Myvesta has launched an online debt confessional facility online. People can use the facility to 'get things off their chest' anonomously. The link to debt confessional resource is below:

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UK borrowers account for one third of unsecured debt in western Europe
On average, a Briton has twice the debt of a European
Total consumer debt in the UK is at a record £1.3 trillion
New debt last year came to an unprecedented £215bn
Citizens Advice faced 1.25 million new debt cases last year - the figure is rising
By David Prosser, Personal Finance Editor
Published: 28 September 2006

Britain's "buy now, pay later" consumer culture has led to unprecedented levels of personal debt. The average Briton now has more than twice as much unsecured borrowing - including overdrafts, personal loans and credit card debt - as the typical European, according to a report published by Datamonitor.

The market research analysts said yesterday that even before mortgage borrowing was considered, the average Briton owes £3,175, compared to the average debt in Europe of £1,588. Datamonitor said Britons had "an insatiable appetite for credit", taking on new unsecured loans of £215bn last year alone.

Borrowers from the UK now account for a third of all unsecured debt in western Europe, Datamonitor added. Paul Marsh, author of the report, said: "While the UK enjoys a buy-now pay-later culture ... many major European countries have a culture of saving and frugality. Countries such as France and Germany are particularly debt adverse."

The boom in unsecured lending has boosted total consumer debt, including mortgages, to almost £1.3trn, close to three times the level of borrowing in 1997, when Labour came to power.

The consumer borrowing crisis is set to become the most pressing concern for Gordon Brown's successor as Chancellor of the Exchequer. George Osborne, the shadow Chancellor, said: "Gordon Brown is presiding over an economy increasingly built on debt. This has left many families vulnerable to the triple blow of rising mortgage rates, taxes and energy bills."

The debt crisis is even hitting young borrowers, according to separate research published yesterday by One Advice, the debt advisers. The company said the average 18 to 24-year-old now owes £2,860 in unsecured borrowing. One Advice said the average figures obscured worrying individual cases. It said 108,000 18 to 24-year-olds had credit card debts of more than £5,000.

There are increasingly worrying signs that many borrowers are struggling to stay on top of repayments. The average person has debts that total 150 per cent of their annual income, according to the Bank of England, half as much again as in 1997.

The Bank believes around one million households face problems coping with debt repayments - around 10 per cent of the four in 10 households that have unsecured borrowing.

A report from Citizens Advice earlier this month said 770,000 mortgage borrowers had missed at least one mortgage repayment over the past year, while two million homeowners said they were concerned their finances would not stretch to cover their debts.

The charity said younger people were particularly vulnerable, with mortgage-holders aged 21 to 24 the most likely to default.

The latest figures from the Government's Insolvency Service, published last month, have also unnerved debt campaigners. The numbers becoming insolvent in the second quarter of the year reached 26,000, a 66 per cent rise on the same period in 2005.

Borrowing difficulties have already begun to affect the housing market. Britain's housing boom has saddled newer homeowners with far larger mortgages. Figures from the Hay Group consultancy , published yesterday, showed the typical borrower now spends 51 per cent of monthly pay on mortgage repayments.

The Council of Mortgage Lenders said the number of homes repossessed in the first half of the year was 8,140, the most for more than five years.

At the same time, there is evidence that Britain's biggest banks, which have all reported a rise in bad debt in recent months, are cracking down on consumer credit. Two weeks ago, for example, HSBC said it would introduce annual reviews of all its customers' overdrafts, with cuts to many borrowers' overdraft limits likely to follow.

Alice Douglas, 42, writer: 'We were happy with a £60 TV. Now we spend £1,500'

"Seven years ago, I moved to Wales for a change of lifestyle," says Alice Douglas, 42, a writer from Snowdonia. "I bought a 4,000 sq ft church for £54,000, which was incredibly cheap, because it needed renovation work, but I had never done a big building project before. I thought I'd be able to do the structural work for £80,000 but I've had to spend £300,000. I didn't think of the cost, and even things like floor tiles for the kitchen ended up costing £5,000 because they were limestone, and I spent £25,000 on windows.

"I used every credit card I could get. At one point, I had 10 different credit cards with £8,000 on most of them, so that my debt was up to £60,000. It was all about to collapse until my mortgage company valued my property, which has massively increased in price.

"I still have about £30,000 on my credit cards, but I've just learned to juggle them. Once you've got them, there's too much temptation and you get used to a lifestyle where you want to have lots of things. We used to be happy with a £60 television set, but now we spend £1,500 on a 38-inch LCD.

"You get sucked into it, and get used to spending large amounts without thinking about it, because it's on a card. It does make a different because it doesn't feel like real money. If it did feel real, it would feel obscene. I went to London recently and spent £3,000 in Whistles, on clothes. I'm about to buy another property with an 85 per cent mortgage and I'll get the deposit on credit card.

"It's a gamble but it could pay off. If you're shrewd, you can use it to your advantage. My credit rating is very good because I borrow a lot but I'm able to make my payments. It used to stress me out but now I think, if I lose everything, it wouldn't be the end of the world."

Arifa Akbar

Britain's "buy now, pay later" consumer culture has led to unprecedented levels of personal debt. The average Briton now has more than twice as much unsecured borrowing - including overdrafts, personal loans and credit card debt - as the typical European, according to a report published by Datamonitor.

The market research analysts said yesterday that even before mortgage borrowing was considered, the average Briton owes £3,175, compared to the average debt in Europe of £1,588. Datamonitor said Britons had "an insatiable appetite for credit", taking on new unsecured loans of £215bn last year alone.

