Financial education charity, the ifs School of Finance, is continuing to lobby the government over its hopes to introduce exam-grade education on personal finance to the national curriculum.

“There are lots of other different financial education programmes being offered in schools, workplaces and online but, as FSA research highlighted last month, there is little or no evidence to suggest it is improving people’s financial capability,” said Phil Hall, Head of Public Affairs for ifs.

Hall went on to explain that there was “an increasing body of evidence to suggest that a standalone, nationally recognised qualification produced financially capable young people.”

This is in marked contrast to the current state of most personal finances in the UK today, where an increasing amount of bad debt was leading people into insolvency, house repossession and years of credit blacklisting.

UK debt currently stands at approximately £1.3 trillion, with most of this accounted for by mortgage debt. However, around £200 billion is owed in unsecured debt on personal loans, store finance, credit cards and overdrafts.

The ifs believe that by adding Personal Finance as a core curriculum subject, fewer people would fall into the debt trap experienced by hundreds of thousands of individuals and families every year.

By teaching individuals the true cost of borrowing and the best way of managing their money, ifs hope that they can help rescue Britain from its position as the Debt Capital of Europe.

At present the average Briton owes over £3000 in unsecured debt, compared with the average European who owes only £1500.

New figures out from the leading high street banks show a gloomy picture of low profits and high numbers of bad debts.

Uswitch.com, the price comparison website, claims that close analysis of figures released by banking giant, Barclays, shows a shocking £2.795 billion in write-offs from bad debt from unpaid overdrafts, personal loans and credit cards.

“With the global credit crunch well and truly gripping the nation, an increased level of write offs by the Barclays Group in 2007 is no great surprise,” said Mike Naylor, personal finance expert at uSwitch.com.

He also claimed that the bad debt situation was worsening the credit crunch for everyone, as the costs were passed on to all consumers.

So even those who make their loan repayments on time and have never missed a mortgage payment are suffering with higher home loan rates as a result of lenders’ plummeting profits.

The advice for potential bad debtors is the same as ever: speak to your lender before allowing things to reach the point of no return. Most lenders will be happier to see you making reduced repayments rather than have the debt go bad.

Debt charities are also there to offer free advice to those struggling to meet loan repayments or make ends meet.

Purchasing your first property will probably be the largest financial commitment you will ever have made. However, looking for the right place can often be time-consuming, expensive if you need to take unpaid time off from work and often extremely frustrating. On top of all the emotional turmoil you have to go through you also have to be aware of gazumping as well as rogue estate agents.

Making sure you have the right information when looking for a property can help in making the process considerably smoother.

The amount of money you will be able to borrow depends on what you can agree with your lender and it can be a good idea to check out home loans before you start looking to ensure you are searching in the right price bracket.

Traditionally the figure has been up to three and-a-half times the main earner’s income before tax. On top of that you can also borrow up to one times the amount of any secondary earner in the household. An alternative to this is borrowing two and an half times the joint income of the two earners combined if this is larger than the amount of the two separate earners.
However many lenders have started to turn away from these income multiples in favour of affordability measures. These take into account other debt you might have as well as if you have children or not. However this also means they consider what you might be able to earn in the future.

When agreeing to a loan be very aware that interest rates can go up or down and this can change how much your monthly repayments are considerably. Many people on two year fixed rate deals are fast learning how a much a change in interest rates can really affect your mortgage repayments when a good rate ends and is replaced by a much higher one.

The citizens advice is warning that UK homeowners are “doomed to fail from the start” if they are sub-prime mortgage borrowers – i.e. those with a history of bad debt, repayments or a troubled financial past.

There are a variety of factors that, when combined, are making it more and more difficult for sub-prime borrowers in particular to get anywhere with their mortgage repayments.

The factors include a reluctance by lenders to renegotiate borrowers’ expensive home loans when it becomes apparent that they are struggling with their repayments, as well as lenders moving the cases to the courts too quickly even when they the borrower is facing only small repayment arrears. Lenders also pile on additional charges when repayments are missed and these only add to the hardships a borrower has to face.

