Past Articles for December, 2007

Borrowers from across the UK could face an “extremely tough year” financially in 2008, it has been asserted.

Paul Fletcher, director of the Repossessions Advice Centre, suggests that thousands of homeowners will be faced with serious debt management concerns when their fixed-rate mortgage arrangements end and they need a new borrowing deal.

In fact, many people could find themselves facing as much as a 65 per cent increase in their monthly mortgage costs and others will be unable to secure a new home loan deal altogether, according to Mr Fletcher.

“I think it’s going to be an extremely tough year and I certainly think we’ll see quite a large increase in repossessions over that period of time,” he said.

“And it is the clients who are with the sub-prime lenders who are going to be suffering.”

The Council of Mortgage Lenders reported that debt management woes had seen 14,000 homes repossessed in the UK in the first half of this year.

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Around ten per cent of British adults keep the details of their debt management circumstances hidden from their partners, according to recent research.

Figures from Engage Mutual Assurance show that millions of men and women around the country are failing to communicate with their loved ones when it comes to issues of personal finances.

The study from the financial services firm found that credit card debt is the most keenly avoided subject among British couples and that men are more likely than women to keep money-related secrets.

Karl Elliott, 3GB spokesperson for Engage Mutual Assurance, said: “It is important that couples discuss their finances, particularly when children are involved.

“Understanding the state of your joint finances before a situation gets out of control could help to alleviate problems further down the line.”

The Credit Action charity currently estimates that the average household debt in the UK stands at around £8,900, excluding mortgage arrears.

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With millions of people around the country struggling to become debt free, Sainsbury’s Bank has predicted that this month will see record amounts of money drawn from ATMs nationwide.

The financial services firm estimates that over the course of December there will be an average of £348.06 million withdrawn from the UK’s cash machines, which will mean £10.79 billion in cash will be accessed in this way.

At an average of 7.59 million ATM transactions each day, Sainsbury’s Bank’s latest figures suggest there will be 1.14 million more cash machine withdrawals this month than was the case in December 2003.

Alex Blake, head of ATMs at Sainsbury’s Bank, said: “People are more reliant on ATMs than ever before and the peak time for cash withdrawals is December.

“This helps explain why there has been a 29 per cent increase in the number of ATMs between December 2003 and June 2007.”

According to the Credit Action charity, the UK’s overall debt management burden increases by close to £1 million every four minutes.

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The Association of British Credit Unions (Abcul) has warned UK consumers that they should plan ahead to avoid the increasingly common new year debt management hangover.

According to the organisation, setting aside small proportions of a monthly income earlier in the year can help to escape potential financial difficulties when the festive period arrives.

Furthermore, Abcul insist that because it exists only to serve the interests of its members, it is in a strong position to assist UK consumers in their efforts to save and to avoid debt management misery.

“A lot of people might not realise that credit unions offer a great range of safe and easy savings schemes for all sorts of needs, including Christmas, as well as low cost loans,” says Mark Lyonette, chief executive of Abcul.

“All we’re saying is that you don’t have to build up bumper bills and dodgy debts to pay for Christmas - just putting a few pounds a week in a safe and easily accessible savings account could make a huge difference.”

Citizens Advice recently called on businesses and regulators in the UK to help resolve the national problem of “soaring levels of personal debt”.

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British consumer who decide to do their Christmas shopping in the week before the big day are prone to overspending, it has been suggested.

Donald MacLeod from Sainsbury’s Bank has made clear that shopping at the last minute often entails an element of disorganisation and as a result can lead to overspending and increased credit card debt.

Part of the problem is that particular gifts could be unavailable and as a result shoppers are more likely to be tempted to go over their budget, which for many people will mean further debt management difficulties in the new year.

“I was surprised at the fact that people were going to spend more this year than last year,” said Mr MacLeod.

“All the press comment at the moment has been about there being a squeeze on [spending], but this doesn’t appear to be the case.”

