Interest rate rise could spell disaster for UK’s over-indebted

One of the UK’s leading debt management specialists, Chiltern Debt Management, is urging the Monetary Policy Committee to hold interest rates at their current level when it meets next week to avoid a worsening of the debt crisis in the UK.

The company, which has been helping people in debt for over ten years, said that January’s interest rate rise saw the number of calls it received from people struggling with their debts double.

And it predicts that a further rise following this week’s MPC meeting would lead to another surge in Brits worried about their financial situation.

Minutes from the last MPC meeting (February 7th and 8th) reveal some members voted for a further rise in the rate to 5.5 per cent to help steer the economy towards its two per cent inflation target.

Jackie Newton, Chiltern’s general manager says: “An interest rate rise in January will always have a big impact, but when looked at in combination with some of the most recent personal debt facts and figures, it does appear that the UK is lurching towards an untenable level of personal debt.

“This situation that can only be exacerbated if the MPC opts to increase interest rates again next week.”

Key personal debt figures (Dec ’06 – Jan ’07)
• Consumer debt in the UK stands at over £1.25 trillion *
• The average Brit owes £27,445 (including unsecured debt) *
• Unsecured debt stands at £8,791 per adult in the UK *
• Personal insolvencies rose by 44.1 per cent in the final quarter of 2006 compared to the same period in 2005 **
• During the same period an 81.9 per cent increase was recorded in the number of people taking out IVAs. **
• More than six million Brits have taken out consolidation loans averaging £13,000 each in the last three years in a bid to get their debt under control***

“The ramifications of over indebtedness are publicised more today than ever before, but despite this personal debt is at a record high,” continues Ms Newton.

“And with so many people over-stretching themselves to fund lifestyles beyond their financial means, further interest rate rises could well have a catastrophic effect on hundreds of thousands of credit-reliant Brits.”

Fees & Information

We cannot guarantee a reduction in interest or charges. If an IVA is not maintained it could lead to bankruptcy. Whilst initial debt advice is free, fees will be charged if a solution is taken out.

Fees related to Debt Management Plans are in two parts;

"Initial Fee" means your first two "Monthly Payments", which is paid by You to "Us". This represents our fee for establishing your arrangement, and therefore is not distributed to your creditors, and can be paid in two separate instalments. Retention of this fee will put you into further arrears.

"Monthly Fee" means the Fee payable for our Services each month. This is an amount equal to 17.5% of your "Monthly Payment" (apart from your first two "Monthly Payments" which is the "Initial Fee"), subject to a minimum payment of £30 for disposable incomes of 0 - £100, and £35 for disposable incomes of £100.01 - £200.

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