The Citizens Advice has referred to this as a ‘hard line’ approach by lenders to get their money back but is really only exacerbating the borrowers’ problems and increasing the chances of the borrower defaulting on their loan.

Many lenders are also trying to solve the problem by forcing borrowers into more expensive remortgaging schemes or separate secured loans. This means even more cash is being taken out on the home itself and this raises the possibility of repossession down the line.

According to the research carried out by the Citizens Advice, many aspiring homeowners have been mis-sold home loans which are either unsuitable or not affordable for their individual circumstances. In many circumstances these borrowers are doomed to fail on their mortgage from the outset.

The Conservative leader, David Cameron has urged lenders to help out struggling homeowners who can no longer afford to repay their debts.

It is estimated that roughly 1.4 million are going to see their current cheap fixed rate mortgage deal end in the coming few months leading to sharp rises in mortgage repayments. It is expected that many of these borrowers will see their mortgages go up by as much as £500 in the coming months. This could be the final straw for many households sending them deep into the red according to Cameron.

Cameron has suggested that lenders ’stagger’ interest rate increases on home loans, as well as offering advice on how to cut the cost of mortgage repayments, like suggesting cheaper deals. One idea Cameron has suggested is to allow borrowers to switch to interest-only loan repayments.

Cameron made the suggestions in a speech to the Council for Mortgage Lenders. During his speech Cameron stated: “”I believed we urgently need to take stock of this situation, and together take steps to minimise the impact these higher mortgage bills might have.”

Cameron went on to say: “After all, it’s in no one’s interest if homeowners can’t keep up with their repayments. Because, lets not forget, banks lose out too if mortgages are not repaid.”

The Bank of England kept interest rates the same at the beginning of June in order to keep a balance between inflation and interest pressure. However some lenders have still increased their rates this month, as inter-bank lending remains at a high rate.

With so many deals out there today it is often difficult to know exactly what deal is the best one for you. Taking out a personal loan is the most common way of borrowing money and it is usually possible to borrow up to £100,000 for a period of time usually between six months all the way up to 25 years. The main determining factor is your financial situation.

The two types of loans out there that are most common are either a secured loan or an unsecured loan. A secured loan is usually tied to a valuable asset you own such as your house. If you fail to keep up with your payments you may end up losing your house.

Unsecured loans on the other hand are not tied to anything. However the danger of these loans lies in your credit rating. If you fail to keep up with your repayments then you could end up being credit blacklisted.

The best way of finding a good deal is to shop around. Generally if you borrow more money then you will have to pay less interest. Banks and building societies are not the only companies offering loans and nowadays it is even possible to borrow money through a supermarket. So make sure you investigate as many deals out there as possible.

The monthly interest rate advertised by the bank is not the best way of judging the price of a loan since they have other fees on top of that so make sure you find out how much fees cost before taking out a loan.

1.4m borrowers are going to come off cheap two year fixed rate deals in the coming few months. If you were to believe everything you read these days then you couldn’t be blamed for thinking things are going to get a lot worse in 2008.

While this picture is partially true it only paints a half picture. For borrowers who are looking for a new deal but have a poor credit history because of going in arrears in the past things could get more difficult. These borrowers are faced with a combination of higher interest rates as well as tighter lending criteria.

For instance, Kensington Mortgages, a home loan lender which specialised in sub-prime borrowers has now closed its books to new business. For many sub-prime borrowers, securing a new loan now could almost impossible.

However this will only be true for a tiny minority of borrowers and the majority of borrowers should not panic. Only borrowers with adverse credit should find it difficult to remortgage to a competitive deal, the majority of borrowers should have little trouble finding a deal that while still more expensive than their old deal is still competitive by today’s standards.

