The debt crisis … and how to safeguard your assets
DAILY MIRROR - 19TH SEPTEMBER 2007
How would you cope if you lost your job? There are growing fears that the US housing crisis could plunge America into recession, dragging us down, too.
Northern Rock is in turmoil, several smaller lenders have already gone bust and smaller lenders have already gone bust and the markets are wondering who’s next.
If you haven’t done so already, it’s time to take steps to ensure you are protected as much as possible – because a recession could not hit us at a worse time …
Shocking research shows that more than eight million Britons are in serious debt.
Years of runaway spending have left us owing a record £1.3trillion on mortgages, personal loans and credit cards.
The house price boom means that most people who bought in the past few years are overstretched and around 250,000 owners who got cheap, fixed-rate deals two years ago are now facing increases in their monthly payments averaging £200. a record 1.7million people sought help with debt problems form the Citizens’ Advice Bureau last year – 20,000 more than in 2005 and twice the number 10 years ago.
There has also been a huge increase in the number of people struggling to meet daily living expenses. Citizens Advice chief executive David Harker says “many people are struggling to afford essentials.”
The Consumer Credit Counselling Service reports that the over-40s and over-60s have some of the biggest debt problems – owing, on average, £32,000 and £31,000 respectively.
That’s partly because grown-up children are remaining dependent longer. More are going to university and relying on funds from their parents.
Parents – and even grandparents – are also taking on new debt to help their offspring buy their first home.
The CCCS says the nest big threat looming is the impact of the Bank of England’s interest rate rises.
It warns: “Unsecured loans are levelling off but mortgages and secured lending is on the increase.
“We see a big increase in repossessions on the horizon. The series of interest rate rise have still got to bite, so we know this is coming.”
Even if you are sensible with money, you can still be plunged into a debt crisis if you fall ill or lose your job.
So what can you do to minimise your exposure? Firstly, you should try to identify the debt danger signs.
These include a reluctance to open bills, having no savings and living on an overdraft and regularly using your credit cards to get bash.
Other things to watch out for are not knowing how much you owe, only paying the minimum on credit cards and having to borrow money to pay off other debts.
Ideally, you should not be borrowing more than you can comfortably afford and accumulate at least three months’ income as savings. Such steps may prove impossible if you have a young family or have only recently bought your home.
Some people slip into debt because they lose their job through ill health or redundancy. One possible safety net is to take out payment protection insurance, that will meet your mortgage and other major debt payments.
These policies typically charge £5.50 for each £100 of monthly payment covered but at British Insurance prices start at £1.85 for £100. For details call 0800 121 8358 or visit www.britishinsurance.com
