Guardian UK: Epidemic of debt spreads to Britain's middle class

[marmar]

Epidemic of debt spreads to Britain's middle class
A decade of cheap credit is now causing problems for once relatively well-off people, writes Jill Insley

Jill Insley The Observer, Sunday May 18 2008


Debt advice agencies are being swamped by demands for help from a new type of customer - the cash-strapped middle income family.

As the cost of credit rises and fixed-rate mortgage deals end, middle-class people who borrowed when money was cheap are turning to agencies that normally help social housing tenants and benefit claimants.

Community Money Advice, a charity that helps establish and support money-advice services across England and Wales in affluent areas where there are no Citizens Advice bureaux, reports an 85 per cent increase in people seeking help in the 12 months up to December 2007, with big increases in Tunbridge Wells (up 234 per cent), Cambridge (55 per cent) and Horsham (48 per cent).

'We are seeing a new type of client.' says Heather Keates, chief executive officer of the charity. 'Teachers, police and banking and service sector workers, many of them homeowners, are struggling with mortgages, secured loans, and credit card debts. They were already financially stretched but have been pushed over the edge by dearer credit and big increases in food and utility costs.'

In Congleton, Cheshire, footballers' wives' territory, the local advice centre has seen a fivefold increase in demand, says Keates: 'The centre has 135 clients, who share a total of £5.1m in debt.' Around the country 'some of the figures are staggering. We have one or two clients with debts of millions of pounds'. Such large debts usually arise from property and stock market investments that have gone wrong, she says.

Clients include a television producer on an annual income of £70,000, with £26,500 credit card and other unsecured debt and £25,500 of loans secured against property (£16,500 of which are as a result of charging orders); an IT support consultant with an income of £28,500 with £28,500 of unsecured debt and a county court judgment; and a retired bank manager with income of £40,000 and £110,000 of debt from 20 credit cards and loans.

Such clients rarely seek to go bankrupt, because they are usually homeowners and would face repossession. But recently the charity has seen a few clients lose their homes, because they left it too late to seek advice.

Easy money, borrowed to pay for extras and luxuries, is a big contributor to the problem, says Richard Blake, from Meridian Money Advice in Greenwich. 'Many of the people we are seeing borrowed money over the past couple of years simply because they could. I had a young semi-professional in last week who owns her home and had borrowed £25,000. When I asked her what she had borrowed the money for, she couldn't tell me. We never saw this kind of thing until recently,' he says. ....(more)

The complete piece is at: http://www.guardian.co.uk/money/2008/may/18/debt.creditcards