Borrowers from the UK now account for a third of all unsecured debt in western Europe, Datamonitor added. Paul Marsh, author of the report, said: "While the UK enjoys a buy-now pay-later culture ... many major European countries have a culture of saving and frugality. Countries such as France and Germany are particularly debt adverse."

The boom in unsecured lending has boosted total consumer debt, including mortgages, to almost £1.3trn, close to three times the level of borrowing in 1997, when Labour came to power.

The consumer borrowing crisis is set to become the most pressing concern for Gordon Brown's successor as Chancellor of the Exchequer. George Osborne, the shadow Chancellor, said: "Gordon Brown is presiding over an economy increasingly built on debt. This has left many families vulnerable to the triple blow of rising mortgage rates, taxes and energy bills."

The debt crisis is even hitting young borrowers, according to separate research published yesterday by One Advice, the debt advisers. The company said the average 18 to 24-year-old now owes £2,860 in unsecured borrowing. One Advice said the average figures obscured worrying individual cases. It said 108,000 18 to 24-year-olds had credit card debts of more than £5,000.

There are increasingly worrying signs that many borrowers are struggling to stay on top of repayments. The average person has debts that total 150 per cent of their annual income, according to the Bank of England, half as much again as in 1997.

The Bank believes around one million households face problems coping with debt repayments - around 10 per cent of the four in 10 households that have unsecured borrowing.

A report from Citizens Advice earlier this month said 770,000 mortgage borrowers had missed at least one mortgage repayment over the past year, while two million homeowners said they were concerned their finances would not stretch to cover their debts.

The charity said younger people were particularly vulnerable, with mortgage-holders aged 21 to 24 the most likely to default.

The latest figures from the Government's Insolvency Service, published last month, have also unnerved debt campaigners. The numbers becoming insolvent in the second quarter of the year reached 26,000, a 66 per cent rise on the same period in 2005.

British people are responsible for a third of all unsecured debt in Western Europe, a report out today shows.

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The average Briton owes £3,175, twice as much as the £1,558 owed by their average European counterpart.

Unsecured UK lending - such as on credit cards, personal loans and overdrafts, but not including mortgages - reached £214 billion last year, making Britain the most indebted nation in continental Europe.

This is compared with a combined total for Western Europe of £600 billion.

France, which came second in terms of its unsecured debt, was still only half the size of the UK market. Total personal debt in the UK including mortgage debt is estimated to be £1.2 trillion.

The research from analysts at Datamonitor attributes the high level of British debt down to the UK’s buy-now-pay-later culture and it "insatiable appetite for credit", compared to major countries on mainland Europe which have a culture of savings and frugality. People in France and Germany are particularly averse to debt, according to analysts.

However, this situation is likely to change, with the UK consumer credit market reaching a "saturation point" at which banks will eventually be unable to loan Britons much more than they are doing at present.

By contrast, consumer credit growth in Western Europe is growing fast, at a rate of 8.3 per cent per year over the last five years compared to 2.7 per cent for the UK, providing new opportunities for lenders, the report says.

Paul Marsh, financial services analyst at Datamonitor and author of the report, said: "UK lenders looking for business opportunities should look overseas to realise their expansion plans.

"The UK is an increasingly difficult place to do business, due to the highly indebted nature of the population. Yet in other European countries consumers are not as indebted and the markets are not as sophisticated."

While the UK market is expected to continue growing at a slower pace than major European countries such as France, Ireland and Spain, the fastest growing markets are Turkey and Greece, according to Mr Marsh.

"These markets are where the real opportunities exist, but only for players brave enough to enter," he said.

After recovering from an economic crisis in 2001, unsecured borrowing in Turkey rose by 52.3 per cent per year on average over the past five years, while in Greece it grew by 28.8 per cent.

One of the reasons highlighted for Turkey’s consumer credit growth, is that it has a very undeveloped mortgage market, and hence, unsecured borrowing accounts for the vast majority of outstanding debt.

After the Office of Fair Trading’s decision to force credit card firms to cut penalty fees for defaulters, providers have turned to other ways to boost profits. Research released on Monday by Moneyfacts, a personal finance information company, found that 19 card providers had increased interest rates in the last three months, some by as much as 12.1 per cent.

Lisa Taylor, an analyst at moneyfacts.co.uk, said: "Rising bad debts and the lost fee revenue has left many providers with no choice but to look for alternative avenues for income. And it seems raising interest rates is a popular option.

"For many consumers this rise may go unnoticed but, should they take the time to look at the long-term consequences, they could be in for a nasty surprise."

Times Online
September 27th, 2006

A crooked solicitor jailed for swindling more than £750,000 from clients is being allowed to give advice at a Citizens Advice Bureau, the Telegraph can today reveal.

Despite being jailed for five years in August 2004 after admitting 36 counts of theft and asking for another 11 to be taken into consideration, former Darwen solicitor Philip Pressler is in a position where he could advise on wills, powers of attorney and other legal issues to clients who know nothing of his background. Shamed Pressler, 53, formerly of Higher Whittlestone Farm, Darwen, leaves Kirkham Prison, near Preston, every Monday and Wednesday on day release to work as an adviser at Manchester District Citizens Advice Bureau (CAB), in Swan Street.

He catches the train from Kirkham to Manchester and works from 9.30am until 4pm before returning to prison in the early evening.
continued...

Although he swindled £759,000 from clients, wills and charities while a senior partner at Darwen solicitors Hindle, Son and Cooper, prison chiefs denied claims allowing him to work as an advisor during his rehabilitation was "inappropriate".

CAB bosses also denied that having a convicted fraudster giving advice on their behalf was a cause for concern.

