UK 'sleep-walking' into personal debt crisis, warns charity

By Iain Withers

 

FILE PHOTO: A Union Jack themed Visa credit card is seen amongst British currency in this photo illustration taken in Manchester, Britain March 13, 2017

 

LONDON (Reuters) - Britain is ‘sleep-walking’ into a personal debt crisis with the number of people in severe problem debt topping a million due to the coronavirus pandemic, charity StepChange has warned.

 

A further 3 million people are at risk of joining the 1.2 million people already in severe financial difficulty, according to StepChange research published on Thursday, with 5.6 million people already in arrears or borrowing to make ends meet.

 

The charity defines severe problem debt as meeting at least three of its indicators including falling behind on essential bills or using credit to make debt repayments.

 

“This report paints a picture of a nation sleep-walking into a debt crisis,” Phil Andrew, CEO of debt charity StepChange, said, warning that protective measures by the government and banks had not kept up with the situation.

 

“The result is a spiraling number of people being plunged into debt due to Covid-19. And the worst is yet to come.”

 

Earlier this month the government extended measures rolled out in the crisis to support jobs and incomes, including its furlough job protection scheme, while regulators told banks to extend loan repayment holidays of up to six months.

 

StepChange urged the government to further extend support including help paying local taxes and to fund interest-free loans, warning the ongoing lockdown to curb a second wave of the virus would exacerbate the problem.

 

While official data has shown that many people have borrowed less and saved more during lockdowns, StepChange warned that millions who had lost work or taken pay cuts are struggling with mounting debts.

 

Nearly 15 million people have been negatively financially impacted by the pandemic, StepChange estimated, around 30% of the adult population.

 

The charity, whose research including a poll of 3,297 adults in September, said almost one in five of those affected was experiencing hardship such as a single meal a day for two or more days or going without heating or electricity for five or more days.

 

A spokesperson for the finance ministry said the government had put unprecedented support in place but was aware some people may need extra help, adding it had given nearly £40m of extra funding to debt advice providers this year and had increased the welfare safety net.

 

-- © Copyright Reuters 2020-11-12

 

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10 hours ago, snoop1130 said:

And the worst is yet to come.”

He sure got that right, IMO.

IMO we haven't yet seen the worst of the lockdown effects.

I wonder how people will feel looking back after it is over.

The lockdown has highlighted the UK’s problem with personal debt, it has not created it.

 

In the two years 2018-2019, UK debt was circa 90% of GDP.

 

https://www.ceicdata.com/en/indicator/united-kingdom/household-debt--of-nominal-gdp

 

 

1 hour ago, thaibeachlovers said:

He sure got that right, IMO.

IMO we haven't yet seen the worst of the lockdown effects.

I wonder how people will feel looking back after it is over.

I don't think this is anything new. I was watching the old series of 'Can't pay we'll take it away', the statistics on the number of people in serious debt was alarming.

3 hours ago, car720 said:

Australia is an island.  New Zealand as well.

They just shut the door and the virus is controlled basically.

England is an island.  Why can't they do the same?

Indeed, that is the question. Why isn't the military guarding the border and turning everyone away?

4 hours ago, soalbundy said:

I don't think this is anything new. I was watching the old series of 'Can't pay we'll take it away', the statistics on the number of people in serious debt was alarming.

I blame the banks. They gave me a credit card without me asking for one, then they increased the debt limit without me asking. Took me years to pay it off so I could cut it up.

3 minutes ago, thaibeachlovers said:

I blame the banks. They gave me a credit card without me asking for one, then they increased the debt limit without me asking. Took me years to pay it off so I could cut it up.

I agree that does encourage debt but it doesn't force you to get yourself into debt. Self discipline is missing especially amongst younger people. Once in debt it is hard to get out of it especially credit card debt where high interest rates are the norm. It is nice to have a high credit limit as a cushion against the sticks and stones of life but it should be seen as such, something for emergencies not for a skiing holiday in Switzerland.

I have always had a large overdraft limit with my German bank but never used it until about 4 years ago for an emergency, I'm still trying to pay it off.

It has been like this for years and is getting worse. 25 years ago you could only get a mortgage 3x your salary. Now it is 5x and can be up to 7x.

 

I have friends who are considered to be in very good jobs, earning between and 80-100k and they have credit cards with debts of 12k on each. They don't even blink, as their answer is they have so much equity in their house.

 

Personally I couldn't sleep with that debt and have always never borrowed, except for a mortgage, one time only.

 

Many people in the UK just don't seem to see it as debt, although i do. It is only going to get worse.

 

Thankfully nobody has used the 'B' word yet as an excuse, although some ships anchor will for sure.

2 hours ago, Laughing Gravy said:

It has been like this for years and is getting worse. 25 years ago you could only get a mortgage 3x your salary. Now it is 5x and can be up to 7x.

 

I have friends who are considered to be in very good jobs, earning between and 80-100k and they have credit cards with debts of 12k on each. They don't even blink, as their answer is they have so much equity in their house.

 

Personally I couldn't sleep with that debt and have always never borrowed, except for a mortgage, one time only.

 

Many people in the UK just don't seem to see it as debt, although i do. It is only going to get worse.

 

Thankfully nobody has used the 'B' word yet as an excuse, although some ships anchor will for sure.

It’s certainly getting worse and is only headed in one direction.

9 hours ago, car720 said:

Australia is an island.  New Zealand as well.

They just shut the door and the virus is controlled basically.

England is an island.  Why can't they do the same?

 

Ask Boris!

 

Although, to be fair, the majority of those entering have been British citizens, and it is illegal to deny them entry.

 

They could have been automatically quarantined or at least checked, though.

