Debt epidemic hits middle-classes

By SEAN POULTER, CONSUMER AFFAIRS EDITOR
Updated:

 

The number of Britons in traditionally affluent areas who are being swamped by debt has more than doubled in the last six months.

woman worried about her finances

Tough times: The recession has seen a rise in middle-class debt

Some owe more than £100,000 in credit card repayments and loans.

The recession and resulting increase in unemployment has hit white collar workers in the service sector particularly hard, according to Transact, which co-ordinates debt advice centres across the country.

One money advice charity in Congleton, Cheshire, has seen a 130% increase in client demand. Centres in Chertsey, Surrey and Hook, Hampshire, have seen a 100% rise in the number seeking help.

And in St Ives, Cambridgeshire, the average debt of those seeking advice for money troubles has risen from an average of £50,000 to £70,000.

There is a waiting list of more than six weeks in Northampton, where client numbers have jumped 30%.

The reality could be much worse, with Transact saying that middle-class clients are likely to wait up to a year before seeking help as they attempt to 'keep up appearances.'

John Franks, from the Transact member Community Money Advice, said: 'Clients with more than £100,000 of debt are no longer uncommon. We are seeing a higher percentage of middle and higher income clients who are struggling because of redundancy or the inability to manage their mortgage repayments, often alongside multiple credit card debts.

'Inevitably, these higher levels of debt are leading to a increased number of clients having to look at bankruptcy or other insolvency solutions.

'Given that personal debt in the UK stood at £1,459bn at the end of March this year, we can only anticipate that the number of people requiring help with debt in the UK will continue to increase over the year to come.'

The Consumer Credit Counselling Service has also seen a rise in apparently affluent people seeking help.

Chairman Malcolm Hurlston said: 'External forces over which the credit industry has no control, including recession, unemployment, increases in the costs of everyday living and a falling housing market, are compounding the problem of debt. The perfect storm may have arrived but we have yet to reach its epicentre.'

The increase has been blamed on ten years of reckless lending by banks, which are now getting tough with customers who fall behind with repayments.

The banks themselves point the finger at customers who borrowed and spent beyond their means. Official figures show that a record 19,062 people went bankrupt in the first three months of this year, nearly 25% more than during the same period in 2008.

Dealing with debt

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Worried man in debt

Transact member Capitalise, a London debt advice partnership, said the average unsecured debt from loans and credit cards carried by its clients had risen by more than 20% in the last six months to £34,000.

Mr Hurlston added: 'When unemployment triggers a debt problem, the fall in income can leave the borrower struggling to service both mortgage and unsecured debts, while the fall in house prices, and growth in negative equity, takes away the option of selling to clear the mortgage.

'As over-indebtedness becomes a problem for the more affluent, people who come to us are more likely to have mortgages and to lead complex financial lives. 'Homeowners owe on average 83% more than renters. As a result, our task in providing best advice is bound to be more difficult.'

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