Debt Statistics

May 1, 2008 on 9:16 am | In Debt Management, Uncategorized

The latest and most notable debt statistics are:

  • £1 million of debt incurred every 5 minutes
  • The daily increase in UK debt is £309 million
  • The average household debt including mortgages is £57,420
  • We pay £257 million interest on our debt every day
  • The total UK debt is £1,430 billion
  • Nearly 300 people will be declared bankrupt today

(Credit Action)

Obviously our debt mountain is getting bigger. I can’t remember where I read it but apparently we have more debt in this country than the whole of Europe. The country is heading for recession and this will be accelerated as the personal lending, which has supported our economy over recent years, dries up.

I would guess most people are putting their head in the sand and not dealing with a debt problem which is nagging at them. When we see a client at Simple Debt Solutions the feedback we get is that they feel like the stress has been lifted. This is because we give sound advice and a practical plan which we can implement on a client’s behalf.

Just give Simple Debt Solutions a call, no matter how trivial you feel the problem is and we will provide a solution.

 

Mortgages, Remortgages and Debt

April 29, 2008 on 12:58 pm | In Remortgages

When you’re trying to remortgage or take on a mortgage for the first time now you will not only be hit by the increase in interest rates but a massive increase in loan fees.

Mortgage fees have in most instances doubled and in other instances there are uncapped fees.  One lender gives a maximum £500,000 lend which would attract £12,000 in fees.

When you are remortgaging, if you can, you really want to pay the fee and not add it to your loan.  For example if you took the maximum loan of £500,000 as mentioned before, you would pay £25,940 for the fee at the end of the term.

There are 116,000 people per month coming to the end of their fixed mortgage deals who are going to be faced with a nasty shock when they see the revised rates.  Some will even experience a negative equity position.

If you are remortgaging to consolidate debt you may have left it too late as many lenders have withdrew the majority of deals following the onset of the credit crunch.  Debt advice is crucial before remortgaging to consolidate debt.  If you are just remortgaging because you have completed the end of the fixed mortgage and, will be paying your debts separately you will drastically need to review your financial position.

 

Getting a loan to live?

April 29, 2008 on 12:18 pm | In Debt Management, Loans

Consumers are running into trouble as a combination of rising costs and tighter lending criteria squeeze their spending powers. Provident Financial has reported that more and more people are borrowing money from them and it blames food and fuel prices. It is worrying that people are borrowing money to live and not just to buy luxury items.

Clearly something has to give. Mainstream lenders are seeing bad debt soar and they are no longer willing to give money to anyone. In fact lenders such as Provident are not a soft touch and in the past six months it has rejected 7 in 10 credit card applications. I am concerned about those people who make applications to look for credit to live. If that is you, you need debt advice.

 

In debt? Know your options to restructure your debt in an affordable way.

February 26, 2008 on 5:36 pm | In Debt Management, IVA's, Remortgages

Simple Debt Solutions have advised thousands of people, and by far the most common and largest debt we find our clients have, is with Northern Rock. Many of the debts we see are in respect of mortgages (secured debts) with part unsecured. 125% mortgages. So for example, if you borrowed £100,000 and your house was worth £75,000, you have a £25,000 unsecured loan (up to £30,000). I know the maths is simple, but I am not sure how many people who took these loans really knew what they were getting into.

In the Times on Sunday there was this interesting article ……

TENS of thousands of Northern Rock borrowers face being trapped in mortgages charging punitive rates of interest following the bank’s nationalisation last week.

About 175,000 borrowers are thought to have been lured into Northern Rock’s controversial 100%-plus loans over the past few years. They are now likely to find it extremely difficult to remortgage after most lenders pulled out of the market last week.

If they stay with Northern Rock, however, they face a huge “payment shock” with repayments likely to go up by as much as £2,000 a year (£166 per month) on a typical loan of about £150,000.

The nationalised bank already has one of the highest rates of repossessions of any lender, and the plight of the 100%-plus borrowers could make matters much worse.

While some were cash-strapped first-time buyers, many others thought the ability to borrow up to 125% of the value of their property was simply too good to miss.

Jamie Lyall, who lives in Newark, Nottinghamshire, and works for a leading high street retailer, borrowed 104% from Northern Rock in July last year. “My wife and I could have put down a deposit, but the Rock deal enabled us to put the money towards an extension,” he said.

