Money worries causing secrets and lies

The pervasive effects of the credit crunch are leading an alarming number of people into concealing their financial woes from their loved ones, a Moneynet.co.uk survey has revealed.

Fourteen per cent said they have debts on an overdraft, credit card or personal loan that their spouse or partner knows nothing about.

And nearly a quarter of those who responded to the survey said they would rather pay high rates of interest on a loan or credit card to get by than admit to their close family that they are in financial difficulty.

“The fact that a significant number of people would rather get into debt than share their worries with those closest to them is a shocking indictment of the state of the nation’s finances,” says Moneynet.co.uk’s Andrew Hagger.

“It shows just how much pressure people are under to stay afloat and with house prices still falling, energy costs soaring and rising inflation keeping a cut in interest rates off the agenda, the number of people in real trouble will only increase.”

It’s not just luxuries or non-essentials that are busting consumers’ budgets. As many as 20 per cent say they are having to use a credit card to pay for everyday household expenses in order to make ends meet.

But this is before the massively increased gas and electricity bills have even landed on the doormat, so what seems difficult for some now could become impossible in the coming months.

Showing just how close to the wind some people are sailing is the fact that 22.27 per cent say an increase of more than £50 to their monthly mortgage repayments would be enough to break their budget.

13.40 per cent could manage up to £80 extra and 14.85 per cent could stretch to £120. That adds up to a staggering 50 per cent of homeowners who will struggle to manage their budget when faced with the end of their current mortgage deal or a rise in interest rates.

For example, switching to one of the most competitive two year fixed rates around at the moment at 6 per cent following the end of an existing 4.79% deal taken out in August 2006 would cost an extra £87.96 a month on a mortgage of £125,000 (with 23 years to run) – not a large mortgage by today’s standards but a rise that 36% of borrowers say they would find unmanageable.

“Before the credit crunch and dramatic fall in house prices many people would have relied on remortgaging as a way of raising cash to fund their lifestyle, but those days are long gone and unlikely to return,” says Hagger.

“For those who have no savings, no prospect of extending their mortgage and no-one they can approach to lend them money, there really isn’t anywhere left to go.

“Admitting defeat on such a sensitive subject as money can be very difficult, but there’s no honour in going down with a sinking ship. Facing up to financial problems as early as possible is the only way of stopping things from deteriorating.

“Money is one of the biggest sources of arguments between couples so racking up interest on loans and credit cards in secret is a sure way of compounding the problem with relationship difficulties too.”

For more information, visit moneynet.co.uk