Debt advice charities are reporting a dramatic rise in the number of middle income households seeking help with their finances.
The rise has been driven by a combination of imprudent borrowing during the days of ‘easy credit’ and the skyrocketing cost of living in Britain today.
Community Money Advice (CMA), which supports money advice services across the UK and Ireland, says it has seen an 85% increase in people needing assistance in the twelve months up to December 2007, with big increases in affluent areas such as Tunbridge Wells (up 234%), Cambridge (55%) and Horsham (48%).
One of its centres in Haywards Heath has been so overwhelmed by demand that it has closed its doors to new cases.
Credit crunch casualties
“We are seeing a new type of client,” says CMA director Heather Keats. “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 have been pushed over the edge by dearer credit and big increases in food and utility costs.”
Another agency, Meridian Money Advice, says the problem has been further exacerbated by the years of easy credit that preceded the crunch.
“Many of the people we are seeing borrowed money over the past couple of years simply because they could,” says coordinator Richard Blake.
“I had a young semi-professional in last week who owns her home and had borrowed £25,000. When I asked her what she had borrowed the money for she couldn’t tell me. We never saw this kind of thing until recently.”
Heavy burden on charities
With charities already burdened by the high number of low income families requiring help during these difficult financial times, there are fears that this new demand will prove a bridge too far.
“We are dealing with many more mortgage problems and repossession hearings which are more complicated and take far longer to deal with than other credit issues,” explains Chris Tapp at debt charity Credit Action.
“The whole face of the debt problem is getting uglier”
More funding, wiser spending
To help deal with their burgeoning workload, charities are calling for increased funding of debt advice, as well as investment in helping people attain the money management skills they need to stay out of debt in the first place.
With debt now a real threat for many Brits, EveryInvestor will be running a series of articles in the coming days designed to help households ease the strain on their budgets and stretch their money further.
