Abacus Daily Debt News

Debt problems may be on the horizon for many consumers in the new year, after research from the Co-operative Banking Group found that only 42 per cent saved enough to fund the festive season.

According to the lender, men tend to put away more than women for Christmas, with averages of £460 and £400 respectively.

No statistics were provided on how these savings were accumulated, although it may be likely that for those who will have to borrow money, credit card debt will follow.

However, it was discovered that those in the north-east, Northern Ireland and London were the most successful at keeping cash to one side for the holidays.

The head of savings at the Co-Operative Bank Zach Hocking emphasised how expensive Christmas can be.

"We would encourage and help everyone get into the habit of saving every month, whatever that amount might be," he added.

The research follows a similar survey published earlier this week by Citizens Advice and Barclaycard.

It said a third of consumers struggled with household bills last January due to blowing the budget over the festive period.

By James Francis
 

The number of people who need debt help may be held down by new measures aimed at stopping a major downturn in the eurozone.

Britons could face bigger debt problems as a result of job losses caused by a new recession if its biggest trading partner goes on struggling, but this prospect may have receded after the European Central Bank (ECB) acted yesterday on rates and bank support.

It cut its three main interest rates by 0.25 per cent and introduced extra support to increase credit availability and liquidity for banks in the zone - a move aimed at preventing a new credit crunch.

However, even if the measures do help the economy in Europe, there are still major problems of slow growth and debt, meaning trade with the UK may be held back and that Britons will go on suffering the effects of a weak economy.

Commenting on the ECB moves, deputy chief investment officer of fundamental fixed income at Blackrock Scott Thiel said: "We view these steps as positive - particularly as they were delivered before the EU summit taking place over the next two days."

By Joe White
 

The cost of debt consolidation may be kept down by lower inflation, with new data indicating the impact of shop prices is likely to help the cost of living ease.

According to the British Retail Consortium (BRC)-Nielsen Shop Price Index for last month, the year to November saw prices on the shelves rise by only two per cent, down from 2.1 per cent in October and the lowest increase for a year.

BRC director-general Stephen Robertson attributed the situation to a price war as Christmas approaches, commenting: "For a second consecutive month the supermarket price war has helped reduce food inflation."

He said lower commodity costs and other factors such as the cancelling of January's fuel duty rise will also bear down on inflation.

Lower inflation may help the Bank of England's Monetary Policy Committee (MPC) to hold the base rate at 0.5 per cent for longer, making the cost of debt consolidation potentially cheaper.

According to the minutes of November's MPC meeting, the committee believes inflation has passed its peak and is set to plunge in the next few months.

By Amy White
 

Parents may end up with the biggest debt problems in the new year because of Christmas if they have older children, a survey has suggested.

The study by LV= of spending on children revealed the average under 18-year-old has £178 spent on them in terms of presents and stocking fillers.

However, this figure rises with age, peaking at £220 for those aged seven to 11 and only a little less at £217 for those aged between 12 and 17.

Although such children may be rather less likely to believe in Father Christmas, stocking filler costs remain the same for them (£24) as they do for other age groups above three, with the very youngest children having the cheapest stockings.

One reason may be the demand from older children for more expensive presents, such as computer games.

Those keen to avoid getting into debt with Christmas spending may find they benefit from searching more for bargains, something a survey published this week by Clydesdale and Yorkshire banks revealed 47 per cent of shoppers now do.

By James Francis
 

Britons may be risking getting into debt this Christmas by splashing the cash, according to new figures on cashpoint withdrawals.

Figures from Link showed that the level of money drawn out in the week to the first Sunday of this month (December 4th) were 11 per cent up on the equivalent period in 2010.

Wednesday November 30th and Thursday December 1st both saw 25 per cent increases on the figure taken out on those days in 2010.

But while the extra £2.6 billion of withdrawals may be good news for retailers, it could also mean more people are eating into their overdrafts and risking debt problems in the new year.

Consumers have been warned by experts to keep their Christmas spending down if they find money is tight.

Chief executive of Credit Action Michelle Highman recently offered such advice, saying: "Try not to live beyond your means over the festive period - otherwise you might face a difficult new year."

