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More than a million people have taken out loans without telling their family or partner about the debt, Abbey Loans has found.

Some 1.3 million people have got a so-called secret loan, with more than half of them saying they are using the funds to repay other debts.

The news comes after the latest debt statistics by Credit Action found that British borrowers pay some £94.5 billion a year in interest, with the average debt per household standing at £56,234.

Abbey Loans’ survey discovered the typical amount borrowed by secret debtors was £5,720, according to Abbey Loans, with the majority of loans for an amount smaller than £3,000.

However, some people’s secret borrowings are more substantial. Abbey Loans found that there are people with secret loans of as much as £50,000.

Paul Morrish, Abbey Loans director, urged people not to take on debt without discussing their options with friends or family.

“Talking about your financial situation with others can help so that you can be realistic about what is affordable,” he added

Many consumers in the UK have made use of credit cards that offer zero per cent balance transfers and purchase rates in order to manage their Christmas bills effectively.

According to Sainsbury’s Bank, zero per cent credit card deals can help most people to keep new year debt “under control” and enable them to clear bills quickly and easily.

Donald Macleod, Sainsbury’s Bank head of cards, claims that nearly two in three Brits expect to clear their Christmas debt by the end of the month, indicating that it is not a “massive problem” for most people.

“Bearing in mind that it’s the busiest time of the year, two thirds of people have their debt all cleared by the end of the month,” he stated. “I don’t view that as disastrous… In the main, it sounds like everybody’s got it pretty much under control.”

Sainsbury’s Bank estimates that 18 per cent of spending over the Christmas period in the UK was put on credit cards, with 61 per cent of consumers planning to pay off bills by the end of January, 15 per cent over two to three months, three per cent over seven to 12 months and one per cent over more than a year.

In light of the expected slowdown in the housing market a number of lenders in the UK have reduced the amount of money that they are prepared to lend to potential property purchasers looking for a mortgage.

According to a recent report around eleven mortgage lenders have cut their lending levels as a result of prediction of a continuing slowdown in the property market.

The report claims that the lenders have cut their loan to value maximums on a range of mortgage products since December.

A number of studies, reports, and analyses have all pointed towards a current and continuing slowdown in the housing market, with falling house prices expected as well as reduced demand in some areas, in addition to some reports of fewer properties coming onto the market because of the costly and controversial Home Information Packs amongst other factors.

The report goes on to state that a number of lenders have now stopped offer 100% mortgages, where consumers can borrow the full value of the property without having to put down a deposit – something that many first time buyer relied on in the past because they had no equity from a previous property to put towards a deposit on a property purchase.

Some lenders have apparently stopped 100% mortgages to anyone that cannot provide a guarantor.

A variety of other mainstream lenders have reduced the amount that they will lend, cutting maximum borrowing levels from 95% of the property value to 90% of the property value on a variety of mortgage products.

One industry official said that the turn of events was understandable given the long period of 95% LTVs offered as a norm by most lenders, and considering that some lenders had been offering up to 130% LTV.

He added that the move came as no surprise taking into account the subdued housing market, the bleak outlook for the imminent future of the housing market, and the state of consumer debt within the UK.

Economists and analysts have predicted that house prices will either stagnate over the course of this year or will drop, although most do not expect the drop to be a highly significant one.

European Union consumers are set to benefit from lower penalty fees and interest rates under the EU consumer credit directive, which is expected to be approved by MEPs this week.

The new law aims to open the €800 billion (£600 billion) consumer credit market to cross-border competition.

Lenders will have to provide standardised information about annual percentage rates, for example, so that borrowers will find it simple to switch from a lender in their home country to one in any of the EU’s 26 member states.

Currently, cross-border agreements account for less than 1% of the market, however this figure could rise substantially under the new rules, because interest rates in the eurozone start as low as 6.3%, in Finland.

The EU directive will be applied to loans from €200 up to €75,000 and will not apply to mortgages, equity releases, charge cards or overdrafts.

BEUC, the consumer group that covers pan-European issues, has called the measures too narrow and is particularly concerned that provisions on early repayment are too vague and could therefore leave borrowers with no early repayment option.

According to the latest figures, outstanding consumer credit per person ranges from over €3,000 in the UK and Republic of Ireland to less than €100 in Slovenia.

The number of households defaulting on their mortgage payments is expected to rise over the next three months, the Bank of England has warned.

Its gloomy assessment comes as it says the global credit crunch is likely to worsen into 2008, as banks become less willing to lend out funds.

The Bank’s comments came as it said homes and firms found it harder to borrow funds towards the end of 2007.

Its findings may raise hopes of a further cut in interest rates.

The Bank’s comments came in its latest quarterly Credit Conditions Survey, which covers the last three months of 2007.

It said banks were now less willing to lend because of the higher cost and reduced availability of credit.

The perilous state of the housing market has proved an unexpected boon to Rightmove the property website.

According to the company, desperate estate agents have been turning to the website to help them to complete sales.

Rightmove said in a trading statement yesterday that profit before tax was likely to be at the upper end of the forecast range, £29.3 million to £32.3 million, as much as 82 per cent up on last year’s pretax profit of £17.7 million.

About 90 per cent of British estate agents now subscribe to the website, which charges £325 per office to host adverts.

Despite nearly running out of estate agents, the company said it was confident it would be able to increase prices. This year has already seen prices raised 30 per cent, from £250.

In a sign that housebuilders are increasingly anxious about selling on new homes, there was a 39 per cent increase in the number of new-build developments signing up to the site. The 20 biggest housebuilders all now use Rightmove.

A spokesman for the company said: “The housing market isn’t doing very well, so people tend to think that Rightmove won’t be doing very well. But because agents are having to work harder to sell properties, they are putting their discretionary spending where they get the best returns.”

He added that Rightmove would be insulated from any downturn until the point that estate agents start shutting offices. Rightmove accounts for about 10 per cent of property advertising spending, with the majority going to the local press.

The update came as Bellway, one of Britain’s biggest builders, suggested it was weathering the storm better than its rivals as sales remained steady over the past six months. Persimmon, Redrow and Bovis Homes have all reported declines this year.

A Council of Mortgage Lenders survey this week showed that the number of new mortgages taken out fell to a seven-month low in November.

THE METHODIST Church in Britain is launching a new credit card, but it will not be used to make purchases.
 
The ‘Buy Less Live More’ credit card is being distributed to act as a reminder to people to think twice before making a purchase.

The card is designed to be placed in a wallet or purse in front of other credit cards as part of a campaign to get people to curb their spending.

The Lent initiative has been welcomed by the Rev Michaela Youngson, Methodist Secretary for Pastoral Care and Spirituality. She said: “When we take time to think about the things we buy and why we buy them, it can help us to reconsider our priorities. I may well want to buy something, but does that mean that I need it?

But Buy Less: Live More isn’t about depriving yourself of those things you want; it’s about looking at life in a new way, trying different things and taking a few risks.

So as well as reducing your carbon footprint by getting off the consumer treadmill, you can live life in all its fullness.”

During Lent people who sign up will receive a daily email with 2 challenges or ideas for buying less and living more.