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'Household debt levels rising'

Families' debt levels are at their worst in at least two-and-a-half years despite strong efforts to shore up their savings, a report has found.

Households owe almost £13,000 typically which is the largest sum on records going back to January 2011, according to Aviva's family finances report.

Average household debt has jumped from just over £9,000 a year ago to £12,834, including around £2,011 borrowed from friends and family, £2,006 piled onto credit cards and £1,959 in personal loans.

Low interest rates have helped to push the cost of borrowing down, although one in 20 (5%) families said they are relying on expensive payday loans to get by and one in 33 (3%) are using pawnbrokers.

Less than half (45%) of families said they are managing to make monthly debt repayments, falling back from 57% one year ago.

At the same time, Aviva reported a big uplift in households trying to put money away in savings, with less than one third (31%) of families saving nothing each month for the first time since the series began.

Families are putting £96 a month away typically, which is also a new high for Aviva's records. The report suggested the increase has been boosted by an improvement in household income, which is 5% higher than a year ago at around £2,108.

Nearly three-quarters of families (72%) receive an income from a primary breadwinner's job, up from 70% at the start of the year, and the number of families with two wages coming in also appears to be on the rise, the report said.

However, the determination to put more cash away comes at a time when savings rates have been plummeting.

Experts have partly put the tumbling rates down to a Government scheme called Funding for Lending, which has given banks access to cheap finance to help borrowers and made them less reliant on attracting savers' deposits.

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