Those who have credit card debt and are finding it increasingly hard to pay off due to pay freezes may be facing this situation for up to two more years, an expert has warned.

Spokesman for candidmoney.com Justin Modray said: "Pay freezes are an unwelcome by-product of our stalling economy and a government that needs to cut back spending, so I doubt matters will improve for at least another year or two."

He added that pay rates will also be held down by increased competition in the jobs market as unemployment rises.

Mr Modray said the stretching of household finances is the main reason the Bank of England is "reticent" about raising interest rates, since this could make life very hard for mortgage payers and such a move would be "the straw that breaks the camel's back".

He also listed inflation and in particular rising utility bills as being a major factor in putting pressure on the finances of consumers.

Those who are struggling because of this may find a debt management plan can ease the strain and enable them to avoid defaulting on any payments.

Such stresses may be felt most by public sector workers, whose pay is currently frozen by the government.

Britons on middle incomes are now facing an additional problem with falling income in real terms on top of pay freezes, according to the Resolution Foundation.

It said many people are set to struggle with lower tax credits and the prospect of a lifetime spent renting.

By Joe White

Britons are in much more and worse debt than was acknowledged in a speech this week by Bank of England governor Mervyn King it has been argued.

Save Our Savers (SOS) has criticised comments made by the governor in which he said:  "The increase in households' borrowing came to an abrupt halt in the 2008/9 recession."

SOS said this was "misleading" because it suggested that consumers have ceased borrowing, adding "nothing could be further from the truth".

The pressure group said that the reality is one of debt that is continuing to cause widespread difficulty for households, with the overall drop in indebtedness being due to some of it being written off by banks.

It stated that the fall from the figure of £1.461 billion of debt in November 2008 to £1.461 billion was mainly due to £26.7 billion being written off, meaning that once these are excluded there has been a net rise of £18.4 billion.

The body also quoted the Bank's own statement that: "There is little sign that, at the aggregate level, households are making an active effort to pay down debt more quickly than in the past."

Credit card debt is one area in which the problems faced by consumers appear to be ongoing, according to a survey by Gocompare.com.

It found 26 per cent of Britons will be carrying a card debt throughout 2012, while nine per cent owned up to being reliant on plastic to make ends meet.

The study also found 35 per cent of people want to reduce or eliminate their debts.

By James Francis
 

More Britons could be left needing debt help if unemployment is sent spiralling upwards by a new recession, something it appears Britain may be entering.

Official figures from the Office for National Statistics have shown the UK was initially estimated to have seen its economy contract by 0.2 per cent in the final three months of 2011, which if followed by any shrinkage in the first three months of this year will mean the country is officially back in recession.

Production fell by 1.2 per cent and construction by 0.5 per cent, in contrast with increases of 0.2 per cent and 0.3 per cent in the third quarter, while service sector output was unchanged.

If Britain is sliding back into a downturn, it could mean significant job losses, not east in the industrial and construction sectors.

Indeed, a report by PricewaterhouseCoopers (PwC) has revealed nearly 10,000 firms in these two sectors have become insolvent in the past two years, a tally it expects to rise because of the weak economic outlook.

Head of engineering and construction at PwC Jonathan Hook commented that "the trend shows no signs of abating" this year, with six per cent more construction firm failures in 2011 than 2010.

Those in debt who lose their job – either because their employer goes bankrupt or has to make cutbacks – may find they need additional help to tackle the situation.

A debt management plan may be one way forward, as it enables people to spread out repayments over a longer period.

By Joe White

A quarter of consumers will be holding credit card debt throughout 2012, according to a new survey.

The GoCompare.com research found 26 per cent of Britons will be reliant on plastic for the whole of this year and nine per cent have admitted they have to use cards to make ends meet.

It found a wide range of financial concerns are leading to hard-pressed consumers maintaining their debt, with the rising cost of living and bills being listed as the most worrying by 22 per cent.

A quarter of people want to find ways to reduce their outgoings and 35 per cent wish to either get out of debt altogether, or at least reduce what they owe on loans and credit cards.

Head of credit cards at the price comparison site Jeremy Cryer remarked: "If used carefully, plastic cards can be a useful budgeting tool, but when used to plug a gap in everyday spending, card debt can quickly spiral out of control."

Commenting on the "worrying" news that nearly a tenth of people rely on their cards to get by, he added: "No wonder we owe a staggering £60 billion on credit cards as a nation".

Those who are in debt that has become too deep to pay may wish to consider a debt management plan to spread out repayments more.

One way in which people are worse off because of rising bills is in the area of energy prices.

A study by uSwitch calculated last week that Britons are still collectively £1.9 billion a year worse off after the large energy price hikes last year, which were far larger than the reductions made by major suppliers earlier this month.

Posted by Paul Thacker