Credit Crunch Hits Weekend Fun
Not only have takeaways become the victim of the credit crunch, but it seems as though more cash-strapped Brits are spending their Saturday nights at home as their disposable income is on the decrease.
According to a new survey by Halifax Home Insurance, 60% of those polled now spend Saturdays nights at home with friends and family rather then go out to restaurants or for an evening at the local pubs and clubs.
84% have admitted that the change in weekend spending habits is due to an active effort to try to manage debt levels as they struggle against the credit crunch and soaring household bills. Many are willing to share debt free tips as 73% said they plan to share money-saving ideas with friends and family.
Paul Birkhead, of Halifax Home Insurance, said: “They say Brits are at their best when times are challenging, and our research clearly shows we’re being resourceful in watching the pennies while looking to have a good time - and it’s bringing people together.”
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Credit Crunch Hits Takeaways
It seems as though nothing is safe from the credit crunch, and takeaway treats have become it’s newest victim. Sainsbury’s have discovered that 1 in 6 people have stopped ordering takeaways altogether, and 37% have cut down on how many the buy.
In replacement is the ‘fakeway’, as the supermarket reports a rise in the number of people who are purchasing key curry ingredients, such as poppadoms, coconut milk and Peshwari naans.
Alison Austin, head of sustainability at Sainsbury’s said: “Fakeaways are here to stay. “They’re created for a fraction of the cost of traditional takeaways.”
In order to combat debt, people are shunning expensive work lunch breaks and are taking their own butties instead, as the sale of plastic lunch boxes has increased by a quarter.
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Repossession Risks Increase by 24%
The number of homes threatened with repossession in England and Wales has jumped by 24%. According to the Ministry of Justice, this figure now stands at 28,568 in the second quarter of 2008. This figure has rose by 4% from the first quarter of the year, suggesting that there is an increase in the number of homeowners who need help to manage debt.
Mortgage possession claims, which is the first stage of the repossession process, has grown 17% from the same period last year. These figures show a worrying trend which can be seen as a result of the credit crunch, as fixed term mortgages have come to an end and have been replaced with more expensive mortgage deals.
Although not everyone of these petitions will end in repossession, the Council of Mortgage Lenders (CML) report that 18,900 homes has been repossessed during the first 6 months of the year, the highest figure in 12 years. They also predict a 50% rise in repossessions this year, which could mean that 45,000 borrowers would lose their homes.
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Credit Crunch Debt “Knocked on the front Door”
The credit crunch onset seemed to happen almost overnight, which has left many Brits with no time to change their spending habits and get help to manage debt. Moneyfacts Darren Cook, head of Public Relations, said that the credit crunch has “knocked on the front door and actually affected the consumer”.
If the credit crunch happened at a much slower rate, they believe that many people would have financially reacted to the change in circumstances, meaning that many would be able to deal with their debt and not have to worry as much about financial issues being a top concern.
Cook added that “If that change had happened gradually in 12 to 24 months then people would have been able to adapt their household expenses. It’s gone from one extreme to another and it’s caught people out.”
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One Advice Guide to Inflation
Inflation has become a hot news topic of late, with the UK annual rate of inflation being at its highest since records began in 1997. In July 2008, inflation rate rose to 4.4%, which is more than twice the Government’s target.
Inflation figures generally represent the overall effect of prices, some will go up and some will go down. Not everyone understands what inflation is or what it does to your finances, savings and cost of living. This is who the One Advice Guide to Inflation is designed for. It will give you a quick overview of the essential things that you need to know about inflation.
What is Inflation?
Inflation is the general increase of prices across the economy which is otherwise known as the “cost of living”. The definition of inflation is: “a general increase in prices and fall in the purchasing value of money”, effectively meaning that your money won’t buy you as much today as it did yesterday.
In the UK, the rate of inflation is most commonly identified by the Retail Prices Index which is published every month by the National Statistics Office. It is the measure of change in prices for typical household goods and services, in comparison to the year before.
Causes of Inflation
The causes of inflation are not crystal clear, and many economists are not in agreement about what causes inflation. Generally, the causes of inflation are seen as:
- Too much demand for too few goods/services, which means that higher prices can be commanded.
- Pay rises can lead to companies increasing the prices of their products.
Types of Inflation
There are different ways that inflation can be calculated, so there are a number of interest rate types which you should be aware of:
- Retail Price Index (RPI) – This known as the headline rate and includes the cost of mortgage inflation rates. It is likely to be the one that you have mostly heard of as it is commonly quoted in the media.
- Retail Prices Index minus mortgage interest payments (RPIX) – This interest rate is preferred by the Treasury. It excludes mortgage interest rates which are set by the Bank of England, so it is believed to be a purer measure of actual prices trends.
- Retail Prices Index minus mortgage interest payments and taxation (RPIY) – This is preferred by the Bank of England and best shows the core inflation rate.
Consequences of Inflation
Inflation affects different people in different ways…
Imagine that you have seen an mp3 player which costs £100, you could either borrow the money or you could save up over a year. If the inflation rate is at 3%, this is how it would work:
Borrower: You have decided that you want this must have item right away and agree to borrow at 15% interest rate over a year. You will have paid £115 for the item when it is only worth £100. With a rate of inflation at 3%, the mp3 player will not be worth this much for another 5 years.
