Repossession Debt, Property Repossession
May 31st, 2010
Deep in debt: the average UK household owes £57,950
Another month goes by and we’re all deeper in debt. According to money charity Debt Action, our collective personal debt comes to £1,460bn – which means as individuals we owe more than what the whole country produces in a year.
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And the debt problem is getting worse. The latest available figures – for March 2010 – show that we fell a further £0.6bn deeper in debt. The interest payments on that debt were £67.8bn in the last year alone.
It means the average household now owes £57,950 while the average amount owed by every UK adult is £30,258.
The average interest paid by each household on their total debt is approximately £2,692 each year while £186m-worth of personal interest is paid out each day in the UK.
Apart from mortgages, we also owe an increasing amount on plastic and loans. Debt Action says the average consumer borrowing through credit cards, motor and retail finance deals, overdrafts and unsecured personal loans soared to £4,593 per average UK adult at the end of March 2010.
There are 9,500 new debt problems dealt with by Citizens Advice each day. Meanwhile house repossessions are occurring every 11.4 minutes as homeowners fall behind with their mortgage payments and someone will be declared insolvent or bankrupt every 3.69 minutes.
Prevention planning
Of course there are ways for people to prevent repeating their mistakes and getting into future problems, according to Justin Modray at CandidMoney.com, who points out that the best way to avoid problems is not to spend more than you earn.
"If you need to borrow over shorter periods then try to take advantage of zero or low interest rate credit cards – but have a plan to repay the balance before interest starts to pile up," he says. "For longer term borrowing, consider a low cost loan or, if you have plenty of equity in your home, a mortgage."
Avoiding store cards – which often charge punitive rates of interest – and keeping on track of your finances with a strict budget are also essential. "A monthly budget is an excellent way to instil some financial discipline so keep a record of all your expenditure and then see where you can cut unnecessary costs and get better deals."
Keeping on top of your mortgage repayments is critical. If you have, or think you may, fall into mortgage arrears, you must get repossession advice as soon as possible.
There are other financial products that are worth considering that may help you during the tough times, adds Penrice at Honister Partners. "To guard against the risk of unemployment, people should ideally have around three months’ salary as a reserve to tide them over should the worst happen," he explains. "It would also be worth considering ASU insurance, which can give protection against loss of income due to accident, sickness and unemployment."
Even so, the financial problems being experienced by many are not expected to ease any time soon. In fact, Sands at RSM Tenon warns we are likely to continue seeing record numbers of people looking towards insolvency during 2011. House repossession and eviction is expected to rise in parallel.
"The UK’s debt culture built up over the last decade has intensified the effects of the financial crisis and people need to understand the consequences of taking on debt and be given incentives to rebuild their savings," he says. "We are seeing record levels for the third quarter in a row so advice is crucial to help the hundreds of thousands of people suffering financial distress who are on the verge of bankruptcy or house repossessions."
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Seeking mortgage help and repossession advice as soon as possible is critical to help prevent personal bankruptcy.
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