By Joe White
 

New data on the state of the UK's service sector has suggested many people working in it may face new debt problems.

The Markit Purchasing Managers Index (PMI) for the sector did show continued weak growth in November, which at a reading of 52.1 was up on October's 51.3.

With a reading over 50 indicating growth, this sector has expanded in every month of 2011 so far.

However, employment levels were at a 15-month low, which could mean some are losing jobs and finding they are unable to pay their credit card debt and other borrowings like they were previously able to.

And more bad news for UK jobs may be on the way as the eurozone composite PMI for November has suggested Britain's biggest export market is heading into recession.

It indicated a reading of 47 and this included shrinkage of the four largest economies, Germany, France, Italy and Spain.

By Amy White
 

Consumers preparing for Christmas should seek to avoid building up credit card debt, the Finance and Leasing Association (FLA) has advised.

The organisation said those who are spending on plastic should try to use introductory zero per cent offers if they can, but also keep their spending down to manageable proportions through means such as shopping around for cheap deals or buying for less online.

And help should be sought quickly if trouble does arise, according to FLA head of consumer finance Fiona Hoyle.

She said: "If you're already in financial difficulty, speak to your lender as soon as possible to discuss a repayment plan - don't take on further credit."

Ms Hoyle also advised consumers to plan ahead, bearing in mind that there will be various bills to pay in the new year, including regular ones.

Chief executive of credit action Michelle Highman recently said people face a "difficult" new year if they overspend and said it is important consumers resist the pressure to spend too much and add to their borrowing in the run-up to Christmas.

By James Francis
 

Individual voluntary arrangements (IVAs) may be playing a part in reducing the personal loan burden faced by indebted consumers.

The latest monthly figures published by Credit Action have revealed £15.68 million is written off by banks and building societies each day.

Some of this may be due to IVA help being sought by those owing £15,000 or more, who are unable to meet their repayments.

IVA help can reduce monthly payments and see interest frozen, meaning creditors are writing some of the debt off.

This may be accepted by creditors as an alternative to bankruptcy, as they will get at least some of their money back, while those owing the money can keep their financial situation confidential.

Figures produced by the government's Insolvency Service for the third quarter of this year have indicated IVAs are being preferred by struggling consumers to personal bankruptcy.

The number of IVAs issued in the three months to October was 13,048, compared with 9,567 bankruptcies.

By Joe White
 

Consumers can easily get into debt unnecessarily at Christmas, an expert has warned.

Managing director at financial advisory firm Invest Southwest Dave Penny said: "Do not borrow money to spend at Christmas, especially if the mainstream lenders won't touch you."

He added that those offering payday loans and other short-term deals represent "the fast track on the road to ruin".

Mr Penny suggested the best approach is to budget carefully and stick to a fixed spending limit, with the cost being kept down through limited present buying and a ceiling on the price of each gift.

He added that in the current gloomy economic climate it is legitimate for people to forego Christmas spending altogether on the basis that it simply cannot be afforded this year.

However, the average consumer will spend £437 on the festive season this year, according to research by Moneysupermarket.com.

It warned this could cause debt problems for many, not least the ten per cent of people its poll found were planning to fund their outlay using credit cards.

By Amy White
 

The increase in credit card lending was no more in October than in September and there was no rise in loans and other advances, according to new Bank of England figures on consumer credit.

In its latest Trends in Lending digest, the Bank revealed the overall seasonally adjusted figure for October was for net lending to be unchanged from September.

This is in contrast with the previous month, which saw a 0.6 per cent rise, while August witnessed a 0.4 per cent increase.

It may indicate consumers are unwilling to add much to their credit card debt and are also keen on debt consolidation through not taking on more loans, or even paying them off early.

One group of people who may be strongly focused on this approach was identified by Aviva in research published this week.

It noted the 'foundation generation' of 25 to 35-year-olds - so called because they are laying foundations for their financial future - contains many who are trying to trim their debt, with 34 per cent seeking to reduce borrowing and 20 per cent aiming to pay off their mortgage as soon as they can.

By James Francis