“We are now racing to pay off as much of the loan as we can to improve our remortgage options. However, with our second baby on the way this could prove difficult.”

House prices in his area have been flat, so the family are in danger of sliding into negative equity. Unless they pay down their debt, most lenders will baulk at their business.

Ray Boulger of broker John Charcol said: “The government is in effect a negative equity lender, while borrowers who owe more than the value of their homes are left with few options as their chance of remortgaging onto another 100% plus deal is slim.”

Northern Rock pulled its range of 100%-plus loans for new borrowers last week in response to heavy criticism from MPs. Alliance & Leicester, Coventry, BM Solutions, Bradford & Bingley and Cheltenham & Gloucester did the same, leaving limited options for those who have borrowed more than the value of their property.

Mortgages up to 95% are also disappearing fast. Alliance & Leicester, West Bromwich, Britannia and Barnsley building societies have all reduced the maximum they will lend from 95% to 90% of the value of the property.

Brokers said it would not be long before borrowers need a deposit of at least 10% to get a decent rate. Melanie Bien of broker Savills, said: “Aspiring homeowners as well as remortgagers could soon need equity of at least 10% to find affordable deals as the combination of the credit crunch and falling house prices has forced lenders to readdress their attitude to risk”.

Ian Peace, 38, from Huddersfield, West Yorkshire, succumbed to a 115% mortgage with Northern Rock a year ago at a rate of 5.75% fixed for two years. He said: “We were desperate to move and the loan from Northern Rock allowed us to take a lower price on our previous property. I am now extremely worried that I will be stuck with Northern Rock.”

Northern Rock’s 100%-plus range was structured so only 95% of the loan was secured on the property with up to £30,000 as a personal loan – so if the property was worth £100,000, you could borrow £125,000, or 125%.

Peace, who is married and has two children, borrowed 95% of a property worth £144,000 – of £136,800 – plus an additional £28,200. This added up to £165,000, or nearly 115% of the value of the property.

When he comes to remortgage, he may find he is stuck with Northern Rock. However, the best rate available from the bank is 7.58%, giving repayments of £1,225 compared with his current outgoings of £1,038 – an extra £2,280 a year. He could switch just his 95% secured loan to another lender, but Northern Rock would reserve the right to charge him 8 percentage points on top of the standard variable rate(SVR) on the personal loan element. This is now 7.59%, so he would be paying a punitive 15.59%.

The Times on Sunday 24 February 2008

What people don’t know is that they can restructure their unsecured debt by proposing an IVA. The IVA will ring fence unsecured debt and you will only have to pay your mortgage, and an affordable monthly payment to creditors.

Essentially, the deals people took out have changed and in most cases unaffordable. If this is you, don’t struggle on, get debt advice.

 

You’re in debt …. What do you do?

February 15, 2008 on 10:51 am | In Debt Management

So everybody is getting refused mortgages which they were obtaining to get rid of all their credit card debt. The credit crunch is biting and the lenders have tightened up their criteria which apparently hardly anyone fits.

So if you have debts or are self employed you may struggle to get a mortgage. Before doing so you need debt advice.

 

Helping employees out of the red can keep your business in the black

February 15, 2008 on 10:49 am | In Bankruptcy, Debt Management, IVA's

Latest figures show that Britain’s personal debt problem has hit the £1.17 trillion mark, up 10 per cent on last year and with cases of personal insolvency at a record high, it is clearly out of control.

Many businesses already provide their employees with a combination of healthcare, pensions, flexible benefits and company vehicle packages, so why not move with the growing needs of many employees and set up a support and advice service to deal with personal issues such as debt worries, which ultimately detract from an employee’s performance in the workplace. It is such support which should be included in the Human Resource manager’s job description.

It is estimated that at least 25% of the adult population have a problem with debt. Taking a workforce in isolation, it is not unreasonable to assume that 25% are insolvent and could be declared bankrupt.

Bankruptcy is a taboo with employers. Currently, many large corporate organisations have rigid clauses in employment contracts which state that if bankruptcy does occur, employment will be terminated. Where is the sense in that? If an employee is trying to get out of debt and struggling, employers should be approachable and show their support, helping employees to get back on their feet. Surely that would be much more responsible and show the company as being a caring and supportive employer, rather one which sacks struggling employees, perhaps just to save face. Clearly, by helping employees the company retains valued personnel and avoids the costs of having to find an experienced replacement.

