Research by analyst Datamonitor suggests that Britain’s mounting debt problems will continue to worsen until, by 2011, almost 25% of employed people in the country will not be able to get a loan, a mortgage or a credit card as their debts will be so bad.
Over the next four years the number of borrowers on the blacklists of mainstream lenders will rise from 7 million to 8.6 million. More people are being forced to default on their debts as their finances become stretched after five interest rate rises in the last 12 months.
The reasons lenders reject would-be borrowers can range from county court judgments (CCJs), through unemployment or being a recipient of income support to bankruptcy.
The Council of Mortgage Lenders also reports that the number of houses repossessed in the first half of 2007 went up by over 30% to its highest level for eight years.
A spokesman for the Consumer Credit Counselling Service (CCCS) said: “We expect problems in the future because mortgage debt is continuing to rise and the jury is still out whether we are going to have another rate increase before the end of this year.” The situation is likely to get worse over the next 18 months as millions of borrowers have to move from cheap fixed-rate. This could see their repayments rise by around £100 a month or more. “The pain may not have hit yet as people are still on low fixed-rate deals, which will soon end,” said the CCCS.
The number of CCJs also went up significantly, with around 25,000 in the first quarter of the year. This was the highest three-month figure for over ten years. Individual insolvencies also went up by around a third last year in England and Wales.
Add in the fact that the UK’s consumer debt has now reached a record 1.3 trillion, while savings are at a 50-year low, and you have a recipe for future financial disaster.
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