But Darwen and Rossendale MP Janet Anderson said she was outraged Pressler was working at the CAB and would write to the minister for prisons to ask for him to be removed.

She said: "People in Darwen will quite rightly be very annoyed and upset about this.

"The very notion that a convicted swindler has been placed in a position where he has access to vulnerable people seeking advice is an absolute nonsense.

"I will be taking this up with the prisons minister Tony McNulty as a matter of urgency and ask him to make sure that he is removed from having contact with the public as soon as possible."

Det Sgt Graham Norris, from Lancashire Police's major crime unit, who led the investigation which led to Pressler's conviction said he was "highly concerned" Pressler could now be advising people on the same legal processes he used to defraud families across East Lancashire.

However, a spokesperson for the CAB said employing Pressler as an adviser did not undermine the work that they did or the quality of advice they provided.

A CAB spokesperson said: "The prime concern of any CAB is always to safeguard the welfare and interests of CAB clients. Philip Pressler has had to go through stringent vetting and risk assessment by the Prison Service as well as the bureau's own rigorous selection procedures before being considered for training as a volunteer adviser by Manchester District Citizens Advice Bureau.

"He has been subject to close supervision and monitoring throughout his time as an adviser and would have faced severe sanctions had he breached CAB rules or broken prison authority rules governing his conduct.

"There has never been any question of his handling bureau funds or having access to clients' money."

CAB advisers are trained volunteers whose expenses are paid for by the organisation. Their literature says advisers can: interview clients; help clients negotiate with people such as creditors; draft letters; make phone calls for clients; and represent them in court and at tribunals.

A Prison Service spokesperson said Pressler was released on temporary licence as a way "to provide increased opportunities to undertake training and educational programmes that cannot be provided within the prison."

She said: "Unpaid community work and reparative projects help prisoners give something back to the community. All prisoners are rigorously risk assessed before release on temporary licence and no prisoners are released if there are concerns for public safety or it is felt it is inappropriate to do so."

The Law Society, which regulates the industry, has paid more than half a million pounds to Pressler's victims from a compensation fund.

He was ordered to sell £690,000 of his assets to repay the Law Society or face a further three years in prison and was struck off as a solicitor by them in May, 2003.

A Law Society spokesperson said: "Unless another solicitor had applied to the Law Society for Mr Pressler to work under his supervision we would not be involved as the CAB can employ him without making us aware."

Det Sgt Graham Norris said: "Pressler committed some diabolical crimes and affected people and families in a big way.

"He systematically gained and then abused their trust and ripped lots and lots of people off.

"He has been proven to be a dishonest man. How can anyone prove he is not being dishonest now and does not have ulterior motives?

"Pressler is a conman and it did shock me when I was told that as part of his rehabilitation he is working at the CAB.

"I have raised my concerns with prison liaison officers at Kirkham about the suitability of him as a CAB adviser. But I have been assured that he is monitored closely and is supervised at all times.

"How would you feel if you had received advice from him and then found out who he was, what he had done and the fact he is still serving a prison sentence for fraud?

"Would members of the public want any advice, legal or otherwise, from a convicted conman?"

Former Darwen Grammar School pupil Dr Sandi Hoyland prompted the investigation into Pressler.

Pressler administered the estate of her father, John Hacking, and had right of attorney over it as his mental health had begun to fail.

Dr Hoyland told the Telegraph at the time: "Probate and power of attorney are probably the only two areas where solicitors can work in total isolation and Pressler exploited that, stealing all that money for his own lavish lifestyle.

"There needs to be tougher penalties for solicitors who abuse their position and a better way for people to make complaints to stop them from doing it to others."

Lancashire Telegraph
September 12th, 2006

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Until very recently credit card providers in the UK loved British credit card users who failed to make repayment of their entire outstanding balance at the end of each statement period. And why not, these customers were the source of huge profits for UK credit card issuers. However, with recently announced bad debt provisions by UK credit card providers being among the largest ever, and having recently been subjected to a fine-comb review from the Office of Fair Trading (OFT), a number of leading UK credit card providers are starting to fight back.

The first casualty in this new battle? UK credit card customers who are finding it increasingly difficult to make repayments on their credit cards.

Yesterday Britain’s largest bank, HSBC, announced that it would be writing to all of its customers informing them that the bank had now engaged a new credit policy with regard to its overdrafts and that period reviews of these would take place to see if a personal loan might not be more appropriate.

This follows the recent announcement by Europe’s leading credit card issuer, MBNA, that it could now be possible for you to have a credit card transaction declined even if you have available credit on your credit card to meet the transaction value. MBNA’s reason for doing this? Because they say they should have the right to decline a transaction if they believe you do not have the means to cover the repayment of your credit card bill! That might be so, but surely this would need to be done as part of a review of your credit card limit, not an instant decision when you are trying to conduct a transaction at a time when you genuinely believe you have the credit limit to cover the transaction value. Potentially very embarrassing indeed.

Likewise, around the same time, Barclays announced that its credit card customers would now be subject to periodic reviews of their credit card limit and that Barclays now reserves the right to lower a customer’s credit card limit at any time. A little harsh perhaps, but far better than the embarrassment of having a transaction declined in a shop!

Collectively then it appears that the leading UK credit card companies are fighting back against recent attacks on them. None less so than that by the OFT, which looks like it will involve UK credit card companies having to lower their fees and interest rates in the very near future. This may also involve some for of rebate to some UK credit card customers who have been excessively charged fees and interest. And herein lies the crux of the issue for many watchers of the UK credit card industry, who do not see these moves by the leading UK credit card companies as a helpful crack-down on delinquent UK credit card companies, by offering cheaper sources of borrowing, such as a personal loan, but more like a chance to cross-sell other products in their stable which are not the subject of such a careful, watchful eye at the moment.