All borrowers who are reaching the end of their cheap two year deals should be expecting to be paying more when they switch to a new deal. There are still a lot of good tracker and fixed rate deals out there if you are willing to shop around.

Merrill Lynch has called on central banks on both sides of the Atlantic to drop interest rates in order to prevent the onset of a global recession brought on by rising oil and food prices.

According to the investment bank US interest rates would have to come down by 2% in the next two years in order for the Federal Reserve to boost the US economy which is on the verge of its first consumer-led recession since 1991. Consumers in the US are facing a massive strain as a combination of ‘punishing’ oil prices, rising unemployment and tighter lending standards all take their toll.

Merrill Lynch also called on the Bank of England’s monetary policy committee to announce cuts in interest rates when they next meet. So far the MPC has been very cautious about cutting rates again as inflationary pressures from high oil and food prices have still not subsided. Merrill Lynch predicts a marked slowdown in the UK economy this coming year from 3.1% now to 2%.

Merrill’s chief US economist, David Rosenberg, said: “A more solid tone to the global economy and a weak dollar will help bolster exports, but it is doubtful this will be enough to prevent overall economic growth from declining. These headwinds are clouding what is already a pretty bleak outlook.”

Poorer families and the elderly are facing a shock this coming winter, as fuel prices have increased by 50% in the last year. Debt charities saw a record rise in the number of families going into debt over fuel bills, with many households taking out personal loans or using credit cards to cover expenses.

The last world recession saw a crash in the housing market as millions of families had their homes repossessed following home loan defaults. Governments and banks need to act now to minimise the damage.

It is likely that mortgage lending is going to dry up in the next year according to experts in the financial sector. But what exactly does that mean for borrowers?

The past six months have provided their fair share of bad news with the arrival of the credit crunch as a result of the sub-prime sector losses and the crisis to hit Northern Rock.

As British borrowers wait and see how bad the global credit crisis is going to get, a stark warning has come that the ‘perfect storm’ is now brewing and it will affect everyone’s lives and finances directly in 2008.

The International Monetary Fund is warning that high oil prices and turbulence on the financial markets could bring a big reduction in international trade. At the same time the Council for Mortgage lenders have said a lack of available funding for home loans could open up next year, and the UK’s biggest building society has said house prices have fallen by their biggest level in 15 years.

If all that wasn’t bad enough, the Bank of England has warned of a slump in new mortgages and getting a new loan could get more and more difficult.

All this bad news points to one clear and simple fact that mortgage costs are going to soar for everyone in the coming year. As a result of the credit crisis banks simply are not lending to each other anymore and this is starting to impact heavily on high street lending.

Many lenders are now warning homeowners that in the wake of the credit crunch home loan costs are going to be much higher as lenders pass on the much higher cost of borrowing. Homeowners who have poor credit histories could find that the cost of mortgages for them could go up by even more.

Whilst there is no simple way of avoiding increased costs, some experts are now advising households in debt to focus on overpaying their mortgages and cut their current consumption. By doing this families can take control of their most valuable assets while sacrificing the less important things.

The majority of mortgage deals allow the borrower to overpay a proportion of the mortgage each year, usually somewhere around 10% extra per annum. The longer term loans are usually more flexible in overpayment rules.

If you do want to overpay your mortgage there are two ways of doing this. First of all you can ask your mortgage provider to reduce the length of the loan from, for example, 20 to 15 years. While this will increase your monthly repayments it will also decrease the amount of interest you pay.

Another option is to simply increase the amount you pay per month voluntarily or you could make a lump sum overpayment.

It is not always easy to overpay however, especially if every penny seems to be going out of the door on essentials. Additionally, some lenders do not like borrowers overpaying so if you are thinking of going down that route check if interest rates on your mortgage are calculated daily, monthly or annually.

It may seem like even more of a squeeze at a time when money is tight, but by working out a strict budget now that excludes luxuries and allows loan overpayment could be the best thing you’ve ever done in the longer term.