The amount of debt among the middle and upper middle classes in the UK have increased since the global recession took effect. Organizations which provide free debt advice to people from a number of UK counties stated 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 statistics continue to rise. Most of these debtors acquire a monthly or an annual five-figure salary. 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 totaling up to £110,000 from loans and credit cards and he only has an annual income of £40,000.
With the domino effect brought by the credit crunch, job losses is also a key factor why people are finding themselves in deep debt. Other reasons, specifically rising mortgage payments and price-fall on houses, are why debts and insolvency have risen among the middle class during the course of the year. A lot 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. Most of the finances that was spent on home improvement also came from borrowed money. As a result, 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. Therefore, they are the ones who have an easy access to loans and credit. However, if the cycle of borrowing and spending go unchecked, they would certainly find themselves at a debt hole. Debt does not discriminate the middle class, but seeing as a lot of people in the middle class invested a huge quantity of their asset to their homes, they are the ones who are feeling it more.
Borrowing credit without giving enough thought has been the main cause of people’s debts and insolvency. Living beyond ones mean 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 acquire a big loan or mortgage should first think about 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 impending bankruptcy.