Bad Debts on the Rise

The Bank of England is pointing out that the number of bad debts that were defaulted on by consumers has increased by an alarming rate through 2009. Financial institutions were forced to write off over 4 billion pounds in bad debt as many consumers declared bankruptcy or find an individual voluntary agreement that ensured they would not be paying back all of their debt. The previous highest number in that category was 3.2 billion pounds that was written off in 2008, so the increase of close to 1 billion pounds has many in the credit industry worried.

More than twice as many mortgages were written off than usual and that combined with personal loans and credit means that the total amount of write-offs for the year reached as much as 9.3 billion pounds.

The effect of this increase in bad debt is being felt most by borrowers that are known for making all of their payments on time. Credit card interest rates are on the rise meaning people are being faced to pay larger monthly payments and new homeowners are having to jump through all kinds of hoops to ensure they meet the criteria and standards of lenders.

It is a sad truth that the most on time of borrowers have to feel the effects for the people that had to declare bankruptcy, but that is the sad truth about the economy at this moment. If interest rates continue to rise then consumers are going to have to learn to live without borrowing, and simply spend what they have at the moment in order to avoid substantial monthly payments on their credit card debt.

That is, unless the government or credit industry can step in and proposes policies or solutions to protect themselves and consumers as we all try to work our way out of this dire economic situation.

Credit Demand is Piling Back Up in the UK

More and more people and UK consumers are turning back to credit in order to pay their bills as they struggle with the current economic situation. In fact, for the first time since June of this year more credit and loans were used than the amount of money that was paid back. In all, unsecured credit for consumers rose by as much as 52 million pounds in December alone thanks to increased credit card use.

During most of the economic downturn the trend has been for consumers to save money and pay off their credit card debts instead of saving money due to low interest rates. For five months in a row more money was paid back than was borrowed, but that has come to an end once again. This was primarily thanks to credit card borrowing as it has risen by 195 million pounds in the last little while personal loan and overdraft borrowing was calculated to be around 143 million pounds.

Many people are connecting the increase in borrowing to the fact that consumers want to buy purchases in order to avoid the upcoming increase in VAT. That means that the increase in borrowing should subside once again at a near point in the future.

Total net lending also rose in December of 2009 by about 1.2 billion pounds with the majority of that money going towards mortgages. However, there are still many people seeking help from the use of IVA’s. This has many experts pointing out that the housing market could in fact remain static for the entire year of 2010.

December has always been a slow month in terms of savings as the holidays tend to have people spending more than they usually would, so many experts are simply pointing that out rather than causing any alarm. We will have to wait and see how the trend continues in the early months of 2010 before any patterns can be analyzed or put into place.

Credit Card Interest is Hitting New Highs in the UK

Research performed by the group known as Moneyfacts is showing that the interest rates on credit cards have hit an all time high in the UK. The average rate has climbed all the way up to 18.8% as of February of this year while the rate at the main Bank still sits steadily at .05%. It appears that card providers have continued to increase their rates because they are worried that more and more borrowers are defaulting on payments. However, even though there are fears that people will stop making their payments, other research done by the Bank show that more and more people are actually paying off their credit than ever.

However, other figures show that there has been a drastic rise in the amount of money that banks are starting to write off as bad debts due to credit card loans. This would make it easy to understand that the main reason for increased interest rates is the fact that more people are defaulting on their payments. This has meant that there has been a big difference between the bank rate and credit card interest rate. The bank has shown that write offs by credit companies has increased to as much as 1.6 billion pounds for the third quarter of 2009. This alone is money that will never be paid back thanks to defaulting loans and bankruptcy.

In the two quarters previous, the default total was around 800 million pounds and was only 3.2 billion pounds in the entire fiscal year of 2008.

It appears that as long as people continue to declare bankruptcy and struggle to come up with debt management plans, credit card interest rates will continue to increase. The increased risk is being passed onto consumers, which is tough as it appears the consumers in good standing are being affected the most.

UK Debt Skyrocketing to Irreversible Levels

The debt of consumers in the UK is being reported as higher than ever and is starting to pose a threat to millions of households around the country. A new report that was done by the Conservative party is showing that drastic measures need to be taken as involuntary debt is rising and debt management plans are failing.

Personal debt levels has reached more than 1 trillion pounds and that means that more than 15 million people are being affected negatively by changes such as the increase in the price of oil, and other economic challenges. The authors of this report are aggressively calling for new laws to protect people that are being drastically affected by such external shocks.

