Past Articles for August, 2007

Thousands of British consumers have been unable to contribute to any kind of savings account because of ongoing debt management problems, according to recent research.

Figures compiled by the Post Office show that around one in four adults in the UK do not add to their savings and 27 per cent of these people cite debt management issues as the reason why.

And the Post Office research suggests that a lack of savings provision has left almost half (48 per cent) of Britons aged between 55 and 64 having to save “frantically” in an effort to secure their finances during retirement.

Head of savings at the Post Office Richard Norman said: “With over 145 years experience, the Post Office has seen many savings trends, but it is worrying to see we are now saving less than 40 years ago - as little as 21p in every £10.”

Data compiled by Scottish Widows recently revealed that more than one million British retirees are still dealing with debt management issues.

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The attitudes of banking groups in the UK are leading to a “slight drop-off” in the number of people entering an Individual Voluntary Arrangement (IVA) in recent months, one expert has suggested.

Chris Tapp from the Credit Action charity insists that British banks are limiting the number of people who are able to enter an IVA by introducing stricter criteria.

“A couple of years ago creditors were agreeing to far more IVAs than they now are, they’re now being a bit stricter in terms of the cases that they’ll agree to,” Mr Tapp explained.

“There are still a very large number of IVAs going through and we are still seeing an increase in the number of people going bankrupt,” he added.

Figures from the Insolvency Service show that the number of individual insolvencies in England and Wales fell from the first to the second quarter of this year, but were 4.2 per cent higher during the second three months of this year compared to the same period in 2006.

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A number of different economic factors have ensured that young consumers in the UK are facing the deepest debt management problems, according to reports.

Economics editor at the Independent Sean O’Grady insists that “debt is concentrated among the young” and he suggests that borrowing money is an increasingly common part of being in your 20s in the UK.

First-time property buyers tend to borrow far more than was the case a few decades ago and student loans often leave young British consumers with thousands of pounds worth of debt before they enter the workplace, Mr O’Grady points out.

He said: “It’s long been normal for people in their 20s, taking their first step on the housing ladder and starting a family, to borrow.”

“In 1980 it would take one and three quarters of a year’s salary to see you in your starter home, now a borrower will need to persuade the bank to lend them well over three times their annual income.”

Research carried out by Unbiased.co.uk recently showed that thousands of young British consumers cannot say to the nearest £500 how much debt they have outstanding.

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Money lenders in the UK ought to give their customers some “financial breathing space” when their debt management problems are getting out of control, it has been suggested.

Picture Financial insists that lenders can help their customers to maintain a healthy level of borrowing and to meet their repayment demands by allowing a certain amount of room so consumers can arrange their finances effectively.

“Responsible lenders should be ensuring that people are borrowing no more than they can afford to repay as well as allowing a certain amount of ‘financial breathing space’ should the unexpected happen,” said Julia Dallimore, marketing director at Picture Financial.

However, Ms Dallimore suggests that credit consumers have come under more financial pressure in recent months in the wake of a series of increases in the base rate of interest.

“It is important for people to ensure that they review their credit arrangements and if necessary restructure their borrowing to allow themselves greater financial freedom each month,” she said.

The Bank of England has raised the base rate of interest five times since August of last year and the cost of borrowing is currently at a six-year high of 5.75 per cent.

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Thousands of British consumers are missing out on what could be worthwhile debt advice by keeping their financial difficulties to themselves, according to recent research.

Figures compiled by the Legal Services Commission show that only 18 per cent of consumers in the UK would turn to professional advisors if their money problems were giving them cause for concern.

And this proportion is matched by those who said they would ask their hairdresser, taxi driver or landlord for advice if debt management circumstance were proving difficult to deal with, the commission revealed.

“It’s worrying that people, especially those that are most vulnerable, are not getting the financial and legal advice that they may need,” said John Sirodcar, head of Community Legal Service Direct.

“While it’s natural for people to look to those they know to give them advice, well intentioned as it may be, this is clearly not always going to be the best advice.”

