Some consumers with debts 'still at risk after credit crunch'
Published On 29 October 2007
Consumers with high levels of debts and large outstanding mortgages could still be at risk from the global credit crunch, an industry expert has warned.Previously, it was commonly thought that only people with adverse credit histories, recent first-time buyers and some buy-to-let investor would be hit by the credit crunch.
However, Fool.co.uk has now warned that other consumers with particular types of debt could be in for a difficult time.
According to the site, the Bank of England has identified people with debt repayments of more than 55 per cent of their household income and those with a net worth of less than 33 per cent of their income as being in particular danger.
As an example, the consumer website cites anyone with two thirds of their mortgage outstanding and no savings as being at risk of financial difficulty in the near future.
"The two thresholds provide a handy guide for consumers to see if they are sitting ducks. And by ensuring that we stay comfortably within them, we should be better placed to face unexpected shocks," explained David Kuo, head of personal finance at the website.
"Consumers should draw up a 'Statement of Affairs' immediately to get a useful snapshot of their finances. The snapshot will tell, at a glance, whether you fall into one of the 'at risk' categories.
"Failing to draw up a statement of affairs in the current difficult financial climate is tantamount to driving a car without shock absorbers. It may get you from A to B, if you're lucky, but the ride won't be nearly as comfortable as one that has."
