Debt hits a record
EVENING STANDARD - 28TH NOVEMBER 2002
Protect yourself against the unforeseen, it’s worth it.
Britons now owe a record £700 billion, working out at £5,300 per family – and that doesn’t even include their mortgages. In a buoyant economy few people worry about debt but, with a possible recession looming, a growing number of borrowers could soon find themselves in difficulties. Fortunately, there is a great deal that can be done now to reduce the impact of future rising interest rates and even redundancy.
Low interest rates have encouraged people to borrow but now a campaign has been launched to make consumers more aware of the dangers of borrowing more than they can afford. It warns that during the past year 23,000 homes were repossessed by mortgage lenders and that that figure is likely to rise.
“Debt can have disastrous effects on people who over-extend themselves or who find they are unable to afford their repayments, perhaps through losing their job or falling ill, or simply through mismanagement of their finances,” says market monitoring firm Mintel.
Unmanageable debt already accounts for almost a quarter of all request for help at Citizens Advice Bureaux, with many victims struggling for years before looking for advice. For many their debt problems could have been guarded against by taking out mortgage payment protection insurance or accident, sickness and unemployment.
Debt management experts now believe mortgage payment protection insurance is a must because redundancy rates are increasing. Social security does not step in to pay mortgage interest until claimants have been out of work for 39 weeks, and if they have £16,000 of assets, they get no help at all.
Broker firm Burgesses is offering an mortgage payment protection insurance policy that will cover customers’ monthly mortgage repayments if they because unemployed or fall ill. The cover costs £4.50 a month for every £100 of repayments protected. The policy will pay out for a year (or 24 months for a premium of £5 a month).
If you have expensive credit card borrowing you can avoid falling into serious problems by off-loading the debt into a cheaper loan. If you are not locked into your mortgage, you can borrow more than you owe on the cards from your existing mortgage lender, or shop around for a new lender.
This extra borrowing can be used to pay off credit-card debt and for at least a year of mortgage repayment protection.
