More people ask for debt advice as credit crunch bites

There has been a 51% increase in new mortgage and secured loan enquiries in the three months to October and a 10% increase in fuel debts compared with the same period last year, according to the Citzens Advice Bureau. 

'While we are pleased to see the number of consumer credit problems going down, the increase in the number of enquiries about basic essentials is worrying and these figures show how the current economic situation is hitting vulnerable and low-income households the hardest,' said Citizens Advice chief executive David Harker.

He said it is vital that mortgage lenders and fuel companies do everything in their power to help people in arrears to come to a workable solution over repayment arrangements rather than piling on extra charges.

'If you are falling behind with payments on a mortgage or secured loan you should speak to your lender straight away. Lenders should negotiate with borrowers but if you are having problems make sure you seek free, confidential, independent advice without delay,' he added, saying up to £9.9 billion means-tested benefits went unclaimed last year.

CAB said more people are seeking advice on how to manage mortgage and secured loan arrears and fuel debts as arrears climbed 35% over the last 12 months compared with the previous 12 months, with 77,324 new enquiries since October 2007.

The charity said there was a reduction in the number of enquiries related to credit, store and charge cards and unsecured personal loan debts being seen by bureaux, down 4% year on year.

These last still account for 35% of all the debt problems handled by bureaux while mortgage and secured loan arrears account for 5% and fuel debt 4% of the total.

A recent Citizens Advice snapshot survey of clients with mortgage and secured loan arrears in June and July this year found that lenders started repossession action within 4 months of the account going into arrears, the charity said.

The most common reasons cited for people falling into arrears were loss of job or failure of business (20%), ill health (17%) and relationship breakdown (16%).