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Rise in families struggling with debt says CCCS

Situation likely to get worse following job losses

Woman using a computer to repay debts

If you’re struggling with debt, get unbiased advice from the CCCS, Citizens Advice or National Debtline

New research by the Consumer Credit Counselling Service (CCCS) has revealed that job losses and lower wage income will leave many households struggling to pay their debts in the months ahead.

The independent debt-advice organisation analysed the cases of 470,000 households with debt problems, published today in its 2010 Statistical Yearbook.

Families with children most vulnerable to budget and wage cuts

According to the CCCS, families are particularly vulnerable to cuts in income: last year households with dependent children needed an additional £650 a month to cover everyday living costs compared to those without. 

Families with more than three children are, on average, £45 short of the money they need to live each month. At the same time, CCCS fears that changes in higher rate tax thresholds and the lowering of eligibility for tax credits are likely to spread the pain to middle-earning families, many of whom will also be hit by increases in interest rates.

Homeowners have higher levels of debt than renters. On average, a client who owns their own home has over £30,000 in unsecured debts on top of their mortgage. A 2% rise in interest rates would lead to a £307 increase in monthly mortgage payments for CCCS clients across the country.

Unmanageable debt is a greater problem in some parts of the country

Commenting on the Yearbook’s findings, CCCS chairman Lord Stevenson said: ‘The picture is undoubtedly bleak and it seems likely that many more families, including better-off ones, will be increasingly prone to over-indebtedness in the months ahead.

‘It is also not a uniform picture across the country: public sector cuts in terms of jobs, spending and benefits will weigh disproportionately on certain groups of people. And as our new Debt View programme shows, the incidence of unmanageable debt bears down harder on specific parts of the country, such as London and Yorkshire.’

Which? credit and debt expert Martyn Saville added: ‘This new report from the CCCS highlights once again the absolutely vital role played by the free-to-consumer debt advice sector, whether it’s the CCCS, Citizens Advice, National Debtline or Payplan. 

‘Average debt levels may have fallen in 2010 compared with the year before, but this could be the calm before the storm. Budget cuts and public sector job losses are likely to really hit later this year, leaving thousands of households vulnerable. I’d urge anyone who’s struggling with debt to seek independent advice sooner rather than later.’

Key findings from the CCCS 2010 Yearbook

  • Last year CCCS dealt with 418,000 enquiries and managed £289 million of repayments to lenders
  • Average debt levels amongst CCCS clients fell by 7% in 2010 to an average of £22,476
  • On average, clients have 5.7 debts. About a third are unable to repay their debts
  • Almost half of CCCS clients gave unemployment or reduced income as the reason for their debt problems
  • Clients receiving Jobseeker’s Allowance (JSA) are in the worst financial position, with average monthly outgoings outstripping average household income by £203
  • Rising costs of living will affect the elderly significantly. Over-60s earn on average £250 a month less than those aged 40-59 and £200 a month less than 25-39 year olds

Which? borrowing and debt advice

If you’re struggling with debt, read the Which? guide How to deal with debt, including 10 reasons you should never use a commercial debt management company. 

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