Saver: You have decided to save £100 in a bank which can offer you a 10% interest rate, so you will have £110 in the bank. Due to the 3% inflation rate, the mp3 player will now cost you £103 but you have accumulated additonal interest on what has been saved.
So if you are struggling with money already, and the cost of items are going up but your wages are staying the same, you might need help to manage debt. This is where One Advice come in, we can offer you access to a number of the leading debt solutions which aim to reduce your outgoings to your unsecured debt.
For free advice about a range of debt solutions, call One Advice free on {Phone Number} or take the 1 minute debt test.
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Negative Equity may cause Divorce Rate Decline
Credit crunch financial woes, debt problems and equity worries means that the number of divorces in the UK could potentially fall, according to Consilium Financial Planning Ltd.
Managing director, Kevin Morgan said that the problem would be that “equity” in a marriage is property which becomes a problem if there is negative equity in the home and this would lead to a drop in divorce rates because “If it can’t be sold, it’s substantially more difficult to release funds.”
According to the Office for National Statistics, the divorce rate is now at its lowest since 1984, and this figure could drop even lower as more couples try to work through their differences as remortgaging their home becomes almost an impossibility.
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Debt Defaults are on the Increase
Record numbers of UK consumers are defaulting of their debt, which can be viewed as a direct consequence of the credit crunch. The number of ‘charge offs’ (debts overdue by more than 180 days) has risen 3% since March, according to research by credit agency Standard & Poor (S&P).
Borrowers are being pushed beyond their means as livings costs are becoming more unaffordable, leading many to seek additional help to manage debt. Before the credit crunch became such a financial worry, the number of charge offs had been declining over the past three years due to more people opting to manage their debt through an Individual Voluntary Arrangement (IVA).
Help with Default Debt
If you have been missing payments then you might have been issued a default notice by your creditors. This is a letter to tell you that you are not up to date with your debt repayments and you are in default of your credit agreement. This could lead onto a CCJ (County Court Judgement) and if the defaulted debt is a mortgage or a secured loan then your home could be at risk of repossession.
But it is never too late to regain control of your financial situation. If you are struggling with your debt and you are worrying that you might default on your debt, please see if One Advice can help. We have specialist debt advisors who will help you find the debt solution which is right for your circumstances.
Take the One Advice 1 Minute Debt Test to see if you can become debt free in as little as 60 months with an IVA.
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Financial Issues are Biggest Concern for Brits
When asked “What would you say are the 3 biggest issues facing you and your family today?”, what would your answer be?
According to a study by advertising agency Euro RSCG London, one in two of us would answer financial insecurity as our biggest concern, this figure has jumped up by 38% in the last 6 months as more people may be seeking additional debt advice.
As people worry more about the credit crunch and the state of their personal finances, it means that they are worrying less about pre-credit crunch issues, such as global warming and the environment, as just 18% see this as one of their top three concerns.
Russ Lidstone, chief strategy officer at Euro RSCG London, commented that: “Our research highlights that financial insecurity and making ends meet have become the main priority for Britons from all walks of life. The phrase ‘Switch the lights off son – do you think I’m made of money?!’ can be heard ringing out in households across the country once again.”
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Debt from Credit Card Penalties
Credit Card companies are raking in hundreds of millions of pounds in credit card penalty fees and interest charges because lenders are failing to stop transactions would would exceed a cardholder’s credit limit.
A report by ThisIsMoney.co.uk declares that this is against a two-year crackdown on unfair practice by the Office of Fair Trading. Campaigners say that a ‘credit limit’ should be as it implies, and that a credit card should be declined at point of sale rather than a consumer having to pay fees on excess borrowing.
Those who are taking advantages of 0% interest rate deals suffer the worse as, when the credit limit is passed, the consumer will lose the special interest rate and can face additional charges. Steve Willey, head of credit cards at comparison website moneysupermarket.com said: “It is wrong to set a borrowing cap and then allow transactions to take cardholders over this limit and charge them penalties.”
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Credit Crunch Spending Habits
The credit crunch may be splashed over the headlines but it seems as though not everyone has adjusted their spending habits in a bid to remain free from debt, according to research by the Norwich and Peterborough Building Society (N&P).
The N&P note that many people are avoiding debt by cutting down on holidays, meals out and retail spending, but few people have completely cut out these luxuries altogether:
Holidays Abroad: 13% are avoiding holiday debt by not going on holiday at all but 44% of people have no interest in changing their vacation plans.
Eating Out: 36% of people are enjoying meals out at the same rate as last year, whilst only 14% admit that they have put a stop to eating meals in restaurants.
Retail Therapy: Shopping for clothes and luxuries seems to be the area where most people are cutting down their spending in order to avoid having to seek advice on debt problems. Women seem to be cutting down the most as 51% are spending less in the shops, compared with just 40% of men. Around 10% of both men and women have cut out clothes spending altogether.
However, as prices rise there are areas where spending more money becomes inevitable. 75% of families said that they have been spending more on gas, electricity, vehicle fuel and supermarket shopping. This figure declines to, a still high, 59% for those without dependent children.
N&P group product manager Gary Lacey said: “It is interesting that a large proportion of those who took part in our survey don’t appear to be taking drastic measures with their finances just yet. However our figures do reveal that families are being affected more than most by rising costs.”