As many people will know, the Bank of England have today announced a reduction in UK base rates to 5.5%, the first reduction in UK rates since August 2005.  While there has been much praise for the move, is it too little too late or will it help?

Even though there is no doubt that any reduction in rates will assist the economy and the working population in some form, this rate cut seems to have been long overdue.  However, it must be said that this has not really been the fault of the Bank of England because we have in effect been running a dual economy for some time.   While the property market was flying high many people were suffering from increased debts and massive financial worries.  Many people were having to  and continue to stare bankruptcy in the face, and while some have found a bankruptcy alternative in the shape of IVAs (or Trust Deeds in Scotland), there are still many people suffering.

We also had the problem of inflation which was the main reason why the Bank did not reduce rates sooner.  Now that we are staring what could be a very serious economic slowdown in the face, the threat of a resurgent inflation rate has all but disappeared.  This is also one of the reasons why we will also see more rate reductions in the short term.

What next?

The UK economy is set for a major slowdown over the next couple of years, at a time when many had been counting the paper profit on their housing assets.  These profits are slowly ebbing away and it is going to become more and more difficult to sell properties for their “true value”. 

The UK population and the UK economy will need further assistance from the likes of the Bank of England although there will need to be a certain level of self cleansing – no pain no gain.  The Bank of England have been very big on the fact that they cannot, and will not, bail out the economy if there have been bouts of over exuberance or plain mis-management.  For this situation there needs to be some pain, something which is set to hit us in abundance very very soon!

Many people in the UK are in serious financial trouble, with hundreds of thousands more expected to join them as the UK starts to fall into a potentially serious economic slowdown.  We have recently seen signs that the housing market is falling back, a slowing of the actual number of physical properties sold and a whole host of introductory mortgage offers come to the end of their discount period.  All of these situations have come together at a time when job security is reducing, wage rises are struggling to keep up with even the most basic rate of inflation and more and more people are struggling.

So what do you do when your finances start to crumble?

The first thing which the majority of people do is “hide their head in the sand” and hope that everything will fix itself.  While this may have rescued many when the property market started to pick up, this little life line is now fast disappearing, leaving many people to “face the music”. While the words bankruptcy and IVA were very much frowned upon and not spoken about, they are becoming a main part of the UK financial market vocabulary – and the numbers being granted have increased dramatically.

While many people overlook IVAs they are a viable bankruptcy alternative and for many they have given them the breathing space to re-arrange there finances, pay back a percentage of their debts and start again.  While it may not be quite as easy as that, IVAs are an alternative, however if your situation is out of control then bankruptcy may well be the sensible option for you.

The laws and regulations ruling bankruptcies have been changed over the years and the penalties in later life are no where near as dramatic as they once were.  The period of bankruptcy has been reduced and while there will be an impact upon your short to medium term credit rating, you can recover you rating in the longer term.

Many people also fall into the trap of taking advice too late, which can be the difference between an IVA and bankruptcy, and a big difference to your credit rating.  As soon as you feel the pressure there is no harm in taking advice, advice which may actual means that neither IVAs nor bankruptcy need to be considered.

Don’t hide you head in the sand, as it will only be worse when you finally pop up for air!

Over the last few years we have seen the levels of personal debt increase substantially in the UK, and they are set to get a lot worse over the next couple of years.  Recent news about the UK economy is not good, consumer confidence is at a record low and people are still intending to spend big on Christmas!

There are many reasons why the debt crisis could hit home over the next few months but the main reason seems to be the cooling of the property market.  Many people have masked their own problems with the thought that their property assets would always bail them out if they got into real trouble.  As the market looks set to stall, and prices fall back in 2008, many people are starting to think again.  If they sell up, where would they move to? What could they buy with what was left out of the sale proceeds less mortgage liabilities? Not a lot……..

On the top of this we have seen credit card debt mushroom over the last decade, with more and more people not being able to payoff their outstanding balances at the end of the month.  While minimum payments may be covered, the interest and outstanding capital continues to rise month on month, storing up potential enormous trouble for later.  The trend for “credit card surfing” has also hit the buffers, with the recent credit crisis resulting in a record number of credit card applications being rejected.  So what are the options if you realise that your liabilities are getting out of control?

It is imperative that your seek debt help as soon as possible, whether this is just general advice about how to organise your finances or specific IVA help – a subject which is rapidly rising to the surface of the financial world, and fast becoming the debt solution of choice for many.

As the UK begins to wake up the high probability of what could turn out to be a very heavy recession occurring, many home owners may slowly be realising that the “profit” on their home may not be enough to bail them out of any financial trouble.  So what really is happening underneath the surface?

The UK has seen a massive increase in personal debt over the last decade, with the cost of living soaring higher each year, your tax outgoings increasing substantially and the housing market continuing to rise year on year – until now!

We are in a situation where the average house in the UK costs somewhere in the region of £200,000 which is about 9 times the average wage – thereby taking out a mass of potential first time buyers from the market.  This then leaves the buy to let investors with a big say in the market, but surely buy to let has done well?

The idea between buy to let is to use income from the rent to cover the mortgage on the property, and while this was just about possible a few years ago, we have seen house prices rise by 10% a year for the last few years, whereby rents have only increased by 3% a year, leading to an ever growing short fall.  While many investors will have made good capital appreciation on their investments, they will at some point need to sell to cover the outstanding mortgage, causing a fall in property prices.

In a very short period of time many home owners will see their “profits” reduce until such a point that some will need to sell to cover their personal debts.  If the housing market was to stall and the number of sales reduces then many people would be left with a home which is falling in value and rising personal debts.  This is where many people will be forced to seek professional Debt Help, and the various options open to them such as IVA and Bankruptcy protection,

For those looking at bankruptcy or an IVA help is at hand through the masses of UK companies who specialise in this area of finance.  The number of the UK population who are in serious financial trouble has grown significantly over the last decade although it has rarely been headline news as the property market continued to boom.  Perhaps that is all about to change?