High-fliers trapped in debt cycle

TO their friends and neighbours, they probably seem like high-fliers who are sitting pretty.

They earn at least £50,000-a-year, have high-powered jobs, big homes and expensive cars. But looks are notoriously deceptive and debt experts warn that impoverished professionals are on the increase.

There has been a sharp rise in the number of people or families who take home £3,000 a month but are seeking help from the Consumer Credit Counselling Service.

Large numbers of middle-class families seem to have gone deep into hock through credit cards, loans and remortgaging to keep up appearances. But rises in interest rates and higher household bills have driven many to the edge of a financial meltdown.

The situation is similar to that of former BBC arts correspondent Rosie Millard who, despite having three homes, is so deep in debt she struggles to cover family bills. The CCCS helps those who are in debt to the banks and others to sort out their finances by reducing spending and starting a repayment plan.

A spokesman said: 'CCCS has seen a huge increase in high-earning professionals asking for help with debts. Many of the clients in this category are asset rich, but cash poor. Most own their own home or have a mortgage. And they have run up credit card bills to match their asset bases.

'An average of 1.2% of clients who joined a repayment plan in CCCS in the first quarter of 2004 earned over £3,000 net a month. In the first quarter of 2005, the average was 2.2%.'

The spokesman said that in the last 15 months there had been requests for help from more than 700 people earning more than £50,000-a-year, which was only the tip of the iceberg.

She said: 'There is a lot of pressure to keep up with the Joneses, to go on exotic holidays and dress yourself and your children in the latest fashions.

'They may have a big house and expensive car but they are hugely in debt on their credit cards and will dread the arrival of the statement each month.

'Clearly, there is a lot of frivolous spending. But also middleclass parents are having to finance children for longer than in the past by, for example, seeing them through university.'

The CCCS figures correspond to a 28% increase in bankruptcies this year on 2004. There has also been a 25% rise in home repossession orders sought by mortgage lenders.

This week, it emerged that the number of women bankrupts has risen from 32% to 42% in five years. Keith Stevens, insolvency partner at accountants Wilkins Kennedy, said: 'The root of the problem is that women have seen the rapid growth in their financial independence outstrip the rise in their incomes.

'The gap between incomes is narrowing, but women are taking on more financial risk and may need to moderate their spending in the short term.' CCCS chairman Malcolm Hurlston said: '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. It's 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.

'With any luck, this will reflect the Bank of England's ambition to achieve a relatively benign slow- down of consumer borrowing and spending which will head off inflationary pressures with minimum economic damage.

'But it will be tougher for many individuals and we expect a further rapid upsurge in demand for our help.'