Insolvency Expert On New Personal Debt Figures

More people in Yorkshire struggle to make it to payday than those in almost any other region in the UK.  The latest wave of R3’s quarterly tracker of the nation’s finances, the Personal Debt Snapshot, shows that 21 per cent of individuals in the region face this monthly problem, compared with just 9 per cent in the East of England.

The insolvency trade body’s research also revealed that nearly half of individuals (47 per cent) are concerned about their debts, a 7 per cent rise compared with this time last year. 

Of those who are concerned about their debts, credit card debt continues to dominate fears for 53 per cent of individuals; an increase of 5 per cent on last quarter.  Concern about certain types of debt has increased this quarter: Payday or other short term loans (up 2 per cent), hire purchase (up 3 per cent) and store cards (up 1 per cent); while worry about secured lending has reduced such as mortgage repayments (down 4 per cent) and bank loans (down 2 per cent).

Andrew Walker, Yorkshire regional chair of R3 and a partner at Irwin Mitchell comments: “Households that are already struggling may find traditional lenders unwilling to provide further credit and are therefore drawn to short-term credit solutions. Individuals turning to short-term loans and credit cards should be wary of the high interest rates that often accompany these products. Overall debt can quickly snowball out of control.

“Concern about secured lending is also likely to have fallen due to the Bank of England continuing to keep interest rates at an historic low.  Households have begun to feel comfortable that their mortgage repayments will remain as they are for the foreseeable future.”

Over a quarter (27 per cent) of people are saving less then they usually do, equating to 13 million individuals, this compares with 24 per cent in July last year and 32 per cent in April 2011. While one in five (21 per cent) consumers are putting off big financial decisions, compared with 14 per cent a year ago and 28 per cent last quarter.

Andrew Walker continues: “Early 2011 was a tough period as individuals struggled to keep control of their finances and felt uncertain about the future. It is encouraging to see people have started to bolster their savings and pay off their debts, but we must remember that financial distress is still higher than it was a year ago. Delays in taking big financial decisions are up considerably on last year, indicating that the public is still hesitant about what the coming months have in store.”

Allied to this is fear of redundancy: the overall fear of redundancy is twice as high as this time last year. Twice the amount of people in the public sector fear redundancy compared to private sector workers, with one in five public sector workers raising their concerns, compared with 9 per cent of private sector workers.

Mr Walker added: “Employees in the public sector are clearly wary that more job losses are yet to be announced with the full force of the public sector cuts still to be felt, the impact of which is, of course, likely to be more severe in the North. We know that unplanned changes of circumstance, such as job loss, are key triggers of insolvency.

“With around six million people employed in the public sector in the UK, significant redundancies could result in increased insolvency levels. More people have started saving and paying off their debts, so these reserves should serve them well if they do face a period of unemployment. Those struggling with debt should seek financial advice rather than dealing with the distress on their own.”