UK sitting on 'debt timebomb'

The mortgage crunch and falling house prices are leaving Brits with a debt timebomb, claims a leading debt advisor.

The combination of rising prices, a slowing economy, falling house prices and banks increasing interest rates and cutting the number of their mortgages on offer is likely to lead an increase in debt problems over the coming years, warns Donald Findley, of Somerset-based debt advice firm Debt Dr.

This week Halifax reported house prices fell 2.5 per cent in March.

“The fall in house prices is just one more signal that the UK is sitting on a ticking time bomb of debt," Mr Findley said.

"Combined with the recent withdrawal of mortgage products, and figures released regarding the rise in consumer credit, it looks like there are gloomy times ahead."

He added the next 18 months would be tough on consumers and it was going to "get much worse before it gets better".

Figures from moneysupermarket.com show 84 per cent of Brits now have financial worries and 30 per cent fear they will not able to cope for much longer.

Tim Moss, head of loans and debt at moneysupermarket.com, said: "Anyone starting to worry about their financial situation shouldn't bury their head in the sand – problems are easier to tackle when addressed early.

"People should start by gathering their paperwork and working out the true scale of their problems. From there they must prioritise bills and pay the essentials such as mortgage or rent first. Non-essential items such as magazine subscriptions and pay-TV might have to be sacrificed.

"If you feel unable to sort out your money worries yourself, start by getting some free independent advice from organisations such as the Citizens Advice Bureau or the Consumer Credit Counselling Service."

Figures from Callcredit show the disposable income of the average working family has dropped from £26,200 in 2006 to £25,900 today.