ThinkMoney.com highlights worries about personal impact of UK’s financial problems

A survey by ThinkMoney.com indicates that the full impact of today’s financial troubles has yet to be felt. While fewer than 1 in 10 respondents who considered themselves in debt saw their debt as unmanageable, a full two-thirds were concerned that the current economic climate could have a negative impact on their personal financial situation.

“Everywhere we look,” says a spokesperson for the financial solutions company, “we find talk of the economy slowing further, house prices dropping further, retail sales tumbling further – all indicating that things will get worse before they get better. It’s no surprise that consumers expect this deterioration to affect them as individuals, as well as damaging the nation’s overall finances.”

The situation may be particularly worrying for homeowners: “Some homeowners may be able to take a philosophical view of falling property values,” the spokesperson continues, “reflecting that any cyclical market will encounter downs as well as ups. But for those who are considering moving, remortgaging or withdrawing equity (for debt consolidation or other purposes), the impact is perceived as both serious and unlikely to improve in the near future.”

There is at least some good news for the housing market. Mortgage rates seem to be dropping, indicating a potential increase in demand for mortgages and subsequent slowdown of the falls in property values.

The Council of Mortgage Lenders, meanwhile, has confirmed that the possession rate for the first half of 2008 (0.16% of all mortgages) remains consistent with its forecast for the year and is less than half the rate experienced in the early 1990s. In a press release, the CML stated that the number of expected mortgage arrears and possessions cases is ‘extremely small when seen in the context of the 11.74 million mortgages in the UK’.

Beyond homeowners, consumers in general seem to be expecting tough times ahead. “Even those who aren’t directly affected by the credit crunch and the uncertainty in the housing market know they’re vulnerable to the knock-on effects. Today, the news is full of experts analysing the data and theorising about the ways a slowdown in one area can filter through to others, and to the economy as a whole.

“Given all the negative news, it’s perhaps encouraging to see that only 8% of our respondents who consider themselves in debt see that debt as unmanageable today. Yet a full 66% worry that the economic gloom will adversely affect them tomorrow. It’s interesting to note that this 66% corresponds exactly with the findings of a recent Populus poll in The Times – which also pointed out that in April 2005, only 19% of their respondents expected to do badly in the next 12 months.

“The results of our survey may not make comfortable reading, but it’s a relief to see that people are, on the whole, aware that there are problems ahead. In general, one of the ‘rules’ of debt management is that tackling a debt problem early on can make it much easier to address. The key question now is this: How many of those people will take action in time to strengthen their financial position, reduce their debts and improve their chances of coming through this downturn with as little financial damage as possible?”

Think Money (http://thinkmoney.com) are a financial solutions company based in Salford Quays, Manchester. The company specialises in a range of financial services, including mortgages, loans, debt help and advice (including debt management plans, IVAs, and debt consolidation).