Past Articles for December, 2007

The overall amount of money owed by UK consumers to their friends and family members is now worth a collective total of around £26 billion, according to a recent study.

Data compiled by PayPal reveals that almost half of the UK’s population is owed money by people close to them and in around three million cases the situation has led to unresolved disputes.

Millions of people around the country are aiming to find a debt solution and a full 16 per cent of the population currently owes money to their own mother, PayPal’s latest research discovered.

Cristina Hoole, PayPal UK spokesperson, said: “Everyone will, I’m sure, have either borrowed or lent out money to friends and family, often on the spur of the moment, however as the study has shown these potentially small amounts of money can soon add up.

“On average we’re each owed almost £900 and with Christmas just round the corner perhaps we should be looking to call in some of those unpaid loans rather than relying on credit to see us through.”

Thousands of indebted Britons have entered an Individual Voluntary Arrangement (IVA) by way of a debt solution so far this year, according to official figures from the Insolvency Service.

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When it comes to doing the Christmas shopping, leaving it late can prove costly, according to recent research by the Egg online banking firm.

Many people around the UK are adding to their debt management burden in order to enjoy their Christmas, but those who leave their shopping until the final week tend to go considerably over budget, Egg reports.

In fact, Britons who carry out their Christmas shopping in the final week before the big day spend almost 40 per cent more than those who complete the task earlier in the year.

Alison Wright, chief marketing officer at Egg, said: “Each year we get 12 months advance warning that Christmas is coming, but still often resort to last minute panic buying.

“Consumers need to try to find ways to drive down the overall cost of Christmas - one way seems to be by avoiding those last minute shopping sprees, when lack of choice and panic buying are rife.”

Around £11.7 billion in credit card debt is likely to be taken on by British shoppers over the course of this month, according to the UK’s payment association Apacs.

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Halifax is urging British consumers to resolve their debt management problems and sort out their finances in the new year.

The financial services firm suggests that consumers across the country could be saving themselves significant amounts of money by shopping around for a good deal on their credit cards and mortgages.

Furthermore, despite the fact that thousands of families are struggling to become debt free, Halifax is keen to see Britons contribute to a savings vehicle as often as they can.

“Most of us religiously hit the high street for the January sales, but too few of us include banking products in our bargain hunting,” said Peter Jackson, head of products at Halifax.

“By making a few small changes today, you could make some significant financial gains in the future.”

The UK’s collective level of personal debt increases by close to £1 million every four minutes, according to figures form the Credit Action charity.

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The Association of Mortgage Intermediaries (AMI) has pledged to help British homeowners who find themselves struggling to meet their home loan repayment demands over the coming months.

AMI bosses have explained that if mortgage-related
debt management becomes impossible for families around the country, there would be a number of negative knock-on economic effects, which the association is keen to avoid.

“As an industry we do not want to return to a culture of unmanageable debt and home repossession, which would have a negative effect on consumer confidence and the wider economy,” said Chris Cummings, director general of the AMI.

“Mortgage intermediaries themselves are best placed to help people find the best deals in a difficult market.”

However, Mr Cummings noted that many homeowners will face increased
debt management pressures as their fixed-rate deals expire next year and that this could come as a “huge shock”.

Earlier this year, the Consumer Credit Counselling Service warned that homeowners across the UK would be “on the rack” financially throughout 2007.

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Millions of people in the UK could be adding to their
debt management problems by missing out on the cheapest energy bills available to them, it has been suggested.

According to figures from uSwitch.com, British households can save hundreds of pounds by changing the company that provides their energy.

Christmas is renowned as an expensive time of year and the price comparison company is convinced that switching energy providers can be an important part of what it calls a “new year financial detox”.

Ann Robinson, director of consumer policy at uSwitch.com, said: “Households could save up to £325 on their gas and electricity bills just by shopping around for a better deal.

“The golden rules of switching are: move to dual fuel (getting both gas and electricity from one supplier), pay by direct debit and sign up to an online plan to make sure that you are getting the best available deal.”

Citizens Advice has made clear that it expects to see an increased number of people approaching its staff for debt advice in January, because of the costs associated with the Christmas period.

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An increased proportion of British consumers were “in the mood to spend” last month, according to a recent study.

