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Research Paper CPE Research Report

Drivers of over-indebtedness: report to the Department for Business, Enterprise and Regulatory Reform


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This report considers trends in household ‘over-indebtedness’ in the United Kingdom (UK) since the late 1990s. A number of indicators and benchmarks of over-indebtedness have been suggested in recent studies. This report finds that measures of over-indebtedness based on actual arrears and defaults seem to be the most pertinent indicators of current household economic and psychological stress, whilst measures of over-indebtedness based on household illiquidity and gearing provide reasonable predictors of the household’s vulnerability to adverse shocks. It shows that self-reported problems of ‘over-indebtedness’ and ‘financial difficulties’ are pervasive, although declining until the mid-2000s. However self-reported problems are not always associated with specific adverse financial circumstances or evidence of arrears, suggesting that trends in self-reported over-indebtedness are partly linked to perceptions fuelled by media coverage and to the household’s own self-esteem and economic stability.
In considering over-indebtedness, the report utilises new empirical evidence for the UK. This evidence is both qualitative, utilising in-depth interviews with several stakeholders in the credit market - including financial providers and debt/money advice agencies - and quantitative, based on analyses from two large-scale household data sets. Using these data, we are able not only to examine the correlates and incidence of over-indebtedness across households, but also, by using both the interviews and the ‘panel’1 aspect of our household data sets, to explore the ‘triggers’ that tip households into potential debt problems.


Household Economics and Debt: Indebtedness



DIUS search; Refs checked for ISER citations; report


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