Many middle and upper middle class citizens’ debts have increased since the start of the financial crisis. Organizations which provide free debt advice to people from a number of UK counties acknowledged that the number of inquiries they received have doubled this year from supposed to be financially capable people.
Thousands of middle class citizens have beared the brunt of the housing crisis and the numbers continue to rise. A large amount of these debtors acquire a monthly or an annual five-figure salary. Among the reports included 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 totaling 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.
With the domino effect brought by the financial crisis, job losses is also a key factor why people are finding themselves in serious debt. Other reasons, particularly rising mortgage payments and drop in house prices, are why debts and insolvency have risen among the middle class during the course of the year. A huge proportion of their funds have been spent on their homes and improvement for it because of the expected equity growth which they thought would cover the cost. A lot of the funds 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 unpaid debts.
Banks and credit card lenders regard people with higher earnings as the ones who can eventually pay for borrowed loans and credit. Hence, they are the ones who have an easy access to loans and credit. Still, if they are unable to become lenient toward their borrowing and spending, they would certainly 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 amount of their asset to their homes, a majority of them was placed in a tough position.
Borrowing credit without giving enough thought has been the major cause of people’s debts and insolvency. 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. Anyone who is planning to take 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 avoid any impending insolvency.
