10 million adults on the verge of debt

| November 29, 2007 | 0 Comments
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Almost a quarter of adults in Britain are unable to manage increasing mortgage repayments and other debts and are consequently, on the verge of debt. Furthermore, in the last 6 months, 12% have missed payments on debts and bills. Approximately 10% had a direct debit, cheque or payment bounced by their bank over the same period and 3% fear they are about to have their home repossessed.

Five interest rate hikes since August 2006 have added over £100 extra a month to mortgage repayments while overdrafts, credit cards and loans are becoming more expensive. With the impact of the global credit squeeze, banks are chasing more borrowers and up to 50% are being rejected for credit card applications and loans.

The research was commissioned by financial website uSwitch.com and is supported by other studies published this week by Mintel and Moneynet.co.uk. The findings portray a worrying picture of a large section of the country that is gripped by financial worries.

Ann Robinson of uSwitch said this is crunch time for consumers and it couldn’t come at a worse time of year. As the Christmas period approaches, traditionally one of the biggest periods of consumer spending, people are concerned about their jobs, their homes and their ongoing ability to manage their debts and bills.

Ms Robinson added that the days of buy now, pay later may be numbered, but they will leave a painful reminder for those left struggling with debt.

Mintel, retail and finance analyst, said that over 5 million mortgage-holders face real financial hardship due to being relabelled as sub-prime, or high-risk, debtors. The analysts estimates that 9% of the UK’s 16.5 million mortgage-holders will now be considered sub-prime by lenders as a consequence of missing repayments.

Accountants PricewaterhouseCoopers recently predicted a significant increase in the amount of insolvencies next year.

The findings will result in pressure mounting on the Bank of England to cut interest rates in order to avoid a personal crisis for thousands that could spark a disastrous slowdown for the wider economy.


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