There is an interesting documentary on ITV tonight about some of Britain’s worst cases of debt. The programme entitled Repossession, Repossession, Repossession is likely to make grim viewing, but does highlight some of the reason for Britain’s growing levels of debt (a phenomena which is also occuring in the US)
According to a survey by KPMG, 22pc of Britons are struggling to repay their debts and 35pc fear that 2008 will become even more difficult to make ends meet.
Reasons for Britain’s debt Crisis.
- Individual Attitude to Debt and Spending. We live in a society where people increasingly seek instant gratification through material goods. The notion of saving and being cautious is less popular than ever.
- Ease of Credit. Even as one family where getting evicted from their house (they borrowed too much) they were still being offered easy credit. Although people have to take responsibility for their own financial situation. It doesn’t help that financial institutions often target people with bad credit histories and poor financial education.
- Ease of Bankruptcy. The government has made bankruptcy easier and less painful. A person who has built up a lot of debts can simply declare bankruptcy and simply start again. There is a problem with people declaring bankruptcy and then setting up a business in someone else’s name
- Low Interest Rates. This is a short term factor, but the low interest rates of the 90s and 00s have made borrowing more attractive. But, there is no guarantee that these low interest rates will remain in the long term
- Rising House prices. Rising property values have enabled homeowners to remortgage and consolidate debt. They have used their rising house equity to take out more loans and borrow more.
- 100% mortgages. Rising house prices have also made it more difficult for first time buyers to get on the property ladder. Therefore, to get their first house people have taken out riskier mortgages often up to 100% of LTV and upto 7 times income. This increases the chance of mortgage defaults.
Debt Juggernault rolls into UK at Telegraph