New Type of Customer Encountering Crisis’s With Secured Loans and Mortgages

Debt advice experts have seen an increase in the numbers of middle class people wanting financial help rise by up to 500 per cent, as middle Britain suffers an overwhelming debt crisis.

Many UK households have seen their budgets being pushed to breaking point by the withdrawal of cheap mortgage deals as a result of the global credit crunch. Families have also had to deal with rising food bills, utility costs and soaring fuel prices.

People lured by bank offers of cheap credit over the last decade are now finding themselves in a position where they are unable to make repayments on their debts.

The problem spread quickly and debt advice centres reported having to turn people away as there were too few experts to handle the demand. One centre based in Cheshire, testified that their 135 clients shared an amazing £5.1 million worth of arrears.

Spokesman for Transact, who co-ordinate the activities of 1,200 debt advice centres across the country, James Elliott said, “In the past it was almost uniquely people on benefits, people in social housing, who went to debt advice agencies. Since the credit crunch started they are seeing a big increase in professional people and homeowners, people who have been pushed over the edge and now can’t cope with the outgoings. These services are being overwhelmed by a whole new breed of debtor; middle class people. But it means there is now much less debt advice to go round.”

Banks have closed a get out route for many people who looked to re-mortgage their homes as a way of clearing their debts, by introducing strict new rules on lending to people who already owe large amounts of money.

Heather Keates, chief executive of Community Money Advice, a charity which helps to establish and back money advice services said, “We are seeing a new type of client. 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 they have now been pushed over the edge by dearer credit and the big increases in food and utility costs. Some of the figures are staggering. We have one or two clients with debts of millions of pounds.”

Community Money Advice has also seen a stark rise in the number of people who are seeing their homes repossessed. Senior adviser at the Mid Sussex Debt Advice Centre, Emma Russell revealed the average debt of their clients was around £20,000, excluding mortgages.

Russell said, “We’ve seen probably almost a 100 per cent increase in clients. This time last year we were really quite quiet. I’ve had at least two clients sit in front of me and tell me they would have killed themselves if they hadn’t found out we were here.”

Experts believe a large proportion of the blame for the crisis must sit with people who have used plastic to live beyond their means buy purchasing new homes, cars, holidays and designer clothes on credit.

However, banks and other lenders must also take responsibility for encouraging people to fall into debt by handing out credit cards and loans without the proper financial checks.