Debt Soars as Britons Struggle to keep up ‘Middle Class’ Appearances
Upward of 15 million Britons are struggling to maintain what they consider to be ‘middle class’ lifestyles by using loans and credit cards to bolster flagging finances.
Research from Moneysupermarket.com reveals that up to a quarter of the UK population are clinging to an unrealistic façade of a middle class ideal, whilst building debts amounting to almost £13,000 for each person.
The research further highlights the fact that 6 million of the UK population who deem themselves middle class earn only £15,000 or less a year. But it has been estimated that the annual income for a working class household is in the region of £23,000, and for middle class households the annual income averages out at around £33,000.
Clearly many of the population are deceiving themselves, but because of these strong middle class aspirations millions have been tempted into taking up secured credit and loans in order to keep up the perceived image of middle class appearances. And a further 2.7 million have turned to unsecured loans and credit cards, bringing a cumulative total of secured and unsecured debt to around £35 billion for the UK.
Richard Mason, managing director of Insurance and Home Services at the price comparison website suggested that with the credit crunch seriously affecting the housing market, it was worrying that so many people were spending and borrowing beyond their means in order to keep up with the perceived lifestyle of others.
An indication of the concern felt at the new high level of nationwide debt has recently been experienced by the UK’s biggest credit scoring firm, Experian. The organisation report that at the moment twice as many consumers are applying for their own personal Experian credit report in comparison to six months ago, and there is now evidently a strong trend amongst consumers towards learning the importance of keeping a clean credit history.
James Jones, a spokesman for Experian indicated that up to 20% of consumers now check their personal credit report prior to applying for secured loans or credit, many using the internet for immediate access to the information, and increasing numbers have also learned to request alerts to any changes in their credit status.
The rise in demand for these reports has also offered a measure of relief to Experian, with the credit report company suffering a 20% drop in revenue from its usual business of supplying mortgage checks to US and UK lenders, who are currently tightening their loan availability criteria and drastically reducing the amount available for borrowers.
As the fear of further financial risk deepens, a recent Mirror Money article strongly advises on the need for adequate insurance cover to protect against jobs and homes should the country go into real recession.
Suggesting that the insurance premiums could be raised by cancelling existing unnecessary and expensive policies that do not provide adequate cover, the article advises that life cover of 10 times or more of the main providers’ total income would prevent the further tragedy of the loss of a house or even insolvency.
Of course, the insolvency industry itself has received much greater demand for its services in these financially troubled times, experiencing a great deal of change in recent months with the new Individual Voluntary Arrangement (IVA) protocol initiated in February of this year, and further changes expected with the introduction of Debt Relief orders. There are also further proposals to change bankruptcy and Debt Management Plans (DMPs) in the near future.
Nick O’Reilly, the newly appointed President of R3, the Association of Business Recovery Professionals, the leading trade body for Insolvency Practitioners, notes the current level of demand for insolvency services, and claims to understand the plight of the financially troubled who make use of those services, commenting: “At some stage we all face trauma, and in the case of people with financial difficulties it is important to treat them with empathy and respect. Though we have a difficult job to do, those words ‘empathy and respect’ are ones I want our members to be associated with.”