Debt & credit – Bank of England figures

The Bank of England has published its latest Trends in Lending report – its ‘assessment of the latest trends in lending to the UK economy’.

It’s split into three sections: ‘Lending to UK businesses’, ‘Mortgage lending’ and ‘Consumer credit’. Most people are likely to be more interested in the second and third sections…

Mortgage lending

Gross lending for house purchase (the total amount lent out, regardless of how much people repaid) in April was much the same as in March, although approvals were slightly down. The number of mortgage products advertised, however, has grown over recent months.

The latest Lending to Individuals figures from the Bank of England show that UK residents were collectively carrying £1.239tn of secured debt at the end of March.

Consumer credit

When it comes to unsecured debt, lenders reported that there was no significant change in either availability of or demand for credit in April.

At the end of March, according to the Bank’s latest Lending to Individuals figures, UK residents were collectively carrying £221.7bn of unsecured debt.

Looking back over the last 12 months, what has changed in consumer credit is the net lending – the amount of money lent out minus the amount repaid. All the way from July to November last year, people collectively repaid more unsecured debt than they took on (which means the net lending figures were negative).

But that hasn’t happened since November. From December to March, people borrowed £400m more than they repaid every month, on average. Even so, this is nowhere near the levels we saw before the credit crunch – in 2006, for example, people took on more than £1bn of extra debt (on average) every month.

Dealing with debt

So – according to the Bank, people are currently carrying around £1.24tn of secured debt, and over £200bn of unsecured debt.

The Council of Mortgage Lenders (CML) has commented on the relatively low numbers of repossessions – interest rates are low, lenders are working with borrowers to keep them in their homes, and unemployment hasn’t risen as sharply as expected. In fact, they’re hoping that their prediction of 53,000 repossessions this year will turn out to be pessimistic.

When it comes to unsecured debt, a lot of people are falling behind on their payments. Insolvencies are at an all-time high, but many people will find they can tackle their debt problems without entering an IVA (Individual Voluntary Arrangement) or bankruptcy – possibly by entering a debt management plan.

Debt management

Some may be able to negotiate with their unsecured lenders and agree on a new repayment plan that lets them clear their debt at a rate they can realistically afford. They may choose to do this themselves, or they may enter a debt management plan, asking a debt management company to negotiate with their lenders on their behalf.

There are drawbacks to either approach – repaying a debt more slowly can end up costing them more in total and can damage their credit rating, whether or not they actually join a professional debt management plan. Nonetheless, debt management can be the best way of clearing their debts without being declared insolvent.

Debt Management Lessons in Schools

Debt ManagementThe UK is in the grip of a severe personal debt crisis. It’s not really too surprising when you consider that this nation has more credit cards than people. But with an ever growing personal debt mountain, the Government has decided to tackle the problem at grass roots. They’re going in to schools.

Not literally of course, but the British Government recently unveiled plans to begin compulsory debt management and personal finance lessons for children in schools from as young as five. The lessons will be incorporated into the UK’s National Curriculum. This means that children from five will be getting to grips with personal finances and budgeting – albeit in a fun and child friendly manner. But will teaching children about debt really make a difference to a problem that thus far seems to have no end?

The hope is that it will make a massive difference. A major part of the problem at the moment is the consumer driven style society we live in. We can buy anything right now, without having the money and just worry about it six months down the line. Of course, what the flashy text on such hire purchase advertising fails to mention is that interest can accrue, charges for missed payments will apply and all in all we can end up paying way over the odds for an item that we’d have gotten much cheaper had we just paid cash.

The credit society is a relatively new thing. When you grandparents tell you that they never bought on credit ‘in their day,’ they’re not joking. It’s only in the last two decades that credit has exploded into popularity. Credit providers have also come under scrutiny for the ease with which they give people credit, almost encouraging debt. Because children currently have no lessons on debt management at school, they leave without any experience of dealing with credit or debt. Perhaps if they are educated on these topics, they may turn out to be a generation of savvy spenders and the debt mountain may gradually disappear. Time will tell.

Benefits Of Using A Professional Debt Management Company

debt14Although you got in too much debt all by yourself, it’s not always as easy to get out of it on your own. The good news is that you don’t have to try to do it alone, you can get the help you need from a debt management company.

When you go through a debt management company to resolve your financial problems you’ll be getting advice from an expert in the financial field. All of the suggestions and actions will be based on research, proven methods and experience.

You will also learn new techniques and tips for managing credit card debt. By letting a professional handle all of the arrangements, you’ll be saving both time and money. And, you’ll even have access to financial tools that can help you calculate how much you can save, how much you can spend and other details.

A professional will know all the ins and outs of regaining financial stability. And, they’ll also know quite a few trade secrets. The simple truth is that if you’re not experienced in this area, you will probably just make things even worse than they already are if you try to take it into your own hands.