Credit crunch puts £640 extra on family expenses

For the first time  -  on the first anniversary of the crisis  -  it lays bare the impact of the economic ills on millions of households across Britain.

The extra burden comes from the higher rate charged on mortgages, credit cards and unsecured personal loans and the lower rates on savings.

Home crisis: Many are finding it hard to meet payments

But these are average figures and some families are suffering significantly higher expenses.

The cost is also before Britons find a penny for all the other bills they must pay, such as for food, petrol and gas, which have rocketed by up to 35 per cent.

August 9 last year was 'the day the world changed,' according to Adam Applegarth, the disgraced former boss of Northern Rock.

The crisis started in America from large loans lent to people who could not afford them. The study from the financial information firm Moneyfacts shows the lasting and dramatic impact on this country.

Researchers looked at average rates charged on  August 8, 2007, the day before disaster struck, and the same day in 2008.

The biggest hit comes from mortgages, particularly if homeowners have a small deposit which means they face being crippled by higher interest rates.

Last year, a buyer borrowing £155,000, the average new house loan, could take out a two-year fixed rate with a 5 per cent deposit at an average of

Twelve months on, the average rate has shot up to 7.06 per cent, which would lead to extra repayment charges of £554 a year.

But it is not just higher mortgage costs which is causing financial suffering but lower returns on savings.

Michelle Slade, an analyst from Moneyfacts, said: 'It seems no aspect of people's personal finances has been left untouched by the credit crunch.'

Investors with £500 in an instant access savings account would have received a typical rate of 3.87 per cent in August 2007.  Today it is 3.01 per cent.

Credit card companies are also having an impact on hard-pressed customers.

The average 'purchase rate' has risen from 16.69 per cent in August last year to 17.09 per cent today.

Unsecured personal loans have also been hit, jumping from an average of 8 per cent last year to 9.46 per cent to borrow £7,500 over five years.

Lord Oakeshott, Liberal Democrat Treasury spokesman, said: 'The Romans had a phrase for it  -  an annus horribilis for British families.

'This year will be even worse as many more firms and families go bust and homes and jobs are lost. Britain's economy has never fallen off a cliff like this.'

A separate exclusive report, from mortgage advisers London & Country, highlighted how people are slashing their spending to cope with the credit crisis.

More than 1,000 homeowners with mortgages were asked how they have changed their lifestyle in the last year.

Around 70 per cent said they have cut costs with decisions such as shelving home improvements, cutting back on using the car and holidaying in the UK rather than overseas.

Others said they have stopped eating out, delayed plans to start a family, cut back on shopping for clothes and cancelled subscriptions to satellite TV.

Around a third have used their savings to pay for expenses which previously would have been paid for out of their weekly or monthly income.

When asked when 'things will return to a more normal footing,' about 50 per cent said they think it will be 2010 at the earliest.

Philip Hammond, Shadow Chief Secretary to the Treasury, said: 'It is a year since the start of the credit crunch, and still we've got no answers from Gordon Brown.

'We've got a falling housing market, rising unemployment and millions of families struggling with soaring living costs but ministers are fighting each other rather than fighting for Britain.'

To make matters worse, workers are facing the biggest strain on their family finances for nearly two decades.

The average pay rise across the private and public sector is 3.2 per cent, but inflation is at a 16-year high of 3.8 per cent.