Families' disposable income slashed by a fifth every month because of debt interest alone

Debt interest payments are swallowing up around a fifth of the disposable income of a typical UK family, despite the amount owed on personal loans being at their lowest level in 14 years.
Households are finding themselves forking out on average £189 in interest payments alone each month on top of capital payments made on their borrowing, a study commissioned by debt charity StepChange has found.
Interest paid on mortgage payments, overdrafts, loans and other types of borrowing such as store or credit cards is taking up 22 per cent of a family's funds left over after capital payments and spending on essentials such as food and transport.

High interest: Households on average are paying out £189 a month in interest on their debts.

Delroy Corinaldi, external affairs director at Stepchange, raised concerns that some families struggling with interest payments who are hit with unexpected costs could be taking out more credit to see them through until payday.
He said: 'With few UK households immune to the effects of the economic downturn, it is crucial that families have the means to buffer themselves from unforeseen expenses, such as a boiler breaking down.

'If they don't have the finances to deal with unexpected bills, they are going to have to rely on credit to cover the cost of them.
'Therefore, the burden of debt interest can often lead to a vicious cycle where people are using credit because so much of their income is being eaten up by debt interest payments each month.'
The British Bankers' Association reported this week that the amount owed on personal loans was at its lowest since 1999, with the level of outstanding non-mortgage consumer borrowing down 1.6 per cent in the 12 months to December, driven by a 7 per cent contraction in personal loan and overdraft lending.
Spending on credit cards however did increase in December.
The amount of interest people are paying on their debts varies by region, with those in areas with the highest house prices paying off the most due to their larger mortgages, according to separate research.
Households in the south east are paying the most, with the study - conducted by The Centre for Economic and Business Research - suggesting they are spending £315 of their disposable income on interest payments.
You would expect that higher wages would assist people in covering these extra payments, but the research found that inflated house prices are not balanced out with better pay to the same extent across south east as they are, say, in London.
Debt interest payments were found to be at their lowest in Wales, at £150, and in Scotland, at £168.