Debts Among the Middle Class

The UK is one of the places in Europe where debts within the middle class have increased since the global recession took effect. Reports from debt advice charities from different UK counties acknowledged that the number of inquiries they received have doubled this year regarding debts from average to wealthier citizens.

Thousands of middle class citizens have suffered the impact of the credit crunch and the numbers keep on rising. A large amount of these debtors have salaries amounting to five-figures. One example is an IT manager who has a salary of £28,500 and has an unsecured debt amounting to £28,500. Another one from Sussex have a debt accumulating up to £110,000 from loans and credit cards and his income of £40,000 annually will not be sufficient enough to cover for it.

The consequences brought by the credit crunch, job losses also brought a big weight why people are finding themselves in deep debt. Another factor, specifically rising mortgage payments and price-fall on houses, are why debts and insolvency have risen among the middle class through the course of the year. A lot of their assets have been spent on their homes and improvement for it because of the expected equity growth which they thought would compensate for everything. Most of the money that was spent on home improvement also came from unsecured and secured debts. Therefore, with the mortgage crisis causing a drop in house prices, a lot of these homeowners have been overstretched leaving them with underpriced equity with outstanding debts.

Higher earners are viewed by banks and lenders as the ones who will be able to pay for what they borrowed. For that reason, they are the ones who are easily granted with loans and credit. On the other hand, if they are unable to become lenient toward their borrowing and spending, they would easily find themselves at a debt hole. Debt does not discriminate the middle class, but since a lot of people in the middle class invested a huge sum of their asset to their homes, a majority of them was placed in a tough position.

The lack of discipline in borrowing easy credit has been the main cause of people’s debts and bankruptcy. Living an unsustainable lifestyle can easily lead to debt. The effects of the credit crunch and housing crisis have before now taken its toll to a lot of people. Anybody who is planning to obtain a hefty loan or mortgage should first assess his present situation and anyone who has just taken a mortgage or a loan within the past 15 months should re-evaluate his financial capability to prevent any potential bankruptcy.

We are now coming to the end of the second year of the credit crunch and the end is still nowhere in sight. This is quite a sobering thought when you add to it the impact that it has had not only on the finance industry but on the whole of the UK’s economy. It is to be hoped that the financial institutions whose lack of foresight is responsible for mess we are in have learned their lessons from this, and will not make the same mistakes moving forward.