Past Articles for July, 2007

Mr Morris lays part of the blame for the worsening debt management difficulties being faced by millions of consumers across the UK at the door of money lending businesses around the country.

“The market is giving money away too quickly and too easily,” he told the 24dash news service.

“People can obtain large amounts of money in minutes even over the telephone or internet without any idea of what they are getting into. The lenders need to be more responsible,” he added.

Mr Morris went on to suggest that consumers in the UK, particularly younger generations, need to familiarise themselves with financial issues and take steps to avoid a spiral of debt management woe.

At the end of April this year, personal debts totalled more than £1,325 billion in the UK, according to figures from Credit Action.

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With official figures from the Insolvency Service due to be released later this week, accountancy firm KPMG expects that the total number of bankruptcies in the UK to have increased by ten per cent during the second quarter of the year compared to the first.

In total, more than 20,000 British consumers are believed to have entered bankruptcy during April, May and June of this year, reports the Telegraph.

“At a time when wages are rising relatively modestly, families have faced five interest rate rises in a year, and huge increases in utility bills and council tax,” Mark Sands, the head of personal insolvency at KPMG, told the paper.

“The level of financial distress is alarming, and we are seeing more and more people crying out for help,” he added.

Earlier this year, KPMG forecast that the number of people entering insolvency in the UK would reach 130,000 over the course of 2007.

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Research carried out by Lloyds TSB found that around 79 per cent of Britons feel sure that the pressure on those facing debt management concerns will be increased at some point during the coming year.

Furthermore, with debt management pressures already having been heightened five times since August 2006, only five per cent of those polled felt that interest rates would be lower next year than they are now.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, commented: “The interest rate hike in July did little to reassure consumers there was an end in sight to the increases and they widely seem to agree with the prevailing view in financial markets that at least one more hike is on the horizon.”

A report from the Consumer Credit Counselling Service warned earlier this year that rising interest rates would put British homeowners “on the rack” financially throughout 2007.

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Figures from MoneyExpert.com show that debt management issues are still getting worse for many thousands of Britons who borrowed money to fund their holidays in 2006.

In addition, around 920,000 UK consumers have only recently managed to pay off the debts they racked up in their eagerness to go away on holiday last year, the recent study discovered.

Sean Gardner, chief executive of MoneyExpert.com, said: “Holidays are a time for getting away from it all but too many of us are just getting into debt and building up troubles for the future.

“With borrowing costs rising across the board there is real concern that too many people are trapped in a spiral of debt which ultimately threatens to overwhelm them.”

A report from uSwitch.com recently claimed that millions of credit card users in the UK could be facing decades of debt management difficulties if they only repay the minimum amounts required by their service providers.

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However, Citizens Advice is convinced that as things stand, with a High Court battle over penalty charges set to get underway, thousands of consumers could find themselves out of pocket and facing more debt management difficulties.

“Consumers desperately need clarity on whether the banks are acting legally in imposing these charges and if they are, what is a fair level for the charges to be set at,” said Teresa Perchard, the organisation’s director of policy.

“We see no reason for banks to hold back from reducing their charges, or introducing £10 ‘buffer zones’ to basic bank accounts so that low-income customers are at less risk of incurring these charges,” she added.

And Ms Perchard maintains that any consumer who feels thy have been charged unfairly by their bank should make an official complaint.

More than 1.4 million people across the UK approached Citizens Advice about debt over the course of 2006.

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Figures from LV= show that around 15 per cent of British consumers aged under 35 would be willing to take on mortgage arrears amounting to four times their annual income.

And close to seven per cent of would-be homebuyers in this age bracket are willing to take on a mortgage deal worth upwards of six times their salary, despite rising rates of interest, LV= has revealed.

“These were hypothetical responses and we fear that, under genuine pressure to realise their home-buying dreams, many more buyers will choose to walk the mortgage highwire without a financial safety net,” said Nigel Snell, communications director at LV=.

Millions of homeowners in the UK have seen their debt management difficulties worsen in recent months in the wake of several rises in the cost of borrowing introduced by the Bank of England.

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The current average amount of debt racked up by students by the time they graduate tops £13,000, but research carried out by the Association of Investment Companies (AIC) demonstrates that students tend to think they can study for a degree and only borrow around £8,000.

Parents have a more accurate appreciation of how student life can lead to debt management problems, with mums and dads on average expecting their child to accumulate around £10,000 while at university.

Daniel Godfrey, director general of the AIC, said: “Whilst it’s important to remember the many positives of a university education, it is a concern that so many parents and students still underestimate the true level of graduate debt.

“Unless parents and students start to really comprehend the financial implications of going to university, the shortfalls faced by tomorrow’s students could put them in serious financial difficulties right at the start of their working lives.”

A report from the Department for Education and Skills last year explained that the government does not see student borrowing as leading to “debt in the true sense of the word”.

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Howard Archer, chief UK and European economist at Global Insight, suggests that while an increase in the cost of borrowing is unlikely to be brought in by the Bank of England’s monetary policy committee (MPC) in August, the option is still on the table.

“While a back-to-back 25 basis point hike in interest rates is very unlikely next Thursday, it cannot be totally ruled out given faster, above-trend growth in the second quarter and the somewhat disappointing inflation data for June,” he said.

“Furthermore, there is clearly a faction within the MPC who feel pretty firmly that interest rates need to rise further sooner rather than later if consumer price inflation is to be kept to two pert cent on a two-year horizon.”

If the MPC does opt to raise the base rate next month, it will be the fifth time since of August of last year that the pressure on Britons looking to find a debt solution has been increased.

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Figures compiled by Scottish Widows show that thousands of would-be first-time buyers in the UK are finding property purchases unaffordable and existing debts are now a major cause for concern.

The latest study shows that around a third of graduates cannot save enough money for a mortgage deposit and one in ten are convinced they will never have enough money to get on to Britain’s housing ladder.

Richard Clark, head of product development and marketing at Scottish Widows Bank, said: “This year’s report reveals that the situation really is getting worse for graduates.

“First-time buyers are struggling to save for that deposit, and recent interest rate rises are acting as a further deterrent.”

The Bank of England has increased the cost of borrowing five times in the past year, making debt management problems worse for millions of homeowners and credit consumers across the country.

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Figures compiled by Scottish Widows show that thousands of would-be first-time buyers in the UK are finding property purchases unaffordable and existing debts are now a major cause for concern.

The latest study shows that around a third of graduates cannot save enough money for a mortgage deposit and one in ten are convinced they will never have enough money to get on to Britain’s housing ladder.

Richard Clark, head of product development and marketing at Scottish Widows Bank, said: “This year’s report reveals that the situation really is getting worse for graduates.

“First-time buyers are struggling to save for that deposit, and recent interest rate rises are acting as a further deterrent.”

The Bank of England has increased the cost of borrowing five times in the past year, making debt management problems worse for millions of homeowners and credit consumers across the country.

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