Past Articles for May, 2007

Moneynet.co.uk has warned that while it may be tempting to consolidate debts in this way, borrowers could ultimately find themselves obliged to pay back more money than they can afford.

Furthermore, these problems are likely to be compounded in the event of further rises in the cost of borrowing, which are now widely expected to be introduced over the course of the next few months, suggest experts from the company.

Chief executive at Moneynet.co.uk Richard Brown commented: “Whilst including the consolidated debt in your mortgage can look attractive, in the long term it could prove to be a very expensive mistake.”

Figures from Credit Action have shown that the amount of personal debt in the UK stood at a total of more than £1,318 billion at the end of March this year.

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With the country’s debt management problems continuing to increase, the financial services firm has suggested that there are now around 8.5 million “secret spenders” across the UK.

Consumers living in London are among the most likely to lie about the costs relating to a particular purchase, while 34 per cent of those polled indicated that they aim to give the impression that have “secured a bargain” under these circumstances.

Vicky Emmott, senior manager of underwriting at Halifax Home Insurance, commented: “Men and women are divided when it comes to their secret spending.

“While women return from shopping trips pretending they have secured a bargain price for their Manolos and Jimmy Choos, men hide the price of stereos and plasma televisions.”

Meanwhile, more than 30,000 consumers in the UK entered into an Individual Voluntary Arrangement by way of a debt solution during the first three months of this year, figures from the Insolvency Service have shown.

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Howard Archer, chief UK and European economist at Global Insight, maintains that despite a fall in consumer price inflation to 2.8 per cent the bank’s monetary policy committee is set to raise rates to 5.75 per cent at least.

The decision would further heighten financial pressures already affecting the millions of consumers around the country facing debt management problems and difficulties in finding a debt solution.

Mr Archer commented: “The Bank of England still seems highly likely to raise interest rates by a further 25 basis points to 5.75 per cent by August at the latest as further insurance against the longer term inflationary dangers.”

Any rise in the base rate of interest before August would represent the fifth such increase within a year as personal debt levels continue to mount up.

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Debt management problems affect thousands of households nationwide and Charcol.co.uk suggests that by tailoring mortgage advice for these borrowers some of these difficulties could be alleviated.

To highlight he extend of Britons’ need for sound debt advice, Charcol.co.uk points to figures showing that homes owned by consumers with a poor credit history account for around 70 per cent of all repossessions made around the country.

Peter Barrett, managing director at Charcol.co.uk, said: “The amount of personal debt in the UK continues to grow, particularly in a rising interest rate environment.

“We are determined to do something about this and providing fees free advice is absolutely the right thing to do.”

Financial pressure on mortgage borrowers was increased earlier this month when the Bank of England opted to increase the base rate of interest by a quarter-point to 5.5 per cent.

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As debt management problems continue to affect families around the country, more homebuyers than ever have taken steps to avoid being susceptible to changes in the base rate of interest, figures from the Mortgage Trust have revealed.

In fact, fixed-rate mortgage arrangements now account for the majority (60 per cent) of all home buying deals being agreed in the UK, which represents a rise of 12 per cent in less than a year, the recent study demonstrates.

“Our research also shows that an even higher proportion of landlords have been taking out fixed-rate loans,” noted John Heron from Paragon Mortgages.

The Bank of England has increased the cost of borrowing across the UK four times since last August, which has made finding a debt solution more difficult for millions of homeowners nationwide.

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And as debt management problems are compounded nationwide, the financial services firm has revealed that nearly one in 20 households affected financially by their neighbours’ actions pays out more than £1,000 in related costs.

Furthermore, a total of around 543,000 households around the UK are affected in this way by those living close to them and the average amount that has to be paid out as a result is around £172, Abbey’s research demonstrates.

Prasad Shastri, head of insurance marketing at Abbey, said: “Not all damage caused to people’s homes by their neighbours is malicious, in many cases this type of damage is accidental.

“However there are often misconceptions about whose insurance is to be used to claim for it.”

Meanwhile, figures from the national not-for-profit organisation Credit Action show that the overall debt management mountain in the UK increases by around £1 million every four minutes.

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With thousands of new homeowners struggling with debt management problems, Ms Cooper has noted that for families nationwide getting on the first rung of the housing ladder has become impossible financially.

“What we are seeing is rising house prices because we are simply not building enough homes,” she told the BBC’s Newsnight programme.

“People do face real pressures,” she added.

Much of the problem, Ms Cooper suggests stems from the lack of new houses being built around the country, which leads to the continuing increase in property values and in many cases a subsequent lack of affordability.

Earlier this year, the Consumer Credit Counselling Service predicted that debt management issues would put homeowners “on the rack” throughout 2007.

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The financial services firm suggests that its introduction of debit cards in early June 1987 has revolutionised the spending habits of UK consumers and notes that around 143 purchases are made every second using these cards across Britain.

In addition, Barclays has revealed that the UK’s men typically spend around 33 per cent more than British women on their debit cards, despite the fact that their female counterparts use them 25 per cent more often.

“Ever since Barclaycard became the first credit card in Europe in 1966 the nation’s spending habits have changed,” commented Brian Cunnington, head of debit cards for Barclays.

“The introduction of debit cards 20 years later gave consumers even more flexibility allowing them to withdraw cash from ATMs as well as to have payments deducted directly from their current accounts when they paid in shops.”

According to the Insolvency Service, debt management problems led more than 30,000 consumers from across England and Wales to become insolvent during the first three months of this year.

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The results of a recent survey showed that around 25 per cent of all Brits know precisely how much money they have in their bank accounts at any given time and close to 38 per cent are aware of their bank balance to within the nearest ten pounds.

Furthermore, one in seven of those surveyed by Sybase 365 indicated that there obsession over personal finances means they check their balance every day, while around two-thirds assess their cash flow every 48 hours or so.

Mark Weait of Sybase 365 said: “Consumers are becoming increasingly vigilant when it comes to their finances and take a prudent attitude to money.”

“This is based on a number of emotive issues that have been highlighted in the media recently such as monitoring bank charges for exceeding your overdraft limit, fraud prevention and identity theft,” he added.

Meanwhile, figures from Credit Action show that excluding mortgages the average household debt management burden totals £8,883 in the UK.

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The move would increase the pressure on the millions of Brits facing debt management problems and figures compiled by Selftrade suggest fears are rising that the UK economy faces a “rocky ride” over the next 12 months.

Furthermore, the recent research also demonstrates that more than a quarter (26 per cent) of British workers are currently worried about their job security and 14 per cent are fearful that the national economy is heading for period of recession.

Neil Jamieson, retail marketing and business development director at Selftrade, said: “Our research shows that people are feeling unsure about the UK economy.”

“Monetary tightening will inevitably serve as a dampener on consumer spending. Investors will want to rebalance portfolios if signs emerge of a significant slowdown in the UK economy,” he continued.

It was revealed recently that the Bank of England considered the option of raising interest rates by a half-point when the last met in May.

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