Mitchell Charlesworth chartered accountants warn against overspending this Christmas

Date: 13 December 2007

A LEADING North West chartered accountancy firm is warning Cheshire consumers against irresponsible spending using credit cards this Christmas.

Insolvency experts at the Chester office of Mitchell Charlesworth Chartered Accountants and Business Advisors are reacting to recent instability in financial markets worldwide and are urging consumers to spend within their means to reduce the risk of unmanageable debt when Christmas is just a distant memory.

Recent events, including the near collapse of Northern Rock and the massive losses by UK banks, most notably the Royal Bank of Scotland who reported losses of £1.25 biliion, due to the collapse of the US sub-prime mortgage market has caused turmoil for the global financial industry.

It is predicted, however that UK shoppers will spend £200 million a day on gifts online in the run up to Christmas even though research has showed that many of us cannot even remember what our loved ones bought us for Christmas last year.

Jeremy Oddie, head of corporate finance recovery and insolvency said: “Spending on plastic is tempting at this time of year but should be avoided as the debt will need to be paid back in the New Year.”

“Many people who overspend using credit facilities this Christmas are putting themselves at risk of non-payment charges, bad credit markers and even the repossession of their homes”

Predictions show that UK housing repossession rates are due to increase by 50 per cent in 2008. This is because many homeowners are coming to the end of cheap rate mortgage deals and are faced with much higher interest rates and mortgage repayments.

Consequently many homeowners may struggle to make ends meet with surplus money that was being used to pay off credit cards and loans being tied up in mortgage repayments; 43,000 homes have been repossessed this year.

Jeremy added: “The Bank of England has just cut interest rates by a quarter of a per cent to 5.5 per cent, but consumers must view this development with caution; mortgage repayment increases may not be as high as first expected but house prices are extremely vulnerable and could drop in coming months.”

The current credit crunch has caused house prices to slow and the continuing vulnerability in the market has led to predictions of a fall in prices in 2008. For a lot of homeowners equity in their property could seriously decrease in the New Year.

Jeremy concluded: “Anyone who is struggling with debt should seek help right away. Advice sought sooner rather than later is always the best option, as one thing is for certain the problem will not go away.”

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