Posted: Mon Sep 17, 2007 9:46 am
Tackling debt must start with some real home truths
MILLIONS OF people are struggling to manage their debts as the recent interest rate rises and the high cost of living take their toll. Experts predict that the worst is not yet over as the global credit crisis pushes up mortgage rates.
The number of people who need help to cope with mounting debts has soared over the past year to record levels, according to the Citizens Advice Bureau (CAB). The charity has reported a 20% jump in requests for advice about debt to 1.7 million over the past 12 months. It now answers 6600 calls a day and has taken on nearly 400 extra advisers to cope with the demand.
"There is no let-up in the rising toll of casualties from an unprecedented consumer credit boom and recent sharp increases in the cost of living. Mortgages, council tax and utilities are all more expensive," a CAB spokesman said.
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The high cost of oil has been one cause of misery for millions of households, pushing up energy bills by around 50% last year. Meanwhile, the Bank of England has raised interest rates five times over the past year to the current rate of 5.75%, and there is evidence that the increases are beginning to take their toll on homeowners.
The number of homes repossessed by lenders has soared by 30% over the past year to 14,000 in the first half of 2007, according to the latest figures from the Council of Mortgage Lenders.
Beccy Boden Wilks, of National Debtline, said: "High house prices mean that many borrowers have stretched their budgets to the limit just to get on to the housing ladder. So it doesn't take much to knock them off balance."
The figures take into account only the last three rate rises, suggesting there is more pain to come. Some lenders have also raised mortgage rates, even though the Bank of England kept the base rate on hold at its meeting this month.
Abbey last week increased the interest rates on its tracker mortgages for new customers by between 0.1% and 0.2%. The bank said it was responding to the current "market pressure". Standard Life Bank quickly followed suit.
Mervyn King, governor of the Bank of England, has warned households to expect higher mortgage and loan rates because the current global credit shortage has made it more costly for UK banks to borrow money.
But consumer campaigners suggest that banks are partly to blame for the debt casualties, arguing that they have been too quick to lend money to people who cannot afford to take on more debt.
Ian Brown of Citizens Advice Scotland said: "I can remember when it was quite difficult to arrange a mortgage, or even an overdraft. Now, lenders are falling over themselves to give you credit. But not enough attention is always given to a customer's personal circumstances. How else could someone who is unemployed be allowed to run up debts?"
Chancellor Alistair Darling waded into the debt debate last week when he suggested a return to "good, old-fashioned banking". He added: "Institutions have in some cases been prepared to lend to people without actually checking if they were ever going to repay it."
Lenders deny the claims. Brian Capon, of the British Bankers' Association, said: "It is in nobody's interests to lend money to someone who cannot afford to pay it back. But debt problems often arise after sudden, unexpected events, such as illness or unemployment, which a bank cannot predict when it makes its lending decision."
Whoever is to blame, the boom in easy credit has sent the UK to the top of the debt league. We now owe a total of £1.3 trillion - more than any other country in Western Europe.
If you are struggling to cope with your debts, there are several ways to get your finances under control.
The first rule is not to ignore the problem - it won't go away. You need to face up to your debts and discuss the situation with your family.
Next, draw up a budget and honestly assess your incomings and outgoings. It will help you get things straight and could be useful if you have to negotiate with creditors. Ask yourself whether you can cut down on spending, or cut the cost of your debt. You might, for example, be able to find a cheaper mortgage or a credit card with a lower interest rate.
Some people consolidate their debts into one loan that runs for 10 or 15 years. The longer term brings the monthly payments down, but you will pay more in total interest, which could make the situation worse. Experts also warn of the risks of taking out a bigger mortgage to pay off debts or arranging a separate loan secured against your house. If you fall into arrears, you could lose your home.
Try to prioritise your debts. Boden Wilks said: "You know when a debt is a priority because you will lose something if you don't pay it. So, pay your mortgage, rent and essential household bills." Finally, contact creditors if you are struggling to meet commitments.
