"The Bank of England data indicated that consumers paid back £635 million more than they borrowed during July – the first time this has happened since 1993, when the statistics began being collected in their current form.
The fall in the total level of consumer debt, dipping to £1.46 trillion, means thousands of prudent households have started to trim their credit card bills, pay back their mortgages and reduce their unsecured loans.
Debt experts welcomed the development saying it was about time consumers stepped "off the debt spiral" and got their finances in order.
However, economists warned that it was bad for the Treasury and businesses if consumers stopped spending and borrowing.
Louise Brittain, debt partner at accountants Baker Tilly, said: "Thank goodness. This is really good news that the British public is finally doing the sensible thing and not endlessly borrowing and is now stepping off the debt spiral. People have done nothing but spend now and pay later for the last decade or so, and they have realised this just can't go on for ever."
The biggest fall came from mortgages, with home owners paying back £418 million more during July than they borrowed.
Part of the move into negative territory – again the first time this has ever happened – has been driven by banks and building societies cracking down on their lending and only offering mortgages to people with good credit histories"
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( 3 / 265 )With news that many are struggling to pay their rent or mortgage, the Government have launched new information online to help those who need it most. It is hoped that by doing this many will be able to avoid being avicted from their homes.
"A series of animated videos, interview clips and articles has been put on to the Directgov website by the Ministry of Justice.
The material aims to answer questions asked by people in arrears and covers everything from what to do if you think you may have a problem keeping up with rent and mortgage payments to communicating with landlords and lenders and preparing for a court hearing.
It also gives details on where people can turn for help if they have financial problems.
The Government has launched a raft of measures to try to help people who are struggling with mortgage repayments stay in their homes, while mortgage lenders are also showing greater levels of forbearance.
Figures released by the Council of Mortgage Lenders earlier this month showed that the number of homes that were repossessed during the second quarter had fallen by 10pc compared with the previous three months to 11,400.
Bridget Prentice, the justice minister, said: "The Government has taken considerable steps to ensure people struggling to pay their rent or mortgage get the help they need to stay in their homes.
"Remortgage repossession figures released earlier this month show that the number of people facing repossession has considerably reduced since this time last year, but we're not complacent.
"The information being made available today is easy to understand and accessible via the Directgov website and aims to help people find a way out of their financial difficulties and avoid repossession."
The information can be found at www.direct.gov.uk/mortgagearrears and www.direct.gov.uk/rentarrears.
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( 3 / 269 )If you have an American Express card but have not used it for some time then you may be interested to hear that you could still be charged!.
"American Express is to slap a £20 annual "dormancy" fee on customers who don't use their Platinum cashback credit cards for a year.
The fee will be introduced immediately for new customers and from 1 October for existing cardholders to cover the administrative costs of running accounts left idle.
Amex is also reducing the top tier of cashback available to new borrowers from 1.5% to 1.25%, and increasing the amount of spending they need to do to earn cashback from £2,400 to £3,000 a year.
From 1 October existing customers will see Amex increase the level at which it pays out cashback from £12 to £25, meaning they will need to spend £4,250 to qualify for a payment compared with the current level of £2,500.
An Amex spokeswoman said the fee would be charged "once existing cardholders who haven't used [the account] for more than a year pass their card 'anniversary'".
Tom Allder, Amex's vice president UK lending, said he was confident the card was still the best on the market for high spenders, but changes had been needed to reduce costs.
"Rather than making changes across the board we have looked very closely at card member usage to ensure that we continue to offer the best proposition we can for our existing card members," he said.
"What this means is we have been able to safeguard the 1.5% top rate for existing customers while still offering a competitive on-going rate of 1.25% to new customers at a lower banding of £7,500."
Rivals Santander and Lloyds TSB levy a fee for low (or no) card use: the Santander Zero credit card and separate Santander credit card carry a £10 dormancy fee if they are unused for six months. Lloyds TSB charges a £35 annual fee regardless of credit card type. In 2007, it also wrote to low-usage cardholders to inform them of a £35 annual charge for inactive cards.
The letter was sent to all credit card customers who hadn't used their plastic for more than 12 months. Although many subsequently cancelled their cards, a spokeswoman said, customers who still have their cards and don't use them have since paid £70 in inactivity fees.
