Servicing Debt

A recent Bank of England survey estimated that nearly 6 million people felt they are currently struggling with their finances. A polling exercise for the Conservative “state of the nation report” suggests that the actual figure for the number of adults who claim to have had a serious debt problem is between 7 and 9 million.

The number of households struggling to repay their mortgage debt has risen to 7.7% according to the Bank of England.

Citizens Advice has dealt with 1.4million debt problems in the past year – 11 % up on the previous 12 months and double the figure just eight years ago. This equates to ~ 5,300 people a day seeking advice on debt problems.

One person is falling victim to insolvency every minute of every working day. There were 27,644 individual insolvencies in England and Wales in the third quarter of 2006. This was an increase of 5.7% on the previous quarter and an increase of 55.4% on the same period a year ago. Individual Voluntary Arrangements (IVAs) grew the fastest and increase 118% / annum. The number of people becoming insolvent in 2006 is likely to exceed 110,000 which is larger than the population of Exeter. The estimate for 2007 has risen to 150,000.

According to uSwitch in the last 12 months almost eight out of ten borrowers were issued loans without the lender carrying out any checks to verify that they could afford to repay the debt and almost 1.6 million loans have been approved without properly verifying people’s incomes. 763,000 loans were issued for debt consolidation purposes and yet 91% of these borrowers were not asked to prove that other forms of credit had been closed with the proceeds of the consolidation loan

Ofgem estimate that there are 4 million households in fuel poverty as a result of the recent gas and electricity price rises. Fuel poverty is defined as where a household needs to spend more than 10% of its income on energy to maintain a satisfactory warm home.

1.4 million adults in over £10k of unsecured debt, report that they are ‘quite likely’, ‘likely’ or ‘certain’ to declare themselves bankrupt or take out an IVA. This is equivalent to the population of Birmingham plus Bristol.

During the third quarter of 2006, 34,626 mortgage possession actions were initiated by banks and other lenders. This is a 15% increase over the third quarter of 2005.

15,000 people have failed to pay off a penny of their mortgage for at least 12 months.

8.3 million letters were sent last year to household water customers warning that they could face legal action because of the non-payment of bills. This is an increase of 43 per cent compared to the previous year. Unpaid water bills more than a year old totalled £490m. Bills left unpaid for less than a year hit £446m.

A recent survey shows that some 770,000 people throughout Great Britain, with a mortgage have missed one or more mortgage payments in the last 12 months. The survey showed that younger people are more likely to have missed a mortgage payment, with 13% of 21-24 year-olds surveyed said they had missed one or more mortgage payments last year. This suggests that some people who are new to homeownership may be getting straight into difficulties.

The number of people hit with a County Court Judgement (CCJ) - ordering repayment of outstanding debts - has leapt by 18per cent. 165,000 people had CCJs imposed on them between April and June of this year, which is up by 25,050 on the same period in 2005. Lenders were aiming to recover around £½billion of bad debts through CCJs last quarter.

A recent report from Datamonitor reveals that the UK is responsible for a third of all unsecured debt in Western Europe and that the average UK consumer owes over twice as much as the average western European owes.

Over two million households are estimated to be struggling to pay council tax according to a recent report for the Joseph Rowntree Foundation.

Citizens Advice Bureau (CAB) clients have an average of £13,000 of debt which is nearly 17.5 times their monthly income. On average it would take CAB clients 77 years to pay back their debts in full.

Three quarters (74%) of British couples find money the hardest subject to talk about with their partners according to the Financial Services Authority (FSA). They also found that over a quarter (27%) of couples regularly argue when they try to discuss their finances; about a third (32%) of couples lie to their partners about how much they spend on their credit cards; over a third (35%) of British couples are kept awake at night worrying about their money situation

Research from AXA shows money worries are a significant cause of worry, anxiety and stress according to GP and leading mental health expert, Dr Roger Henderson, who recently published a paper identifying the condition Money Sickness Syndrome (MSS). Almost half (43%) of the UK adult population is affected by money worries and have experienced MSS symptoms. 3.8m people admit money worries have caused them to take time off work and more than 10.76m people suffer relationship problems because of money worries, with almost one in five complaining of a sex life slump.

A quarter of those in debt are receiving treatment for stress, depression and anxiety from their GP.