£200 per month on interest hits households hard

Households are being increasingly financially squeezed as it emerged that families are having to pay nearly £200 in interest each month.

After paying out money each month on their regular bills, the Consumer Credit Counselling Service (CCCS) believes that the average UK household still spends 24 per cent of their discretionary income on their ‘interest burden’.

The CCCS released a report stating: “Interest payments are a heavy burden on household finances.

“With payment necessary regardless of economic circumstances, they pose a major threat to the solvency of many families.

“As a major spending component that must be met on time, the need to service debt is posing a significant challenge in the current economic downturn when household heads lose their jobs and income sources dry up.”

The charity conducted its research through the Centre for Economic and Business Research, which analysed the charity’s existing database.

The results indicate that demand for debt advice looks set to peak in 2014, indicative of the lasting impact of the financial crisis.

CCCS further highlighted a rise in demand for debt advice from the more mature generation aged between 45 and 59. The report explained: “There has been a gradual rise in counselling demand from this group, with its share rising from 22.8 per cent in 2005 to 31.7 per cent by the end of 2011.”

“With incomes set to grow at a slower pace and first time buyers hard-pressed to get on the property ladder, rates of home ownership may well decrease gradually in the coming years and decades.

“With rising property prices and rising borrowing, mortgage debt has grown in importance compared with other areas of household finances. This development is evident in the growing share of mortgage debt as a proportion of total household debt. This has risen from 80.3 percent in January 2000 to 86.3 percent by the end of last year.”

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Jobless figures mask reality of households struggling on reduced incomes

The latest job market figures have revealed a startling rise in the number of families struggling on reduced incomes because they can’t find full-time work.  

The figures follow a recent report suggesting that increasing numbers of workers are being forced to take pay cuts or ‘downbanding’ of their jobs or face redundancy.With loss of income the top reason why people enter Debt Management Plans (DMPs), debt solutions specialist and DEMSA member Atlantic Financial Management is warning that while the headline jobless figures look positive, the underlying picture is much more worrying for families across the UK.The ONS figures have revealed that the number of employees and self-employed people working part-time because they could not find a full-time job increased by 80,000 in the three months to May 2011, on the previous quarter to reach 1.25 million, the highest figure since comparable records began in 1992. This rise is also echoed in the number of people claiming Jobseeker’s Allowance (JSA) which has risen by 24,500 in June – the highest increase in two years. Redundancies have also risen by 16,000 over the quarter. Kevin Still, Director for Atlantic, said: “While the overall figures show a reduction in unemployment, when you dig below the surface there’s clearly a growing number of people tackling a loss of income either because they can’t find full time work, or because they have had an enforced pay cut or have been ‘downbanded’. “When you look at this combined with the rising costs of day to day living – utility bills, food costs and fuel for example – the challenge of balancing reduced income against rising outgoings is becoming a real issue for many UK households.” He explained that people often turn to their credit cards in order to manage the rise in costs, which can often lead to a debt spiral. “It’s at this point that household need to start prioritising debts and a Debt Management Plan (DMP) from a DEMSA accredited debt solutions provider such as Atlantic can prove invaluable in this regard.“A new schedule of payments can often be negotiated with all the creditors and will ensure rent, mortgage, energy, critical insurances and council tax bills get paid before other unsecured debts,” he added.  "Atlantic Financial Management offers a range of debt solutions including Debt Management Plans (DMPs), IVAs, Protected Trust Deeds and Bankruptcy advice and its expert legal support team prioritises dealing with any court actions an individual or household may be facing. "It also offers a number of money saving tools including energy switching and a prepaid current account," Mr Still said.He explained the process individuals can go through in order to find the best debt advice for their circumstances. "Debt Advisors will confidentially discuss an individual’s financial circumstances over the phone and provide initial debt advice without obligation. Once they know more about the current financial situation, the best debt solution for their circumstances will be recommended."If a Debt Management Plan is chosen, Atlantic will then complete a statement-of-affairs, from which it can work out which payments are prioritised and which can be negotiated. Priority debts, such as mortgage, secured loans, rent, council tax, priority insurances and utility bills must be paid first and Atlantic makes allowances for these in the client’s monthly budget and statement of affairs."Mr Still revealed that Atlantic’s business model is based upon very early contact with a client’s creditors to advise them of their appointment and to commence the debt repayment negotiation process at the earliest point possible. Atlantic is licensed to use the Common Financial Statement, which is widely accepted by creditors and their collecting agents. "Part of the Atlantic model is to look at benefit entitlements and ways of optimising income,"  he concluded.     
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3.2 million households in the UK are in debt

More than three million households across Britain are suffering financial difficulty while another three million are financially vulnerable.

