thedebtblog.co.uk

In the UK over half a million of us spend an average of 25 hours per week worrying. Property and our possessions are the things we worry about the most.

The fact is the credit crunch has had a worrying effect on us all, so much so that there has been an increase in people taking out optional mortgage repayment cover. This is also sometimes referred to as paymentcare by mortgage providers.

It makes sense that areas of London and the South East UK seem to be the biggest worriers because these are areas where house prices are the highest and therefore people will probably be struggling the most in these areas. With the average house price in an area of South East London where I used to live is now £277,519! Over just the last 12 months there has been an increase of 11.6 per cent. If you break this cost down by property type it becomes even more staggering; Detached: £570,634, Semi-detached: £347,396, Terraced: £268,966, Flat: £192,583. If you take a central London area like Ealing, the average price here is even higher at £347,622.

The credit crunch, talk of recession and inflation has only increased the worries and paymentcare or mortgage protection cover may be a good idea to put your mind at rest. The basic idea is that your mortgage will be paid for a specific period of time if you loose your main source of income through no fault of your own.

If you think you might be in need of help with your mortgage repayments or general debt help then do not bury your head in the sand. There are lots of professional debt management companies able to help you and if you’re unsure what to do then visit the Citizens Advice Bureaux or seek professional financial advice.

Almost every edition of lunchtime and evening news headlines on the TV has finance related news these days, the financial markets are plumeting and every month, sometimes every week another bank asks for additional funding.

The first casualties of the credit crunch both in the USA and UK is the mortgaged homeowner.

Here in the UK it started with interest rates being cut to try and encourage consumer spending and bolster the economy. Then house prices stalled and are falling, although they’re still up on 12 months ago.

Next mortgage products were pulled off the high streets by lenders worried about their lack of funding and losses in the adverse mortgage market. Something like 60 per cent of all mortgages available in the UK have been pulled, fixed rate products and 100 per cent mortgages made up the majority of the 60 per cent. This is because most consumers were looking for some certainty and grabbing fixed rates as quickly as possible. The 100 per cent mortgages were pulled because they are too risky an investment for the banks going forward.

Today you’re unlikely to get a mortgage unless you have a deposit saved up and if your deposit is less than 5 per cent you might be restricted in your choice of lenders.

The thing that really irritates me is that around 8 years ago, when I bought my first property, it was standard practice to have a 5 per cent deposit. OK, I admit 100 per cent mortgages were available and infact the housing company from whom I bought my house offered me a 100 per cent mortgage.

However, I knew that a 100 per cent mortgage wasn’t the most sensible way to start off on the property ladder and so after following the advice of my parents I saved up a 5 per cent deposit.

It’s only within the last decade that banks have jumped on the marketing bandwagon and made finance and credit into some sort of superbrand marketplace. People are almost encouraged to use 0 per cent credit cards and low rate loans to basically get what they couldn’t normally afford.

The rise of the internet over the last decade has also contributed to this and it’s made getting finance even easier for everyone; even people who shouldn’t be getting more finance and perhaps shouldn’t have been approved for finance in the first place.

So mortgage rates are increasing and lenders are also increasing the upfront fees on mortgages. Even though the cost of getting a mortgage is increasing but people shouldn’t panic.

The fees can be high, sometimes upto a staggering £5,000, but I think that now the banks are insisting on a 5 per cent deposit it’s only a good thing. Consumers should be thankfull that this is happening again. If only the banks had continued to insist on a minimum deposit, with every mortgage, over the last 10 years, then maybe some of this could have been avoided?

In my opinion, if you cannot afford a 5 per cent deposit then you shouldn’t really be thinking about taking out a mortgage. Similarly, if you don’t have at least 50 per cent of your monthly take home salary left over after your mortgage payment has been made then perhaps you should consider not going for a mortgage at all.

Today in the UK there are more people than ever looking for advice on repaying their mortgages. Are these the people who borrowed way beyond their financial means?

January and February this year have seen record breaking numbers of people asking for professional debt advice about their mortgages. Recent figures reveal that more and more people are concearned enough to get help with their mortgage arrears - so these are people who already have defaults and arrears, let alone the hundreds and possibly thousands of people who are about to default on their mortgage.

There has been a huge 35 per cent jump in mortgage related debt enquiries in the UK, over January and February 2008 compared to 2007. The good news is that people seem to be learning not to continue spending on credit cards as the credit card related issues fell by 9 per cent.

Of 5.7 million issues dealt with in 2007 almost a third of these enquiries were related to debt; a rather worrying trend. As well as mortgages, the ever increasing energy bills and general household bills are huge contributing factors to the 215,000 new debt related enquires taken this January and February.

The combination of huge increases bills like petrol and diesel prices plus rising housing costs has put additional pressure on day to day finances when they are already stretched to the maximum.

The usual Christmas credit card debt enquiries have fallen by 9 per cent in January and Febraury this year compared to last year, however overdraft enquiries are up 7 per cent on the same time period. So it looks like people are just shifting the debts to other forms of credit, it will be interesting to see the number of debt consolidation loans and general unsecured loans taken out and the number applied for in January, February and when we get to the end of March this year. I bet there are lots of people trying to shift debt to unsecured loans, although the credit crunch has lenders tightening their lending criteria, making it more difficult to get accepted for a new loan.

If you are struggling you should tell whoever you owe the debt to as soon as possible if you’re struggling to make repayments.