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Consumers' Finances Are 'On The Edge'

Jan 16, 2008
An increasing number of people in one Midlands county are struggling with their finances, new figures show.

Overall, findings from Citizens Advice indicate that it is helping people in Leicestershire get to grips with debts totalling some 50 million pounds. The statistics reveal that the amount of debt within Leicester, which could include money owed on mortgages, loans and overdrafts, has doubled over the past 12 months to stand at 20 million pounds. Meanwhile, the number of people in the red has tripled to 3,100. Outside of the city, the county's Citizens Advice branches are now managing debts of 30 million pounds, the Leicester Mercury reports.

The increase in financial difficulties was mainly attributed to homeowners coming towards the end of their fixed-rate mortgage deals, which, Citizens Advice suggested, could be adding up to 300 pounds on consumers' monthly bills. In addition, it was stated that three years ago borrowers could get a four-year fixed-rate deal charging interest of 4.2 per cent. However, now rates for new deals are revealed to be closer to the six per cent mark, a figure which could place more pressure on their spending.

And in seeing an increase in mortgage payments, it is possible that a significant number of people may also encounter problems in meeting other demands on their finances. This could see them struggle to pay back personal loans and credit cards, as well as affording groceries and transport costs.

A spokesperson for the county branch of Citizens Advice told the publication: "There are some scary figures coming out. Everyone's finances are so fragile, they're teetering on the edge. It's almost as if you lost your job and were off work for two weeks, you would be in serious trouble. It's happening to everybody, but it tends to be the middle-classes, because they have the jobs, the credit cards, the loans and the cars."

Alan Duncan, shadow business secretary and MP for Rutland and Melton, said: "People need to realise [the] full cost of their borrowings at the start - and that goes for mortgages, store cards and especially credit cards." He also warned against those mortgage products "which give you a cheap start and then thump you later".

Michael Morton, case work manager for Leicester Money Advice, also pointed out that property prices have increased dramatically over the past ten years. "But with the rise in interest rates, people can suddenly find they are paying a lot more than they can cope with," he added. And although the Bank of England's monetary policy committee lowered the base rate of interest to 5.5 per cent last month, it was suggested that one in five banks are yet to pass on this reduction to consumers.

For people struggling with the prospect of higher mortgage repayments, taking out a loan for the purposes of debt consolidation might be of use to homeowners. Doing so could allow consumers to negate increased constraints on their spending as the loan allows them to pay off various demands at once, leaving them with one low-cost payment to make each month. Such a loan might be especially helpful for people in Swansea, after the South Wales Evening Post reported that the number of debt cases dealt with by financial advisory services and solicitors in the city increased by 34 per cent in the 12 months leading up to June 2007 to stand at 533.
About the Author
Tom Dawson is the Editor in Chief for Essentially Home Loans where visitors can apply for cheap loans online. We also specialise in loans for debt consolidation
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