Borrowers should expect more dormancy fees to be introduced as credit card providers see their profits squeezed by the downturn, according to David Black of financial researcher Defaqto"
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( 3 / 276 )For those in debt it can be tempting to turn to a loan shark to try and rectify the situation but this is an option that you should avoid at all costs.
"Adam Fox went to a loan shark when he wanted £100 to buy a car stereo that was on special offer. He agreed to pay back the entire sum several days later, and was charged £20 interest.
Mr Fox, 26, of Stoke-on-Trent, had successfully borrowed money from a loan shark in the past, but on this occasion failed to pay the full amount owed on the due date — so the lender doubled the interest charge.
As the debt mounted, Mr Fox found it increasingly difficult to repay the growing amounts, and missed more payments — ending up being charged £100 interest every day. “Every time I didn’t pay, it cost me more and more,” he said. “There was no way that I could pay this, and the entire loan had reached £1,000. The loan shark said that he would break my legs if I didn’t pay up. This is the kind of thing that happens to people around here.”
Mr Fox, right, turned to A4e, a debt advice agency based in Stoke. Julie Cliffe, a debt adviser at the agency, said: “Mr Fox was on benefits at the time, and we found that there was additional income to which he was entitled.”
He also turned to family and friends to raise the money to repay the loan. “I’d never go to a loan shark again, never, ” he said.
Ms Cliffe said: “The worrying thing here is that the loan shark was not prosecuted and is most probably still trading.”
Where there are illegal loans, there are usually other debts too. “Mr Fox had faced eviction from his council-run accommodation on three occasions, but we have managed to help him,” Ms Cliffe said.
She said it was common to find borrowers who had been threatened with guns and physical violence.
Pressure among vulnerable groups to turn to loan sharks has been exacerbated by the growing difficulty of obtaining mainstream credit from high street banks. Many people have accumulated debts from before the recession, and now find they have few options.
Chris Peel, director of A4e, said: “We’re seeing more people these days. Clients come to us with priority debts such as rent arrears and council tax, but once we scratch the surface we find people have turned to illegal credit to pay off legal borrowings.
“As people’s loans become more complicated, they become less aware of what is legal and what is not, compounding the difficult situation they are in,” he said"
If you are in debt and would like help then why not consider an IVA. This is a legal and government approved method of resolving debt that avoids the consequences of bankruptcy. If you owe over £15,000 to three or more creditors and can't afford to meet the repayments then you may be eligible for an IVA.
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( 3 / 246 )Latest reports suggest that with an increase in home loans we could be seeing the end of the recession as far as the housing market is concerned.
"The number of loans approved for house purchases rose to a 17-month high in July, prompting fresh claims that the property market is emerging from recession.
A total of 38,181 mortgages were awarded by banks in July, up from 35,564 in June and the highest since February last year, British Bankers' Association (BBA) data showed. The typical loan size increased by 1% on the month to £139,700, with the total value of mortgages taken out for home purchase reaching £5.2bn in July, up 79.1% compared with the same month last year.
The BBA's figures add to recent data suggesting the property market and house prices may have bottomed out and begun to move forward again. Halifax and Nationwide reported 1%-plus gains in house prices last month, while the property website Rightmove said last week that bargain seekers had pushed its online traffic to record levels. Today, the Countrywide estate agency group said confidence was returning at its property auctions, with one in five homes selling above guide price.
Allan Monks, of JP Morgan Chase Bank, said: "This is the highest reading on mortgage approvals since February 2008 and extends the recent steady uptrend."
But the figures also revealed that debt-laden households are choosing to repay loans rather than take out new credit. Existing mortgage holders are repaying their loans faster, taking advantage of historically low interest rates.
The BBA said the amount of new spending on credit cards was down 9% on a year ago, personal loan demand had fallen 39% and bank overdrafts had edged back by 3.2% compared with last year.
British households repaid £200m of debt in July while at the same time increasing their bank deposits by £2.5bn, the association said.
In part, the figures reflect a new thriftiness after years of splurging on debt, but they also highlight difficulties in obtaining loans. Despite the record low Bank of England base rate, interest rates on personal loans and credit cards have risen substantially throughout the credit crunch. The typical rate on a personal loan has risen from 10.57% to 12.55% over the past year and lenders are turning away as many as half of all applicants.
Economists say the continued shortage of available finance, plus rising unemployment, could snuff out any recovery in the property market"
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