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Credit Crisis Looming For Millions Of Brits

A recent report has warned the number of UK residents refused personal credit will increase as the UK’s consumer debt problem looks set to worsen.

The report released by market analyst Datamonitor, estimates that 9.1 million people were refused credit last year by mainstream lenders. Typical reasons for applications being turned down were unemployment, county court judgments and poor credit history.

Datamonitor estimate that by 2010 the number refused credit will rise by 300,000 to 9.4 million, as a direct result of households struggling to cope with the effects that personal debt has on the household budget.

The UK’s personal debt figure has hit an all time high of £1.2 trillion, consisting of personal loans, credit cards, mortgages and overdrafts.

The reports author, Maya Imberg, said: “ Consumers have accumulated a significant amount of personal debt and they are now increasingly vulnerable to economic upsets.

“ Even small changes can significantly affect ability to meet repayments for those with high levels of indebtedness.”

The years previous to 2005 saw credit refusal in decline due to a strong economy and in part due to lenders relaxing their lending criteria in order for more consumers to qualify for credit, although consumer groups have criticised the relaxing of credit criteria citing this as a major factor for consumers loading themselves up with more debt than they can handle.

However, 2005 saw refusal figures rise again as the country experienced rising unemployment and slower economic growth.

“ The UK economy has now turned a corner and, for the first time since the trough of the last recession, there are various indications that households are having more difficulty coping with their financial situations,” said Ms Imberg.

Last year saw a record number of personal bankruptcies and also saw homeowners fall behind with their mortgage repayments for the first time since 1992. The Council of Mortgage Lenders published figures that show 10,250 went through the trauma of having their homes repossessed, with a further 100,000 in arrears.

Lenders, especially credit card providers have been under increasing pressure from the government and consumer groups to tighten up their lending criteria in order to help reduce the number of consumers struggling to repay their personal debt.

Alisdair Milton
19th July 2006



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