Richard Smith
19th September 2006

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People who repeatedly use financial comparison websites can inadvertently damage their credit rating, a report has said.

Comparison websites have sold 13.6 million products in the past year.

But the report, by Professor Merlin Stone of Bristol business school, says the sites do not offer credit checks to people shopping for financial policies.

If consumers are then rejected by a bank or another lender, the failed application damages their credit score.

"Many people apply for products they will not be approved for and are left with failed applications on their credit scores," said Professor Stone.

His report was commissioned by the Moneyexpert comparison site.

If you have too many of these applications on your file in a short period of time, a lot of the ratings systems... will probably downgrade your credit rating
Neil Munro, Equifax

Professor Stone argues that the problem lies with the fact that the comparison websites assume all potential customers are the same and have good credit histories.

If someone eventually applies for a product such as a mortgage or credit card, the lender checks their credit history.

This enquiry is logged and thus leaves a "footprint" on the files kept by credit scoring companies such as Experian and Equifax.

Equifax's spokesman Neil Munro said: "These footprints are used by future lenders as an indication of your credit-worthiness.

"So if you have too many of these applications on your file in a short period of time, a lot of the ratings systems the lenders will use will probably downgrade your credit rating.

"A large number of applications over a short period of time is statistically quite predictive of somebody's credit worthiness."

According to Moneyexpert, about 3.5 million people had applications for financial products rejected in the past year after being channelled through comparison sites.

This process can develop into a spiral, with failed applicants trying again and again to buy polices or products they have no hope of getting, but simply leaving themselves with a worse credit score each time.

Credit histories

What many people fail to realise is that it is not just events such as failed mortgage or credit card repayments, or county court judgements for debt, that can damage a credit score.

People with healthy finances can have a poor score if, for instance, they have been in a job for a short time, are not on the electoral roll, or do not have a fixed phone line.

You can have a poor score even if you have never borrowed money before simply because you have no identifiable borrowing history.

The use of comparison web sites has grown rapidly over the last few years and is still continuing to grow.

The most popular products bought were car insurance, travel insurance and home insurance.

Credit cards, personal loans and mortgages were the next most popular items.


BBC Online
September 19th, 2006

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The consumer watchdog’s decision to investigate whether bank overdraft charges are legal has sparked outrage among current account providers. But as the wrangling continues there is no better time to stand up to your bank and demand the return of cash it has taken from your account when you slipped into the red.

The banks reap an estimated £4.7 billion a year from charges on unauthorised borrowing. But the Office of Fair Trading (OFT) has announced that it will investigate whether charges of up to £39 a time are legal. The OFT is expected to introduce a limit on overdraft charges, similar to the £12 cap on credit card default charges implemented this year.

*
If you have been penalised for repeatedly going over your limit and believe that the charges are unfair, you should write to your bank to request a refund. Although it is unlikely that you will receive the full amount, the bank may offer part of the total. If you think that the bank’s reply is unsatisfactory, you can take the case to the Financial Ombudsman Service (FOS), which can force the bank to offer a refund if it agrees that you have been treated unfairly.

Emma Bandey, of Which?, the consumer organisation, says: “People should not be put off challenging their banks while the OFT investigation is carried out. But be prepared for some bully-boy tactics that banks have used to intimidate customers, such as closing accounts. Customers should open a new account elsewhere before making a challenge.”

For advice on how to complain, go to the FOS website at www.financial-ombudsman.org.uk or call 0845 0801800.

In future, try to minimise any charges by keeping regular checks on your bank balance and pending direct debits or standing orders. If there is no way to avoid going over the limit, contact the bank first because it may agree to waive the charge. Similarly, if you accidentally go over your limit and contact the bank as soon as possible, it may agree to refund the charge.

Trying to stay in the black will be crucial in the coming months because some banks have increased their overdraft interest rates.

Credit Suisse estimates that capping unauthorised overdraft charges at £10 would reduce banks’ profits by £1.2 billion. With this source of revenue in danger, the banks are turning to those customers who have authorised overdrafts.

On September 1 Lloyds TSB, NatWest and smile all put up rates on their main current accounts. Lloyds TSB’s Classic Plus account now charges 18 per cent, up from

15 per cent, on overdraft borrowing. NatWest customers with Current Plus, Advantage Blue or Advantage Gold accounts are paying between 1.14 and 1.16 percentage points more. Customers with smile, the internet arm of the Co-operative Bank, suffered a dual blow: it added two points to its overdraft rate and increased the monthly service charge from £7.50 to £10.

HSBC has gone one step farther, announcing a clampdown on those who depend too heavily on their overdrafts. From December it will impose stricter rules on overdraft allowances and conduct annual checks on customers who request overdrafts regularly.

Banking could become even more expensive if the OFT caps charges. Defaqto, the research group, responded to the OFT announcement by suggesting that such a move could lead to the end of free banking in the UK.

Ed Wells, of Troika, the financial services consultancy, says: “The jury is still out, but charging for services is something that banks would like to introduce. They say it would allow them to offer more transparent and fairer pricing.”

Case study

STEFAN ZUBAC, 24, won back £750 of £1,495 in overdraft charges incurred on his Barclays current account after requesting a refund. The bank agreed to halve the total sum as “a gesture of goodwill” and to avoid “the cost and inconvenience inherent in a further dispute”.

