Credit boom coming to an end

A study by uSwitch backed by the Financial Services Authority (FSA) has established that 25% of 16 to 44-year-olds are scared about their bills arriving in the New Year. Furthermore, over half of people had no idea what they spent over the festive season.

Figures indicate that families’ finances are spiralling out of control as research shows that interest repayments in Britain have rocketed by £12.7 billion to a record high of £93 billion a year suggesting that millions of Britons could be left unable to manage with the rising cost of their debts.

Consumers are being warned that the credit boom enjoyed by Britons over the last few years is almost certainly coming to an end as lenders tighten their lending practices.

In the meantime, uSwitch have discovered that nearly 25% of adults say they are finding their debts unmanageable while 9.5 million have reached their limit on one form of credit in the last 6 months.

Research also shows that 38% of those who applied for a credit card in the last 6 months have had their application rejected.

Many households have been put under pressure following the rise in interest rates resulting in higher mortgage repayments. uSwitch estimate that the average annual interest bill per household, including mortgages, is now £3,744, up by £517 compared with 12 months ago.

Mike Naylor of uSwitch said those with big debts need to take urgent steps to protect themselves. People have enjoyed easy access to cheap credit for a long time. The recent reduction in interest rates is a step in the right direction, however, it could be too late for those in severe difficulties concluded Mr Naylor.

Finally, 26% of people questioned said that they are more likely to book a holiday or take up a hobby while only 13% said they would make an effort to get their finances in order.

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