Revealed: Shocking Northern Ireland debt time bomb laid bare
Almost 250,000 people in Northern Ireland are facing a debt time bomb - but are doing little or nothing about it, the Belfast Telegraph can reveal.
Families account for 62% of those currently in serious financial difficulty and, in over half of these cases, both parents are working.
New figures obtained by the Belfast Telegraph from Citizens Advice have laid bare the shocking extent of the problem, and the agency has said it expects the crisis to escalate in the coming months following the Christmas excesses.
There are also concerns that the level of reliance on debt to make ends meet is beginning to increase again as the economy slowly begins to recover.
Money Advice programme coordinator at Citizens Advice, Kathy McKenna, said people should get help sooner rather than later.
"The Bank of England's Money and Credit report for November revealed that the amount of cash borrowed by consumers ahead of Christmas was the highest that it has been in any month since February 2008, at the height of the credit crunch," she added.
"Many households, particularly those on low incomes and those vulnerable to income shocks, may not be able to handle the extra borrowing.
"Citizens Advice is expecting an increase in debt problems in the new year as a result of this.
"Our experience shows that people generally wait a year before seeking out debt advice - however, waiting means their financial situation can spiral even further out of control, leaving them deeper in debt."
Last year, more than 9,000 people in Northern Ireland turned to Citizens Advice for debt and money advice. Recent research by the Money Advice Service into the local debt landscape has, however, found that around 15% of the adult population - 217,000 people - are currently over-indebted.
Of that figure, only 11% are actually getting help, leaving a staggering 193,000 adults with serious financial problems who are not accessing debt advice.
The organisation also discovered that families were struggling more with debt than others, with 34% of working homes and 28% of benefit-dependent families now living on the breadline. Ms McKenna said borrowers who pay off the minimum amount or fall behind can soon find themselves trapped in a crippling cycle of debt. "Mainstream debt problems, from credit cards to formal loans, are only part of the story," she added.
"We see increasing numbers of people struggling with priority debts like rates, rent arrears and mortgage shortfalls.
"Sometimes it's only when the situation gets out of control - for example when a client receives a court letter or eviction notice, or cannot get access to any more credit - that they will come seeking advice."
Citizens Advice is particularly concerned about a generation of buyers who have never experienced an interest rate rise and whose monthly mortgage repayments could increase significantly if that happened.
"First-time home-buyers would struggle to find an extra few hundred pounds a month when rates eventually start to rise," Ms McKenna said.
"A recent report commissioned by the Department of Social Development showed that the repossession rate in Northern Ireland in 2015 was four times higher than in Britain, and it is predicting that the number of households at risk of repossession will rise from 15,000 last year to 32,000 by 2018."
Ms McKenna stressed that anyone who is suffering can easily access free confidential advice and find a solution that meets their own individual circumstances.
"No one chooses to get into problem debt," she said.
"There are a number of reasons - not just the recession - why people end up in unmanageable debt, and most of the time it's through no fault of their own.
"It's often as a result of redundancy, illness, business failure, relationship breakdown or even an unexpected bill, for example if the car breaks down or the roof needs repairing."
She added: "Northern Ireland is clawing its way back out of recession, but we still have a long way to go."
If you are affected, please visit the following website: www.citizensadvice.org.uk/nireland
Case study one: Nicola, a single mum in her 30s, with one young child, works part-time and rents.
Before I became a mum, I’d been working full-time for a number of years. I was reasonably well off and able to pay my bills.
But now that my income has reduced, I find it extremely difficult to pay even the minimum payments.
I was £12,000 in debt (including credit cards, a catalogue debt and a personal loan), so I replied to a text from a fee-charging debt management company and entered into a plan to try and pay off the debt.
At the time I felt desperate and knew of no other option.
But then most of my small monthly payment was taken up with fees and I realised it was going to take me another 20 years to pay off the debt so I contacted Citizens Advice.
They explored all my options and I opted for a Debt Relief Order. An adviser completed an online application and I paid a one-off fee of £90. I now don’t have to make any more payments, and if my circumstances remain the same I’ll be debt-free in a year.”
Case study two: Vincent is in his early 40s, in a relationship and owns his own home. He ran a very successful business for several years.
In 2007, I purchased a buy-to-let terraced house for £152,000 on an interest-only mortgage.
Shortly afterwards, the property crash saw house prices plummet.
Initially, I didn’t panic because the rent covered the bills.
Unfortunately, I then had a series of tenants who caused significant damage to the property, and I had to use credit cards and a personal loan for repairs.
As the property wasn’t generating rental income, I started to meet the interest payments from these sources too.
When my business also began to fail, I accessed more credit to meet my liabilities.
Eventually, I handed the keys back to the lender, but it took a further year for the property to sell at auction for only £55,000.
After estate agent fees and other charges, I received a £68,000 mortgage shortfall demand letter. I also owed a further £10,000 in credit card and personal loan debt.
Finally, I contacted Citizens Advice, and I now have an Individual Voluntary Arrangement, which allows me to protect my home and make affordable monthly payments from my income.