The original total was a result of Stefan, left, intermittently exceeding his authorised overdraft limit by £10, for which he was charged a £30 penalty on each occasion. He repeatedly asked the bank for leeway of £20 before going over his limit to tide him over before his pay went in the account, but his requests were denied.

Stefan says: “It was a vicious circle. The bank would stick me in a situation where I could never get out of my overdraft because it never gave me any grace period to pay off the unauthorised amount before it started charging me again.”

Know the Banking Code
# The Banking Code, set up by the Banking Code Standards Board (BCSB) in 1999, aims to ensure fair dealing and standards of good practice in the UK.

# Principles of the code include a commitment to clear information on interest rates and charges and how accounts work. Banks should also “deal quickly and sympathetically when things go wrong”. At present, the BCSB believes that banks “could do more” to fulfil their obligations on transparency.

# The code applies to current accounts, personal loans, savings and credit cards but excludes mortgages, investments, general insurance, pensions and life assurance.

# Signing up is voluntary, but most banks and building societies in the UK have agreed to abide by the code. The Post Office has not signed up but is in talks with the BCSB. A few small building societies and private banks have yet to sign up.

# The BCSB is lobbying to change the code so that banks are required to give 14 days’ notice before charging for an unauthorised overdraft. Seymour Fortescue, of the BCSB,

says: “This would ensure that customers have time to query the charges if necessary. It would also help to avoid charges on top of existing charges.”

The Times
September 17th, 2006

High-street banking giant HSBC is to clamp down on customers who go heavily and repeatedly into the red.

Concerned about people who regard their overdraft as "an extension of their salary" rather than as a safety net, it is to introduce an annual review from 1 December.

The bank will contact all customers who have an overdraft, to check if they are having difficulty with the repayments and to gauge whether an overdraft is still the most suitable form of borrowing. Those who regularly breach their overdraft could see their limits cut.

The changes are designed to bring "greater clarity on what an overdraft service is, how customers apply for one and how fees are charged", said Joe Garner, HSBC's head of personal financial services.

In August, HSBC revealed a rise of more than a third in bad-debt write-offs, seriously hitting profits.

Its move comes just days after the Office of Fair Trading announced an inquiry into the size of bank charges imposed on customers who exceed their overdraft limits.

This probe was launched as the watchdog wound up a separate investigation into penalties for late payment of credit card bills. Providers have now cut these charges to £12.

Stuart Glendinning from price-comparison service Moneysupermarket.com said there could be a "pre-emptive element" in HSBC's move, since overdraft charges are expected to be cut. But it was more likely, he said, that HSBC was acting to reduce its exposure to customer bad debts.

NatWest, Lloyds TSB and Smile have all raised their overdraft rates recently.

Mortgages and loans: Repayment woe begins at home

An estimated 770,000 UK homeowners have missed at least one mortgage payment in the past 12 months, according to Citizens Advice.

In a survey of 2,000 home loan borrowers, the debt charity found that 4 per cent had missed one or more repayments. This figure was extrapolated to provide the national calculation.

For young borrowers saddled with student loans and credit card debt, the figure rose to 13 per cent, said Citizens Advice.

Last year, the charity helped to deal with 1.25 million debt problems and received 51,000 enquiries about arrears on mortgages and secured loans.

"Missing payments on mortgages or loans could possibly lead to repossessions," said David Harker, chief executive of Citizens Advice.

Meanwhile, figures from the Council of Mortgage Lenders (CML) show that spiralling house prices have forced first-time buyers to borrow a record 3.24 times average income to get on the property ladder.

This figure for July was up from 3.21 times the average income in June, and 3.06 times in the same month last year.

The Independent
September 17th, 2006

Large levels of debt is the reason why half of students that leave university decide to drop out.

New figures suggest that debts are having a real impact on the lives of students.

And while the average graduate can now expect to owe £15,000 by the time they receive their degree, half the people that do not make it that far blame their borrowing.

And the £15,000 debt exists despite the best efforts of students and their families.

Close to half (45 per cent) of undergraduates work more than 16 hours a week during term time, with more than four in five (81 per cent) working over the summer holiday to lessen their debts.

Additionally, some 58 per cent of students receive £5,000 from their parents to help them during their time at university.

But despite all this, not to mention student loans, more than three students in five (62 per cent) struggle financially during their time at university.

The majority of students do budget, but if they are to emerge from university financially stable, it is increasingly vital that they are well educated about how to manage their money.

Some 58 per cent of students draw up budgets to help them manage their money.

Myvesta UK IVA Advice

Increasing numbers of pensioners are borrowing money without any plans to pay it back, a recent survey from financial advisers Sesame reports.

Additionally, one in seven of the 2,000 pensioners that were surveyed said they would consider equity release to clear off credit card and loan debt.

The findings fly in the face of the long-held view that UK pensioners try to avoid debt at all costs.

The group said that today's pensioners had used credit in the 1960s and 1970s and were more comfortable with it.

But Alastair Conway, a spokesman for Sesame Financial Advisers, warned that debt held dangers for pensioners, particularly as many have a fixed income or an income that only rose in line with prices.

"People have to take control of their finances in the lead-up to retirement and beyond, if we are to avoid adding to the UK's mounting debt crisis," he said.

"This is because the ability of retired people to recover from bad financial decisions is more limited."

It may become more common for people to die with debts, Mr Conway added.

BBC News, September 14th, 2006

Myvesta UK IVA Advice

Myvesta UK has today launched its Trust Deed Educational Video Series. The online video clips have been generated to assist Scottish individuals experiencind debt problems to assess the suitability of a Protected Trust Deed.

The Trust Deed Video Series can be accessed below:


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Highstreet banks face the loss of billions of pounds after the OFT launched an inquiry into the fees charged to consumers on current accounts.

