Job loss leads to 'big middle class debts'

15/05/2009

New research from Transact suggests that increasing numbers of the middle classes are facing nightmare debts.

The financial inclusion forum claimed that the average debt of the middle class client had risen from £55,000 to £60,000 over the past year.

By contrast, the typical amount owed by clients classified as working class stood at £30,000.

The difference is also not covered by the higher personal incomes enjoyed by the middle classes.

Rising unemployment, with white-collar financial services and high-end retail jobs bearing the brunt of the lay-offs, is thought to be a major factor behind this trend.

Adam Clark, head of Transact, said: "As the recession hits harder, Transact members are reporting increasing numbers of middle-income clients seeking debt advice.

"These individuals typically have higher levels of debt and more complex borrowings than typical free debt advice clients," he added.

"EuroDebt's recent figures for debt levels over the last 12 months show that the average level of unsecured debt has risen to nearly £29,000 with eight creditors," director Kevin Still commented. "34 per cent of the balance is made up of credit card debts with approximately 3 cards. Many have taken out consolidation loans and failed to clear the balances on existing credit agreements, causing a snowball effect. We are seeing a huge increase in the number of homeowners with large unsecured balances and many with arrears on secured borrowings."

He added: "The average unsecured debt for a homeowner last Christmas was nearly £38,000, but it is now very common to see debt levels over £50,000 and a regular occurrence for unsecured borrowing over £100,000 from middle class demographics not historically associated with unmanageable debt."

Tags; Budgeting Advice, Young Family Finances, Recent Graduate Debt,

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