Source: sundayherald.com
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk
MILLIONS OF people are struggling to manage their debts as the recent interest rate rises and the high cost of living take their toll. Experts predict that the worst is not yet over as the global credit crisis pushes up mortgage rates.
The number of people who need help to cope with mounting debts has soared over the past year to record levels, according to the Citizens Advice Bureau (CAB). The charity has reported a 20% jump in requests for advice about debt to 1.7 million over the past 12 months. It now answers 6600 calls a day and has taken on nearly 400 extra advisers to cope with the demand.
"There is no let-up in the rising toll of casualties from an unprecedented consumer credit boom and recent sharp increases in the cost of living. Mortgages, council tax and utilities are all more expensive," a CAB spokesman said.
advertisement
The high cost of oil has been one cause of misery for millions of households, pushing up energy bills by around 50% last year. Meanwhile, the Bank of England has raised interest rates five times over the past year to the current rate of 5.75%, and there is evidence that the increases are beginning to take their toll on homeowners.
The number of homes repossessed by lenders has soared by 30% over the past year to 14,000 in the first half of 2007, according to the latest figures from the Council of Mortgage Lenders.
Beccy Boden Wilks, of National Debtline, said: "High house prices mean that many borrowers have stretched their budgets to the limit just to get on to the housing ladder. So it doesn't take much to knock them off balance."
The figures take into account only the last three rate rises, suggesting there is more pain to come. Some lenders have also raised mortgage rates, even though the Bank of England kept the base rate on hold at its meeting this month.
Abbey last week increased the interest rates on its tracker mortgages for new customers by between 0.1% and 0.2%. The bank said it was responding to the current "market pressure". Standard Life Bank quickly followed suit.
Mervyn King, governor of the Bank of England, has warned households to expect higher mortgage and loan rates because the current global credit shortage has made it more costly for UK banks to borrow money.
But consumer campaigners suggest that banks are partly to blame for the debt casualties, arguing that they have been too quick to lend money to people who cannot afford to take on more debt.
Ian Brown of Citizens Advice Scotland said: "I can remember when it was quite difficult to arrange a mortgage, or even an overdraft. Now, lenders are falling over themselves to give you credit. But not enough attention is always given to a customer's personal circumstances. How else could someone who is unemployed be allowed to run up debts?"
Chancellor Alistair Darling waded into the debt debate last week when he suggested a return to "good, old-fashioned banking". He added: "Institutions have in some cases been prepared to lend to people without actually checking if they were ever going to repay it."
Lenders deny the claims. Brian Capon, of the British Bankers' Association, said: "It is in nobody's interests to lend money to someone who cannot afford to pay it back. But debt problems often arise after sudden, unexpected events, such as illness or unemployment, which a bank cannot predict when it makes its lending decision."
Whoever is to blame, the boom in easy credit has sent the UK to the top of the debt league. We now owe a total of £1.3 trillion - more than any other country in Western Europe.
If you are struggling to cope with your debts, there are several ways to get your finances under control.
The first rule is not to ignore the problem - it won't go away. You need to face up to your debts and discuss the situation with your family.
Next, draw up a budget and honestly assess your incomings and outgoings. It will help you get things straight and could be useful if you have to negotiate with creditors. Ask yourself whether you can cut down on spending, or cut the cost of your debt. You might, for example, be able to find a cheaper mortgage or a credit card with a lower interest rate.
Some people consolidate their debts into one loan that runs for 10 or 15 years. The longer term brings the monthly payments down, but you will pay more in total interest, which could make the situation worse. Experts also warn of the risks of taking out a bigger mortgage to pay off debts or arranging a separate loan secured against your house. If you fall into arrears, you could lose your home.
Try to prioritise your debts. Boden Wilks said: "You know when a debt is a priority because you will lose something if you don't pay it. So, pay your mortgage, rent and essential household bills." Finally, contact creditors if you are struggling to meet commitments.
Source: sundayherald.com
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
See my Blog:
http://ivanews.blogs.iva.co.uk