Higher incomes still leave debtors cash strapped

by Gill Montia

Story link: Higher incomes still leave debtors cash strapped

Chiltern, the debt management specialist, has published its latest six-monthly monitor showing that since August 2007, the average yearly income of an individual with an informal debt management plan has risen by nearly £3,000 from £20,540 to £23,432.

During the same period average debt levels have decreased by more than £300 from £26,662 to £26,344 but the percentage people can afford to pay creditors as a proportion of their contractual agreements has remained constant, at 26%.

Since August of last year, the number of men on debt management programmes has increased from 42% to 43%, while the average age of a debtor has risen from 43 to 44 years.

According to Chiltern’s spokeswoman, Joanne Gill, “People who earn more and owe less, are being forced into seeking help to manage their finances because of a number of conspiring factors.”

These include the credit squeeze, which has reduced the availability of credit to borrowers with poor credit histories, and a significant increase in household bills.

Figures from the Council of Mortgage Lenders show that mortgage payments as a percentage of income rose from 16.3% in November 2006 to 18.8% in November 2007.

Almost half-a-million people have missed a mortgage payment during the past six months, increasing the number of potential borrowers who now have poor credit histories.

Chiltern defines debt stress according to the following indicators: 25% or more of income paid to service unsecured debt repayments; four or more credit commitments; using credit to pay for necessities, like food or travel; paying only minimum balances on credit and store cards; a history of debt consolidation and further credit spending.