Past Articles for March, 2008

Rising costs associated with food, petrol, energy bills and council tax are leaving British consumers significantly out of pocket, it has been claimed.

According to research by the Post Office, fewer people are able to set money aside on a regular basis and many of those that do are returning to these funds after only a short period of time.

With millions of people around the country struggling to become debt free, it has reportedly been the recent increases in energy bills and council taxes that have had the greatest impact in the finances of British households.

Richard Norman, director of savings at the Post Office, said: “Our research shows that millions of people are missing out on earning interest on their savings and have to live without the security of having a ’savings safety net’ if they ever found themselves in financial trouble.”

A report released by accountancy firm Grant Thornton last month suggested that the rising cost of living in the UK has resulted in a notable increase in the number of people entering an Individual Voluntary Arrangement (IVA) in recent years.

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Confidence among British consumer has hit a 15-year low, according to the latest figures compiled by GfK NOP.

The research firm has found that consumer optimism dipped around the country in each of its five assessment categories last month, despite recent cuts in the base rate of interest.

Families around the country are seeing their debt management woes worsen and the attitude toward the economy deteriorated in March for the seventh consecutive month.

“With news reports of possible recession in America, fears of recession in the UK and stock market fluctuations, the consumer’s gloom continues to grow,” said Rachael Joy from GfK NOP.

It is hoped that the recent Budget will give consumer confidence a boost this month, but Howard Archer, chief UK economist at analysts Global Insight, said the latest data strengthens the case for further reductions in the cost of borrowing.

Tim Moss, head of loans and debt at moneysupermarket.com, recently urged anyone who is worried about their ability to pay off their debts to seek advice as soon as they can.

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Many of the UK’s young consumers are hoping to take on a home loan despite the worsening economic climate, according to new research.

Homeowners around the country are feeling the financial squeeze as their debt management problems mount up but around 57 per cent of people aged in their 20s remain keen to get on to the housing ladder.

In fact, figures from Alliance & Leicester have demonstrated that Britons aged between 18 and 29 have not been deterred from taking on mortgage debts and becoming a homeowner is a priority for most before they reach their 30s.

“Those aiming to get on to the property ladder need to do some background work and consider professional advice to establish exactly what they can afford to buy and to plan a budget in order to manage their new monthly mortgage payments,” said Richard Taylor, head of mortgage products at Alliance & Leicester.

Including mortgage arrears, the typical British household has a debt management burden worth close to £56,700, according to data from Credit Action.

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People who use loans in order to fund their everyday activities are facing disaster as a result of rising interest rates, it has been claimed.

According to moneysupermarket.com, interest rates in the UK have been rising in recent months, which is good news for savers and could spell disaster for people who are struggling to become debt free.

The interest rate increases have come despite cuts in the base rate by the Bank of England and are viewed as an effort by lenders to “claw back profits”.

Banking groups have been hit by economic turbulence during the past 12 months and it is poorer consumers and those with debt management problems who are set to suffer most acutely as a result, the price comparison firm maintains.

“For every happy saver in Britain, there is a now a disappointed borrower,” said Tim Moss, head of loans at moneysupermarket.com.

After a series of increases, the Bank of England opted to trim its base rate of interest by a quarter-point in December 2007 and again in February this year.

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Serious debt management problems are in no one’s interest and consumers should take the steps necessary to solve their financial difficulties, says Gareth Mackie, a spokesperson for Halifax.

Mr Mackie has noted that borrowing has become a significant part of British society but is convinced that lenders and consumers have nothing to gain from excessive indebtedness.

With this in mind, the Halifax spokesperson has stressed the importance of finding a workable solution to debt problems as soon as possible through communication with the relevant financial service provider.

However, Mr Mackie has also accepted that many people around the country are struggling to become debt free and to stay on top of their monthly out-goings.

“The advice is to keep on top of bills first of all because they’re the important things to pay, be it mortgage, rent, council tax or utility bills,” he said.

