Households ‘still struggling despite falling debt’

Britons may need to step up their debt consolidation efforts to reduce monthly payments as consumers are continuing to struggle.

A study by the Consumer Credit Counselling Service (CCCS) for its Statistical Yearbook has found that households are now spending less and have reduced their borrowing, but are still having many financial problems.
 
Based on the experienced of the 370,000 people who contacted it with debt problems, the average unsecured debt in 2011 was £20,023, compared with £22,476 in 2010, while monthly living costs had been trimmed from £1,410 to £1,369.

But despite this, the typical struggling debtor had very little extra money available last year to use to pay back what they owed, up from £43 to £44 a month.

CCCS chairman Lord Stevenson commented: "It is good news that our clients are reporting reduced unsecured debts, but stagnating incomes mean that debtors had no more money available to repay what they owe."

And unemployment was a major factor in increasing debt, this being suffered by 27 per cent of clients, including 42 per cent of those aged under 25 – the demographic presently suffering the highest joblessness levels.

Renters have also seen increasing problems, with a 30 per cent rise in the number in arrears over the past three years. This group accounted for 55 per cent of the 370,000 CCCS clients, four per cent more than in 2010.

And rental arrears were worst for those in private accommodation (£924 on average), compared with £705 for those in housing association accommodation and £622 for local authority tenants.

Private renting has been one way people who are struggling with their finances can improve them, director at rental site SpareRoom Matt Hutchinson recently noted.

He said many more homeowners are renting out rooms privately because they have had to come to terms with the fact that "the way we borrow money" has changed permanently after the credit crunch and recession.

Posted by Paul Thacker