Your Money: Dont Risk Going into the Red over Christmas Gifts; Consumers Are at an Increasing Risk of Debt When Buying Presents. JEREMY GATES Reports

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WITH more than seven weeks to go to Christmas, consumers have made an alarming discovery: before they buy a single present, many are deeply in the red.

Says David Thomson at the Debt Advice Agency: aaThe situation this Christmas is dangerous. The feelgood factor from two years of the lowest interest rates for 40 years is combining with a sense of wealth which many feel from the soaring value of bricks and mortar.

If interest rates go even lower, Christmas 2002 could be another plastic- melting experience for credit card holders.

But paper profits on houses cannot usually be turned easily into ready cash and there is a risk of static, or even falling, house prices in 2003.

All the recent surveys on personal debt have flashed up alarming signals. HSBC economist John Butler warns consumers have aagone ballistic in their readiness to put themselves in hock.

Kensington Mortgages calculates that outstanding consumer credit excluding mortgages has soared 126 per cent since 1995, up to pounds 140.1 billion. Being overborrowed, says Kensington, worries men more than women.

Bank of England figures show consumer credit credit cards, store cards, loans and overdrafts totalled pounds 17 billion in September, up pounds 2.2 billion or 15 per cent on September 2001. Total amount outstanding in this sector is a staggering pounds 153 billion.

In theory, of course, there is no great danger in personal debt for people who have enjoyed a surge in the value of their homes. But the Consumer Credit Counselling Service (CCCS), a charity which helps people to manage debts, says debts owed by those in their 20s have risen the fastest of any age group up 11 per cent in the past two years to an average pounds 17,000.

Many in this age group have yet to buy a home. Saddled by debts from student days, they have yet to command the higher salaries which further education is supposed to bring.

Older generations are joining in the binge as well: people aged between 40 and 60 have average debts of nearly pounds 28,500 and many will be paying them off until well into their retirement unless they release a lump sum by selling off their home.

So long as people have a steady income, they may believe that problems can be contained typically by switching credit cards to enjoy introductory 0 per cent offers on transferred balances for the first six months. But unemployment is already rising, notably among higher earners in financial services and media industries concentrated in London and the South-East.

Says Drew Wotherspoon of The MarketPlace at Bradford & Bingley: aaNobody really knows what lies around the corner, but borrowing is a part of most peoples lives and they should do their utmost to get best value. …