Meanwhile, research from Datamonitor suggested recently that more and more British adults will be refused credit over the coming months and years.

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Thousands of people in the UK are regretting the fact that they rushed a decision to make a property purchase, according to a new study.

Ing Direct reports that more than one in four new homeowners regrets their snap home buying decision as they attempt to deal with the resulting debt management issues.

The nature of Britain’s housing market means that many thousands of would-be home owners are rushing their property purchase decisions in fear that a rival consumer will beat them to it.

Meanwhile, debt management pressures have increased for many of Britain’s homeowners in recent months in the wake of five rises in the cost of borrowing introduced by the Bank of England.

Chief executive of Ing Direct Lindsay Sinclair said: “The pace of today’s housing market puts a huge amount of stress on buyers and our research shows this can lead to snap decisions being when choosing a new home.”

Earlier this year, the Consumer Credit Counselling Service forecast that British homeowners would face serious financial difficulties throughout 2007.

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Around one in four British adults have added to their debt management burden over the course of the last three months, according to the latest figures.

Research carried out on behalf of MoneyExpert.com also shows that around seven per cent of adult consumers in the UK have increased the amount of money they owe by 20 per cent or more during the same period.

In addition, MoneyExpert.com has revealed that seven per cent of those polled by YouGov recently said that they were “very concerned” about their debt management circumstances.

Sean Gardner, chief executive of MoneyExpert.com, said: “With more than 2.48 million very concerned about keeping on top of their debts it is clear that there is a serious crisis brewing.”

“Anyone who is very concerned about their ability to keep on top of their debts is heading for serious trouble if they do not take action now,” he added.

Accountancy firm KPMG expects to see around 130,000 British credit consumers declare themselves insolvent over the course of this year.

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The UK’s debt management burden is worth more than the country’s gross domestic product (GDP), according to analysis by business advisory firm Grant Thornton.

A culture of borrowing prevails around the country and has seen the amount of debts owed by British consumers reach new heights in recent years, experts at Grant Thornton suggest.

Data cited by the company shows that while the UK’s overall debt management burden is worth more than £1,345 billion, the GDP generated by the economy as a whole on an annual basis amounts to around £15 billion less.

“Britain’s huge level of consumer debt is symptomatic of the country’s well established ‘buy now pay later’ culture,” said Stephen Gifford, Grant Thornton’s chief economist.

“We can no longer generate enough yearly GDP to cover the amount we owe and need next year’s income to cover this year’s debts.”

National consumer charity Credit Action reports that Britain’s debt management burden increases by close to £1 million every four minutes.

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With debt management problems facing millions of consumers, new research has shown that many thousands of Britons fear for their financial future.

Figures compiled by YouGov on behalf of Scottish Widows demonstrate that around a quarter of all British consumers count future financial woes as their single greatest cause for concern.

However, the same study also discovered that spending money was the fourth most popular way to find happiness among the 2,339 adults polled.

Mike Hoban, customer and brand marketing director at Scottish Widows, said: “The nation has a head-in-the-sand approach to money - we’re putting off thinking about our fears until ‘tomorrow’ while we live for ‘now’ - but it doesn’t stop us from getting increasingly stressed as these worries niggle away.”

The average amount of money owed by a British adult stands at around £28,600, according to figures from Credit Action.

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British consumers have been warned that their current saving habits could lead them to face serious financial problems when they come to retire.

With millions of consumers already dealing with debt management issues, a panel of experts assembled by Prudential has suggested that the UK could be heading for a “catastrophic income and retirement crisis”.

In fact, part of the problem for younger generations of Britons is that paying off their student debts leaves them unable to start saving for retirement until later in life, according to the team making an assessment on behalf of Prudential.

Paul Fife, managing director of independent financial advisor Equus commented: “People are not given enough skills to deal with money. Advice is being forced upmarket.

“You need to start planning your pension when you start working. Most people have no idea how difficult it is to build up a pension.”

Earlier this year, the Consumer Credit Counselling Service warned that the UK’s debt management burden will increasingly shift to more elderly generations.

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