An additional 81,000 people became unemployed between may and July this year taking the official unemployment rate up to 5.5 per cent which means that 1.72 million people in the UK are now unemployed.

These are all more bad signs of an economic slowdown as more people loose their jobs and job vacancies fall at the same time…

The TUC’s General Secretary Brendan Barber said; “Today’s figures show that unemployment is starting to accelerate and it now looks very likely that total unemployment will reach two million during 2009.”

“It is clear that deflation is a much more pressing threat than inflation, and interest rates should be cut,”

This is the highest level of unemployment in the UK since early 1999 and industry experts are warning that falling employment and vacancies will only lead to further unemployment over the months ahead as the demand for labour weakens…

Mervyn King the Bank of England governor is blaming high food and energy prices for the increases in inflation over the last 12 months.

The office for National Statistics said that rising energy prices were compounded last month as most of the big energy companies increased their prices. Believe it or not they’re even blaming the rising cost of pizzas and fruit for the increase in inflation figures!

Mr King must write to the Chancellor and explain why inflation is above the government’s 2 per cent target and he says that ‘the expected peak in inflation later this year us now likely to be significantly higher than anticipated.’ Also, rather unfortunately for most of us, that inflation is likely to remain above the 2 per cent target well into 2009…

Industry experts are predicting or should I say praying that interest rates will be cut in the last few months of 2008 as we’re seeing the longest period of decline in manufacturing output for over seven years.

If predictions are correct the UK economy will be officially in recession by the end of 2008.

The British Retail Consortium also reported high street conditions were at their worst as sales fell 5 months out of the last 6.

Citizens Advice Bureau issue the credit crunch survival guide

Household finances have been badly stretched in the past year as the cost of energy has increased by 17% and the cost of food by 12%*. And the credit crunch means that the cost of new mortgages has increased, there are fewer mortgages available to choose from, and they are more difficult to obtain. This is making life harder for the 1.4 million borrowers coming off cheaper, fixed-rate mortgages in 2008.

But there are ways to help yourself and organisations to help you cope if you are struggling, according to the Council of Mortgage Lenders, Citizens Advice and Shelter.

No matter the size of your financial problems there are steps you can take to tackle them, and the CML, Citizens Advice and Shelter have worked together to come up with ten tips to help struggling households get through the tough times.

1. Get talking

If you are worried about your finances your first move should be to start talking: talk to your lender, talk to your partner, and talk to a free, independent debt adviser. The earlier you tell your lender, the more options available to solve the problem. Options that your lender may consider include: extending the term of the mortgage, changing the type of mortgage, deferring interest payments for a short period, and treating the arrears as part of the original debt.

2. Get debt advice

There are many organisations which offer free and independent money advice such as Citizens Advice, Shelter, National Debtline, and the Consumer Credit Counselling Service. Their debt advisers can assess your situation and devise the best course of action for you.

3. Plan ahead

If you are coming to the end of a fixed-rate mortgage in the near future start planning ahead for higher repayments and researching the best deals in the market now.

4. Don’t bury your head in the sand

Ignoring your debt problems will only make them worse. Positive action will help you find ways to solve them.

5. Pay your priority debts first

A mortgage is a priority debt as if you don’t pay this you could lose your home. Debt advisers can help you plan your budget and pay your priority debts first.

6. Pay what you can each month

If you can’t afford your full mortgage repayments, you should talk to your lender and still pay what you can afford.

7. Open all your post

Don’t ignore letters or telephone calls from your lender; if you are not sure what they mean ask your lender or a debt adviser. Open all mail that is addressed ‘to the occupiers’; if you are a tenant this is how the mortgage lender will contact you if the landlord has a payment problem.

8. Facing possession proceedings? Don’t panic

Always attend the court hearings yourself. Court proceedings do not mean that you will automatically lose your home. The court process acts as a final check to make sure repossession is the last resort. Some courts have advice desks which can provide last minute assistance.

9. Don’t abandon your property

If you are struggling with mortgage repayments you may be tempted to send the keys to your lender or abandon your property. Don’t do this without advice. You could still be responsible for the debt on the property and may be pursued for it years later.

10. Take care with “mortgage rescue”

Selling your home and renting it back might seem like a quick fix to your debt problems. But, many of these schemes offer very little security. They are also not regulated so you will not have access to the same protections as a mortgage holder.

CML Director General, Michael Coogan, said: “The first step for anyone struggling to pay their mortgage is to contact their lender and get advice. There are a range of options your lender can consider to help reduce or reschedule your payments for a period of time while you get back on your feet. 

