The only silver lining to this economic cloud is that the Bank of England is expected to cut interest rates twice in the months ahead and hence reduce the cost of borrowing. However, there is no guarantee that the savings will be passed on to ordinary debtors. Recent cuts in interest rates have helped mortgage providers rather than homeowners, as lenders seek to protect themselves against the worsening economic situation. Borrowing, both in for mortgages and ordinary credit, is likely to continue increasing in cost, as are food and fuel prices.

This will be an urgent wake up call for many. Despite the financial difficulties faced by an increasing number of Britons, many have been acting as though the higher cost of living and troubled house prices were a temporary blip rather than a steady decline. Things will get better in the future, but it is a future that years rather than months away. Debtors will have to plan carefully in order to make it through the difficult times ahead. Above all, they must be cautious about taking on credit in order to help with temporary costs. This strategy might work if the economic troubles were only going to be short term, but since it may well be years before things improve regular use of credit is likely to prove a recipe for disaster.

Of course, this isn’t to say that people in debt are more prone to mental health problems. The vast majority of debtors are ordinary people who have seen their debts pile up for ordinary reasons – job loss, routine overspending, a long sickness, and so on and so forth. What these findings do highlight is the how vulnerable certain groups can be in a culture of easy credit. The targeting of credit cards to the young has been widely criticised, and with good reason – it normalises debt for young people just as they begin to earn. Equally, numerous members of the IVA forum have cited depression and bereavement as being causes of their debt. When someone is upset, they don’t think about the full consequences of their spending, and it is all too easy to get into a serious level of debt.

Once again, more responsible lending, based not just on an individual’s income and credit report but on their personal circumstances and situation, is something that needs to be implemented more by creditors. This needs to be carefully handled – responsible lending needs to be avoid discriminating against those with mental health problems and other difficulties, while at the same time protecting troubled people from taking on an excessive amount of debt. Otherwise, we will continue to see the unfortunate pattern of vulnerable members of society running up enormous amounts of debt that they cannot afford to repay.

With the double effect of a sharply rising cost of living and mortgage prices that are spiralling upwards, many homeowners are finding themselves trapped between a rock and a hard place. The 1.4 million homeowners who are set to come off their fixed rate mortgages are especially likely to suffer, as are recent home buyers who have found themselves in negative equity. In the past, equity rises would have allowed struggling homeowners to remortgage and pay off their debts, and the more buoyant housing market meant that it was much easier for those on sub-prime mortgages to find a decent deal. Now, with house prices tumbling, many people could find themselves stuck in mortgages that they simply cannot afford to pay.

The good news is that this rise in possession claims and orders won’t necessarily lead to a wave of repossessions. Almost 50% of those under a repossession order manage to negotiate an agreement which allows them to keep their house or temporarily make reduced payments. But most analysts are predicting doom and gloom this year. Insolvencies, repossessions and CCJs are all likely to increase significantly over the next six months, and thousands of people are likely to face severe financial trouble before the year is out.

This has long been a problem in the personal debt and insolvency industry. Certain sectors are subject to strict scrutiny and are tightly legally controlled, while others inhabit a legal grey area and are more difficult to control and regulate. The IVA industry has numerous laws that are applied to it, and it is very closely monitored. An IVA is a legal contract between and debtor and his or her creditors which must be respected and followed closely.

Debt Management Plans and other informal debt solutions are not so well monitored or legally binding. Statistics are not published about who is on them, how much they owe, what their rate of success is, and so on and so forth. This does not mean that Debt Management Plans are necessarily problematic, it just means that they are harder to monitor and, potentially, easier to offer poor service on without getting caught out.

The downturn in IVAs is suspected to have driven many debtors into Debt Management Plans. Given that there is no write off of debt, many of these plans can potentially last ten years or longer. It is highly unlikely that a debtor will be able to maintain payments for this length of time or resist the temptation of taking out further credit, and this is likely to eventually lead to bankruptcy. If debtors continue to turn to unregulated Debt Management Plans, we won’t have a full idea of the personal debt crisis in the UK until it is too late.

That debt continues to rise is unsurprising. Fewer sources of credit are now available, but there is still plenty of money that is there to be borrowed, and plenty of people who want or need to borrow it.  But debt is getting more expensive every week – since the credit crunch hit, the cost of borrowing has risen considerably. Mortgages, credit cards and personal loans have all seen significant interest rate rises in the past few months, and the more that people borrow, the more the interest is going to pile up.

 The rise in debt during March is not exceptional. It is simply the same steady increase that has been seen in recent months, and does not show that borrowing is either slowing down or spiralling out of control. But because borrowing is starting to cost much more than it did, if the increased interest rates starts to be felt, it could snowball considerably. £93 billion was paid in interest alone by consumers over the past twelve months – in the next year, with interest rates spiralling up, this figure could be much, much higher, unless consumers can manage their debts and avoid being caught out.

There is little to do but play the waiting game to see which way the statistics go next month, and the month after that, to see how the pattern develops over time and whether or not the UK’s debt mountain is likely to shrink or grow in the months ahead.

