Speculation Abounds as Pound’s Value Falls

Even after four straight weeks of the pound’s value falling against the US dollar, the Bank of England continues to shoo away talk of impending inflation. This has fueled banter in the press over the the idea that UK interest rates could remain low while those in government attempt to take aim at the current budget deficit. With gilt yields continuing to drop to the lowest levels of 2010 due to an increasingly tense view the EU’s debt crisis, risk aversion is triggering investors to pursue the assets they view as safest. Prices for UK consumers have risen nearly 4 per cent between April 2009 and April 2010, exacerbating debt levels for UK households as product prices rise with no corresponding rise in income levels.

This situation is what lead Governor Mervyn King to pen an open letter of explanation to George Osborne, the incoming Chancellor of the Exchequer. The rise in consumer prices has exceeded the central bank’s desired target of only 3 per cent, causing public concern and requiring King’s direct response regarding the situation.

This, in collusion with the Bank of England’s recent Monetary Policy Committee meeting on May 10 has lead many economists both domestic and foreign to speculate that the UK is currently in a crucial phase from which two futures are possible. In the first, the UK continues to rise from the ashes of the global economic crisis first begun in 2008, leveraging the fall out and bettering not only the consumer economy, but the buying power of the pound. In the second, a misstep could mean that the committee’s unanimous vote to keep interest rates low while refusing to purchase more debt send the economy off kilter, creating a second round of trouble for the British consumer base.

With uncertainty now running rampant, consumer level experts are advising that those households experiencing debt take advantage of a debt management plan while these offer a decent road to recover rather than hold off in the hopes of better terms. It’s a win win situation for most consumer households looking to restructure their finances at this time. If the economy gets worse, the DMP can be adjusted, but if it betters it can also be adjusted and possibly paid down faster.

Just as the UK itself continues to be advised by financial experts to tighten its fiscal policies to preserve the pounds values versus both the dollar and the euro, UK consumers are being encouraged to get their monetary houses in order to ready for either coming economic change.

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.

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.

Credit Showing Lower Default Levels than Experts Expected

Lenders and experts appear to have overestimated how many people they thought would default on their loans and credit cards for the tail end of 2009. Far fewer people were forced into bankruptcy or debt issues than were expected, even though the numbers are not nearly a positive or impressive thing.

A Bank of England report states that people seem to be climbing out of their debt but there is no sign as to whether or not things will remain that way in 2010. Lenders were expecting an increase in defaults, which has thrown things off a little bit in terms of their statistics and reports. However, the statistics are in a way misleading to many as the amount of money lost through bankruptcy and defaults actually increased even though the amount of people that defaulted decreased. Essentially, this means that less people are being forced to default on their loans and debt, but those that still have to default are trying to climb out of a lot more debt. This may also be due to the fact that the interest for credit card borrowing is continuously rising based on the amount of people defaulting and not paying back their debt.

There have been a number of changes in the credit industry and the margin between the interest rate on credit cards and the rate used at the bank is much different than it was just one year ago. The difference did remain almost the same for personal loans however, as UK consumers seem more capable on keeping up those payments rather than their credit card interest.

Thanks to the economic downturn and recession lenders have been far stricter about how much money they give out and who the give it to, but this isn’t necessarily the reason that less people defaulted on their loans. In fact, many feel that the decrease in credit default has a lot to do with the fact that unemployment rates have been lower than they expected.

There was a surprise fall in unemployment rates from September to November, and it allowed the UK to get a bit of relief in terms of the recession and bankruptcy. Another difference may be the fact that UK consumers are far more willing to pay off their debts in order to avoid financial strain and bankruptcy. People are keen to pay off their credit bills, and lenders and banks are expected this trend to continue. A lot of this is thanks to the increased awareness of UK consumers and the added fear of negative finances that was brought to the forefront after the recession and banking crisis.

If the new statistics that are expected at the end of January do show positive growth for the last three months of 2009, then the good news should continue to roll in. With unemployment rates decreasing, defaulted loans decreasing, and signs of positive growth people are starting to get excited about the bounce back of the economy. Everyone just needs to keep in mind that it is going to be a long and arduous process for everyone in the area, but that is to be expected after everything the UK has been through.

