Since the start of the credit crunch and subsequent economic down turn leading to the inevitable recession which the UK is now in the middle of, a growing number of individuals have been finding it harder to manage their money on a regular basis, with the well publicised result that there is a dramatic increase in the level of arrears and repossessions due to people falling behind with their secured loans and homeowner loans.

Throughout the course of last year, the government has introduced a number of schemes and additional funding to provide help and support for those struggling with their loan repayments, whilst applying pressure on banks to take a more lenient approach towards loan arrears handling.

John Healey, the local government minister has now announced that the government is to provide yet more funding for free debt advice services for individuals with growing arrears on their secured loans, through charity organisations such as the Citizens Advice Bureau (CAB) and credit unions. The additional funding, which will be used to offer practical help and advice for those struggling with secured loan arrears and possible repossession, will be targeted in specific regions which have been worst affected by the credit crunch and where the threat of someone losing their home is the greatest.

The money is to be directed towards the former mining communities in the North east, North West, Midlands, Yorkshire and Humberside and will be used to provide additional staff and extended opening hours for CAB centres and other charity organisations, thereby providing a more comprehensive service to more of those people who need it the most. The chairman of CAB Peter McNestry welcomed the additional funding, he said “Demand for free debt advice and money management support is on the increase.”

Since the beginning of the credit crunch, some eighteen months ago and particularly over the course of the past six months or so, the name “Bank” seems to have become a dirty word amongst the majority of people living in the UK.

A recent survey carried out by ASDA supermarket found that 73 per cent of those interviewed, entirely blamed the banking sector for the current economic situation which is affecting all global economies, for carrying out irresponsible lending in the past by offering too many unsecured and secured loans to borrowers who could not realistically afford to pay them back.

Now that a large number of individuals are struggling to keep up with their repayments, particularly on secured loans and the level of loan arrears is increasing dramatically, many banks are taking action against borrowers with secured loans and starting repossession proceedings against those in arrears. The Council of Mortgage Lenders (CML) have predicted that there will be a dramatic increase in the number of properties being repossessed over the course on the coming year, due to individuals failing to maintain their secured loan repayments.

With this in mind, Which?, the consumer campaign organisation, has called on banks and building societies to take a more responsible approach when it comes to their repossession policies and to offer more help and support to those borrowers who may be finding difficulty in repaying their secured loans.

The most recent Which? survey has found that around 80 per cent of the population expect the current economic down turn to last for at least another twelve months, with around half of those surveyed believing that the Government is in the best position to resolve the situation and only 14 per cent thinking that the banks which got us into the current mess will be able to get us out of it.

Since last Thursday, when the Bank of England’s Monetary Policy Committee reduced the base rate of interest for loans and savings to half a per cent, there has been some talk of cost savings for those individuals with loans, but more talk of people complaining about the minimal rate of return they are receiving on their savings.

Billions of pounds worth of savings are currently being withdrawn from banks as savers try and find a better return for their money. One area which is often overlooked by people who have both savings and a homeowner loan, is that of offsetting savings against their loan.

With an offset mortgage, a savings account sits alongside the loan account and the capital in savings is used to reduce the outstanding loan balance, thereby reducing the amount of interest being charged each day on the loan. Many individuals already have this facility with their homeowner loan without realising it and whilst no interest is received on a person’s savings, offsetting can save large amounts of interest on their homeowner loan and it is tax free.

A study by U Switch into offsetting has shown that a borrower with a homeowner loan of £150,000 who placed £3000 in an offset account and then saved £200 per month into the same account, could expect to save somewhere in the region of £40,000 in interest payments on their homeowner loan and repay the total debt seven years earlier that they would have done without offsetting.

As savings rates are always much lower than loan rates, there are considerable benefits to be had from this idea and because you are saving interest, not receiving it, there is no tax to be paid. Offsetting works in exactly the same way as overpaying on a loan would do and has exactly the same benefits, however, with offsetting all the person’s savings are still available and can be withdrawn at any time, thereby making it an ideal tool for short term saving for things such as holidays and tax payments for self employed people.

For more information on offsetting, talk to your existing lender, or speak to an independent financial adviser.

More and more people in the UK are now using the internet to find the best deal for themselves on all sorts of different products such as car insurance, holidays and cheap loans and in view of this there are many new web sites being launched, which offer a range of services.

Since the beginning of the credit crunch and continued economic slowdown, there has been a growing concern with people getting deeper into debt through their personal loans and credit card balances and with job losses, unemployment and reduced income on the horizon for many individuals, an increasing number of people are finding it harder to manage to keep up with their loan repayments and other debt commitments.

In this situation, a large number of people turn for help to debt management companies, many of which operate on line.

Recently, the Office of Fair Trading (OFT) has carried out an investigation into the growing number of debt management websites and has ordered that eleven such sites are closed down immediately, as they are copying the style of various charity loan and debt help and advice websites, which is regarded as being misleading by the OFT. Other firms were found to be trading without the appropriate licenses and have been informed that they must stop trading with immediate effect, or face prosecution.

David McCann of Guardian Debt Management supported the action of the OFT. He said “It’s great to see the OFT take such decisive action on websites that are preying on vulnerable consumers who may be in need of real help. The sector needs to highlight and rid itself of these perpetrators in order to move forward and try and address those people with real problems in the right way.”

The recent cuts in the Bank of England base rate has come as welcome news to many individuals with a homeowner loan or a mortgage, many of whom have seen their monthly loan repayments reduce significantly.

However, the same cannot be said for those people with savings in the bank or building society. Since October last year, the base rate has fallen from 5 per cent to just 0.5 per cent and savers have seen the level of interest they receive slashed to practically nothing, forcing many savers to look for alternatives to the traditional savings account.

Recent research from the Nationwide building society has shown that the number of people in the UK who believe saving is important has dropped to just over half the population, whereas this figure stood at almost two thirds of people in July 2008. Out of those individuals who were interviewed for the survey, 57 per cent believe that they are not currently saving enough money, but the majority of these people also think that their savings levels are likely to be restored in six months time.

However, whilst the number of people saving on a regular basis has decreased, the economic slow down in the UK and current recession, has made a large number of individuals review their own financial situation with regard to their debts on personal loans and credit cards and 80 per cent of those people interviewed are viewing the repayment of their existing personal loans and other debts as their main financial priority, largely due to worries over future job security and loss of income as the slow down continues to have an impact on all areas of the economy.