Oracle of Omaha Wouldn’t Want Job of Fixing British Debt

It appears that debt in the United Kingdom has risen to such a degree that it has attracted the attention of those financial experts overseas. The US billionaire Warren Buffet, known by his nickname the Oracle of Omaha in his home country, has announced that he has no jealousy over the job of Britain’s new Prime Minister. The new leader’s work will be cut out for him, according to Buffet, simply because so many unpopular budget changes will have to be made in an effort to keep the UK government somewhere near safe financial ground.

Buffet has been known through the years for his quiet yet outspoken message against Wall Street for its excesses. Living a modest life, Buffet has tried to lead by example and that particular lifestyle has made him a billionaire rarely equaled in terms of wealth by any other individual. His Berkshire Hathaway company meetings are well known and this meeting saw 40,000 investors attending. The bond market, he pointed out to his listeners, could well end up poorly for the UK if public spending can’t be brought under control.

The US faces equally steep budget issues according to Buffet, primarily being the deficits that are so large they will affect the economics of the global community itself. With such massive economic power across the globe, Buffet believes that both the UK and US could cause effects so large if they do not control their debt that it will be more than record numbers of citizens seeking bankruptcy. It could well end up tipping the world on its side.

Unlike Greece, the billionaire was quoted as saying, Britain has the ability to print its own currency which is a very important asset. Still, both Buffet and his partner Charlie Munger agree that the UK is doing a better job than the US did at first, thus giving hope to those UK citizens who have been entering into debt management plans. As those citizens fix their own financial woes, they will be ahead of the curve from those who have waited to deal with problems thinking that the proverbial sky was falling.

UK Insolvency Figures Not Dropping Any Time Soon

Trouble does not look to be lessening for UK households and businesses any time soon, financial analysts say. Recent studies have shown that insolvency figures are still at record levels and have not yet begun to peak. All through 2009, UK debt continued to mount and even with consumers taking strong action to reduce their debt loads, more and more are turning to IVAs and bankruptcy as the consumer credit crisis continues. While the global recession may well be winding to a close, the UK’s debt woes are longer in term, experts have stated in the press.

While the economy itself may turn the corner now, the debt consumers deal with today is usually from a year or more ago and has been accruing interest throughout its life. Various UK insolvency organizations are publishing figures which show that more borrowers and entering into new agreements designed to ease their debt over time, but results will take a while to heal their financial problems.

With over 134,000 people entering insolvency in 2009 alone, the nation’s level of debtors is growing at a frightening pace. The easy credit of the last half of the millennium’s first decade encouraged far too many borrowers to bite off more than they could chew and the results are painful to see. The first quarter of 2010 has been rather gruesome with a full 35,000 individuals reaching insolvency so far.

The coming months should show more are hitting the insolvency threshold, say analysts, due to the fact that financial fallout is on going even in the current economic recovery. Not all sectors of the UK economy are fairing equally well which means jobs continue to be scarce in certain segments of the market.

Famous Actor Admits to Turning to Individual Involuntary Agreement

If you are one of many UK citizens dealing with debt of all kind and wondering where to turn, then you can take solace in the fact that you are at least not alone.

Famous UK actor Neil Morrissey has admitted that he owes credit companies a total of 2.6 million pounds and has thus had to turn to an individual voluntary agreement. Morrissey poured money into a business venture that involved a chain of luxury hotels, but the idea did not pan out and Morrissey is now paying the price.

The actor ran into major problems when the company behind the hotel chain fell into administration. It took the hotel far longer to get their ideas in motion that originally planned and there are a number of people that are facing serious debt due to it, including Morrissey.

Many people are impressed with Morrissey’s decision to take the high road and avoid bankruptcy. He says he intends on paying back his creditors in full, and that is why he has taken the path of an IVA. He told local newspapers that bankruptcy is the easy way out and that he instead decided to take blame for his decisions and work his way out of things so that everyone could get back they money that they were owed.

Morrissey has officially begun undertaking in an individual voluntary agreement and in agreeing to do so has promised to pay back as much money as he can. All of his spare cash will go directly to creditors, but once he has paid them back he will have a lot more financial freedom than if he had taken the route of bankruptcy.

An IVA may seem like the hard way to go about things if you are facing serious debt, but in the long run it is a much more beneficial decision than simply calling quits and declaring bankruptcy.

Rules for Debt Relief may be Made Easier

It appears that new rules and regulations may be put into place to allow UK residents that have pensions to use debt relief orders in order to fight back and rid themselves of their insolvency. Business departments around the UK are coming up with certain changes that can be made to DROs that would make them more easily accessible for people so that they do not always have to turn to bankruptcy or individual voluntary agreements.

Debt relief order rules can allow people to rid themselves off a lot of debt within as little as a year, but people cannot use them if they have any assets that are more than 300 pounds in value. This means that at the moment it is hard for anyone with a pension fund to access a DRO, but that may all change soon.

Although these DROs were only introduced in April, there is already a plan for a new common sense change that would allow easier rules and let people with pension funds still take advantage of their benefits. Essentially these debt relief rules target people that have less than 50 pounds of excess income each month and have debt that is lower than 15,000 pounds. 12,000 people have used these DROs since they have been put into place and the government is trying to find a way for more people to use them.

The only discussion right now is how to determine how big of a pension pot should be before people are not allowed into the process, and where to draw the lines. There has been a lot of concern that people were getting denied for these rules even though they met all the criteria, and reports showed that 96% of people were excluded from the DRO process based on their pension. And in 78% of those cases the citizens pension funds were less than 5,000 pounds.

Personal Insolvency in the UK is on the Rise

In the last quarter of 2009, England and Wales saw the number of people that were declared insolvent each its highest number of all time. The Insolvency service has released figures that show that more than 35,000 people had to declare insolvency in the final three months of the calendar year, which is a staggering increase of 25% from the year before. On top of that, more than 6,355 businesses were forced to declare bankruptcy in the same time period which was also a record.

For the entire year of 2009 there were over 134,000 that were declared insolvent in the UK which was a 26% increase from the year before and almost 30,000 more than the previous record which was seen in 2006.

Many people thought that record low interest rates would have saved a lot of people from being declared as insolvent, but the increase of long term unemployment just meant that some people did not have the chance to fight back and compile enough money to pay off their debts. Due to these new increases many creditors have tightened the reins on consumers and started to act a lot tougher. The increase in toughness by creditors could have a lot to do with the increase in individual voluntary agreements, but the increase in the last few months of the year was surprising as usually people wait until after Christmas to deal with their debt issues.

IVAs may also have risen as more people seem to be aware of their options and want to pay back some debt rather than go bankrupt. No matter how you look at, most people agree that there is a lot more to come for UK consumers before things get better and we actually find a way to climb out of the recession.

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.