Banks are shoring up their lending positions, and are now ever quicker to seek court orders which would allow them to secure debt against property.

The number of these court order applications rose 42% in 2007 to almost 132,000, and the figure is expected to increase further this year. If successful, the lender is granted a charging order, which, in effect, secures the debt against the home of the borrower. When the house is sold, the lender is repaid from the proceeds.

The figures quoted above were obtained by the BBC, and come from internal Ministry of Justice reports. They also show a growing trend of lending criteria being tightened, while at the same time bankruptcy petitions have almost doubled in four years.

The Chancellor of the Exchequer, Alistair Darling has urged lenders to help struggling borrowers, and Philip Hammond (the Shadow Treasury Chief Secretary) claims that UK personal debt is increasing by £1 million every five minutes.

Unbiased, an indedendent financial advisor website, claims that workers toil until March 10th to service the interest on unsecured borrowing. This is before any reduction in the actual amount owed. This is a big increase from the 2007 ‘Debt Freedom Day’, which was 1st February.

This is due to an increase of 10% in personal debt and also an increase of 6% in the interest charged - the amount owed in personal loans has jumped to £9.8 billion this year. Interest charged on personal loans has risen by 0.5%, meaning borrowers now face a total interest bill of around £1.5 billion.

The savings products manager at Co-operative Bank, Scott McPhail, has revealed that Britons spend 13 billion hours a year worrying about debt. He said, “It is worryingly clear from the research that the vast majority of UK adults are deeply concerned about their finances, with rising levels of debt and inadequate saving provisions responsible for countless sleepless nights nationwide.”

Although the survey was from a small sample of just 573 mortgage holders, the FSA has taken the results seriously enough to plan the launch of a £2 million advertising campaign and an advice guide.

Many fixed rate mortgage deals are coming to an end this year, and mortgage holders may find they are unable to find a new deal at similar interest rates. This is because many mortgage products have been withdrawn by lenders as a result of the global credit crisis.

It is this group of  people on expiring fixed rate mortgages which is causing most concern to the FSA, and they will be targeted by the new campaign.

The new guide will suggest that people budget properly, and consider ways to make savings well ahead of their mortgage deal expiring.

Meanwhile, in a seperate report carried out for the supermarket firm Asda, it has been stated that the average family is about £5 per week worse off than this time last year because of increased food and fuel costs. 

Many of these firms are using aggressive, yet legal, collection methods, and now there are calls for a clamp-down on collectors.

Yet there are fears that collection agencies will be given even more power when the details of a new Tribunals, Courts and Enforcements Act are unveiled by the government in May. Bailiffs may be given powers to break into homes and use force to remove goods.

The Ministry of Justice has claimed that such powers would only be granted once a regulatory framework for bailiffs has been put in place, and would only be used in ’strictly controlled circumstances’.  The Citizens’ Advice Bureau is due to meet the Ministry of Justice shortly to discuss the proposals.

Debtors had a total of 796,528 county court judgements (CCJs) handed down against them in 2007, a rise of 48% since 2004, while the debt collection agency Interim Justicia made group profits of around £37 million. The company expects profits to rise as more people struggle with debts: “We are looking forward to controlled sustainable growth… there’s a lot of potential in this market.”

Savings bank ING Direct, which published the report, says that many parents are keeping the savings a secret because they fear that if their offspring were aware of the safety net they would spend even more.

Other reasons given for keeping the savings secret were to teach children the value of money and how to manage on a budget before getting a job.

Many parents are looking ahead and beginning to save while their children are still at primary school, and around 30% claim they make “huge sacrifices” to put money aside. In some cases parents are even remortgaging their homes and cutting down on social and leisure activities in order to bump up savings balances.

But the secrecy is not always on one side. Over 40% of students admitted to having debts which they had not told their parents about - on average around £5000. Ways in which they raise more money is to take out more than one bank account with an overdraft facility, as well as loans and credit cards.

Reasons given for keeping debts a secret ranged from not wanting to worry parents to being embarrassed about being in the red.

Millions of people may have to come to terms that their take-home pay is not enough to service repayments on mortgages, personal loans and credit cards

According to the firm 6.6 million people, or 22% of those with debts, are already struggling to make all their repayments, with 10.6 million (35%) believing they will encounter difficulties with debt payments within the next twelve months.

The figures are provided from a survey by YouGov, commissioned by the ITV programme ‘Reposession Reposession Reposession’.  The average household now owes a total of £51,730, bringing to total UK personal debt to £1.345 trillion. This is an increase of 300% over the last decade.

The programme predicts the end of shifting credit between lenders as lending criteria tighten, and new credit cards become harder to obtain.

Last month Egg announce its intention to close the credit cards accounts of 160,000 of its customers, while Barclaycard has lowered the credit limits for half a million of its customers. Other banks are expected to follow suit in cutting back on lending.

It is thought that authorities are getting tough over arrears in order to meet govenment-set performance targets.

Citizens Advice is claiming that councils are failing to seek negotiated settlements with defaulters, and are moving straight to enforcement, which can include bankruptcy and potentially the losing of homes.

This action is quicker than other methods of collection, and enables councils to collect more tax in the year it falls due - a performance indicator for the authorities.

The Bankruptcy Advisory Service, an independent body, says that the problem is not restricted to a few authorities. Advice is being sought from across the UK from people facing losing their home because of council tax arrears. Fife council, for example, made 32 people bankrupt in 2006/2007 for non-payment of council tax, an increase from 28 the previous year.

Julia Goldsworthy, who speaks for the Liberal Democrats on communities and local government, is worried that this trend may be followed by other government departments such as the Child Support Agency, and warns that a dangerous precedent is being set.

A total of 1.7m sought debt counselling in the last year, with the CAB themselves receiving 6,600 enquiries a day. While the usual suspects of credit cards and unsecured loans accounted for 40% of the debt enquiries, there was also a ‘worrying’ increase in people seeking help in paying day to day bills such as telephone and utilities.

Enquiry Rises in Detail

• Bankruptcy related - up 50%
• Energy bill related - up 33%
• Council tax - up 25%
• Overdraft related - 14%
• Mortgage problems - 11%

Commenting on the figures, a CAB representative called for banks and other finance providers to not extend further credit to people already struggling, and also to be more open to negotiation when people begin to experience problems.

The CAB also said it was looking for a further 5000 volunteers to help field the surge in enquiries.

Court action over mortgage debt also slowed down slightly, with just under 33,000 entering into the first legal stages of the repossession process during the second quarter of 2007 - although the drop is perhaps statistically irrelevant standing at only 0.2%.

CML director Michael Coogan said that repossession figures were still low by historical standards, and that changes in the way it calculates the figures may have played at least some part in the rise. Repossessions were also much more commonplace in the ’sub prime’ market than among mainstream mortgage borrowers.

Both types of insolvency - bankruptcy and IVA - fell in numbers, but it was IVAs or Individual Voluntary Arrangements which showed the greater reduction of 15% from the first to the second quarter, leading to speculation that IVAs are not being accepted as readily by lenders worried about the growing amount of bad debt they’re exposed too.

In recent years, IVAs have been seen by many as an easier alternative to bankruptcy - time will tell whether the fall in IVA numbers will translate into more bankruptcies a few months down the line.