Credit Boom Busts
For years, Britons have enjoyed access to easy credit and less restrictive lending practices. However, studies made by uSwitch and backed by the Financial Services Authority (FSA) indicate that consumers are facing drastic changes.
The report by uSwitch showed that 26% of consumers questioned would rather plan a holiday or take up a new hobby, while only 13% would take steps to put their finances in order. In the past, this lack of attention to the average household’s rising was unavoidable as consumers were confident in their ability to pay interest on credit, however that is rapidly changing.
As lenders tighten their lending practices, uSwitch reported that 25% of consumers ranging from 16 to 44 year-olds dread seeing their bills after the New Year. Over half of the consumers surveyed could not remember how much they had spent during the holiday season; a reflection that is not indicative of many consumers taking the credit bust as seriously as the number of financially injured individuals reveal.
With 38% of all credit card applications now being rejected and 9.5 million people reaching their limit on at least one form of credit in the past 6 months, consumers are quickly being left with little money or financial leverage in their pockets. Making matters worse, research shows that interest repayments in Britain are increasing - having gone up by a total of £12.7 billion to a record high of £93 billion. The increase leaves 25% of adults unable to manage their debts.
Higher mortgages repayments, credit card interest and expenses have raised the annual interest of a typical household, including mortgages, up by £517 in the past 12 months to £3,744.
Mike Naylor of uSwitch said consumers have been able to access easy and cheap credit for a long time, but those with big debts urgently need to take steps to protect themselves. Mr. Naylor concluded that the recent interest rate reduction came too late for those with the most severe debt.