Unsecured debts rise by 30%
More than 8 million Britons have unsecured debts of £10,000 or more, with 2.1 million regularly struggling to meet their monthly repayments, it was claimed today.
The number of adults with high levels of debt on credit cards, store cards, loans and overdrafts has increased by 30% since this time last year, according to debt consultancy Thomas Charles.
Around 18% of adults now owe more than £10,000 in unsecured debt - such as on credit cards, store cards and loans - while 5% have unsecured debts worth at least £30,000.
Among those who owe at least five figures, 25% admitted they frequently struggled to meet their monthly repayments.
This figure has risen from 21% in August 2006, but is down from a peak of 30% in October last year.
According to the research, men tend to owe more than women, with 13% owing more than £15,000 compared with 11% of women.
But despite this, 27% of women are more likely to struggle with the repayments compared with 24% of men.
James Falla, director of Thomas Charles, said: "Over the past year we have seen a sharp increase in the number of people who have taken on unsecured debt and are now struggling with repayments.
"These high levels of unsecured debt are clearly linked to the rise in interest rates over the past 12 months. A record rise in house prices, especially in London and the south-east, has led to a growing discrepancy between mortgage payments and salaries.
"The high pressure to maintain social and commercial status, particularly experienced by women, often goes hand in hand with high expenditure on the high street."
But Falla warned that borrowers affected by the higher interest rates were storing up debt problems for the future, and instead of reducing their expenditure were taking on further unsecured loans and credit card debt.
Awaiting insolvency figures
Tomorrow, the government will publish official figures showing the number of personal bankruptcies and insolvencies in the second quarter of this year.
In the first three months of the year 30,075 people went bankrupt or took out an individual voluntary arrangement (IVA) - the first time a quarterly total had broken the 30,000 mark.
Two rate rises in the months since then are likely to have put further pressure on borrowers on variable rate deals, which could mean another sharp increase in bankruptcy figures.
However, the Consumer Credit Counselling Service (CCCS) said that while it expected to see a rise in the number of personal bankruptcies, the number of IVAs taken out by borrowers looked set to fall, as a result of a growing dissatisfaction with profit-making IVA firms.
"Bankruptcies are likely to be up and calls to CCCS helplines are up, which suggests that people are contacting us earlier when financial counselling can resolve their problems," said CCCS chairman Malcolm Hurlston.
"A better understanding of how to keep on top of unsecured debt is reflected in the slow-down in unsecured borrowing over the past couple of years.
"The biggest problem today for consumer borrowers is no longer the ubiquitous credit card; rather it will come from secured borrowing and the rising cost of mortgage debt."
Source: guardian.co.uk
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