More than ten million adults are teetering on the brink of the financial abyss because they cannot cope with rising mortgage payments and other debts.
A study paints an alarming picture of a large section of the population that is gripped by money troubles. Almost one in four - 23% - fear their current borrowing is already unmanageable or is about to become so.
Meanwhile 12% - 5.4m - have missed payments on debts and bills in the past six months. Around 10% had a direct debit, cheque or payment bounced by their bank over the same period. About 3% even fear they are about to lose their home.
Five interest rate rises since August last year have added more than £100 a month to repayments on the majority of mortgages, while personal loans, overdrafts and credit cards are also more expensive.
However, the pain has been compounded by the impact of the global credit crunch. Banks are chasing more borrowers through the courts to pay up, while they are turning down up to half of applications for credit cards and loans.
The research revealing the debt paralysis was commissioned by financial website uSwitch.com. It is backed up by other studies published today by Mintel and Moneynet.co.uk.
Debt-ridden Britons owe some £1.3trillion to banks and finance companies, and uSwitch found the average person now sees over half of his or her monthly take-home pay eaten up by mortgage repayments and other debts.
Ann Robinson, uSwitch's director of consumer policy, said: 'This is crunch time for consumers and it couldn't come at a worse time of year. In the run-up to Christmas, traditionally one of the biggest periods of consumer spending, people are concerned about their jobs, their homes and their ongoing ability to manage their debts and bills.
'The days of easy credit and the "buy now, pay later" culture may be numbered, but they will leave a painful reminder for those left struggling with debt. The credit crunch will claim casualties - it will be enough to tip some over-indebted households over the edge.'
- 53% of take-home pay is taken up by debt payments on average.
Retail and finance analysts Mintel said that as many as one in three mortgage-holders - more than five million - face real financial hardship due to being relabelled as sub-prime, or high-risk, debtors. Mintel estimates that 9% of the UK's 16.5m mortgage-holders will now be considered sub-prime by lenders as a result of falling behind on debt repayments.
But it said a further 24% could also be considered a high risk because of their personal circumstances. They may be self-employed, they may have fallen behind on bills or moved frequently. As a result, they will find it more difficult and expensive when they come to remortgage or move home.
People in this category generally have to pay much larger mortgage application fees and higher interest rates than the rest of the population.
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