Charity engulfed by people with heavy debts

Charity engulfed by people with heavy debts

The number of consumers with spiralling debts jumped by more than 10% over the last year said the charity Citizens Advice, heightening fears that a rise in interest rates later this week will result in thousands more families facing bankruptcy.

The charity said its network of advice bureaux handled 1.4m debt problems in the year to April 2006, an increase of 11% on the previous year.

Many people were close to defaulting on mortgages and secured loans, which the charity said was one of the fastest growing problems.

The report comes a few days after figures showing personal insolvencies rising at an annual rate of 55%, on course to break through the 100,000 barrier.

Separate figures emphasised the impact on families, many of which were having trouble meeting their monthly mortgage repayments. Department of Constitutional Affairs data showed that lenders started 34,626 repossession actions in the three months to September, the highest figure since the early 1990s.

Liberal democrat Treasury spokesman Vince Cable has called on the government and major lenders to tackle the problem of rising personal debt. He argued that banks and other finance companies were often lending to vulnerable people, many of them already in debt.

Tens of thousands of people opt for an individual voluntary arrangement which can cut their debts by up to two thirds. Others turn to specialist lenders that consolidate loans in one "super loan". Both options.....continued below

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can involve paying large commissions to private debt advisers. Citizens Advice, which offers free advice, said that while catalogue and mail order debts remain the largest source of problems, accounting for 824,000 enquiries, housing debt was one of the fastest rising categories.

Of the 127,000 housing debt problems brought to Citizens Advice nearly 10,000 concerned threatened repossession and 2,000 involved actual repossession.

It said: "These figures bear out the findings of an NOP survey for Citizens Advice published in September showing that some 770,000 people had missed at least one mortgage payment in the previous 12 months."

Council tax debt problems handled by bureaux went up by almost half to 89,000, and debts from unpaid bills on utilities were up by 19% to 90,000.

Citizens Advice chief executive David Harker said: "Our debt enquiry figures are deeply worrying. They suggest that a growing number of people are getting deeper into unmanageable debt it will be difficult to recover from. Many of our clients already face a lifetime of debt and research we published in May found it will take them an average of 77 years to pay off the money they owe at a rate they can afford."

Mr Harker added: "We are particularly concerned by the sharp rise in enquiries from people getting behind with mortgage payments and having trouble paying council tax, gas and electricity bills, at a time when court action that can lead to repossession is on the increase, and fuel prices are rising steeply.

"This is likely to lead to more people than ever experiencing the sort of serious debt problems our advisers are already seeing day in day out."

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