High earners struggle with debt

High earning borrowers are among an increasing number of people struggling to meet repayments on their debt, according to a national advisory service.

The Consumer Credit Counselling Service (CCCS) said that post-Christmas debt problems among those earning over £50,000 a year had almost doubled since the first quarter of 2004.

Between January and April last year 1.2% of clients who joined a repayment plan with the CCCS had a household budget of more than £3,000 a month. In the same period this year the figure was 2.2%.

The total number of people experiencing repayment difficulties was also up, standing at its highest ever level for a first quarter. This is despite a 4.5% increase in average earnings since the first quarter of 2004.

"The consumer is spending less and repaying less. There are early signs here that the whole consumer-driven economy may be moving into lower gear," said CCCS chairman, Malcolm Hurlston.

"It is likely that warnings about debt are getting through, encouraging people to come for help quicker.

These warnings combine with higher mortgage repayments for many to create a less confident climate, particularly among the better-off whom mortgages affect."

A separate survey published earlier this week showed that borrowers in England and Wales had racked up debts equal to 116% of their annual income.

The survey, compiled from data submitted by more than 1,000 applicants to ClearDebt, an agency to help people negotiate with their creditors, showed that 78% owed more on credit cards and loans than they earned in a year. More than a quarter owed more than two years' income.

Andrew Smith, a spokesman for ClearDebt, said that although 3.1% of those who had applied to use its services were high earners, the majority were on low incomes and faced a much bigger struggle to clear their debts.

"With a debt to income ratio of just 92% and monthly outgoings (before mortgage and interest payments on credit cards/loans) of 49% of their income, there seems plenty of scope for them [high earners] to draw in their horns.

"Contrast that with lower income debtors (more than half of all applicants to our site), who spend roughly three-quarters of their income on living expenses, even though their outgoings are just a quarter of the high earners.

"Lower income debtors have to spend more keeping body, soul and family together.

"Many higher income debtors probably have the flexibility to forego a few luxuries, maybe consolidate higher-rate debt and move on."