“Lenders will treat you fairly and use repossession only as a last resort. If you take positive action to contact your lender, pay what you can, and show up to court and make your case, you are more likely to reach an agreement your lender that allows you to stay in your home. But you cannot just walk away and assume you are no longer responsible for the mortgage.”

Citizens Advice Chief Executive, David Harker said: “We would urge anyone who is falling behind with payments on a mortgage or secured loan to speak to their lender and seek free, confidential, independent advice straight away.

“Getting advice, even at a late stage, can help the majority of people come to a workable agreement with their mortgage lender and can make all the difference between saving or losing their home.”

Adam Sampson, Chief Executive of Shelter said: “Getting advice quickly is crucial in helping struggling homeowners keep a roof over their head. At Shelter we often see people when it’s too late, but the loss of their home could have been prevented if they had sought our help early on.

When a credit card customer tries to get out of paying their credit card debt it’s called a ‘charge-off’ - which is repayments and interest that the credit card company think they will not be able to recover. The number of Charge-offs rose from 6.6 per cent at the end of March 2008, to 6.9 per cent by the end of June 2008.

The credit card industry had seen a sharp rise in IVA applications back in 2005 as debt management companies began springing up all over the UK. These companies began advertising heavily promising to write off huge percentages of debts for their customers. As such credit card companies in the UK have had 3 years head start on mortgage and loan companies now feeling the strain of the credit crunch.

Since 2005 credit card interest rates have risen and the lenders have tightened their lending criteria making it more diffcult for non credit worthy customers to open an account.

Even though there is now great public awareness of the credit crunch and managing finances it looks like UK consumers are continuing to spend on their credit cards. June 2008 saw a growth rate on credit card spending of 7.1 per cent, the highest growth rate in 2 years.

If you owe money to a company it’s known as a debt, and taking the help of a third party to get out of a situation of financial debt is debt management.

In the current economic climate many profitable and non profitable organisations have sprung up to help people in financial credit crisis. Spending less than what you earn does of course reduce the chances of you falling into financial difficulty but in extreme cases a debt management plans will help you keep your personal finances under control.

Debt or credit counsellors, trained in money management, budgeting and credit monitoring will help you minimise the heavy debt and damaged credit ratings with their structured repayment plans.

Generally the debt councilor at a debt mangement company will take you, as the debtor, through a step by step assessment of your current financial situation.  A list of your income and expenditure such as rent, loans, mortgage amounts, medical bills, car payments, cost of living and so on is calculated and the total outstanding amount is known as your disposable income.

Next an assessment is completed to acertain what you can comfortably afford to repay towards your debts each month. The debt management company will then undertake a negotiation process with the creditors for payment of debts over a longer period of time and sometimes with reduced interest rates. Most creditors do not hesitate to agree with a debt management plan because, from past experience, they know that the plans are generally successful with regards to repayment of the debt owed.

Sometimes creditors will even lower interest rates and waive certain fees and or charges in debt management negotiations. Debt management plans are generally reviewed at intervals and sometimes with face to face meetings to see that customers are still able to continue repaying their debt until it’s cleared.

A single monthly payment is made to the debt management company who then distribute the required amounts evenly among the creditors, for this service they charge a very nominal rate as service charge, usually 10 to 15 per cent. 

Former Atomic Kitten star Kerry Katona is facing a tax bill of £417,000, and unless she can make the payment she will be facing bankruptcy.

Kerry Katona was told to pay £157,000 of the £417,000 by today but her lawyers have managed to get a ’short ajournment’ reported to be around 2 weeks on this first payment because Miss Katona is waiting for payment of just over £200,000 for work she has already completed.

The next hearing at the Bankruptcy court in London is on 21st August.

Following on from my post Government’s £9 million extra to help Citizens Advice Bureaux

Haddington is home to the Citizens Advice Bureaux’s new offices, and during July it started more than 200 new cases, of which 70 per cent involve consumer debt problems. This is the highest volume of new cases in nearly 20 years and unfortunately for me signifies the need for money advivce throughout the UK.

At the Haddington office all face to face debt counselling meetings are fully booked until the second week in September. In the last quarter of the year the Haddington office has handled more than 1000 calls and helped 25 people file for bankruptcy in the midst of rising bills and mortgage payments.

If you’re struggling with debt problems then you can get free debt advice from your local Citizens Advice Bureaux. Look through your Yellow Pages under debt or debt management services to find the details of your local offices. Whatever you do make sure you speak to someone and do not bury your head in the sand, this will not help you to pay off your debts.

Last week Alastair Darling was critised over the fact the government made out that £9 million in additional funding was given to the CAB over the next 3 years, when infact the budget was being cut by £3 million a year!

>>Click here to read the story in The Sun - £9 million con on advice bureaux