Also, according to another research company by the name of DataMonitor, it appears that average citizen in Britain owed close to 4,000 pounds by the end of 2004 but that number has continued to rise drastically with each year since. If something isn’t done soon there is fear that many citizens will be unable to pay back their debt and thus the country will have quite an issue paying back all the debt of its own.

The recommendations of this report are expected to be published by the end of March as Lord Griffiths demands action by pointing out the sad state of affairs. Griffiths was also the director of the Bank of England and was head of the policy unit of Downing Street when Margaret Thatcher was in power.

Griffiths himself feels that the major problem when it comes to bankruptcy and debt in the UK is the fact that there is such aggressive marketing for loans, and that credit is too easy to get your hands on within the UK.

If something is done soon then the time bomb that is known as debt could go off and affect the entire country.

Tory Backbenchers Fighting Off the Vulture Fund Bill

There appears to be a last minute amendment proposed to the vulture fund bill that could put the end to the entire idea. The vulture fund bill was put into place in hopes that it would protect countries that are indebted to the UK, but it could be scuppered as early as this weekend.

The legislation was proposed in order to protect some of the world’s poorest countries after threats that they could be sued by vulture funds. However, a backbencher for the conservative party has thrown together an amendment even though the original bill has won the support of the government and the front bench of the party.

The private members bill is sponsored by MP Andrew Gwynne of the labour party but there is fear that the recent amendment could prevent the bill from getting another reading before the upcoming general election. The amendment was tabled by MP Philip Davies and seems to have been issued at the perfect time to put a halt to the entire process.

For more background, vulture funds are used to purchase the debt of countries that are poor for just a small part of their face value. They then pursue the debt through international courts and can often counteract agreements by creditors that have given the country in question some form of debt relief.

Campaigners for the bill are very excited to see it take place as it would help poor countries such as Liberia to avoid total bankruptcy due to any legal action that could be taken against them.
Many are very disappointed with the last minute amendment as it seems its sole purpose is to simply delay matters, and prevent the bill from going through on time. It remains to be seen what the final outcome will be, but the questions and concerns are still surfacing at all times.

Debt Charities calling for Help and Better Practice

Many people across the UK and especially some debt charities are calling on big members of the credit industry to start offering more help, and more solutions when it comes to the credit crisis. There are many that are urging for everyone to start working together in order to fight debt and possibly create a best practice policy.

A new report was recently put together by a group including the Money Advice Trust, Institute of Money Advisors, and the Citizens Advice called on all kinds of creditors to start of discussions that could lead to policies that will help the nation improve debt collection. As of now there are more and more individuals dealing with bankruptcy and more and more bills that are going unpaid, so the creditors need to step in and do something to improve the situation.

The report itself was mainly focused on five different steps that the credit industry could take and focus on ideas such as providing more information and support to citizens as well as creating a culture that is more organized and focused on being debt-free. The idea is that giving people the support and information that they need to fight debt will have a huge impact on the debt of the nation in the following years.

This report has followed one that was recently done by the Citizens Advice group that noted that there are a record amount of people seeking help when it comes to debt, yet not enough support or debt management programs that will help to go around. If the nation wants people to climb out of debt then it may just be up to the big businesses and the credit industry to give them a hand in getting back on their feet.

Debt from Utilities Excluding People Financially

Debt and the issues that surround it have come to the forefront of the UK over the past year or so, and although things have improved in many ways there are still a number of problems that citizens are facing. One new problem is the creation of utility debt that is driving a wedge between lower and upper class citizens. More and more citizens are foregoing on payments or having to borrow more money, from a system that cannot afford to lend any more money.

Recent studies done by a number of agencies, and especially Citizens Advice, noted and announced that people who are unable to pay their utilities each month are spiralling into insurmountable debt that could lead to major problems down the road. While a few politicians and people of influence have stated that they are on the path towards a debt-free Britain, announcements like this tell us how far we just may be from such a positive future.

The Bank of England recently discovered that net lending to individuals in Britain had reached an exasperating figure of 2 billion pounds in January of this year, and is continuing to be on the rise. They also calculated that on average, every adult in the UK owes close to 30,000 pounds, which is more than 129 percent of the median wage in the country. More and more citizens continue to seek help from debt management programs and IVA’s.

With utility prices going up, and debt continuing to rise, something or someone needs to step in if Britain wants to find a way to be debt-free. If people cannot pay their utility bills then that is just a small sign of other problems that must be on the rise due to the economy. Britain will continue into the next 5 or 10 years with quite a bit of debt yet individual lending continues to rise, so there does not seem to be an end in sight.