Middle classes forced to take second jobs

MIDDLE-CLASS families are being forced to take on second jobs as the credit crunch plays havoc with their budgets.

Households with an annual income of £30,000 or more are resorting to extreme measures to ease the financial strain, according to a new YouGov poll.

It comes amid a deepening credit crisis which threatens to cripple the housing market as lenders continue to withdraw mortgage products and raise rates.

Yesterday, the UK's sixth largest building society, Skipton, pulled its three-year fixed-rate mortgage and two of its tracker products, while Salt, part of Derbyshire Building Society, is withdrawing its entire tracker range, although it will be launching new deals on Monday.

Other lenders to alter their terms included the Woolwich, Loughborough Building Society and West Bromwich Building Society.

Earlier this week, the internet and telephone bank First Direct temporarily closed its mortgage range to new customers after receiving five times its usual level of applications, while the Co-operative Bank said it was pulling all of its two-year deals.

The number of different mortgage products available has dived by 12 per cent since Monday alone, falling to 4,754. At the beginning of July 2007, before the credit crunch first hit, there were 15,599 different deals.

The shortage looks likely to get worse, with firms warning they are likely to rein in lending further, according to the Bank of England's Credit Conditions Survey, out yesterday. The research, for the first quarter, found the cost of borrowing will continue rising.

The Bank's monetary policy committee is to meet next week to set the interest rate. It is charged solely with keeping inflation to the 2 per cent target but with turmoil in the market denting confidence, the committee is facing pressure to cut rates to ease conditions. There is speculation they will cut interest rates by 0.25 per cent to 5 per cent.

Rob Clifford, the chief executive of brokers Mortgage Force, said: "There will be significant re-pricing that will hurt consumers. No-one will escape the mortgage market getting more expensive."

According to YouGov research – which involved 2,000 people and was commissioned by the insurers Axa – about 72 per cent of households with an annual income of £30,000 plan to cut their spending this year.

For 15 per cent of respondents, making ends meet will require getting a second job or sending a member of the family not currently working out to get a job.

One in five people will stop saving or cut their pension contributions, with 30 per cent of people saying they do not have enough money left at the end of the month to save. Some 15 per cent blame their cashflow problems on high house prices and the same proportion blame them on debts.

Axa said the survey shows the extent of the difficulties faced by people on above-average incomes. It said middle-class inflation, which takes into account goods and services typically bought by middle-income families, is running at 5.7 per cent when income growth is slow.

The findings were released after the Bank of England showed that borrowing through credit cards, overdrafts and loans soared to its highest level for more than five years during February.

Unsecured debt increased by £2.35 billion during the month, its highest level since October 2002, prompting speculation that consumers are resorting to credit to make ends meet.

Steve Folkard, an Axa spokesman, said: "A typical family in middle Britain may have a higher-than-average income but millions are weighed down by high lifestyle costs and face tough choices as the strain on their finances takes its toll.

"We've had it easy for so long and spent without thinking of the consequences – now people aren't sure what to do."

The full article contains 641 words and appears in The Scotsman newspaper.Last Updated: 04 April 2008 12:12 AM

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