The Impact of the Credit Crunch on the Middle Class
The amount of debt among the middle and upper middle classes in the UK have increased since the start of the financial crisis. Reports from debt help charities from different UK counties stated that they have received more than double the surge of inquiries this year from supposed to be financially capable people.
These middle class debtors have beared the brunt of the housing crisis and the figures keep on rising. A large amount of these debtors acquire a monthly or an annual five-figure salary. Among the reports included an IT manager who has a salary of £28,500 and has an unsecured debt amounting to £28,500. Another one from Sussex have a debt totaling up to £110,000 from loans and credit cards and his income of £40,000 annually will not be sufficient enough to cover for it.
The consequences brought by the credit crunch, loss of jobs is also a key factor why people are finding themselves in deep debt. Another factor, specifically rising mortgage payments and price-fall on houses, are why debts and bankruptcy have risen among the middle class during the course of the year. A lot of their funds have been spent on their homes and improvement for it because of the expected equity growth which they thought would compensate for everything. A lot of the funds that was spent on home improvement also came from loans and credit. As a result, with the mortgage crisis causing a drop in house prices, a lot of these homeowners have been overstretched leaving them with underpriced equity with unpaid debts.
Higher earners are viewed by banks and lenders as the ones who can eventually pay for borrowed loans and credit. Therefore, they are the ones who have an easy access to loans and credit. However, if they are unable to become lenient toward their borrowing and spending, they would easily find themselves at a debt hole. Debt does not discriminate the middle class, but since a lot of people in the middle class invested a huge quantity of their asset to their homes, they are the ones who are feeling it more.
Borrowing credit without giving enough thought has been the main cause of people’s debts and ruin. Living an unsustainable lifestyle can be a financial ticking time bomb for anyone. The effects of the credit crunch and housing crisis have already made a statement to everyone. Anybody who is planning to take a big loan or mortgage should first think about his present situation and anyone who has just taken a mortgage or a loan within the past 15 months should re-evaluate his fiscal capability to prevent any future liquidation.