The Office of Fair Trading (OFT) is to examine the banks’ £4.7 billion annual income from the default charges that are applied when customers slip into the red or miss direct-debit payments. The move comes after the OFT forced banks to lower charges applied to borrowers who default on credit card payments by introducing a £12 limit last April.

The OFT believes that, as with credit card charges, fees applied to current accounts should reflect the administrative cost borne by the bank. Holders of current accounts can be hit by charges as high as £30 a day for exceeding their overdrafts. Charges for unpaid direct debits or standing orders are higher, at up to £39 for each item.

The banking industry defended its system. Ian Mullen, chief executive of the British Bankers’ Association (BBA), said: “Our members remain of the view that the current-account charging system is fair and legal. The majority of customers do not pay fees and enjoy free in-credit banking, unlike the vast majority of developed economies.”

Yet there are signs that the resolve of banks is beginning to crack. After several high-profile public awareness campaigns from organisations such as Which?, the consumer group, many banks have offered settlements, in some cases for thousands of pounds, to disgruntled account holders.

Emma Bandey, of Which?, said: “We have long since asked banks to open their books to public scrutiny, as we feel that default charges should be proportionate and reflect the administration costs involved. They should not be, as they are now, arbitrary figures picked to make the most money out of unsuspecting customers.” Overdraft charges and interest rates have long been an important source of revenue for banks and building societies, netting them about £10 billion a year, according to the BBA.

If the OFT sets a limit of £10 on charges, the industry stands to lose an estimated £1.2 billion a year, according to Credit Suisse, the investment bank. If they are scrapped altogether, the lost revenue could approach £5 billion, Which? estimates.

Some banks are attempting to stem their losses. Lloyds TSB, NatWest and Smile all increased their overdraft interest rates by up to 2 per cent on September 1.

Nick White, of uSwitch.com, the price comparison website, said: “The new overdraft rates are a signal that the industry is looking to stay one step ahead of the game.”

The banks expected an investigation into current accounts after the OFT’s ruling on credit card charges. The OFT will report its initial findings in three to six months.

The Times
September 8th, 2006

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Insurers, which are already under scrutiny from regulatory and competition watchdogs, are to better equip consumers to buy payment protection insurance (PPI) by launching a buying guide and providing clearer pre-sale information for the cover.

The move to raise customer understanding of payment protection, which is sold as an add-on to credit cards and loans and is meant to help consumers repay debt if they are unable to work, is at the heart of the industry?s offensive to stave off enforcement action by the Financial Services Authority (FSA).

The FSA has threatened to tighten its rules if the industry does not show how it will improve poor selling practices and weaknesses in product design, uncovered during a mystery shopping exercise last year.

The regulator was concerned that the product was being sold to people who could not claim, because they were self-employed, and that sales literature was often unclear or did not highlight significant exclusions.

In setting out its proposals to address the FSA?s concerns, Jane Milne, head of household and property insurance at the Association of British Insurers (ABI) says: ?One of the main things we want to achieve is to help customers think through what sort of insurance they actually need, to make sure that they are covered for their sorts of eventualities.?

The ABI is to work with its members to produce a guide which explains how payment protection works and how it differs from other protection products, including income protection and critical illness cover. The guide will also contain a checklist of key questions consumers should ask when buying PPI.

The industry will also introduce guidance on ways of communicating key features using standard headings in policy summaries, to make it easier for customers to compare products. ?We will be looking at ways of equipping customers so they can buy more effectively,? says Milne.

In its submission to the FSA, the ABI, which represents the biggest underwriters of insurance, said distributors of PPI products would also be encouraged to improve their sales staff training. ?Clearly this is one of those issues where we need to work very closely with the distributors so at the point of sale the conversation is happening properly,? says Milne.

The ABI is also to finalise work on its guidance on consistent interpretations, to improve the claims handling process. The aim of this is to ensure that key definitions such as ?self-employed and ?contract worker? do not differ from insurer to insurer.

The industry has clarified its stand on refunds on loans that are repaid early, saying: ?Where customers have repaid their loan early and have not made a claim, ABI members will make an appropriate premium refund.?

Despite these efforts to standardise promotional features of the product, Milne says the industry is not moving towards a ?baseline?, from which consumers could expect certain types of cover as standard. Consumer groups say a baseline model, would help consumers compare deals.

?There isn?t a one-size-fits- all on this, but we do want to make sure that people are able to make realistic comparisons and choices. What we are looking at is whether we can come up with some sort of guidance which says: This is typically what you might find in a PPI product,? says Milne.

The ABI also defended the practice of insurance being sold as single premiums, even though unlike regular premiums, the total cost of the insurance is added to the loan, resulting in the customer paying interest on the combined amount.

The important thing is that when people are buying they understand the pros and cons of each approach and they can make the choice which suits them best,? says Milne.

Consumer groups say the initiatives were a ?small step? towards addressing the FSA?s concerns but doubted they would do enough to stop misselling.

This is a useful step but there is a heavy reliance on consumers to understand what they are being told,? says Peter Tutton, of Citizens Advice, the charity which made a complaint to the Office of Fair Trading about the cost of PPI.

The FSA says it plans to meet insurers in April to discuss their proposals but plans to check on their improvements with a second round of mystery shopping.

Copyright The Financial Times Limited 2006

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Debt Facts and Figures - Compiled 1st September 2006

Total UK personal debt

At the end of July 2006 the total UK personal debt was £1,237bn. The growth rate increased to 10.5% for the previous 12 months which equates to an increase of £105bn.
Total secured lending on homes has exceeded £1 trillion (£1,000 billion) and in July 2006 it stood at £1025.4bn. This has increased 11.2% in the last 12 months.

