Past Articles for April, 2008

Citizens Advice has raised concerns about the issue of returning money to the pockets of those who lost out as a result of the changes to the ten pence tax rate.

Thousands of people approach Citizens Advice about debt each month in the UK and the charity is keen to ensure that those who are due to be reimbursed after the government’s reversal on tax changes receive their money in good time.

According to the organisation, there are so many people with debt management and other financial issues to worry about that they need all money-related concerns resolved as quickly as possible.

“While we welcome the government’s recent commitment to compensate those who have lost out, it is vital that any measures can be introduced quickly, are backdated and are easy for people to receive,” said Katie Lane, social policy officer for Citizens Advice.

Last week, Moneysupermarket.com suggested that millions of people in the UK are living in denial about the state of their finances and the extent of the debt problems.

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Consumer confidence has hit a new 15-year low as debt management issues spiral out of control for many thousands of families.

According to the latest data from GfK NOP, the state of the economy and the lack of money in people’s pockets have seen consumer confidence reach its lowest level since November 1992.

The research firm’s reading of the current situation for UK consumers is that they have become less optimistic about their ability to spend money now and their prospects for doing so over the course of this year.

Rachael Joy from GfK NOP remarked: “With the news dominated by stories of recession, the credit crunch, housing market falls, and future petrol and food price increases, it will take more than a quarter point reduction in interest rates to alleviate the current gloomy mood of the UK consumer.”

The Bank of England opted to cut the base rate of interest to five per cent earlier this month but concerns have since been raised that this move has not had an impact on how much it is costing Britons to borrow.

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The scale of lending volumes within the UK’s housing sector will continue to fall, according to the Council of Mortgage Lenders (CML).

In response to the Bank of England’s latest figures on consumer borrowing, the CML suggested that activity will continue to be constrained as the credit crunch goes on.

The council also maintained that the recent special liquidity scheme introduced by the Bank of England will take a number of months to have an impact on mortgage affordability and debt management for homeowners around the country.

“We hope that some of the liquidity will be recycled down into the mortgage market,” said the CML’s director general Michael Coogan.

“But it will take some months for this to happen and mortgage lending volumes are going to continue to fall before they improve,” he added.

Including mortgage arrears, the typical British household has a debt management burden worth more than £57,000, according to data from Credit Action.

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A desire for ‘blinging’ accessories and fashion items in general has seen many thousands of young Britons head into the red, it has emerged.

Research carried out on behalf of the mobile banking firm Monilink has suggested that as many as seven out of ten UK consumers aged between 16 and 43 are in debt because they want to be seen as cool.

However, for almost a quarter of Britons in this age bracket, the resulting
debt management headache has become a cause of “significant” concern.

Around 19 per cent of young people use debt to fund their clothing purchases, while 21 per cent use credit in order to go out and socialise, the latest figures suggest.

John Milliken, managing director of Monilink, said: “This study highlights the price younger Britons are willing to pay for peer acceptance. But for many, the price is too high - leading to financial problems.”

Meanwhile, research published recently by Abbey revealed that almost one in five British children aged between 11 and 15 are already afraid of being in debt in adulthood.

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An increasing number of British couples are opting to keep their assets separated into different financial products, according to a recent study.

Figures put together on behalf of payment provider PayPal have indicated that around 71 per cent of British couples do not share and share alike when it comes to money and other assets.

With millions of people struggling to become debt free, perhaps it is unsurprising that one in six Britons manage their money on their own because they do not want to share any unnecessary financial risks.

Cristina Hoole, a spokesperson for PayPal UK, said: “Our research suggests there is a growing trend emerging between partners and how they manage their finances, with people having separate bank accounts so they can keep control of their own finance.”

The Christians Against Poverty group claimed recently that debt management issues are causing thousands of British couples to break up each year.

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The scale of lending by financial service firms in the UK increased at a slower rate during March than the previous month, according to the latest data.

Figures from the Bank of England show that there was an extra £8.2 billion lent last month around the country but this increase in activity was less sharp than the average for the past six months.

Borrowing activity in most areas of the economy slowed its rate of growth but appetite for credit card debt appears to have remained strong as the rise in this kind of lending increased at the same pace as in February.

Overall, net consumer credit was worth £1.2 billion more in March than the previous month, while 57,000 loans were approved for purposes other than house buying or remortgaging, the bank reports.

Earlier this month, the Bank of England opted to reduce the base rate of interest by a quarter point for the second time so far in 2008.

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The prospect of a significant debt management burden is not dampening the ambitions to attend university among young Britons, according to the latest figures.

Research carried out by Ipsos Mori on behalf of the Sutton Trust has found that only 13 per cent 11 to 16-year-olds in the UK are put off from the idea of going to university by concerns about debt, which is seven per cent less than was the case a year ago.

More than 2,000 British children were polled as part of the study and almost three-quarters feel they are at least fairly likely to go to university, despite the fact that only 40 per cent are expected to.

“We need to offer more support to young people throughout their education so that they are in a position to realise their ambitions at 18 and beyond,” said Sir Peter Lampl, chairman of the education charity behind the research.

A report from Abbey Banking recently suggested that more than 20 per cent of all children aged 11 to 15 in the UK are afraid of being indebted when they reach adulthood.

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British consumers are losing faith in the banks and other financial services firms they find on the high street, according to a recent study.

Since the start of the credit crunch, millions of UK consumers have seen their debt management problems worsen and people are generally becoming less trusting of their financial service providers.

In fact, research carried out on behalf of the Newcastle Building Society has suggested that one in ten Britons would now prefer to stash their money under their mattress than invest it in a bank account of any kind.

Furthermore, the study also established that only a quarter of consumers around the country now consider a bank account to be the safest place for their hard-earned money.

Last week, Citizens Advice urged British banks not to charge people who are struggling to become debt free when they enter an overdraft without prior permission.

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The housing ladder currently appears to be out of reach for millions of would-be homeowners around the UK, according one expert.

Sean Gardner from price comparison firm MoneyExpert has made clear that lenders are pricing a large number of people out of the housing market and adding to the debt management problems of those looking to remortgage.

He has suggested that while the government is trying to encourage finance firms to lend more readily, the reality is that many people are now unable to save enough money and avoid debt sufficiently to afford a housing deposit.

“When disposable income is already at breaking point for many, it is frankly impossible to see how those with limited savings will find a way to get a foothold on the property ladder,” Mr Gardner remarked.

A report from the Alliance Trust Research Centre last week claimed that UK consumers are facing up to the reality of their own debt management position as the economic climate continues to worsen.

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Many of the UK’s most prominent money lenders are increasing the rates of interest they charge on their personal loans, it has been claimed.

According to a report from Moneyfacts, close to half of all the finance firms in the UK have changed the rates relating to their personal loans and in most cases the alteration was upward.

For many people, these changes have made it more difficult to become
debt free and some are mistaking the rates advertised by lenders as “typical” for the one being actually offered on all associated deals.

With this and other potential pitfalls in mind, Moneyfacts has urged credit consumers to be aware of what deals are on the market and to shop around for the best arrangement available.

Meanwhile, David Kuo from Fool.co.uk recently urged people with debt management problems around the country not to hide their difficulties and to seek help from appropriate sources.

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