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UK Debt Becoming A Cause For Concern
By: Rich Green
The UK attitude toward debt has received a major shift over the past few years.
Where once the UK was seen as a nation that held up thrift as being virtue and
considered debt a vice, it has now changed to owing £1.3 trillion on mortgages,
credit cards and other loans. The main cause of this growth in debt is the
British obsession with house ownership, making up 80% of the borrowing. Figures
for the number of repossession orders granted in the first three months of 2005
have reached nearly 26,000, which is the highest figure since 1995.
The Consumer Credit Counselling Service (CCCS) reports that calls from people
worried about debt have been increased by 50% compared with last year.
The Chairman of the CCCS, Malcolm Hurlston, said:
"The consumer is spending less and repaying less. There are early signs here
that the whole consumer-driven economy may be moving into lower gear.”
In the past, homeowners have been the main victims of previous recessions due to
their reliance on credit, however, this time it seems the young are most at
risk. "We are seeing lots of younger people coming to us for help," said Frances
Walker, from the Consumer Credit Counselling Service ( http://www.cccs.co.uk/ ),
"They are often very heavily in debt as they have been able to borrow far more
than in the past. The trouble is they have no assets, so when they get into
difficulty they have nothing to fall back on."
It is not only the young who are being affected however, as the number of houses
exchanging hands each month is gradually decreasing, and high street sales are
poor – traditional signs that consumers in general are beginning to suffer. With
a number of the UK’s main lenders, including Barclaycard, HSBC, HBOS and the
Royal Bank of Scotland, recently being warned about bad consumer debts, it seems
that consumers need to take on more financial responsibility for themselves,
rather than relying on the providers to protect them.
Independent financial adviser, Alan Steele commented, “Debt has always been a
problem for a minority of people. One of the current problems is the willingness
of bank managers to hand out loans and credit cards, which means this minority
has increased, but the majority are coping with their debt.”
Free information on credit cards including costs, from comparison websites like
Moneynet ( http://www.moneynet.co.uk ) or Moneyfacts (
http://www.moneyfacts.co.uk/)can help consumers check for the lowest rates and
best deals on their loan and credit requirements, thereby reducing the risks of
incurring high interest charges due to mis-selling by providers.
The introduction of tougher codes of practice imposing stricter standards on the
way products are sold, and the use of financial information from qualified
financial advisers will also help to protect consumers against possible debt
induced problems.
In an interview with the BBC, the debt charity, National Debtline
(http://www.nationaldebtline.co.uk/), stated, "We are not in an early 1990s
scenario yet, but large numbers of people are living up to and beyond their
incomes."
Organisations like the National Debtline, Citizens Advice, CCCS
(http://www.cas.org.uk/) and Business Debtline (http://www.bdl.org.uk/) are
available to the public to provide information, in the unfortunate event of debt
escalating out of control; however it is much better to prevent the situation
from getting to that level in the first place.
About the Author:
Richard works in Edinburgh for a media company, occasionally writing for the personal finance blog Cashzilla ( http://cashzilla.blogspot.com/ ), and drinking
too much coffee. |
