No debt exemption for high income earners
Recent figures released suggest that UK debt problems are not solely the reserve of those on lower incomes. It seems that a near boundless supply of easy credit, followed up with the sting of the credit crunch, has forced even the most affluent to seek out debt support. Admittedly, the roots of their financial strife may be different, as in the vast majority of cases these high earners are not in difficulty through losing their job. Instead it seems to be that these high earners are also big spenders.
To quality for debt solutions like the Individual Voluntary Agreement, you have to be earning an income. Traditionally, many of those seeking debt advice were not home owners, on a very low income or had no earnings what so ever. Now though, there has been an increase in the number of people seeking debt advice in relation to mortgage repayments.
A debt consolidation loan has often been a primary recourse for borrowers facing a build up of unserviceable credit card debt. Therefore, potentially allowing them to consolidate their borrowings into a single, more affordable monthly payment. The most common means of facilitating this has traditionally been either through a personal loan or by remortgaging to release equity in their home. However, the current climate of financial caution has manifested itself as outright nervousness amongst the UK’s banks, making such loans harder to get. For the most part, banks are looking for somewhere in the region of 40% equity.
The Bank of England published figures in the last week that point to a more prudent approach to saving as well as borrowing. These findings, for the second quarter of the year, suggest that the proportion of our monthly wage packet which we’re saving has gone up to 5.6%. This is the largest percentage of our income that we’ve saved since 1993. Also, a whopping 90% of us pledge to carry on with our newfound prudence once the economy recovers. These claims should be taken with a pinch of salt though. Research carried out by the Social Issues Research Centre has shown that almost half of those that who can remember a previous recession feel now that their experience has not helped them to be better prepared this time around.