Debt problems spread to affluent

More affluent consumers are struggling with debt problems, a charity has warned.

The Consumer Credit Counselling Service (CCCS) has found that although people with debt problems are better off and owe less money they are finding it harder to repay their debts.

Malcolm Hurlston, CCCS chairman explains: "External forces over which the credit industry has no control including recession, unemployment, increases in the costs of everyday living and a falling housing market are compounding the problem of debt."

With the average credit card debt standing at £3,256, and unemployment levels above two million and expect to rise further, the increase in debtors appears inevitable.

CCCS has noticed fewer people are in a position to repay their debts: in 2008 only 35 per cent for clients were able to commit to a Debt Management Plan (DMP) compared with 42 per cent in 2007 and 46 percent in 2006.

Mr Hurlston said: "When unemployment triggers a debt problem, the fall in income can leave the borrower struggling to service both mortgage and unsecured debts, while the fall in house prices, and growth in negative equity, takes away the option of selling to clear the mortgage."

Debt problems are also becoming more complex and harder to resolve.

Mr Hurlston said: "As over-indebtedness becomes a problem for the more affluent, people who come to us are more likely to have mortgages and to lead complex financial lives – homeowners owe on average 83 percent more than renters – as a result, our task in providing best advice is bound to be more difficult and time consuming."

Even clients able to undertake a repayment plan are finding it more difficult to maintain payments.

"Increasingly we find people need more than one counselling session before a solution can be proposed. This is particularly marked for homeowners and the self-employed," Mr Hurlston said.

"These trends seem likely to continue for the foreseeable future: the perfect storm may have arrived but we have yet to reach its epicenter."