Figures compiled by Legal & General show that despite the millions of people struggling to become debt free, the overall willingness to spend was greater in November than during any other month of this year.

In fact, consumers have been “spending with confidence” in recent weeks, the financial service firm claims, noting that around three per cent more people were optimistic about spending last month than was the case in November 2006.

Julia Clayworth, Legal & General’s wealth management customer marketing manager, said: “It is really interesting to see that despite suggestions we are starting to feel the pinch, consumers are still getting into the Christmas spirit and spending with confidence.

“As these results relate to November, I’m pleased to see that people are quite sensibly looking to spread the cost of Christmas over a few months rather than leave it all to the last minute.”

The UK’s payment association Apacs estimates that around £11.7 billion worth of spending nationwide during December will be funded by credit card debt.

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The number of people entering into an Individual Voluntary Arrangement (IVA) looks set to rise in the early part of next year, it has been claimed.

Experts at the consultancy business Capital Economic are convinced that more and more people in the UK will opt for entering an IVA as a way of finding a solution to their debt problems, reports MoneyExtra.com.

Some creditors have been reluctant to deal with IVA providers, but a set of operating standards was recently agreed between these firms and the British Bankers Association (BBA), which Capital Economics believes will boost the popularity of IVAs around the country.

Furthermore, the general economic climate, with credit criteria becomes increasingly stringent, will also lead an increasing number of consumers to turn to IVAs by means of a debt solution, the consultancy firm suggests.

The new set of IVA industry standards will give indebted consumers more clarity about their debt solution options, the BBA said on announcing its planned introduction.

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Travellers from the UK have been warned that they could add to their debt management problems by spending large amounts while on holiday.

According to the Post Office, the average charge levied for using a credit card overseas stands at 2.75 per cent of the relevant purchase and around 2.4 million Britons are likely to go on holiday over Christmas.

With millions of British consumers already dealing with debt management issues, using a credit card regularly outside the UK could lead to further financial problems for many in the new year, the Post Office insists.

Post Office director of lending Gary Fitton said: “For many people, going abroad for Christmas is a great way to relax and not have to worry about cooking Christmas dinner.

“However, with 49 per cent of UK holidaymakers planning to use their credit card when shopping abroad many people could be returning from their Christmas break with a lot more than just ‘memories and mementoes’ due to hidden card charges.”

Apacs, the UK’s payment association, expects to see around £11.7 billion added to the country’s credit card debt total over the course of this month.

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A report from the Citizens Advice charity has suggested that the practices of some of the UK’s sub-prime mortgage lenders have forced thousands of British borrowers into serious debt management trouble.

Mortgage arrears, repossessions and court actions are all on the increase around the country and Citizens Advice is convinced that in many cases the blame lies with sub-prime lenders.

Furthermore, some of the most disadvantaged people in the UK are among those most vulnerable to being mis-sold a particular mortgage deal or borrow money on the basis of unsound ’sub-prime’ advice, the charity’s report makes clear.

“Many sub-prime lenders are flouting the rules on responsible lending by granting loans when it’s clear the borrower will not be able to afford to repay it from the very outset, then getting tough immediately things go wrong,” said Citizens Advice chief executive David Harke.

“Far from providing housing security and a valuable asset, home ownership has proved a fast track to debt and homelessness for many vulnerable borrowers on low incomes.”

Last month, Citizens Advice called on the British business community and regulatory bodies to do more to arrest the rising prevalence of debt management problems in the UK.

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The Council of Mortgage Lenders (CML) has told the leaders of the Conservative Party that public policy should be focussed more directly on helping homeowners who are struggling to meet their debt management commitments.

Income support for mortgage interest was “severely cut back” due to government policy in 1995 and the reintroduction of this benefit would help some of the homeowners most at risk of repossession, the CML suggests.

The council also made clear that with many thousands of fixed-rate mortgage deals due to come to an end in the early part of next year, consumers across the country are likely to need financial help to avoid debt management disaster.

CML director general Michael Coogan CML director general Michael Coogan, said: “[The Conservatives] are rightly concerned to address the issue of how best to support home-owners who may face payment difficulties over the coming year.

“As we explained, this can best be achieved through a mixture of lender forbearance and public policy.”

The CML forecast recently that there will be around 50 per cent more home repossessions in the UK next year than will prove to have been the case during 2007.

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