Survey shows households in UK still overstretched

A recent study has shown that households in the UK are still overstretched financially, with the findings showing that more than 50 percent of them have been struggling to repay their debts. The study was carried out by the Bank of England and involved polling around two thousand people.

According to the results of the study more than half of households were struggling meet repayments on debts such as credit cards, loans, and other unsecured debts. The results also showed that around 22 percent of consumers had been put off spending money because it was becoming more difficult to borrow money – this reflected an increase from the 16 percent that said the same thing in a poll carried out last year.

In addition to looking at difficulties with debt repayments and spending the survey also looking into how people thought they would be affected by government cutbacks. The results showed that a massive 90 percent of consumers thought that they would be affected by the cutbacks and spending cuts that were being imposed by the coalition government.

However, despite the fact that so many believe that the cutbacks will affect them less than 50 percent had actually taken any steps or action to try and prepare themselves for the possibility of being affected, such as saving more money, looking for a new job, or working longer hours. Reliance on credit cards and loans has been growing according to the Bank of England report, and a quarter of households are struggling to meet payments on bills.

In its report the Bank of England noted: “The burden of unsecured debt has risen this year, most likely reflecting a combination of weak earnings growth and the interest rates on unsecured debt remaining high over the past two years.”

Tags: report, United Kingdom, debt consolidation, Household, addition, weak earnings growth, fact

Consumers saving more and using credit cards less

Recent reports have shown that consumers are getting far savvier about their finances, with many now choosing to save money and shore up their finances rather than splashing the cash on large purchases or spending ruthlessly on their credit cards. This indicates that consumers have become more accustomed to the fact that they need to save money to help them through in the current climate and that they have to be more mindful about their spending.

Prior to the global credit crisis and the recession many of those that are now saving their money may not have thought twice about using the money to purchase big ticket items, splash out on luxuries, and spend on items that they didn’t really need. Likewise, many may not have given a second thought before going out armed with their credit card and treating themselves to pricey luxuries.

However, over the past couple of years many people have realised how important it is to have money put aside to help them through in the event of a financial emergency or if they lose their jobs. With this in mind more and more people are putting money aside and avoiding spending unnecessarily. According to reports a rising number of people are also trying to pay off their debt so that they can be more financially secure in the future.

A spokesperson from ING Direct, which released the report, said that many people were now trying to get over the debt that they accrued over the Christmas period and were focussing on saving or repaying their debt.

He said: “We are also seeing a trend, which is getting stronger and stronger, that people start saving before they make big purchases and use their credit cards less and less.”

Tags: finance, debt, credit, saving, spending

‘Bumpy’ recovery for firms in the UK

According to a recent report UK firms should be prepared for a bumpy ride to recovery over the course of this year. Despite a fall in the number of profit warnings over the final quarter of last year the accountancy company Ernst & Young has stated that the recovery for UK firms is still likely to b a bumpy and challenging one, and that companies needed to prepare themselves for this. Read more

Tags: accountancy, Ernst & Young, contrast, United Kingdom, scheme

Christmas clubs increasing in popularity in current financial climate

A couple of decades ago Christmas clubs in the UK were extremely popular amongst consumers that wanted to ensure that they had enough put by for the Christmas period when they would have to spend a fortune on gifts and food. Read more

Tags: christmas clubs, ongoing recession, north midlands, spending, office, christmas, report, Credit Cards

Decrease in online credit card payments

Recent figures have shown that there has been a decline in the level of online credit card payments, with officials from the Nationwide Building Society claiming that use of credit cards when making online transactions has been falling and demand for an alternative method of payment from consumers has been increasing. Read more

Tags: online credit card payments, spending, survey showed that, finance, online credit cards, purchases

Many Brits too scared to spend

It has been revealed in a recent report that many people in Britain are too scared to spend money, with a third of Brits having scared themselves into spending less. Read more

Tags: spending, savings, fear, turnaround, analyst firm, holidays, recent report, future

Consumer to cut back further over this year

The sales that have been on both before and since the Christmas period have seen many people flock to the shops in the hope of picking up bargains for the home or as gifts. Read more

Tags: january sales, industry, hope, household budgets, unemployment, name, spending

Debt cycle ‘carries on’ with payday loans

Regularly using payday loans to get through until the next paycheque can lead people into a spiral of debt, National Debtline has warned.

Spokesperson Beccy Boden Wilks said that payday loans can have high interest rates and consumers can often find cheaper borrowing options.

Ms Boden Wilks warned that people using payday loans on a regular basis may have a more serious underlying debt problem and advised them to have a close look at their budgets as well as to possibly seek advice on how to deal with their debts.

