We may have started the year with brimming optimism over the U.K. consumer resolve, but if my January credit card bills - which haven't shrunk as much as expected - are a measure of the common man's burden, then it's likely we could have more problems in store for the future.

As it turns out, some of the latest market reports indicate that I am not alone in feeling the pinch of overspending and rising interest rates. No one expected the surprise January 0.25% rate increase, not even economists who were anticipating rates to stay at 5.0%, through at least this month. But now that it's here, it means more belt tightening and less spending for those of us who can afford to make such concessions.

For U.K. consumers more heavily indebted and sitting on a floating- rate mortgage loan, the impact is expected to be much more detrimental. Bankruptcies continue to climb rapidly and, according to a research from U.K. debt consultancy firm Thomas Charles, 19% of adults with debts of GBP10,000 ($19,676) or more reporting some likelihood of becoming bankrupt or taking out an individual voluntary arrangement (IVA).

Indications are that the early January rate rise will likely be followed up by at least one more hike in April. Should variable rates rise

further, consumer woes could translate into an increase in arrears in consumer ABS deals. These rising arrears and possessions within individual transactions could start to make some investors nervous.

The good news is that unemployment rates are expected to trickle down again, and the house price forecast suggests continued growth, albeit at a slower rate. Plus, the rise in interest rates and more stabilization in house prices can only encourage new borrowers. Market analysts said they are reassured that the economic factors are broadly supportive of a stable market.

So, for me, it means that I at least get to keep my job and maybe look forward to finally getting my foot on the notorious U.K. property ladder. As for shifty ABS investors, it means the promise of more stabilization in deal performance.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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