Total consumer credit lending to individuals in July 2006 was £211.9bn. This has increased 7.2% in the last 12 months.

Total lending in July 2006 grew by £10.9bn. Secured lending grew by £9.8bn in the month. Consumer credit lending grew by £1.1bn.

Average household debt in the UK is approximately £8,577 (excluding mortgages) and £50,091 including mortgages.

Average owed by every UK adult is approximately £26,313 (including mortgages). This grew by ~ £200 last month.

Average interest paid by each household on their total debt is approximately £3,086 each year.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,506 per average UK adult at the end of July 2006.

Britain's personal debt is increasing by ~ £1 million every four minutes.

Plastic card / Personal Loans: Research by uSwitch has found that 3.4 million credit cardholders in the UK regularly make only the minimum repayment on their credit card. 11% of those with a credit card only ever make the minimum repayment – increasing to 18% for the 25-34 age group.

Credit card arrears rose consistently throughout 2005. The proportion of balances more than three months in arrears increased to 8.5%.

The number of people refused credit by mainstream lenders is estimated to increase from 9.1m in 2005 to 9.4m in 2010.

Total credit card debt in July 2006 was £54.7bn.

According to the BBA the proportion of credit card balances bearing interest was 74.3% in June 2006.

The average interest rate on credit card lending is currently 15.72 %, around 11 percentage points above base rate.

282 plastic transactions took place every second in the UK in 2005.

Debit cards accounted for 37% of all retail spend in 2005, ahead of cash at 34%. Plastic cards were used for 63% of all UK retail spending last year

Plastic cards in issue were 190m in 2005. This works out at an average of 4.1 plastic cards for every adult in the UK.

There are more credit cards in the UK than people according to APACS. At the end of 2005 there were 74.6m credit and charge cards in the UK compared with around 60 million people in the country.

Servicing Debt: Approximately 9.8% of individuals consider unsecured debt to be a “heavy burden”. A further 31% saying they are keeping up, but struggle from time to time

One person is falling victim to insolvency every minute of the working day - 26,021 people became insolvent between April to June 2006 which is a 66% increase on the same quarter last year. The number of people becoming insolvent in 2006 is likely to exceed 100,000.

In the last four years the average age of a bankrupt has fallen from 43 to 41 and the proportion of younger bankrupts, aged between 18 and 29, has more than doubled.

According to recent research by a leading debt solutions consultancy, the number of consumers facing personal insolvency is growing fast. Of adults with a high level of unsecured debt (£10,000 or over), 20% of those interviewed said they were ‘quite likely’, ‘very likely’ or ‘certain’ to declare themselves bankrupt or take out an IVA (Individual Voluntary Arrangement). This equates to 1.1 million adults across Great Britain.

The Bank of England raised the base lending rate to 4.75% in August 2006. This was the first increase for 2 years.

Citizens Advice Bureau (CAB) dealt with 1,128,000 debt enquiries last year. In the last decade the number of consumer debt problems dealt with by CAB has increased 118%. 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.

The average debt of a client coming to Consumer Credit Counselling Service (CCCS) for advice is now £32,000. The number of people earning more than £30,000 a year who are asking them for help has risen by 257% in the past three years.

Three quarters (74%) of British couples find money the hardest subject to talk about with their partners according to a recent survey by 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.

Young people (under 30): Graduates leaving university this year had average debts of £13,252, a 5% increase on 2005, according to a survey by NatWest bank. 62% of graduates leave university with debts of over £10,000.

Sixth-formers heading for college this year expect to leave their courses with debts of nearly £15,000. For those starting university this summer, the biggest concern was money being tight. Students are now increasingly relying on part time jobs to finance their life at university. A massive 87% of this year’s intake believes that they will have to get a part time job and 46% of current students have to rely on their income from term time work to get by, working an average of 14 hours a week.

Recent research shows that budgeting is the last thing on many students’ minds as the vast majority (80%) of 16-24 year olds admit they don’t keep track of their finances. Also, despite the likelihood of being on a tight budget, 1 in 5 doesn’t know within £100 what their financial state might be.

The average UK weekly pocket money for 7 – 16 year olds is £8.20 (£9.76 for 12 to 16 year olds, compared to £6.30 for seven to 11 year olds).

Four out of every five women aged between 21 and 25 spend more than their wages every month.

Pensioners / Pensions: 1.4 million pensioners (14% of the UK’s pensioner population) live on an income of £5,000 or less each year. After council tax, water and electricity bills, this leaves only £3,092 per annum – which is equivalent to £59.46 each week or £8.49 a day. More than 38 per cent (3.6 million people) get by on £10,000 or less, and over half of the British pensioner population live on £15,000 or less each year.

A major report published by Scottish Widows, reveals a dramatic deterioration over the last 12 months in the number of people saving adequately for retirement. The percentage of the population saving adequately for retirement falls from 55% in 2005 to 46% in 2006. The percentage of people who do not know where their main income in retirement will come from has almost doubled, and is now nearly a quarter of the population (23%)


Research from Scottish Widows Bank reveals one in six (over 1 million), pensioner homeowners in the UK have an outstanding mortgage on their home – each with an average debt of £45,313 – making a nationwide debt of almost £47 billion. What is more, one in three owe more than £50,000 and one in ten more than £100,000 putting increased pressure on retirement income.

Over 8 million British workers (21%) don’t have any pension provision according to a recent report issued by Virgin Money. This is despite continued warnings from the Government and the pension industry of the need to save now to avoid inadequate income at retirement.