Sainsbury’s Bank reported recently that more than two in five Britons aged under 24 find it impossible to save money on a regular basis.

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The scale of the UK’s consumer borrowing increased by around £600 million over the course of last month, according to the latest data from the British Bankers’ Association (BBA).

January saw an increase of £400 million and the six month average rise has been £500 million, but the association has described consumer credit activity as having remained subdued.

Millions of people are struggling to become debt free and over the course of February British consumers spent less money on their credit cards than they were able to repay, the BBA reports.

Furthermore, the overall amount of money borrowed through overdrafts fell last month and this figure is now lower than has been the case since April 2006.

“Despite the relative pick-up in February’s reported retail sales, consumer credit and cards in particular continued to be subdued,” said BBA statistics director David Dooks.

At the end of January, the UK’s overall debt management burden was worth close to £1,412 billion, according to figures from Credit Action.

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An article from Times online points out that desperate banks and credit card companies are increasingly taking people’s unsecured loans and getting them secured against the borrower’s house instead.

The lenders are using charging orders to do this, sometimes with borrowers that have only missed a single payment on their loans. The Courts report that there were more than 92,000 applications for “charging orders” in 2006 - more than seven times the figure in 2000.

Twitchy lenders use the procedure to get more security against defaulters - even in an atmosphere where, ClearDebt believes, as many private individuals have been oversold to as have over-borrowed.

“This is yet another reason why people with debt problems should get advice early, rather than wait for banks to take this sort of action against them - after all, consumers get charged more interest on unsecured loans because they are more risky - why should lenders be able to continue to charge more whilst risking less, because they now have a claim on your house?” says ClearDebt SEO, David Mond.

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Money lenders in the UK are “running scared” of the effects of the credit crunch, one expert has claimed.

Interest rates have been rising on small loans as creditors look to avoid losing out as a result of the financial turmoil witnessed in recent months, according to Jo Roberts, a director of Needanadviser.com.

The impact of these rises is being felt by people with unsecured loans who are finding it more difficult to become debt free, Ms Roberts suggested.

She said: “The trend is for lenders to put their rates up so it makes it worthwhile for them.

“This is all the result of the credit problems going on in the world at the moment.”

Ms Roberts went on to indicate that lenders are likely to continue increase their rates on unsecured credit for at least the next 12 months.

Earlier this month, the Financial Services Authority suggested that the era of cheap credit in the UK is over.

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Parents around the country are handing over considerable sums of money to help their grown-up children solve debt management problems, it has been asserted.

Anne Young, a savings expert at Scottish Widows, has suggested that while parents helping their children financially is nothing new, this assistance is now increasingly for the purpose of paying off debts.

Ms Young’s comments follow research by Scottish Widows that found the average British parent gives their children as much as £12,500, which helps younger generations but can cause financial problems for people approaching retirement.

“A lot of children now are going into their working life with a lot of debt hanging over them,” she said.

“I don’t think we really do enough in educating our young people to manage their credit.”

A report released by Help the Aged and Barclays recently showed that consumers in the UK now have a four times greater debt management burden when they reach pension age than was the case a decade ago.

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University graduates in the UK are “being squeezed form all sides” as the interest charges on their debts increase, it has been claimed.

According to the Conservative Party, the rate of interest a typical British graduate is obliged to pay in relation to his or her student loan has doubled during the past 12 months.

As a result, thousands of young people are entering the workplace with a considerable debt management burden that will add to the financial difficulties they already face.

The Conservatives have laid the blame for the money problems of British graduates squarely at the feet of the current government and what they claim to be “economic incompetence”.

“New graduates are finding it harder than ever to cope financially,” said the party’s university and skills spokesperson David Willetts.

“It will take longer than ever for new graduates to pay off their debts,” he added.

A recent report from the Brewin Dolphin company suggested that debt management problems are preventing thousands of young people in the UK saving for their own retirement.

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