Although our appetite for debt may be weakening, millions of Brits struggle to make ends meet. And the worst is yet to come...
As a hardened anti-debt campaigner, I keep a close eye on the debt figures that are released by various governmental and other bodies. I do this because, despite overwhelming evidence to the contrary, I continue to hope against hope that the British public will, at some point, come to its senses and begin to curb its severe addiction to credit.
Today, two important sets of figures caught my eye. Alas, one brought fairly good news, but the other warned of tough times to come!
The somewhat good news came from the Bank of England, which released its latest 'Lending to Individuals' report this morning. The Bank revealed that our mortgage debt grew by £9 billion between March and April of this year, to reach £1,112bn. This is around a tenth lower than the £10 billion increase of April 2006, which gives me hope that the British appetite for paying ever-higher house prices is finally beginning to wane.
Alas, with a debt mountain of over £1,325bn and interest rates on the rise, is it any wonder that more and more of us have difficulty making ends meet? The second dataset I viewed was published by the Registry Trust yesterday -- and it made for grim reading. Amongst other things, this trust produces figures for the number of County Court Judgements or CCJs.
Generally, CCJs are granted when a lender takes a borrower to court because s/he has failed to keep up repayments on a mortgage or other credit agreement, such as a credit card, or personal loan etc.
Once a CCJ has been granted against you, if you fail to satisfy it by paying it off within a reasonable time, then up step the bailiffs. These agents can enter your home to seize your belongings and action them in order to reduce or settle your outstanding debt. In addition, a CCJ will be recorded on your credit reference for six years, making it very difficult to borrow in the future.
Now it's time for the really bad news, so brace yourself. I was shocked to learn that 247,187 County Court Judgements -- almost a quarter of a million -- were issued in the first quarter of this year. To put this into perspective, the equivalent figure for Q1 2004 was 124,842, so the number of CCJs has nearly doubled in the past three years. Furthermore, in order to preserve their sky-high profits, lenders are taking a tough line on borrowers. This indicates that the total number of CCJs for 2007 could easily exceed one million. Aargh!
In addition to rising CCJs, bankruptcies and insolvencies are also on the rise. Earlier this month, in Going For Broke!, I alerted Fool readers to the fact that more than 10,000 people in England and Wales are going bankrupt or becoming insolvent each month.
Also, lenders are increasingly willing to apply for charging orders against defaulting borrowers, which effectively turn unsecured debts into loans secured against properties. Hence, when these homeowners sell their homes, they are forced to settle these charging orders before getting their hands on their equity. I think it's fair to say that lenders will recover their money by any legal means necessary!
To me, these disturbing figures give the lie to the argument that Britain is booming. Quite simply, much of our illusionary affluence is funded by borrowing, thanks to our 'live now, pay later' attitude. More than any other data, the above figures tell me that Britain is suffering from serious financial mismanagement -- and that this is going to get worse before it gets better.
By the way, when it comes to learning the hard lessons about budgeting, spending and borrowing, I (humbly) consider that I'm several years ahead of the rest of the class. Having had £50,000 of debt on top of my mortgage in 1998, I am now much more comfortable. If you'd like to learn my no-nonsense method of creating wealth, then read The Secrets Of Financial Success.
Finally, if you haven't woken up and smelled the coffee, do so now before it's too late. For the record, I'm never going to stop warning the public about the perils of excessive debt -- and I aim to turn you all around at some point!
More: Get help today in the Fool's Get Out of Debt centre and Dealing with Debt discussion board!