Money worries haunt consumers
The rising cost of living and global financial turmoil have hit consumer confidence hard with 30% fearing they won’t be able to cope financially for much longer.
A poll of 3,500 people by moneysupermarket.com found that just 16% have no financial worries. However, 30% didn’t think they can cope financially much longer. A further 54% said they are worried about their finances but are managing to cope despite the rising cost of living.
Moneysupermarket.com says people have been "spooked" by the Budget, which many left financially worse off. Increases in “sin” levies, including road tax, cigarettes and alcohol, as well as expected council tax hikes this year are hitting many consumers’ pockets.
In addition, creeping mortgage rates, energy bills and food prices mean household budgets are stretched to their limit.
Tim Moss, head of loans and debt at moneysupermarket.com, said: "I am really surprised by the extent of worry out there. Close to a third of Brits have obviously been really spooked by the Budget.
"There is little doubt many Brits will find their annual road tax as high as the value of their car as from next year, creating a massive headache for people who are really struggling. These are some of the unintended but very real victims of the Budget.”
UK consumers owe more than £1.3 trillion on loans, credit cards and overdrafts.
New debt figures from Citizens Advice Bureaux in England and Wales show a 35% increase in people experiencing problems with mortgage arrears in the first two months of 2008 alone.
The charity says it has also seen a rise in the number of people struggling to pay gas and electricity, water, telephone and council tax debts. However, credit card problems were down while overdraft concerns were up.
In January and February a whopping 215,000 people with debt contacted Citizens Advice.
Teresa Perchard, director of policy for Citizens Advice, said: "These latest figures paint a worrying picture, suggesting a significant number of households are struggling to meet their most basic living costs.
“The combination of big increases in household bills, especially fuel, and rising housing costs is putting additional pressure on people’s finances when they are already stretched to the limit."
If you are struggling with debt...
Perchard says people concerned about their levels of debt should seek help sooner rather than later as the problem is only likely to get worse.
She says: “We cannot stress enough the importance of telling your creditors as soon as you have difficulties in paying – they should treat you sympathetically.”
If you are snowed under with debt, then Moss suggests spending some time with recent bank statements and other paperwork to work out the true scale of the problem.
He added: “From there you must prioritise bills and pay the essentials such as mortgage or rent first. Non-essential items such as magazine subscriptions and pay-TV might have to sacrificed.”
You can also get free and confidential advice from Citizens Advice or another debt charity such as the Consumer Credit Counselling Service to help you work out a payment plan for your debts and explain what options there are.
It is also worth checking what benefits you may be entitled to, and this money could help you cope with your debts.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.