Housing: According to the Department for Communities and Local Government (DCLG) the average house price in the UK in June 2006 stood at £190,883 (£198,952 in England). UK annual house price inflation rose by 5.2%. Annual house price inflation in London was 5.8%.

Note: the weightings used by DCLG were changed for the February 2006 figures.

The average Mortgage Interest rate at the end of June 2006 was 5.29%.

28% of mortgages taken out in June 2006 were “interest only” mortgages compared with only 12% taken out in June 2003. 22% of these “interest only” mortgages were taken out without a repayment plan specified to repay the capital.

Approximately 280,000 mortgages are one month or more in arrears. This represents an increase of 4% from the same period one year ago.

During the second quarter of 2006, 33,180 mortgage possession actions were entered, and a total of 22,254 orders were made – 11,020 of which were suspended orders. This is a 17% increase from the second quarter of 2005.

Gross mortgage lending was £30.4 billion in July - the second highest figure on record and the strongest July figure ever - according to new data from the Council of Mortgage Lenders (CML). Home buyers borrowed 19% more in July 2006 than in July 2005.

According to the Nationwide the annual rate of house price inflation picked up for the third consecutive month in August. House prices are now 6.6% higher than at this time last year. This is the fastest annual rate of growth since April 2005 and almost three times faster than at this time last year.

According to The National Association of Estate Agents (NAEA) the average time between instruction and completion is 17.0 weeks.

The average loan approval for house purchases in April increase to £139,200, which is 5% higher than a year earlier.

The Council of Mortgage Lenders has revised up its forecasts for housing market activity for 2006 and 2007. The CML now expects house prices to end the year 7% higher than at the start, compared with a 2% forecast back in February. Next year, the forecast for house price inflation has been raised from 2% to 3%.

The amount of unmortgaged property wealth held by UK home-owners currently stands at £3.6 trillion. Housing equity is the largest component of total wealth held by people living in the UK. Mortgage lending has helped fund a dramatic expansion of home-ownership, from 60% to 70% of the population during the last 20 years. Roughly 40% of the housing stock is owned outright, mainly by retired and older middle-aged households,

Housing 1st Time Buyers: The average house price in the UK in June 2006 for first time buyers now stands at £149,215 which is an annual increase of 6.8%.

The average first-time buyer was paying 3.21 times their income to get a mortgage in June - the highest figure on record - according to data from the Council of Mortgage Lenders (CML). The average new mortgage for first time buyers has now reached £110,000. The average age of a first-time buyer was 29 and interest payments consumed 16.5% of the income of the average first-time buyer.

Half of parents feel responsible for helping their children on the property ladder. Parents intend to help their children onto the property ladder by giving them an average of £17,677. One in six are prepared to give or lend their offspring over £30,000.

The average couple needs to save at least £29,000 to pay for the deposit and stamp duty on their first home.

According to the National Association of Estate Agencies (NAEA) first time buyers accounted for 11.3% of properties purchased in August.

High Street Spending: Britons now spend more on eating out in restaurants, pubs and on takeaway meals than on buying fresh and processed food and drink products to have at home.

For the first time more than half of all adults made an online purchase during 2005 - 25 million or 52 per cent of all adults.

Parents typically spend £165,668 on raising a child from birth to the age of 21, according to friendly society Liverpool Victoria's most recent annual Cost of a Child survey. This works out at £7,889 a year and represents a rise of 7.8 per cent on last year's survey, more than three times the rate of inflation, and up 18 per cent on the 2003 survey.

The cost of running the average new car has grown to nearly £5,000 a year, or £14 a day, according to the latest RAC Cost of Motoring Index.

The average wedding costs around £19,595. 45% of couples - some 117,000 nationwide - have no financial planning to pay for the big day, a study by stockbrokers Brewin Dolphin Securities found.

Money Education / Financial Literacy: Classes on personal finance and budgeting in schools could make children richer by up to £32,000 between the ages of 35-49 according to the Institute for Public Policy Research.

25 million Brits (56%) spend 60 minutes or less per week reviewing their finances, with the average amount of time we dedicate as a nation reaching only 1 hour 19 minutes – the least amount of time in Europe, according to a study from Scottish Widows. We spend nearly twice as long (2 hours 11 minutes) chatting on the phone or texting each week, and 6 times as long (8 hours 4 minutes) watching TV.

A quarter of Brits (25%) have no idea how much they spend in a week, and a similar number (26%) have no idea of their monthly cash flow. This lack of knowledge extends into other financial aspects of life. Only half (51%) the population know the balance on their credit cards and nearly half (46%) have no idea what interest rates they receive on their savings or are paying on their accounts and debts.

Around 15 per cent of 18 to 24- year-olds think an individual savings account (ISA) is an iPod accessory, and one in 10 reckon it's an energy drink. With rising personal debt levels in Britain, and a lack of long-term savings, better money management seems a pressing issue.

Savings: A massive 72% of UK consumers believe they aren’t saving enough, but out of the people who are in a position to increase the amount they currently save, almost 8 million (18%) claim they enjoy spending their money too much to do so.

Halifax research shows that the UK saving ratio hit a four year high of 6.0% in Q1 2006. The household saving ratio measures the proportion of gross disposable income that households save rather than spend. The savings ratio has varied from a high of 14.1% in 1979 to a low of 3.1% in mid 2004 with a 7.8% average for the last 43 years.

Half the population (52%) could survive financially for just 17 days, should they suffer an unexpected loss of income, according to research by Combined Insurance.

Compiled monthly by Richard Talbot. richardtalbot@creditaction.org.uk

Myvesta UK IVA Advice