£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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Posted in: households,interest,month

Interest rates left on hold again

It has been announced that the base interest rate is to remain on hold at its all time low of just 0.5 percent for the month of January. The announcement was made by the Bank of England following the January Monetary Policy Committee meeting earlier this week. The base rate has been at 0.5 percent since March of last year, and this is the lowest it has ever been in the history of the Bank of England, which goes back over three centuries.

Economists have stated that the move to keep the base rate on hold has not come as any great surprise, and most do not expect the MPC to increase the base rate in the near future. The move to keep interest rates on hold has been welcomed by manufacturing and industry groups, who have said that whilst the economy has shown signs of improvement it is still fragile and there is doubt over the sustainability and strength of the recovery seen so far.

The manufacturers’ association the EEF stated: “The recovery is now underway, but its strength remains in doubt. There are a number of potential pitfalls even as the UK economy starts growing again, including cautious consumers, questions over the public finances and a still-fragile banking system.”

One economist said that 2010 would be a very difficult year for policy makers, as there were many difficult decisions to be made with regards to interest rate movement and the quantitative easing programme. The Bank of England also confirmed that the QE programme would be held at £200 billion but would continue to be reviewed. There is a chance that the QE programme may be extended next month, although most industry experts do not think that it will be extended any further in the foreseeable future.

Tags: eef, interest rates, history, bank of england, monetary policy committee, movement

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Posted in: again,interest,rates

Brits need to focus on high interest debts

There are many people these days who use any spare cash that they have into savings in order to ensure that they have some money towards their future – which is something that would normally be highly commendable. However, many of these that are saving their spare money are also struggling with a range of high interest debts such as credit cards, loans and store cards, which means that they are effectively putting money into savings accounts that earn them little or no interest whilst wasting money on huge amounts of interest on their debts because they are dragging the repayments out.

One industry official has now said that it is important for those that have high interest debts to make sure that they put any spare money that they have toward repaying their high interest debts rather than putting it into a savings account that offers hardly any interest or returns. The warning comes from Justin Modray of online resource Candid Money, who said that in the current climate getting finances sorted was the most important thing to think about.

He said that many people were paying huge amounts of interest on their debts but rather than trying to pay them off when they had a little cash to spare they were simply putting the money into savings and continuing to pay huge levels of interest on the debts. He said that things were difficult for those that had no savings to pay off debts and that saving for the future for many people in today’s climate was something that was unattainable.

He stated: “Those fortunate enough to have savings can use them to stave off debt, but I think for many it’s more a case of just trying not to drown in debt and saving for the future remains a pipedream.”

Tags: Brits, interest, interest debts, Finance, debt consolidation, United States, little cash

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Posted in: Brits,debts,focus,interest

Many paying huge amount of interest on credit card debt

Most people know that credit cards can attract very high interest rates, and this is why those that borrow on credit cards that are not interest free are always advised to pay off the balance as quickly as possible to avoid paying so much interest. However, there are still many people that are letting their credit card debts fester, and for the privilege they are paying hundreds of pounds or more each year in unnecessary interest.

A survey was recently carried out by price comparison site moneysupermarket.com and showed that on average Brits are wasting just under £300 a year each on interest charges that could avoided. On average credit card debts are being held for around ten months before they are paid off during which time hundreds of pounds in unnecessary interest is paid by the cardholder.

Officials from the company said that those with debt on their credit cards which they couldn’t pay off in one go could save a lot of money simply by transferring it to an interest free credit card and avoiding the interest charges on it. However, of those polled as part of the survey nearly 25 percent said that they either didn’t know how to transfer their balance onto another card or that they simply couldn’t be bothered to do so.

One official said: “If you are in this situation and have a debt you need to shift, you need to look at all of your outgoings and try and get a target for paying your debt down. The longer to take to pay off your balance, the more it will cost you in interest. Anyone looking to switch cards should always check which card is most suitable for their personal circumstances as different lenders will treat each applicant differently.”

Tags: lenders, Personal finance, average credit card, polled, interest free credit, Money Management

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Posted in: amount,Credit,interest,paying

Consumers need to be aware of interest rates to help them avoid debt problems

Consumers concerned that they may end up needing a debt solution if they borrow too much should check the interest rates on any credit they obtain.

This advice applies to anyone thinking about taking out a credit card or a loan as the interest rate could help contribute to debt problems in the future.

Richard Sorsky, money advice co-ordinator at the UK Insolvency helpline, stated that many people seeking debt advice have been caught out by interest rates.

He said: "People still don't understand the interest element. Although it's well stated, people are always with the attitude, 'I don't care about the interest rate because I always pay my debt off every month anyway'."

However, this attitude can be dangerous as people may intend to pay off their debts in full each month but an unexpected expense may prevent them from doing so one month, Mr Sorsky added.

According to unbiased.com, Brits will spend the first 45 days 2011 working just to pay off the interest on their debts.
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Brits concerned about their debt problems, which have been accrued through borrowing on a credit card, may want to consider using a zero per cent balance transfer card... Tue, 22 Feb 2011
Around 430,000 students will be given a manual about how to manage their money and avoid debt problems in the process.

Finance charity Credit Action intends to give its guide on student finance to young people planning to attend university in the 2011/2012 school year.

The average student is expected to graduate with debts amounting to more than £23,000 so the charity has created a guide to inform youngsters about the financial support available, how to budget and how to save money.

This could help would-be students learn how to stay in control of their money and help them avoid debt problems while at university.

Joanna Parsley, associate director of Credit Action, said: "Getting this information and guidance into students' hands before they begin university is key as it allows them to prepare financially, so their university experience can get off to a smooth start."..

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Posted in: avoid,aware,Consumers,interest,problems,rates

UK Banks manipulating interest rates

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Posted in: Banks,interest,manipulating,rates