“If you’ve run out of money [ahead of your next paycheque], so you feel that you need to use these sorts of services, then there’s obviously a problem,” she commented.

Ms Boden Wilks added that people using these services should review their spending and budgets.

The take-up of short-term payday loans has risen by 55.4 per cent since last September, according to Moneysupermarket.com.

Tags: problem, finance, Financial services, spending, Boden Wilks, debt, national debtline, Business Finance

Londoners spend the most on loved ones

London males spend an estimated £2,458 on their loved ones per year, double the national average, according to the latest figures.

Findings from moneysupermarket.com show that women spend £659 on their partner each year while men fork out £1,326 on items such as anniversary gifts, dining out, flowers and special holidays.

According to the figures, female and male Londoners spend an average of £1,776 on each other compared with those in the north where £873 is spent.

Richard Mason, director at price comparison site moneysupermarket.com, said: “People might laugh at the north where the starry-eyed spend is less than half of that in London, but £873 a year is still a pretty respectable figure.”

“And it’s the Midlands that has the dubious honour of having three per cent of people spending nothing on their partner,” he added.

The research also found that British males spend seven times more on gifts for their partners than on extras for their cars, which came in at £191.

Further findings from the firm show many Brits miss out on the significant tax-free savings available in Individual savings accounts.

Tags: london, Credit card, Driving, spending, nothing, Richard Mason

Christmas consumers expect debt to hang around

Only 61 per cent of spenders expect to clear their Christmas debt by end of January, according to new research.

Research from Sainsbury’s Bank revealed that 483,000 consumers believe paying off their debts will take over a year and 71 per cent of this figure are female.

Donald MacLeod, head of cards, Sainsbury’s said: “We estimate that around 18 per cent of Christmas spending was placed on credit cards.”

“Our research indicates that around 8.6 million people intended to put half or more of their festive spending on cards,” he continued.

He advised that those Christmas consumers who anticipate having difficulty in paying off their debts should look at spreading the cost of their festive debts.

Sainsburys announced news of better-than-expected turnover with sales over the third quarter were up by 3.7 per cent, excluding petrol. This compares with 3.1 per cent in the second quarter and is Sainsbury’s 12th consecutive quarter of growth

The bank predicted nearly £1.5 million per minute would be spent in the Christmas Eve rush.

Tags: 5 million, spenders, spending, christmas, sainsburys, Marketing, cost

Personal debt soars

Britons are paying a whopping £93 billion a year in interest on borrowing, it has been reported this week.

That is an increase of £12.7 billion on the figure for the same time last year, raising widespread concerns that many people are going to be unable to manage their levels of debt.

Increasing domestic fuel bills combined with tightening borrowing conditions – and the short-term effect of Christmas spending – have led to a particularly tough environment.

The average household now pays £3,744 per year in interest on borrowing alone – an increase of £517 compared to last year.

According to uSwitch, which carried out the research, around one in four people acknowledge that repayments on their debts are not manageable.

Accountants KPMG have also warned that personal bankruptcies are likely to increase to 130,000 in 2008.

Spokesperson Mark Sands told the Daily Mail: “Those in difficulty will find that their options are becoming limited.”

Tags: Financial services, Christmas spending, spokesperson, personal debt, debt

Consumers need to spend carefully at Christmas

Consumers should be careful with their Christmas spending and ensure they do not put more than they can afford to pay back on credit, warn financial experts.

The Consumer Credit Counselling Service has said, that despite it being the festive season, people still need to remember that money spent on credit has to be repaid over the course of the year.

James Ketchell, spokesperson for CCCS, said: “The amounts you put on for Christmas spending might be done in good faith and for good reasons, but they do have to be measured by common sense too.”

CreditExpert.co.uk has predicted that, despite recent interest rates rises and the credit crunch, the majority of Christmas consumers will not be reducing their spending.

The news comes even though 29 per cent of respondents admit money is tighter this year.

According to statistics from Credit Action, the total personal UK debt stood at £1,380 billion at the end of September.

Tags: economics, sense, respondents admit money, statistics, year, consumers, News, spending

Inflation Report Signals Further Rate Rise

The Bank of England has given clear signals that interest rates may have to rise yet again to make sure that it keeps inflation under control. Homeowners will be dreading the possibility of yet another rate rise as they have seen five quarter point rises already ion the past 12 months.

