|
News throughout 2006 has suggested very strongly that personal debts in the UK are rocketing. The statistics have become quite amazing.
For example, it is now believed that personal debt rises by Ł1 million every four minutes. Your thoughts may be different to mine, but that seems like quite a lot. In June 2006, the total of UK mortgage debt was announced to have passed Ł1 trillion.
Back in May 2006 the debt counseling charity, the Citizens Advice Bureau reported that the average person they help is likely to need 77 years to repay their debts. By contrast, on a government website, I have found statistics that suggest that children born in 2002 have a life expectancy of 81 for girls and 76 for boys.
To me at least, this is getting very serious.
There are solid reasons for this massive growth.
Firstly, house prices have shot up since 1991. If you plan to buy your own home in the UK, you need to be doing pretty well these days. Without any extra help, this rise can explain much of the increase in mortgage debt. If house prices rise at twenty percent plus per year as they did, mortgage lending is bound to rise. How could it not?
Lending for remortgages has increased strongly as well. This extra lending has, for example, helped the Spanish property market amongst others. As interest rates were low, borrowing extra against the rapidly rising home value enabled many tens of thousands to buy a 'place in the sun' outright. The additional borrowing was not excessively expensive each month and it enabled many to live their dreams.
Much of Europe has seen prices rise purely because of Brits buying abroad.
Next of course, is credit card debt. It seems as if credit cards are given away on cereal boxes these days, they are that easy to get! And of course as you repay your balance, the card company begins to trust you more and more. This reliability and proven track record enables to the card companies to increase borrowing limits at will. These increases happen automatically and could easily prove to be the downfall of anyone lacking discipline.
Equally easy to obtain are store cards and overdrafts. A worthwhile shopping spree can easily occur without any need for cash these days. For many, this lack of cash in the hand at the point of purchase is a big problem. Handing over a card does not seem like real money to many, especially the young.
Car finance is another source of instant and often easy credit. Unlike a store card where the balance slowly increases, one purchase at a time, purchasing a car will alter personal finances instantly.
Depending upon where you find your loan, the interest rate may be high, very high or scary. Either way, it will still take a chunk of any personal income to support the debt each month. The value of the car does not, alas, rise at the rate the loan mght if it goes unpaid. Purchasing a depreciating asset with a high interest rate loan is not a path to financial success.
Whether the UK population can fight their way out of this debt before it drags them under, only time can tell. One thing is near certain however, the UK consumer will struggle to support the economy for ever.
Stuart Langridge is an experienced financial adviser and personal finance columnist. To find more online personal debt related resources, please click here: debt-swicki.eurekster.com/ |
|
|
|
