Callcredit Highlights Overindebtness Hot Spots


London's eastenders are the UK's most carefree credit spenders while the people of Harrogate, Salisbury and Dorchester share the honour of being the UK's most prudent borrowers according to research by the UK credit reference agency Callcredit.

Consumer borrowing in the UK hit the £1 trillion mark in 2004 and, although the vast majority of consumers can cope with their credit payments and borrowings, there is a growing concern that many are over-indebted and living on a financial knife-edge.

Callcredit's research highlights levels of indebtedness at both postcode and regional level.

Regionally, people in the South East are the most careful at keeping their credit commitments within their means while the residents of Inner London are the most financially stretched.

Over-commitment seems to be a bigger temptation for city dwellers than it is for their country counterparts. After Inner London the three most indebted regions are the urban centres of the West Midlands, the North and the North West. Cities such as Middlesbrough and Sunderland top these charts.

Interestingly however, there are significant differences within regions. Areas in close proximity to each other, such as Manchester and Stockport, can demonstrate big variations. Manchester is, on average, in the top 20% of indebted areas, whilst Stockport is in the bottom 26%.

At the bottom of the indebtedness ladder, just above the South East, are the predominantly rural South West and East Anglia regions.

Even within post areas, significant differences will often be present, with City Centres often having the highest levels of indebtedness. Some areas of Bradford, are in the top 2% of indebted areas, whilst others are in the lowest 3%. *

Four out of the top ten most indebted postcode areas in the UK are in Scotland - Kilmarnock, Hebrides, Motherwell and Kirkcaldy - a fact which confirms the Scots are prepared to borrow more as a percentage of their earnings than their Celtic cousins in Wales. However, other outlying areas of Scotland, such as Shetland, are amongst the least indebted areas of the UK.

Callcredit analysed over-indebtedness using GeoDebt, an indebtedness index developed to aid responsible lending and borrowing. GeoDebt scores consumers based on key indicators of over-indebtedness, including ones identified by the Government's 'Task Force on Tackling Over-indebtedness'

These key indicators include:

  • High outstanding credit balances
  • High level of commitments relative to income
  • Accounts falling into arrears
  • Frequent opening of new accounts
  • Revolving credit agreements

By aggregating the GeoDebt scores to postcode level Callcredit generated a UK map and regional league table of over-indebtedness (both attached).

Graham Lund, product director at Callcredit, said:

"The regional variations seem to indicate that people in major urban areas are more likely to take chances with their finances than people from rural areas. This sort of information is very useful to lenders because it helps them to profile consumers more accurately and to refine their lending policies accordingly. "

He continued:

"The Government and the UK consumer credit industry are all making great efforts to aid responsible lending and prevent over-indebtedness. The more that such data is made available to lenders, to help responsible lending, the more informed and accurate the decisions will be. It is important for all of us to understand levels of financial stress amongst consumers. We are working with a number of lenders on initiatives in this area, and this type of data is proving invaluable in their work".

* BD3 9 is in top 2%, BD23 5 is in lowest 3%.