The average level of debt of people on informal debt management plans has fallen below the £26,000 and is now at its lowest amount since the Chiltern Debt Monitor started.

This average total debt amount is down by almost £400 since the beginning of the year, which shows that customers are dealing with their debts sooner and preventing their debts from escalating further.

However people’s disposable incomes are dropping, with household expenditure rising, which suggests that household finances are still under increasing pressure. Already this year consumers have seen fuel, food and energy increases putting further strain on already overstretched budgets.

Credit is becoming increasingly more difficult to secure amid the global credit crunch, with credit card holders seeing their limits reduced and homeowners having reduced mortgage options. 

The Council of Mortgage Lenders has indicated that there have been 30% fewer home loans offered so far this year than the same time last year, and many lenders have pulled the plug on their 100% deals.

Nathan Gladwell, spokesperson for Chiltern, said: “The current climate is encouraging more people who are struggling with their finances to seek alternative options, as credit becomes harder to get hold of. Add to that the rises in food, fuel and energy costs and it’s no surprise that most people are feeling the pinch in their pockets.

“People struggling with their finances need to readjust their spending to more realistic levels and be open to alternative options, like informal arrangements. Options like debt management can offer a valuable short-term solution whilst debts are brought under control, and they ensure that debts are prioritised so mortgage or rent and utility bills are accounted for first.”