Press Release

IT’S TOUGH OUT THERE... AND THE MIDDLE CLASSES ARE SHARING THE PAIN CCCS Debt Dashboard Q1 2005

Borrowers are finding it increasingly difficult to service their debts according to Britain's leading debt charity, Consumer Credit Counselling Service (CCCS), despite rises in average earnings.

The repayment difficulty index for the first quarter of 2005 published in the charity's quarterly debt dashboard shows a year-on-year rise of 10.6 percent. The index stood at its highest level for any first quarter. This rise is despite a 4.5 percent upsurge in average earnings since the first quarter of 2004.

The record repayment difficulty index figure in the first quarter of 2005 may foreshadow a period of hardship in debt repayment as surplus income is diverted, perhaps to pay the extra interest on fixed rate mortgages which have come to the end of their life. CCCS plans to keep a close eye on the trends in repayment difficulty.

According to CCCS debt is beginning to affect a wider spectrum of people, including the better off. The number of clients estimated to be earning £50,000 a year or more and on debt management plans with CCCS has almost doubled since the first quarter of 2004.

The CCCS findings come in the wake of two recent announcements: bankruptcy figures increased by 28 percent year-on-year in the first quarter of 2005 and repossession orders for mortgage arrears increased by 25 percent in the same period.

Chairman of CCCS, Malcolm Hurlston, said:

"The consumer is spending less and repaying less. There are early signs here that the whole consumer-driven economy may be moving into lower gear.

"It is likely that warnings about debt are getting through, encouraging people to come for help quicker. These warnings combine with higher mortgage repayments for many to create a less confident climate, particularly among the better-off whom mortgages affect.

"With any luck, this will reflect the Bank of England’s ambition to achieve a relatively benign slow down of consumer borrowing and spending which will head off inflationary pressures with minimum economic damage. But it will be tougher for many individuals and we expect a further rapid upsurge in demand for our help."

Attached: CCCS debt dashboard Q1 2005 (PDF)