The recession is expected to create a new era of debt for middle class families, according to the Credit Services Association (CSA).
The return of the 17.5 per cent VAT rate and the end of many fixed mortgages, on top of increasing interest rates is expected to push the number of people unaccustomed to being in debt into the red.
The CSA has noted a sharp increase in the volume of debt coming from sections of the public not previously associated with financial distress during the downturn.
And CSA president Roger Lucas expects it to get worse. Lucas said: “Despite the recession many individuals have managed to cut their cloth according to their means, but they are fast running out of cloth. It is no single issue but rather the cumulative effect of a number of challenges that will prove the tipping point to plunge a new generation into debt.”
Of particular concern is news that many of the fixed rate mortgages that homeowners have come to enjoy are coming to an end, just at the point that interest rates look set to rise.
Lucas added: “There have already been warnings about homeowners being caught out with new mortgages and having to resort to credit cards to make payments. Unfortunately this is storing up trouble for later, and our members are beginning to see the first signs of it already.”