Human Resource managers should be aware of the options available or be able to point an employee in the right direction to get help. An alternative and more subtle option to bankruptcy is an Individual Voluntary Agreement (IVA) and something which employers should look to educate employees about. Put simply, an IVA is a private deal between a debtor and their creditors to repay a percentage of the debt over an agreed term. At the end of the IVA any outstanding debt is written off. IVA’s do not have the stigma that is attached to bankruptcy and the information is not released into the public domain, meaning that the impact on both the reputation of the debtor and their employer can be controlled.

It can be a humiliating experience to admit that you are in debt beyond your control, so by being supportive, employers can make the process that little bit more bearable. Of course I’m not suggesting that HR departments should become insolvency practitioners (IPs), but should put out messages to the workforce that the company is there to help in respect of all personal issues including debt problems. If HRs knew the basic options available and had contacts with a reputable IP, they could help employees to get the best possible advice so that they can improve their financial situation.

It’s in an employer’s best interest to help workers tackle debt problems, as with it comes a great deal of stress and anxiety, which can have a huge impact on productivity in the workplace. Stress affects around 7million people in the UK, with many stating that money worries are a main cause.

With consumer debt rising so rapidly and showing no signs of a slowdown, personal insolvency should no longer be a taboo subject but should be openly talked about with employees so that they have the confidence to make the necessary moves to get out of debt, before it escalates into something less manageable and much more public.

 

Is this year going to be the biggest Christmas debt hangover?

January 3, 2008 on 11:06 am | In Debt Management

There has been a massive increase in the number of people spending online and using credit and debit cards to do their Christmas shopping. The answer to the question, ‘Is this year going to be the biggest Christmas debt hangover?’ has got to be YES.

We have spent our way into debt. Personal debt will be the biggest political topic this year and with interest rates at a six year high things are not going to improve, especially when you read that paying off our debts and mortgages are way down on our priority list.

The first bills are going to hit shortly and when they do have a look at how much of your disposable income is being used to repay your debts. If more than 35% of your income goes on servicing debt then you’re in trouble.

 

Post Christmas Options

December 11, 2007 on 11:15 am | In Debt Management, Remortgages

What never ceases to amaze me is the number of people who do not think that their mortgage is a debt. So it follows that when they remortgage to consolidate unsecured debt they see that as a license to run up further large bills on their credit cards and obtain unmanageable loans.

This is all well and good in a buoyant property market and when lending is cheap. However, when the lenders decide to withdraw products which allow remortgages over 75% loan to value (‘LTV’) and interest rates creep up, then remortgaging to repay debts is no longer a viable option.

There are in the region of 1 million people due to come out of the fixed rate mortgages in the coming weeks. Their monthly mortgage payments will sky rocket. Christmas spending is set to be at a record high with the majority of spending on credit cards. Banks have cut interest rates marginally but this will not repair the damage done by the credit crunch.

When the first credit card bill hits in the New Year it is essential you get good debt advice.

 

UK Debt

November 1, 2007 on 9:13 am | In Debt Management

Staggering new debt statistics have been issued today……..

Britons are incurring debt at a rate of £15million per hour, £373million per day.

Accepted loan applications decreased by 15% and are getting lower month on month as lenders withdraw products that are no longer viable.

You don’t need to be a professor of economics to work out that we are heading for disaster.

 

Stress

October 12, 2007 on 3:12 pm | In Debt Management

Credit card debt, personal debt, bank debt, mortgage debt, car finance, loans, consolidation loans … debts, debts, debts …. it’s all you hear and even moreso over recent years as society becomes more indebted to meet individual wants.

Never in the history of our country has there been so many people in debt or more to the point, unmanageable debt. What does debt cause? STRESS! Even Northern Rock’s key man, Keith Currie is off with stress, the Telegraph tells us today. If Northern Rock’s treasurer is off with stress what is the average man in street suffering?

The problem with stress is most of the time you don’t know you are suffering from it and that’s why it’s a killer.

Debt or financial worry is probably the biggest cause of stress and quite honestly facing up to a problem by getting sound advice is the first step.

 

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