarter record in 2017, according to Capita Asset Services’ quarterly UK Dividend Monitor, reaching a total of £33.3 billion. Dividends were boosted by a strong contribution from companies in a “resurgent” mining sector, where second-quarter pay-outs rose at an annualised rate of 73%. During July, miner Anglo American revealed stronger-than-expected half-year results and a sharp decline in debt, and announced the early reinstatement of its dividend pay-out. Its dividend policy will target a pay-out of 40% of underlying earnings. Anglo American announced the cancellation of its dividend pay-out in December 2015 as part of a restructuring programme designed to address a downturn in commodity prices.

Total underlying dividend payments of £28.6 billion were augmented in the second quarter by special dividends totalling £4.6 billion. Sterling’s weakness continued to flatter pay-outs from UK companies: underlying growth in the second quarter was 12.6%; however, when the currency effects were stripped out, underlying growth was a slightly more modest 7.8%. Looking ahead, although the second half of the year is expected to be quieter than the first half in terms of dividends, Capita still expects 2017 to be a record year.


Uncertainties surrounding Brexit continue. The UK will "soon regret" leaving the EU, European Commission President Jean-Claude Juncker has said. Inflation hit 2.9%, ahead of the Bank of England’s target of 2%....ongoing concerns of a rise in interest rates continue.

The euro rose to its highest level against the US dollar since January 2015 during August, driven up by concerns over the impact of Tropical Storm Harvey in the US, and by the strengthening European economy. The eurozone’s economy expanded at an annualised rate of 2.2% during the second quarter.

 The euro’s appreciation generated some apprehension about the impact on corporate earnings in the region. Over August, the Dax Index fell by 0.5%, while the CAC 40 Index edged 0.2% lower.

European Central Bank (ECB) President Mario Draghi played down speculation that the central bank intends to start winding down its programme of economic stimulus measures soon. Mr Draghi said: “The last thing that the Governing Council may want is actually an unwanted tightening of the financing conditions that either slows down this process or may even jeopardise it”. Mr Draghi hailed the measures as successful, citing “all the economic sentiment indicators (and) survey indicators (which) are either at all-time highs or close to that”. The euro rose to its highest level against the US dollar since the beginning of 2015; meanwhile, the Dax Index fell by 1.7% and the CAC 40 Index dropped by 0.5% over the month.

Mr Draghi issued a cautionary note, however, warning that underlying inflation remains subdued and has not yet demonstrated “convincing signs of a pick-up”. The annualised rate of inflation in the euro area remained unchanged at 1.3% during June, remaining below the ECB’s 2% target. A survey undertaken by the ECB found that expectations for inflation in the euro area have deteriorated, highlighting the problems faced by the central bank. The survey found that the rate of inflation expected to remain below target in 2017, 2018 and 2019.

Economic sentiment in the eurozone rose in July to its highest level for ten years. Sentiment was boosted by stronger confidence in the services sector. The eurozone’s rate of unemployment fell to 9.1% during June, reaching its lowest level since February 2009. The International Monetary Fund (IMF) expects economic expansion in the eurozone to be stronger than previously predicted, and upgraded its forecast for 2017 from 1.7% to 1.9%, citing better-than-expected momentum in domestic demand. The IMF also upgraded its economic forecasts for several major European countries, including Spain – which is expected to expand this year by 3.1% - and Italy, which is forecast to grow by 1.3%.

Following a surge in demand for European equity funds in April and May, investors ’ appetite for funds in the Europe excluding UK sector declined during June, according to the Investment Association (IA). Nevertheless, in absolute terms, demand remained relatively robust and the sector experienced net inflows of £188 million during the month. Similarly, although demand for funds in the European Smaller Companies sector waned in June, net retail sales remained in positive territory.


The US economy expanded at an annualised rate of 3% during the second quarter of 2017, compared with an earlier growth estimate of 2.6%. The Dow Jones Industrial Average Index edged 0.3% higher over August.

The hurricane season is still playing havoc with the production of oil, refining activity, demand and distribution. Prices rocketed in August, early September and it is very unstable.

Credit ratings agency Moody’s reported that, of the US$1.84 billion cash pile held by US non-financial companies, 87% of the pile is held by investment-grade companies, and the top-five cash hoarders can all be found in the technology sector, led by Apple.

Despite a backdrop of persistently low inflation, speculation over the likelihood of tighter monetary policy continued to put pressure on global bond and currency markets during July. The US Federal Reserve is expected to begin cutting back its balance sheet soon; meanwhile, the European Central Bank is trying to curb speculation that it intends to wind down its programme of economic stimulus measures.


China’s economy posted annualised growth of 6.9% during the second quarter of 2017, having alsoexpanded by 6.9% during the first three months of the year. This growth exceeded the Chinese government’s official annual economic growth target of around 6.5%. Although the news was generally well received, it did not manage to allay broader concerns over the impact of China’s mounting debt burden, excess capacity in the manufacturing sector, and worries over a bubble in the property sector. The Shanghai Composite Index rose by 2.6% during July.

The International Monetary Fund (IMF) upgraded its forecast for China’s economic growth in 2017 from 6.6% to 6.7%, and in 2018 from 6.2% to 6.4%, citing the country’s “policy easing and supply-side reforms”. China’s industrial output rebounded in June, rising at an annualised rate of 7.6%; meanwhile, imports grew at an annualised rate of 18.9% during June, while exports rose by 8.5%. Elsewhere, retail sales increased to their highest level for more than a year during June, rising at an annualised rate of 11%. During July, China’s authorities launched a new programme – Bond Connect – which is designed to open the country’s bond market and make it easier for foreign investors to buy and sell Chinese bonds.

In India, pressure on central bank policymakers continued to intensify amid calls to cut interest rates. The Reserve Bank of India’s (RBI’s) key interest rate currently stands at 6.25%. Disappointing inflation figures were compounded by lacklustre industrial production data in July. Annualised consumer price inflation fell from 2.18% in May to 1.54% during June, while the rate of wholesale price inflation dropped from 2.17% to 0.9%. The CNX Nifty Index rose by 5.8% during July.

Brazil’s economic growth is likely to remain weak for a prolonged period, according to a report by the World Trade Organisation (WTO), although the WTO expects the country to begin a gradual recovery over 2017. The WTO believes that, although Brazil’s fundamentals are generally solid, the economy remains vulnerable to fresh political uncertainties and delays in tackling fiscal imbalances and structural reforms. Meanwhile, the International Monetary Fund (IMF) believes that Brazil’s economy is reaching a “turning point”; nevertheless, like the WTO, the IMF remains concerned about the impact of political instability. Over July, the benchmark Bovespa Index posted a rise of 4.8%.

A PDF version of the commentary is available here

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