Past Articles for April, 2007

The Consumer and Housing Prospects report published this week by the centre for economics and business research (cebr) points to the likelihood of high rates of interest and low house price inflation stretching the finances of millions across the country.

In addition, the recent study from cebr forecasts a tough time for retailers during 2008, with consumer spending growth likely to fall to a little over two per cent as debt management becomes increasingly difficult for consumers.

Jaspreet Sehmi, one of the report’s authors and economist at cebr, said: “2008 will see house price inflation slowing to around two per cent, interest rates stuck above five per cent, a constrained government and a weak US economy.

“This all adds up to equal a tough time ahead for consumers and retailers.”

Many economic observers are now expecting the Bank of England’s monetary policy committee to raise the base rate of interest in Britain to 5.5 per cent when next it meets in May.

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With debt management difficulties mounting for consumers across the country, the building society has revealed that people from different areas look after their money in a variety of ways.

Over a quarter of all British people use a traditional piggy bank as a way of accumulating cash, according to the recent research, but those from Leeds, Plymouth and Newcastle were among the least effective savers in country.

“People take very different approaches to saving and it’s interesting to see the different trends in different parts of the country,” commented Vicki O’Connell, spokesperson for Chelsea Building Society.

“It’s about whatever works for an individual - some people prefer to put a set amount away every month and some people would rather put away a lump sum when it suits them,” she added.

Researcher from Ohio State University in the US recently established that there is no link between a person’s intelligence level and the extent of their debt management problems.

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The ban will impact pubs, restaurants and workplaces throughout the country and could cut spending on tobacco and alcoholic drinks by close to three per cent, according to a report from the centre for economics and business research (cebr).

Many tobacco-lovers are expected to kick their expensive habit when the ban comes into effect on July 1st and this could prove beneficial to the finances of smokers aiming to become debt free.

Jaspreet Sehmi, one of the authors on the new report and an economist at cebr, said: “We expect belts to tighten across the board over the next eighteen months as high interest rates, low house price inflation and a weak international economic situation take effect.

“However, while tobacco and alcohol sales have traditionally been relatively immune to these cyclical effects, we expect the smoking ban to change that on this occasion and sales to drop.”

The National Institute for Health and Clinical Excellence recently recommended that employers in the UK should give their staff paid time off work to get help to quit smoking.

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Insolvency practitioner Phillip Allen suggests that consumers across Britain are finding it increasingly easy to accumulate debts through online betting websites and many seem certain that bankruptcy is their only option.

And Mr Allen, who runs the Debt Lifeboat company, also claims that in many cases people who have run up debts through gambling are treated more harshly than other credit consumers.

He commented: “We often meet with people who have got into debt problems through gambling and can help them find a solution if they are prepared to stop gambling completely, seek professional help for their addiction and destroy their credit cards.”

Over 100,000 people in England and Wales entered into to an IVA over the course of 2006, accountancy firm KPMG reported earlier this year.

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Figures from Investec Private Bank show that the number of women in the UK who share similar concerns about their financial future has risen by around 600,000 over the course of the last 14 months.

Furthermore, the proportion of British women who would now admitting to being worried about how they will stay debt free and support themselves though retirement has now reached 54 per cent, Investec’s research demonstrates.

“This research shows that women must consider their retirement planning carefully,” said Linda McBain, head of banking and treasury at Investec Private Bank.

Last month, a study from the Consumer Credit Counselling Service suggested that the burden of Britain’s debt management
difficulties looks likely to increasingly fall on more elderly generations.

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Divorce lawyer Vanessa Lloyd-Platt suggest that while there is little to be gained from a joint loan arrangement, one or other marriage partner might well end up facing the prospect of paying back the entire debt on their own.

In the event of a relationship breakdown either partner is vulnerable to the other “disappearing” and leaving a serious debt management problem behind them, Ms Lloyd-Platt told This Is Money.

“There’s often little point in signing up for products in joint names, but couples seem to do it because they think it’s the right thing to do,” she is quoted as saying.

Meanwhile, a recent report from insurance firm Churchill revealed that the average amount spent on gifts by those attending a wedding ceremony in the UK is close to £340.

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Described as the most wide-ranging study of its kind, the OFT will pay particular attention to the charging of consumers who have items returned or who enter an overdraft without authorisation to do so.

With these charges impacting thousands of those people struggling to find a debt solution and facing often serious
debt management difficulties, the OFT suggests that it “shares public concern” that banks could indeed be levying unfair charges on their current accounts.

John Fingleton, OFT chief executive, said: “Our ultimate objective is a competitive retail banking market in which informed and active consumers drive strong competition and high levels of customer service among banks long-term, with minimum regulatory intervention.”

Meanwhile, consumers with mounting credit card debt might be interest to discover the results of an OFT investigation into credit card interest rate calculation methods, which are due to be published in a little over two months time.

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Billy is keeping his debt management difficulties a secret from his on-screen wife Honey and hiding final bill demands as his financial problems spiral out of control, which is all very familiar behaviour to Debtmatters’ expert Michael Shirley.

Mr Shirely explained to the Sun that with thousands of people around the UK looking for debt advice with his company each month, he is often in contact with consumers who are struggling to face up to the reality of their own situation.

“Billy is obviously under increasing financial pressures and a lot of people in this situation find it difficult to be honest with a partner and admit their problems with debt,” he told the newspaper.

“While personal debt problems are evermore commonplace, admitting to having a problem and seeking help is often still the biggest hurdle.”

Figures from the Credit Action charity put Britain’s overall personal debt levels at over £1,310 billion earlier this year.

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With millions of Brits already facing debt management difficulties, the amount of money consumers need to borrow to buy a home increased by a further 0.9 per cent during April, recent figures demonstrate.

And this increase equates to an average rise in the cost of a property in the UK of around £16,741 since April 2006, heightening debt management concerns for thousands of people around the country.

“The underlying trend is softening and the return to double-digit annual growth largely reflects a weak period this time last year,” said Nationwide chief economist Fionnuala Earley.

She added that affordability problems would not lead to a crash in house prices, despite the likelihood that the Bank of England will raise the base rate of interest again next month.

Last month, the Consumer Credit Counselling Service predicted that British homeowners looking to find a debt solution will be “on the rack” throughout 2007.

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Researchers at Ohio State University studied the IQs and financial situations of around 7,500 people in 2004, and found “no relationship” between being smart and being wealthy.

Indeed, among the thousands interviewed as part of the study, six per cent of those deemed to have very high IQs were dealing with substantial credit card debt after borrowing the most they could on plastic.

“Just because you’re smart doesn’t mean you don’t get into trouble [financially],” explained Dr Jay Zagorsky, who wrote the report.

“Those with low intelligence should not believe they are handicapped, and those with high intelligence should not believe they have an advantage.”

Meanwhile, figures from UK-based charity Credit Action suggested recently that the debt management mountain in Britain increases by around £1 million every four minutes.

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