Experts now believe that the rise will come sooner rather than later after the Governor of the Bank, Mervyn King, said that he believed the turmoil in credit markets – set off by the sub-prime crisis in the US – was far from being an international financial crisis. Given that comment, experts think that he will not be afraid of recommending a further rate rise in the UK in the near future. Indeed, there are some doom-mongers who suggest that an interest rate of 6.5% – or even higher – could be reached.

A quarter point rise on a mortgage of £110,000 would mean an increase in monthly repayments of over £16, and on a mortgage of £200,000 the increase would be £30 a month.

A further quarter point rise now looks likely in September. Mr King said: “[We] cannot be sure if what we’re seeing so far foreshadows a more disruptive move on the markets or whether there’s a more gradual easing of pressure that allows credit spreads to widen to more sensible levels. So it’s impossible at this stage to judge how large and how persistent the tightening of credit conditions is likely to be.”

Adding that he did not see the recent events, which have seen some US investment banks in trouble because of defaults on loans and some big takeovers postponed, as an international financial crisis, he went on: “We are seeing signs of bad loans arising clearly in the US, but I don’t think we are seeing signs of these bad loans in other markets. The developments in [the widening of] spreads is a more realistic pricing of risks which we welcome.”

Mr King said that it was not the duty of central banks to give protection to any financial institutions if they get in trouble for poor lending practices.

The Bank’s quarterly inflation report said that inflation would come back down to 2% if interest rates rose according to market expectations, and that would be one more quarter point rise before the end of the year. It is difficult to see the Monetary Policy Committee waiting too long before implementing the rise. The report said that risks to inflation remained on the upside but not as much as a few months ago. It now expects economic growth to dip to 2.5% in the next two years from about 3% now.

Mr King was concerned that official figures did not accurately measure the strength of the economy, and may be revised upwards. The near term outlook for inflation had the bad news of higher food prices from flooding influencing it.

Inflation was also under threat from rising oil prices and potentially increasing wages demands, but Mr King did note that consumer spending was cooling. However, there has been surprise at the resilience of consumer and housing markets despite the five rises since last August.

Mr King insisted that 6% was not yet a done deal.

Tom Smith
1st October 2007

Tags: spending, economy, increase, interest, markets, rates, costs, Loans, housing, inflation

Working to clear card debt

The average Briton slaving his or her way through January, struggling to clear the Christmas debt hangover, gets meagre returns for their pains, Unbiased.co.uk has claimed.

If we worked for 31 days solidly, we could clear the interest on our credit card and loan debts, but not the debt itself, the financial advice service reveals.

Since average UK earnings total £23,556 per annum, a January pay cheque would be just enough to clear the £2,012 interest gathered on the average British consumer’s total personal debt.

But Unbiased.co.uk has declared February 1st ‘Debt Freedom Day’, hoping to inspire consumers to work on eliminating the debt itself in the coming year.

This date should serve as “a wake up call to those who carry personal debt”, Unbiased’s chief executive David Elms emphasised.

“The real headline will come when official figures show people controlling their spending behaviour and increasing their saving power,” Mr Elms added.

For every pound saved, Britons are still borrowing 49 pence to fund their lifestyles.

Average household debt in the UK at the start of 2007 stood at £8,765 excluding mortgages, according to Credit Action statistics.

Tags: spending, January pay cheque, Freedom, David Elms, briton, Christmas debt hangover, power

Credit card spending set to rise

The amount of money spent on credit cards is set to increase sharply in 2007, according to Morgan Stanley.

New research from the firm has led to predictions of a 68 per cent increase in credit card spending in the first three months of the year compared to the same period in 2006.

The Morgan Stanley Card Index shows that Brits intend to spend £1,228 on their cards during the first quarter of the year, a vast increase when compared to the £730 spent between January and March last year.

One reason for the rise is said to be increased comfort with spending on plastic, with consumers happy to buy everyday products such as groceries using their credit card.

Morgan Stanley’s research makes for positive reading, with repayment figures at the highest they have been since 1998, meaning consumers are using their cards sensibly.

“The results of our research show an increased confidence in the use of credit cards as a financial aid,” said Patrick Muir from Morgan Stanley.

“It is encouraging to see that people are using their credit cards sensibly, with credit card spending and repayment figures increasing in tandem.”

Mr Muir also pointed out that consumers appear to be becoming more skilled in using their credit cards to maximum personal gain.

“Cardholders are becoming increasingly clever when it comes to being rewarded for the purchases they make, and with a wide variety of reward schemes available, ranging from collecting points to cash back, spending on credit cards is fast becoming the most appealing way to pay when compared to other methods,” he added.

Tags: card index, cent, first quarter, GBP, Cardholders, variety