Research, conducted by debt charity the Consumer Credit Counselling Service, reveals that 3.2 million households are either in debt action such as insolvency or are three months or more behind with debt repayments.This figure may be set to rise, however, as the proposed increase to electricity and gas prices will potentially affect the three million financially vulnerable households. Electricity prices will go up by 14.5 per cent, whilst gas will increase by 19.7 per cent.Any increase in monthly outgoings for these financially stretched homes, which are only just managing to meet existing repayments, would result in them also being categorised as being in financial difficulty.The chairman of the CCCS, Lord Stevenson, said: “These figures confirm our fears – that troubled times lie ahead for many people in the UK. This report shows the pain is going to spread wider and affect many more people than many commentators have previously assumed.”The CCCS’s report on debt and household incomes shows the difficult financial situation faced by around one tenth of the UK population, and includes more than a million people struggling to pay their mortgage.More than one third of the CCCS’s clients earning £13,500 to £25,000, and a quarter of clients earning £25,000 to £50,000, have no surplus money to repay unsecured loans and debts, the report revealed.Clients earning less than £13,500 per year were likely to have unsecured debts worth more than 20 per cent more than their yearly income. Clients who earned between £25,000 and £50,000 per annum had average debts worth 95 per cent of their annual income, whilst those who received benefits had the greatest levels of unsecured debts, worth 124 per cent of their yearly income.“CCCS was contacted by almost 418,000 people last year, and our data reveals the stark realities faced by many decent, ordinary people who struggle to make ends meet in these difficult economic times. “It is important that the complexities of their vulnerability are understood and addressed by government as well as the financial and charitable sectors,” Lord Stevenson continued.
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Rising debt levels affecting households

Over the past few years more and more people across the UK have been experiencing issues with debt, with many finding it difficult to cope with their high levels of debt. It has now reported that unsecured household debt levels have been increasing, which could lead to further problems for families that are already struggling with their finances.

Research has shown that over the past few months alone the level of unsecured household debt has increased. The research was carried out by insurance giant Aviva and formed part of its Family Finances Report. The research suggests that the level of household debt has increased by 9.66 percent since the beginning of this year reflecting an increase from £5,360 in January to £5,878 in May.

The research also shows that households with children are finding it extremely difficult to cope financially in the current challenging financial climate and many are now struggling to make ends meet. One official involved in the research said that there was a great deal of concern about the rising levels of personal debt. He said that many households were concerned about the future and a huge number of adults were worried about the cost of living continuing to soar over the next few months, as this would put further strain on their finances and make the situation even more difficult to cope with.

Industry experts have warned that any families that find themselves struggling to meet basic payments such as bills and mortgage or rent should seek advice as quickly as possible in order to ensure that their situations do not spiral out of control, which could easily happen if the cost of living continues to increase or the base interest rate increases leading to higher mortgage repayments.

Tags: problems, debt, credit card, cost, Mortgage, advice

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Rising debt levels affecting households

Over the past few years more and more people across the UK have been experiencing issues with debt, with many finding it difficult to cope with their high levels of debt. It has now reported that unsecured household debt levels have been increasing, which could lead to further problems for families that are already struggling with their finances.

Research has shown that over the past few months alone the level of unsecured household debt has increased. The research was carried out by insurance giant Aviva and formed part of its Family Finances Report. The research suggests that the level of household debt has increased by 9.66 percent since the beginning of this year reflecting an increase from £5,360 in January to £5,878 in May.

The research also shows that households with children are finding it extremely difficult to cope financially in the current challenging financial climate and many are now struggling to make ends meet. One official involved in the research said that there was a great deal of concern about the rising levels of personal debt. He said that many households were concerned about the future and a huge number of adults were worried about the cost of living continuing to soar over the next few months, as this would put further strain on their finances and make the situation even more difficult to cope with.

Industry experts have warned that any families that find themselves struggling to meet basic payments such as bills and mortgage or rent should seek advice as quickly as possible in order to ensure that their situations do not spiral out of control, which could easily happen if the cost of living continues to increase or the base interest rate increases leading to higher mortgage repayments.

Tags: problems, debt, credit card, cost, Mortgage, advice

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January debts causing problems for households

Many households are being adversely affected by January debts according to recent reports, and the problem has become so bad that they are struggling to pay their bills or even buy basic essentials. Many people have accumulated huge levels of debt over the Christmas and New Year period, which has left them struggling with their finances now as they try and make repayments on their debts.

This month many households have received their credit card statements having spent a huge amount over the festive season, and the amount that they owe has come as something of a shock for many. A lot of people spent on their credit cards without really budgeting or thinking, but are now set to pay for their frivolity. This means cutting back in other areas but doe to the state of their finances a lot of households will have to cut back on essentials because there is nowhere else to make cutbacks.

It is likely that more and more people will be seeking advice and help with their debts over the coming months, as they realise that they cannot meet their debt repayments as well as paying their bills. However, with demand for such services already so high many may struggle to get the advice and assistance that they need. The Debt Advice Foundation has expressed concern over the situation, adding that people were not taking out finance to pay bills in January but quite the opposite – they were missing their bill payments to pay off their borrowing.

An official from the group said: “It’s really the other way around, the debt tends to be racked up in November and December when people borrow money using credit cards, store cards, overdrafts and personal loans, to pay for a Christmas they can’t really afford.”

Tags: realise, doe, cutting, debt advice, New, Debt Advice Foundation

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Posted in: causing,debts,households,January,problems