Past Articles for August, 2006

The increase in total net lending to individuals was £10.9 billion, with loans secured on homes accounting for £9.8 billion of this.

Even though Britons are still struggling with debt, the figures reveal that the demand for loans and credit is continuing.

Increases in the amount people are borrowing on credit cards could be a symptom of this, with net credit card lending up by £0.2 billion in July compared to June.

Even with an overall fall in the annual growth rate of consumer credit, it is still growing by 7.2 per cent as the public’s demand for loans continues.

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In its survey, Citizens Advice Cymru found that 57 per cent of Welsh residents lacked a monthly budget and this is likely to be mirrored throughout the UK.

“The experience of Citizens Advice Cymru shows that a general lack of understanding, skills and confidence when it comes to managing money and making financial decisions has contributed to increasing levels of personal debt,” said Fran Targett, director of the principality’s bureaux, in the Western Mail.

Criticism of people’s day-to-day budgeting comes as the government decides to take action to improve financial knowledge by making schools teach basic finance.

Britons are facing massive debt as levels reach £1.2 trillion, but the survey revealed that around one in seven people had no money saved and a similar proportion avoided opening their bills.

Rather than avoid debt problems, experts recommend that people consult professionals about management, especially as advice is often free.

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Birmingham Midshires claims that the average amount is £7,548 in liquid savings, enough for 167 days, as the bank continues to urge people to save more.

Jason Robinson, director of savings operations for Birmingham Midshires, said: “For a long time we’ve been vocal in recommending that Britons have at least three months salary in savings to cover those unexpected costs that lurk around the corner.

“It is encouraging to see that we are taking heed of this message and are actually saving double this amount. To see this grow even further it is very important to find the best rate of return on their hard earned savings.”

Men were found to save the most in the survey and women the least, which compares to recent research which suggests that many young women are outspending their income.

While the bank paints a rosy picture of Britons’ savings, debt is still growing along with fuel bills and council taxes which means many may dip into savings for repayments in the future.

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Northern Ireland Assembly member John Dallat blamed the “grossly inflated fines” of late payment for pushing people into debt which could result in bankruptcy.

“Credit card debts are now the major reason why a record number of people are facing bankruptcy with debts reaching a record high,” said Mr Dallat.

“These debts have been grossly inflated by ‘fines’ for late payments, exceeding limits and other penalties which push the most vulnerable over the top.”

Only yesterday the head of the National Unions of Students in Scotland told that Scotsman that he blamed credit cards for the reason why many graduates are in debt.

Mr Dallat adds his criticism of credit cards, saying that schools should educate pupils to the dangers of debt and credit.

While he praised Citizens Advice for giving help to those affected by debt, he urged more people to seek advice for money management problems.

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Nearly half of respondents in the Unisys survey thought that mortgages require a ten per cent deposit and that they can only borrow three times their salary, but this is not exclusively the case.

“These figures suggest that there may be a misinformed and therefore untapped market for mortgage lenders in the UK,” commented Peter Axson, head of banking solutions at Unisys.

“This could mean that there are millions of people across the UK who think they cannot afford to buy their own homes when in fact they can.”

Findings come as the mortgage market expands and growth areas include loans aimed at people who would normally be excluded due to their credit rating.

Mr Axson believes that with more people becoming bankrupt, the survey showed the risks people take by selecting the wrong mortgage.

He called for more education of mortgages and loans by banks and lenders to ensure that people are informed and take out the most suitable mortgage for them.

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Coleen McLoughlin, fiancee of England player Wayne Rooney, told girls to “get a grip” with debt and spending before it gets too much.

“Don’t try to shop and party like a footballer’s wife,” said the 20-year-old in the Mirror.
“I don’t think it makes sense to want to be like a footballer’s wife. They are usually lucky enough to be able to spend an awful lot.”

Her comments follow warnings last week from accountants Wilkins Kennedy who said that young women were spending more than they earned and getting into debt trying to emulate Wags.

At current rates of spending, the accountants fear that women will account for half of all bankruptcy cases by 2010.

Yet women need not overspend to look good, with Coleen sharing her wisdom: “You can look amazing on a budget.”

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British Banker’s Association (BBA) figures show that net loans on credit cards fell by £0.3 billion, which adds to the £0.1 billion fall experienced in June.

Commenting on the figures, David Dooks, BBA director of statistics, said: “Unsecured lending is displaying [a trend], with the growth rate continuing to decline, largely reflecting the ongoing contraction in credit card borrowing.”

Yet despite the slow down in borrowing, figures show that Britons’ debt still tops £1.1 trillion and Mr Dooks hints that this could still grow.

He claims that July is “typically a slow summer month” for loan approvals which means that these signs still do not indicate for certain that Britons are getting better at debt management.

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Of the 20 towns with the worst record for CCJs over the past year, eight are in the Midlands according to the Callcredit survey which showed how debt is affecting different parts of the country.

Yet while some areas escaped without any residents suffering a CCJ, Callcredit director Mel Mitchley warned that this could change in the near future as debt levels rise.

“A combination of record levels of personal debt combined with the recent interest rate rise could mean that over the next year we start to see CCJs in neighbourhoods that have so far been unaffected,” she warned.

A CCJ is usually entered when a borrower fails to repay debt and can severely impair a credit record.

As Britons struggle to manage their debt, over 0.75 million CCJs were registered over the last twelve months, one for every 50 adults in England and Wales.

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R3, the Association of Business Recovery Professionals, has stated that it will give support to schools offering ifs School of Finance qualifications by discussing the “perils of debt”.

Tony Supperstone, R3 president commented: “Personal debt in the UK is increasing at enormous levels, by starting with children we can help educate them on managing their finances for the future.

“By allying ourselves with the ifs School of Finance, we are actively trying to encourage more education for young people today on the dangers of personal debt.”

Announcement of the support comes as the government announces plans to introduce personal finance education into schools to improve Britons’ debt management.

Mr Supperstone said that he too wants to see students leave school with debt management skills, especially as many take on student loans without knowledge of budgeting.

Topics to be discussed to improve financial education will include talks on debt, loans, credit cards and budgeting, R3 said, along with using real-life case studies.

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