Debt Worries Hit High in England, Wales in 2006

LONDON - Calls to a citizens advice charity in England and Wales about problems with personal debt rose by 20 percent in 2006 to a record high of 1.7 million, Citizens Advice said on Tuesday.

The national charity said debt was now the number one concern among callers, accounting for one in three of all phone calls to its offices.

Of those calls, 40 percent were for credit card woes and problems with unsecured loans. The number of calls about bankruptcy jumped by 50 percent while problems with mortgages with secured loans rose 11 percent.

"These figures are worrying evidence that while many have enjoyed the benefits of the credit boom, a large and growing number of people continue to pay the price, becoming overwhelmed by serious debt that can have a devastating impact on their lives," Citizens Advice Chief Executive David Harker said.

"Even more worrying are the signs that people are struggling not only to repay credit, but also to afford day-to-day essentials," he said in a statement.

The Bank of England has hiked borrowing costs five times to 5.75 percent since last August and is expected to push interest rates up to 6 percent by the end of the year to bring above-target inflation back under control.

The number of Britons losing their homes because of bad debt hit an eight-year high in the first half of 2007.

Official figures showed personal insolvencies were at near record levels with the equivalent of nearly 12 people an hour succumbing to bad debt in the three months to the end of June.

Citizens Advice offices blamed the rise in debt casualties on an unprecedented consumer credit boom and sharp increases in the cost of living, which have raised the cost of mortgages, local authority taxes and utilities bills.

Its figures showed everyday costs were beginning to hurt, with gas and electricity debt problems rising 33 percent. Local authority debt enquiries went up 25 percent and telephone debt problems climbed 19 percent.

Overall, the number of debt problems reported had doubled in the past 10 years, the charity said.

Harker criticised companies which actively market expensive credit and loans to people already struggling to keep up payments and called on lenders to carry out more checks on borrowers.

"We also want to see creditors being more willing to negotiate with people in debt, and to work with us in helping people manage their debt problems effectively."