‘Unsurprising’ that credit crunch has hit the middle classes

Given that credit has been easily available in recent years, it is “unsurprising” that many people have been lulled into a false sense of security and are now waking up to financial difficulties, an expert at Transact has said.

Jamie Elliott, coordinator at the network committed to promoting financial inclusion, agreed that the economic downturn is hitting the middle classes and “an increasing number of people are finding that their sums no longer add up”.

He pointed out that credit has been widely obtainable in the past few years, with lenders offering 100 per cent mortgages, as well as attractive terms on loans and credit cards.

This comes just after the organisation reported that it is seeing a growing number of middle class people turn to it for financial help.

Mr Elliott commented that their difficulties are “compounded by big increases in food costs and energy costs”.

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‘We need to be doing much more saving’, says expert

With the economic downturn increasingly putting a strain on people’s finances, the country needs to “be doing much more saving”, an expert has advised.

Jamie Elliott, coordinator at Transact, which is a UK-wide network for people committed to promoting financial inclusion, pointed out that Brits have one of the lowest saving ratios in the world.

“It’s a huge problem and we need to shift from a culture of borrowing and seeing borrowing as the solution to our problem[s], to living within our means.”

He added that people should also be saving for “difficult times” and the financial industry will be making efforts to encourage this, for example by allowing people on low incomes to open bank accounts with the government adding a maximum of about £250.

Recent research by Credit Action revealed that total secured lending on homes was £1,207 billion at the end of April this year, which represented an increase of 8.7 per cent over the last 12 months.

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