People in the UK who have trouble paying their debts are more than twice as likely to have mental health problems or suffer severe anxiety compared with the general population. What’s more, among people with the most difficult debt challenges – arrears on mortgage or rent payments – the rate of mental health problems is three times higher than in the general population.

These are the central findings of research by Dr John Gathergood of the University of Nottingham, published in the September 2012 issue of the Economic Journal. His study reveals that people who face tough debt problems find that the stress and anxiety spills over into other areas of their lives. He says:

‘One striking finding of my research is that many people with debt problems describe feelings of being unable to concentrate on day-to-day activities or make normal decisions. This has wider effects on their attitudes and general health’.

The research also finds that in parts of the country where bankruptcy and repossession are more common the impact of debt on people’s mental health is less severe. This seems to result from a ‘social norm’ effect: people experience less impact of negative events when they are more common among their peer group. The research suggests that this ‘social norm’ effect occurs because the social stigma of having debt problems is lower in areas where debt problems are more common.

The study analyses data on the financial position and mental health characteristics of around 10,000 people in the UK between 1991 and 2008. It estimates the mental health effects of being unable to meet debt payments on unsecured debt, such as credit cards, as well as mortgage and rent payments.

The research measures people’s mental health using data on recognised medical conditions plus responses to a series of 12 questions known as the ‘General Health Questionnaire’ or GHQ12, which asks people to describe their feelings and experiences, including sleeplessness, self-confidence and ability to concentrate.

Dr Gathergood investigates how the effect of debt on mental health differs depending on how common bankruptcy and repossession are in the location in which the person with the debt problem lives.

The resulting finding is that higher local rates of bankruptcy and repossession are associated with less impact on people’s mental health. The author comments:

‘My research clearly shows that problem debt causes worse mental health – but where people live makes a big difference.

‘If an indebted individual lives in an area where debt problems are more common, the impact on their mental health is much less severe.’

People who face problems paying their unsecured debts (approximately 15% of the sample) are more likely to suffer anxiety and say that they are experiencing adverse effects on their feelings and emotions, including feeling constantly under strain, hopeless and incapable of decision-making.

More severe mental health effects are found among people who are late with housing or rent payments, particularly those with arrears on their mortgage. Among people with mortgage arrears, one in five suffers a recognised medical impact in the form of depression, severe anxiety and related mental health effects.

As well as these problems, falling house prices and negative equity amplify the negative effects of unpayable mortgage debt on mental health.

Debt and Depression: Causal Links and Social Norm‘ by John Gathergood is published in the September 2012 issue of the Economic Journal. This article is available free.

Media Coverage

The Daily Mail Online The true cost of debt: People struggling to pay loans are ‘three times more likely to have mental health problems’