 

My wife and I returned to the UK last April during the previous lockdown. We went through many temperature checks at BKK, last one at the gate before being allowed to board. We had to wear a mask during the flight except when eating. Staff at BKK all wearing masks, crew on flight in full PPE.

 

When we got to LHR; no checks and staff and most passengers not wearing any protection, not even masks! We were given a leaflet on the lockdown and what to do if we developed symptoms; but were not asked where we had been or where we would be staying/living in the UK!

 

This is important, because an infected person is infectious before they start to show symptoms.

5 hours ago, Laughing Gravy said:

Thankfully nobody has used the 'B' word yet as an excuse, although some ships anchor will for sure.

 

Well, one merchant couldn't resist; could you!

£409pm  universal credit is impossible to live on that's for sure merry Christmas Boris ????

14 hours ago, car720 said:

Australia is an island.  New Zealand as well.

They just shut the door and the virus is controlled basically.

England is an island.  Why can't they do the same?

 

England is not an island; it shares an island with other countries. 

[quote]

Why isn't the military guarding the border and turning everyone away?

[/quote]

 

Unfortunately, it's too late for that.  The virus is everywhere in the UK and its continual spread and presence is helped by the nut-jobs and tinhat deniers.  I'm glad that I live in Laos (zero deaths, no lockdown for months).

just like everywhere else so they wont be spending on  thai holidays any time soon all in debt and potless

4 hours ago, simon43 said:

[quote]

Why isn't the military guarding the border and turning everyone away?

[/quote]

 

Unfortunately, it's too late for that.  The virus is everywhere in the UK and its continual spread and presence is helped by the nut-jobs and tinhat deniers.  I'm glad that I live in Laos (zero deaths, no lockdown for months).

its not everywhere .,many counties dont have any cases ,manchester and Lpool is bad because of partying youths who think theyre invincible ,and BAME areas have double the  rate of infections

If interest rates are low and people are maxed out on their credit cards, they either have no job, or credit rating to get a bank loan, or they just love high interest rates and do not want to stay out of a debt that is nearly impossible to get out of.  Because the credit  card companies with their higher than 15 percent is not the debt to have at any time.

 

  The bank industry will not have low interest loans forever.

Geezer

1 hour ago, Stargrazer9889 said:

If interest rates are low and people are maxed out on their credit cards, they either have no job, or credit rating to get a bank loan, or they just love high interest rates and do not want to stay out of a debt that is nearly impossible to get out of.  Because the credit  card companies with their higher than 15 percent is not the debt to have at any time.

 

  The bank industry will not have low interest loans forever.

Geezer

Much of U.K. debt is held by people with poor credit rating, miss payments on a credit card and your rating drops to the point where a low interest bank loan is not available.

 

The debt trap.

On 11/13/2020 at 12:50 PM, Laughing Gravy said:

It has been like this for years and is getting worse. 25 years ago you could only get a mortgage 3x your salary. Now it is 5x and can be up to 7x.

 

I have friends who are considered to be in very good jobs, earning between and 80-100k and they have credit cards with debts of 12k on each. They don't even blink, as their answer is they have so much equity in their house.

 

Personally I couldn't sleep with that debt and have always never borrowed, except for a mortgage, one time only.

 

Many people in the UK just don't seem to see it as debt, although i do. It is only going to get worse.

 

Thankfully nobody has used the 'B' word yet as an excuse, although some ships anchor will for sure.

UK seems to be then more flexible then Netherlands, 5x is not normal 7x would be crazy.

 

If they have much equity in their house why not use it, in general prices of houses have been rising. But I would not have done it on a credit card too much interest. 

4 minutes ago, robblok said:

UK seems to be then more flexible then Netherlands, 5x is not normal 7x would be crazy.

 

If they have much equity in their house why not use it, in general prices of houses have been rising. But I would not have done it on a credit card too much interest. 

It is crazy. Certainly something I would not do. Also i100% mortgages are another stupid idea IMHO, keeping people tied to the banks for eternity.

 

The only thing with equity is that is good if the house prices are high. Like in the 1990's when it crashed people where in negative equity. It can easily happen again and the laws of economics suggests it will sooner rather than later.

4 minutes ago, Laughing Gravy said:

It is crazy. Certainly something I would not do. Also i100% mortgages are another stupid idea IMHO, keeping people tied to the banks for eternity.

 

The only thing with equity is that is good if the house prices are high. Like in the 1990's when it crashed people where in negative equity. It can easily happen again and the laws of economics suggests it will sooner rather than later.

They forbid 100% mortgages in my country. Some own money has to be put in. Still in my country buying is often still cheaper then renting.

 

Over the lifetime of a person house prices rise. But yes there is a correction once in a while but the trend is upwards.

 

But I dont think you can compare the UK (much land and space) with Netherlands cramped lil country with little space left to build houses. That is why houses and rent are expensive.

On 11/13/2020 at 12:33 AM, Chomper Higgot said:

The lockdown has highlighted the UK’s problem with personal debt, it has not created it.

 

In the two years 2018-2019, UK debt was circa 90% of GDP.

 

https://www.ceicdata.com/en/indicator/united-kingdom/household-debt--of-nominal-gdp

 

 

 

 

The 90% figure is misleading.

 

If I own a house worth £500,000 and I have paid off 80% of my mortgage, I have an asset worth £400,000. But the £100,000 that I owe is counted towards the "household debt" statistics ????

 

Unsecured loans and credit cards are only a small percentage of the "90% of GDP" figure.

On 11/14/2020 at 8:32 AM, car720 said:

Of course, my slip, I stand corrected though I think most got the gist.

New version ; the UK is an island....................