Finance Matters

Posts Tagged ‘Debt News’

Although households reduced their debts last year they face a ‘tide’ of difficulties in repaying them, according to a study by the Consumer Credit Counselling Service (CCCS).

The study of 370,000 cases handled by the counselling service suggests that youth unemployment and rising rents are key factors which cause people to fall into debt.

42% of the under-25s who sought help from CCCS last year were unemployed, and being out of work and a drop in wages were the main reasons given by nearly half of the organisation’s clients for falling into debt.

Clients living in private rented accommodation were particularly badly affected by debt, with many admitting that they were unable to pay their rent.

The report also highlighted an increasing number of older people in debt.

Demand for the organisation’s service from people over 60 has increased by 15 per cent in the past three years.

Chairman of the CCCS, Lord Stevenson, said: “Work carried out for us last year by the Financial Inclusion Centre showed that there is a persistent minority of older people trapped with extreme debt.

“It would appear that this minority is growing rapidly.”

As older people spend more of their income on essentials such as food, utility bills and petrol, they are more susceptible to an increase in inflation.

AgeUK’s Silver Retail Prices Index, which measures the cost of living for people over the age of 55, showed an 18 per cent increase since 2008, five per cent higher than for the general population.

The CCCS’s report also highlights an increasing number of people experiencing debt problems after taking out a payday loan.

The number of people who contacted The CCCS last year with concerns over a payday loan increased to 17,414 from 7,841 in 2010.

The Office of Fair Trading is due to publish the result of an investigation into payday loans later this year.

Saga’s latest quarterly report is slightly more optimistic about the financial health of the over 50s than its report for the final quarter of 2011, but the organisation warns that the “green shoots” of recovery are very tentative at the moment.

Compared with a year ago, the report suggests that the quality of life for over 50s has worsened, with 32 per cent of respondents saying their living standard had dropped.

Sixty per cent of respondents between the ages of 50 and 54 said that they are more worried about living costs than they were a year ago and 45 per cent of over 50s are reducing the amount they spend on non-essential items.

However, even though they are struggling to make ends meet, 33 per cent of over 50s are financially helping their children and grandchildren

Saga’s report combines economic data from official sources with a nationwide Populus Survey of more than 11,642 over 50s on their well-being.

Dr Ros Altmann, the Director General of Saga, said: “We are still a long way from reporting a “positive” Quality of Life for the over 50s in the UK.

“Although there seems to have been a minor improvement over the last quarter only it’s too early to say whether this marks the start of a new trend towards lasting quality of life improvement.

“Our Quarterly Report Series serves as a reminder to policy makers that older generations should feature more prominently on the Government’s agenda.”

Yesterday, The Mail on Sunday reported the results of a recent survey by consumer group Which? suggesting that 25 per cent of people in the UK are having to dip into savings to pay for household essentials, and 20 per cent have borrowed money to pay for groceries.

Which? surveyed 2,094 UK adults and interviewed 20, about the effect of the economic downturn on their live.

Less than half (43 per cent) said they could afford to live on their salaries.

Seven in ten UK adults are in debt but many are choosing to ignore the problem instead of seeking help before it gets out of hand.

Research by The Co-operative Bank found that 29 per cent of people refuse to confront their debt problems.

Many do not admit that they are in debt until borrowing on credit cards, overdrafts and loans reaches £1,247, on average.

According to the bank, these people are suffering from ‘DRIP syndrome’, because they Deny they are in debt, Rationalise the reasons for being in debt, Ignore their debt and Postpone dealing with it.

Worryingly the research found that some people resort to gambling or pay day loans in an attempt to get out of debt.

The research also found that 50 per cent of people in the UK have fallen further into debt in the past year, by £325 on average, due to the rising cost of living, including energy and fuel.

Robin Taylor, Head of Banking at The Co-operative Bank, said: “Our research also shows that the ‘debt alarm’ doesn’t go off until people owe more than £1000, which can be a real struggle to pay back.

“Managing your money with steps such as writing a list of incomings and outgoings and regularly checking your bank account will help you get on top of your finances now before problems get any worse.”

The latest figures from the Bank of England show that UK credit card companies wrote off £3.64 billion in bad debts on their customers’ cards in 2011, representing 7 per cent of all outstanding debt on consumers’ credit cards.

However, this was an improvement from 2010, when £5.32 billion in bad debts were written off and from 2009, when bad debts on credit cards totalled £4.12 billion.

UK households will find it increasingly difficult to service their debts in the coming years, according to a report by debt charity, Consumer Credit Counselling Service (CCCS).

According to the charity’s research, an average of more than 23 per cent of households’ disposable income went towards interest payments on loans at the end of 2011.

Although interest payments fell by £2 per week in the final quarter of 2011, inflation caused the cost of living to increase, further reducing disposable income for UK householders.

The CCCS warned today that the outlook remains difficult despite a recent fall in inflation because of an expected increase in unemployment.

The CCCS expects middle-aged and elderly people to be particularly prone to debt problems, with people over the age of 45 expected to account for 47 per cent of its clients by December 2014, compared with 28 per cent in 2005.

There was bad news for younger people too today, with a survey predicting that the rising cost of childcare could make it too expensive for parents to go to work, pushing more families into poverty.

According to the Daycare Trust charity, the average cost of a part-time nursery place for child under the age of two-years is more than £100 per week.

This is an increase of 6 per cent compared with childcare costs for under-2s in 2010.

However, average wages increased by just 0.3% over the same period.

The charity also highlighted that 44,000 fewer families are able to claim tax credits to pay for childcare following recent changes by the government.

Families who are still eligible to claim the tax credits are now receiving an average of £500 a year less.

In October the government announced an investment of £300m to help families on low incomes with childcare costs, through the introduction of the Universal Credit.

It is also investing more money into early years and nursery education.

The economic downturn, the rising cost of living and the government’s austerity programme have pushed over 70 per cent of UK families to the brink of poverty, according to online parenting organisation Netmums.

The organisation surveyed over 2,000 of its members this month to find out how they are coping in the economic downturn and the findings are startling.

Twenty per cent of mums are regularly forced to skip meals to make sure their children have enough food, 25 per cent of families are living on credit cards, 5 per cent are using payday loans and 1 per cent have been forced to take money from loan sharks or illegal lenders.

The study revealed that 64 per cent of families have suffered a fall in income over the last year.

Struggling families are having to sell or pawn their belongings to find money for essentials and 16 per cent of parents have developed stress-related illnesses as a result of financial worries.

The situation has become so desperate that 33 per cent of respondents to the survey said they felt suicidal and unable to cope.

With incomes so stretched, parents are becoming socially isolated as they are unable to afford to go out with their friends and are even having to stop their children attending friend’s parties in order to avoid buying gifts.

Netmums founder Sally Russell said: “It’s shocking that seven in 10 families in the UK today are living on the edge of existence – but it’s a crisis that needs exposing.

“Mums shouldn’t be missing meals to feed their children or turning to loan sharks in modern Britain.

“Family finances are so strained that any more pressure will turn this personal crisis into a catastrophe for the nation.”

Netmums findings follow a survey by the Halifax which found that UK households remain among the most indebted in the world.

The average UK consumer starts to struggle to make ends meet just 17 days after receiving their monthly pay, according to the Halifax and UK families owe an average of £7,900 on personal loans, overdrafts and credit cards.