That IVAs have begun to increase in number is of little surprise, given the almost apocalyptic predictions for personal insolvencies this year. Indeed, what is more surprising is how little they have increased, relatively speaking. Just over 25,000 people went insolvent in the first quarter. If the trend continues, over 100,000 will be insolvent by the end of the year, but this is nowhere near the 130,000 predicted by KPMG. This may well be the calm before the storm, of course, if there is a surge in solvency later on this year, but it has not happened just yet.

It is important to keep the changes in perspective. While IVAs have increased by 4.3% compared to the previous quarter, they are still down a massive 22% compared to the same time last year. We are nowhere near an insolvency crisis just yet, as we are not even up to the number of IVAs being taken out at the beginning of last year, when the economy was booming. And, strangely enough, it is good to see that IVAs are being approved again. Whether or not this is due to seriously increased demand or down to the code of practice agreed by banks and IPs earlier this year, it isn’t known. But this increase in insolvencies, small as it is, is a warning sign, and could be an indication of more serious problems to come in the year ahead.

It’s unsurprising that these changes have occurred, particularly in the wake of the credit card interest increases that have been going on since the credit crunch started. Perhaps, given the ruling on unfair bank charges that the OFT has made, the banks are anticipating mass payouts to consumers in the next few months. The banks are trying to protect themselves and maximise their profits in the wake of some substantial profits. The days of cheap borrowing are over – maybe temporarily, maybe for the foreseeable future. While these rises will hurt debtors, at least they are straightforward interest hikes. The number fiddling and hidden charges that have been brought in on a range of credit cards are much more likely to catch debtors unawares.

Those who considering taking out a personal loan to shore up their finances are advised to research thoroughly before taking a loan out. Some good deals are still out there, but it is important to remember that interest rates are typically more punishing for the smaller loans than for the larger ones – a loan of £1000 from Black Horse has a 27.9% interest rate, whereas a £7500 over five years has a 16.9% rate of interest. Of course, there’s no reason to get a bigger loan than you need just to get a better rate of interest and Payment Protection Insurance is usually best left well alone. It’s regarded as one of the poorest forms of insurance that can be taken out, with the banks offering PPI that is particularly poor value for money. Any loan that is taken out needs to be affordable, and with a clear repayment plan in place.

The Archbishop was particularly critical of doorstep lenders and loan sharks who charge exorbitant rates of interest to those who have been refused by highstreet lenders, and also criticised the growing divide between the super rich and the poor. Dr Williams warned that an “economy built on spiralling, more or less uncontrolled, credit” is leading to “the erosion of family life and the erosion of self-confidence” for many people.

It is a timely address. Previously, the Church of England has shown a concern for debt, setting up a webpage dedicated to debt relief, and it is good to hear debt being taken seriously by a national institution. Most of the comment on the credit crunch and house market troubles has been on the bigger picture – the state of the economy, the future of the financial industry and so on. Worthy concerns, to be sure, but of equal or greater importance is the plight of the many ordinary people who struggle under the practical and physiological pressure of chronic debt.

The Archbishop had some deeply concerning things to say on this last point, saying that his charity workers had discovered that 1 in 3 heavily indebted people has seriously considered suicide. It is hard to understand the pressure that heavy debt brings until you have actually felt it. Thankfully, Dr Williams is making an effort to understand, and is determined to help the nation work towards a solution.

Bank charges are big business for banks. It is estimated that the banks collectively receive £3.5 billion from the charges every year. That’s over £10 million a day. The charges can go as high as £39 for a bounced cheque or missed direct debit, when the actual administration cost is estimated at £2 for each instance. Reclaiming the charges can bring a few hundred pounds back to consumers, or much much more – one Norfolk businessman reportedly claimed back over £35,000 last year.

Anyone who feels they have a case to make should send a template letter (many of these are available on the internet) to their bank, and should be aware that there is a time limit on making claims – you cannot claim back charges that are over six years old. But those who are hoping to claim back their charges will have to keep waiting for a while. The ‘freeze’ on repayments, imposed last year, still applies for the time being. It may be a long time before a decision is reached, and there may well be a lengthy appeals process. But the case has made it past the first step at the very least, giving hope to many.

For credit cards, in March people actually paid off marginally more then they borrowed, with £7.4 billion being taken out and £7.5 billion of credit card debt paid off. Every silver lining has its cloud, however – despite these figures, due to interest and charges net credit borrowing still increased by £300 million. About £2.7 billion was taken out in loans, which is similar to previous months, and overdraft borrowing increased slightly. Overall, a quieter month compared to the February surge in borrowing.

Remarkably, March also saw the biggest increase in savings in a long time, with over £2.9 billion being invested in savings compared to the monthly average of £1.9 billion. Perhaps in anticipation of troubles ahead, people are banking as much as they can into savings whilst they still have the chance. Whatever the reason, bigger savings will provide many with the safety net to survive the uncertain future.

While March saw a significant boost in savings, mortgage rejection rates climbed to 46%, as the housing market worsens and new and existing homeowners struggle to secure new mortgages.

These statistics are only averages, and debtors experiences are will always be individual. It may be that it is the best off in the country who are responsible for the surge in savings rather than those who are truly struggling. Equally, the fact that borrowing has decreased may have more to do with banks rejecting customers than debtors growing more cautious. But the figures seem to suggest increased consumer caution in the face of anticipated problems, and it can only be a good thing that can only be a good thing as the economy remains unstable, and many ordinary families struggle to make ends meet.