Gordon Brown Fights Back Over Deficit Accusations

Recent conservative claims that Gordon Brown is completely rejecting the deficit have been vehemently denied by Mr. Brown. The Tories claimed that Brown has been ignoring the problem purely based on political issues and David Cameron stated that the Labour party had no right or excuse to not start cutting back on the budget deficit.

Brown shout back by stating how fragile the recovery process is and that certain cuts and a lack of spending would put a serious damper on job opportunities and growth. He believes that his banking background and the actions he took during the banking crisis give him the ability to make the right decisions, and not be bullied by Cameron and the Conservatives.

At the moment the liberal democratic party is prosing a 10 billion pound cut in spending and a spokesperson for the treasury let it be known that failure to bring the deficit under control is going to be a serious matter in the long run. The parties have been battling for quite some time over the issue and monthly press conferences have seen ideas, insults, and arguments thrown about on a regular basis. Aside from this, Brown stated that there was a consensus in the parliament in terms of supporting the economy in this uncertain time.

He continued by saying that people calling for cuts now are just going to put the economic recovery at risk, and parties that want policies to withdraw stimulus are risking the recovery in a way that the Labour party never would.

The Conservatives are very open about how they would cut spending much harder and faster than is being done at the moment. In fact they have gone so far as to say that they would halve the deficit if they were in power for one term. George Osborne stated that he would cut the deficit within the next Parliament while Mr. Cameron would not go as far as to say how, why, and when he would cut the deficit.

The Labour party has been open saying that premature cuts would send the UK back into a recession and have more people dealing with debt management plans and bankruptcy than they do right now. Even without the spending there is word that the last three months of 2009 resulted in positive growth, which is a good sign for Brown and his party. However, Cameron jumps back and points out that the deficit is going to rise to 178 billion pounds this year, which is a staggering number which will be quite hard to climb back from.

What many UK consumers are hoping for is to see a pre-election budget from each party. Looking at how each party would tackle the deficit and cut spending would be one of the best ways to see who has the ability to help fight back against the recession without sending things in the opposite direction that is wanted. Brown has stated that the Labour party will put out a tough yet positive budget, but it remains to be seen if that is enough to have Cameron and Osborne cut back on their dislike of his approach.

Too Much Christmas Cheer Leads to UK Bankruptcy and Debt

A new report that surfaced this week in the UK has shown that close to 4 million people in the United Kingdom have entered debt in order to pay for the holidays in 2009. GfK NOP undertook some research and studies and concluded that 3,989,272 consumers in the UK are now dealing with high levels of debt and even bankruptcy based on their overspending during the festive season.

On top of that startling statistic, the study also showed that just fewer than 6.5 million UK citizens are worried that they will not have enough money or financial resources to make it to the end of January. And it all appears to be thanks to the Christmas spending and the increase in household bills over the last year.

The study was officially conducted in December and also found that 8% of adults have borrowed money from friends, family, or institutions in order to get out of debt after their Christmas spending. If that wasn’t alarming enough, close to 3 million people stated that they are still working their way out of bankruptcy or debt thanks to the Christmas of 2009.

Aside from finances, there has been note that a lot of peer pressure, guilt, and expectations play a part in the overspending that comes during Christmas. Research showed that over 30% of respondents felt that they had to spend extra money on Christmas in order to prove they could match their friends and families.
Derek Oakley who is the director of insolvency for Debt Free Direct stated that he and the company know all about the pressure of Christmas, especially for people that are already dealing with bankruptcy or debt management plans. January usually holds the most amount if individual voluntary agreements and insolvencies due to the season. That is why Oakley urged UK consumers to seek out debt advice even though they may not feel comfortable doing so. When seeking advice however, it is crucial that consumers find tailor made and unique advice for their situation, and do not just follow what other people are doing.

2009 saw a high of personal bankruptcy issues and it looks like 2010 is going to be just as bad. The hope is that maybe this Christmas people can turn things around and not give into all of the pressure. If UK consumers can see the result of their spending and put it all into perspective then they have a much better chance to break out of debt and avoid bankruptcy.

Debt Free Direct urges people in the UK to create realistic budgets and stick to them, as well as seek out professional help before it is too late. Debt is something that can be dealt with and fixed as long as things are not allowed to get to out of hand first. While professional advice is often very intimidating, it is almost completely necessary thanks to the credit crunch, bank failures, and long winded recession that has gripped the UK for the past few years.