Past Articles for the Uncategorized Category

Howard Archer, chief UK and European economist for Global Insight, believes that Britons are to have limited spending power over the next year.

“This is due to the major headwinds that consumers face - higher interest rates, elevated utility bills, moderate real earnings growth, an increasing tax burden, rising debt levels and pension concerns,” he said

Mr Archer’s comments come despite the fact that spending in the high streets this year was much higher than expected, with British shoppers leading to a 4.4 per cent year-on-year improvement in sales, according to research from the British Retail Consortium.

Heavy price discounting is thought to have contributed to the retailers’ performances over the Christmas period.

The increased spending, both over Christmas and in January, has meant that many consumers have had to seek help in managing their debts.

Lesley-Ann Walsh, debt advisor at Citizens Advice, told the Carlisle News & Star that those concerned about their debts should seek professional help immediately.

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Research from Axa suggests that about a third of Britons refuse to plan their finances at all, with those who do look at them only spending five minutes a week doing so.

The provider states that by increasing time spent reviewing finances to 15 minutes, people could save thousands of pounds in the amount of debt they have.

Steve Folkard, spokesperson for Axa, commented: “There is a direct correlation between the amount of time people spend on their finances and how much they save.”

“Our research shows that it’s not until people start to spend around an hour a month on planning and reviewing their money issues that they really see their savings pot grow,” he added.

The news follows suggestions from Citizens Advice that people in debt should tackle their finances head-on and not avoid them.

Liz Revely, specialist services manager at Citizens Advice, said that those who have overspent over the Christmas period should seek specialist help.

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About one in ten people believe that lenders will not look at a person’s credit history when deciding whether to issue loans.

However, evidence of missed repayments stays on a credit record for about three years and is used by lenders to determine how well a person can manage their credit commitments.

In addition to this, details of bankruptcies and court judgements can stay on records for six years, affecting a person’s chances of securing credit in the future.

The research commissioned by CreditExpert also found that a third of people have been refused loans in the past, despite not knowing the reason why.

It consequently advises people to keep up to date with their credit records so that they are aware of their situation and can protect their identities against fraud.

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Data from HBOS suggests that consumer savings are set to top the £1 trillion barrier for the first time this year.

This figure matches that of the collective total for household debt, with researchers from HBOS suggesting that Britons are becoming increasingly cautious about taking on more borrowings.

Martin Ellis, chief economist at HBOS, commented: “Households are rediscovering the savings habit.

“We’ve seen sizeable increases in previous years, but more caution in terms of borrowing has led to households saving more. We are also seeing a period where consumer spending is softer.”

However, with consumer debt at £1 trillion and research from the Debt Counsellors stating that the figure is rising by £1 million every four minutes, it seems that Britons still have some way to go in tackling their repayments.

This could especially be the case if the Bank of England raises its interest rates to 5.25 per cent in February, as widely expected by analysts.

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Neil Munroe, external affairs director for Equifax, states that for many people bankruptcy is the only way out of debt.

His comments follow an Equifax survey stating that 56 per cent of respondents believe that it is not fair for people who declare themselves bankrupt to be discharged within a year.

Mr Munroe commented: “It’s an interesting response.”

He added: “I think that most people have sympathy with those who have got themselves into very serious debt and for which bankruptcy really does seem to be the only option.”

However, Mr Munro continued that a reduction in legislation allowing people to be discharged in a year has hit a “sore point” with people who keep on top of their repayments.

Insolvency is often taken as an alternative to bankruptcy, with CreditExpert urging consumers to think carefully before considering either option.

Research from CreditExpert today showed that many people are unaware of their credit ratings and the effect missed repayments could have on future borrowing.

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Angela Knight, chief executive officer of the British Bankers’ Association, states that banks remain willing to accept the new voluntary code, which is to be introduced by the end of March.

The code is set to cover charges, the quality of advice given on IVAs and contract transparency.

It aims to provide consumers with a fair overview of the IVAs, which have soared in popularity in the last year, according to Bloomberg.

Ms Knight said that “all the banks . . . [are] on board and are very keen to adopt” the new code.

The news comes as moneysupermarket.com reports that it has seen a 70 per cent increase in volumes using its service since Christmas.

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A survey from the Confederation of British Industry has found that 30 per cent of banks and more than three-quarters (78 per cent) of businesses are to see a rise in the number of bad loans in the first three months of 2007.

The news follows reports that the financial services authority has suffered five-quarters growth in bad loans, with experts suggesting that the problem is likely to get worse.

John Hitchins, UK banking leader at PricewaterhouseCoopers, said: “We know there has been a problem with bad loans rising in 2006 and, while the majority think they have hit the peak, one third of banks are still saying they think it will keep rising because of the level of [personal] insolvencies.”

He adds that the main reason for people traditionally defaulting on loans is due to divorce or unemployment, but that people are now defaulting because they are unable to meet their debts.

Balance transfer deals are one way that consumers have been tackling their debts, with Moneyfacts stating that 70 per cent of credit card providers now allow custoemers to switch balances.

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January is traditionally the time of year when debt counsellors are most busy as consumers are faced with hefty bills following large Christmas spends.

Nisar Afsar, a debt advice coordinator with the Family Welfare Association, says he has been taking calls from between 40 and 50 clients on people seeking his help over bills from money spent over Christmas.

He told the Bradford News: “Don’t think ignoring an outstanding debt will make it go away. Seek advice.”

Liz Revely, specialist services manager at Citizens Advice added that people who have overspent should not panic and bury their heads in the sand.

It was recently reported that rising levels of debt and booming house prices are forcing consumers to lease more frequently than to buy.

Research from the Future Laboratory suggested that the trend, which began in America, is likely to take off in the UK this year.

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Research from Norwich Union suggests that Britons’ zeal for a bargain as they flock to the shops for the January sales could risk them encountering serious debt.

The data states that 55 per cent of shoppers are proud to boast about a bargain they have found during the sales, with 27 per cent unable to wait for their next “bargain hit”.

Cesarina Holm-Kander, financial expert and presenter of Channel 4’s Your Money or Your Wife, told the Reading Chronicle: “What we don’t realise is that while we are spending less on single items, we are spending much more frequently - what used to be an occasional shopping trip has become a weekly activity for many British women.”

She added that this could explain why despite a growing popularity in bargain shopping, increasing numbers of consumers are landing themselves in debt that they cannot cope with.

The news follows research from Marks & Spencer suggesting that 51 per cent of cardholders in the UK have transferred balances on credit cards in order to make their debts more manageable.

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Although the number of people suffering from debts is increasing across the UK, one debt solution charity suggests that certain problems peculiar to Scotland mean that the numbers of debtors north of the border are continuing to rise at a faster pace.

Invocas believes that lower numbers of homeowners in Scotland together with a buoyant economy in places such as Aberdeen mean that people are spending more and hence landing themselves with debt problems.

Mike Gerrard, head of Grant Thornton, adds that the problem is likely to get worse before it gets better.

He told the Scotsman: “While the figures may suggest belt-tightening exercises up and down the country, people are still spending.

“In fact, during 2006, Britons borrowed almost £14 billion in unsecured lending alone.”

Meanwhile, John Hall, chief executive of Invocas, added that the “phenomenal” growth in IVAs will be matched by the Scottish equivalent of Trust Deeds in order to tackle outstanding repayments.

The news comes as research from the Future Laboratory states that more people are having to lease goods rather than buy them due to their levels of debt.

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