Recent research by Sainsbury’s Bank found that around 8.6 million Britons intend to fund almost 50 per cent of their last minute shopping via credit card debt.

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British consumers have been urged to find a debt solution as soon as they can after the Christmas period is over.

Millions of people borrow money to finance their festive expenditure and Susan Hammuns from the financial advisory firm AWD Chase de Vere insists that clearing debts should be a priority for many consumers in the new year.

“In the majority of cases, the interest rate on your debt is probably going to be higher than any interest rate you will earn on your savings, so ultimately you should be thinking about clearing that debt as quickly as possible,” Ms Hummuns remarked.

The finance expert also suggested that by saving any as much money as possible throughout the year, UK consumers can avoid any serious debt management difficulties after Christmas.

Earlier this month, the Citizens Advice charity urged consumers across the country to plan their finances carefully in the run up to Christmas to “avoid a debt hangover”.

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Credit card users in the UK need to seek out the best deals available to them before entering into a particular lending agreement, one expert has asserted.

Robin Amlot, senior editor at the Money Extra financial news firm, insists that unless consumers find a competitive credit card deal, they “might as well just stand on a street corner tearing up fivers”.

Mr Amlot’s comments come after the Royal Bank of Scotland group decided to reduce the length of the interest-free period on its credit card deals, which he suggests is effectively a stealth charge that could be costly for people dealing with credit card debt.

“If the due date for payment is brought forward, then potentially the credit card company is making more money and certainly they are exposing themselves to less risk,” said Mr Amlot.

“I would always advise people to shop around and look for the best deals for themselves,” he added.

Britain’s overall credit card debt burden is set to increase by more than £11 billion over the course of this month, according to Apacs, the UK’s payments association.

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Generous Britons should ensure that they are not risking their own financial security by lending money to their friends and family, it has been suggested.

Cristina Hoole, a spokesperson for PayPal, insists that while asking friends and family for debts to be repaid can be awkward, it is important that informal lending does not lead to unnecessary or more serious debt management difficulties.

Ms Hoole’s assertion comes after her organisaiton, which operates an online payment business, commissioned a study that found almost half of all UK consumers had lent money to their friends or family during the past 12 months.

“If you have lent the money, you need to find ways of getting that money back because we tend to forget,” she said.

“But you need make sure that you’re not getting yourself into debt by being the one that lends money to everyone else around you.”

The recent research carried out by YouGov on behalf of PayPal found that more than three million Britons had fallen out with their friends or family this year as a result of unpaid informal debts.

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Last minute Christmas shoppers around the UK are likely to accumulate around £2 billion worth of credit card debt this year, according to recent research.

Figures from Sainsbury’s Bank show that more money will be spent during the final week before Christmas this year than was the case in 2006 and much of this expenditure is expected to be financed through debt.

In fact, credit card debt is likely to fund 50 per cent of the last minute shopping of around 8.6 million British borrowers, according to the financial services firm’s latest data.

“There are a number of credit cards to choose from all offering different terms and conditions so it is important to ensure that you have the right one for you,” said Donald MacLeod, head of cards at Sainsbury’s Bank.

An overall total of around £11.7 billion is expected to be spent via credit cards around the country during December, according to the UK’s payment association Apacs.

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The rate of borrowing among UK consumers doubled during the third quarter of this year, according to figures from Unbiased.co.uk.

Data form the financial comparison service shows that British consumers borrowed around 35 pence for every pound they saved during the most recently assessed three-month period.

With millions of people around the country struggling to become debt free, Unbiased.co.uk is keen to see British consumers take control of their finances and boost the amounts of money they set aside each month.

“Interest rates over the summer were still at a high level of 5.75 per cent and many people will have felt the impact of the credit crunch starting to bite their disposable income,” said David Elms, chief executive of Unbiased.co.uk.

“While the high level of borrowing and a drop in savings for this quarter may come as no surprise, it is a worrying development.”

The Bank of England increased the cost of borrowing five times in the 12 months after August 2006, which added to the debt management pressures faced by credit consumers around the country.

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