Economic recovery depends partly on continued lending

The deputy governor of the Bank of England, Paul Tucker, has recently spoken out about the future of the UK’s economy, and has stated that in his opinion the future of the economy partly depends on continued credit being extended by lenders. Read more

Recession in UK could almost be over

Officials from the National Institute of Economic and Social Research have recently stated that the recession in the UK has almost completed its course, and could soon be over despite concerns from other industry groups and officials that it could last for another one to two years. Read more

Job loss misery for UK

According to recently released figures the UK has been hardest hit compared to other countries in Europe when it comes to the number of job losses during the first three months of the year. Read more

Rising number of Brits could head to New Zealand

Whilst many Brits may have jetted off to New Zealand for a long vacation to enjoy the beauty, natural surroundings, and sights, it has been revealed that many have made their minds up to go there and not bother coming back. Read more

Credit crunch results in loss of sleep for many

A recent report has suggested that the effects of the ongoing global credit crunch is resulting in many of us losing sleep through worries over our finances and our futures. Read more

Many will never be free from debt claims CAB

Officials from the charity the Citizen’s Advice Bureau have recently claimed that the typical person that is seeking assistance with their finances and debts has no chance of actually ever getting out of debt during their lifetime, which is a daunting prospect for the many people that have found themselves burdened with high levels of debt. Read more

Debt management firms warned by government

Officials from the government have been warning debt management firms to stop misleading consumers with regards to getting their debts written off. Read more

Increase in jobless figures

According to a recent report there was in increase in the number of jobless people in the UK towards the end of last year, and the rise in the number of unemployed is expected to continue this year. Read more

Progress with PPI not fast enough

Senior officials from the UK’s financial regulator, the Financial Services Authority, have said that progress is not being made quickly enough in the crackdown on the mis-selling of PPI. Payment Protection Insurance has been at the centre of investigations and controversy for some time after investigations revealed that it was commonly mis-sold by lenders and providers. Read more

£22 million in fines from FSA over 2008

Recently released figures have indicated that over the course of 2008 the Financial Services Authority handed down around £22 million in fines as it continued its crackdown against the mis-selling of payment protection insurance cover and tried to curb rising levels of mortgage related fraud. The UK’s financial regulator has been handing down record fines over the course of the year according to industry officials. Read more

Lenders issued with deadline to prove fairness

The UK’s financial regulator, the Financial Service Authority, has been contacting lenders that deal with home loans, and has advised them that they have a deadline by which they must prove that they are exercising fairness when it comes to their customers. Lenders will have to prove that customers that have arrears or are facing repossession are being treated fairly, and they have until the end of January to prove that this is happening. Read more

Banks could make billions from increasing profit margins

According to a recent report many of the UK’s major banks could end up making billions of pounds in extra profits by increasing the margins on loans and mortgages. It is thought that the banks could end up making around £3.6 billion as a result of these increases, so although the Bank of England base rate has fallen from 5.75% to just 3% over the past year the banks are still set to make huge profits. Read more

Sixteen year high for inflation in UK

According to recently released figures the level of inflation in the UK has now reached a sixteen year high, with inflation for September registering at 5.2%. The high cost of food, oil, and energy has been blamed for pushing inflation levels up to such a high figure, and the level of inflation is now way more than the 2% target set by the government. Inflation has been soaring for some months, and as a result of this the Bank of England has been unable to cut the base rate as quickly as had been expected at the start of the year, although it did apply a surprise 0.5% cut recently. Read more

Central banks cut interest rates in unprecedented move

Just a day ahead of the scheduled Monetary Policy Committee meeting, the Bank of England followed other global central banks by slashing the base interest rate by 0.5% in an unprecedented move. The interest rate in the UK has dropped from 5%, where is has stood since April, to 4.5%. Many lenders also reduced their borrowing interest rates right away upon hearing the news. Other global central banks have also shaved half a percentage point from their base rates, including Sweden, Switzerland, Canada, the United States, and Europe. Read more

House prices have plunged over last year

Over recent months homeowners and industry officials have seen one report after another that has shown how house prices are falling steadily on a month on month basis, and there has already been a significant fall in the value of homes compared to last year before the housing bubble burst. It has now been said that property prices have started falling at the fastest pace since the 1990s, and thousands of pounds have been wiped off the value of the average house price over the past year. Read more

Interest rate cuts could be put on hold

At the start of this year there were high hopes about base rate cuts amongst both borrowers and industry officials, with many expecting the base rate to fall significantly over the course of this year, and with some industry officials predicting that the base rate could fall as low as 4% or below by the end of the year. However, whilst the base rate was cut three times between December 2007 and April of this year, it seems that further rate cuts could be put on hold, as the Bank of England tries to deal with soaring inflation levels. Read more

2007 ended with lower lending levels from banks

A recent report has shown that there was a significantly lower level of lending to households from banks in the UK during the fourth quarter of last year. The information was released by the Bank of England, and officials from the Bank of England have put the drop in lending levels down to a number of different factors. The data came from the Bank of England’s Quarterly Credit Conditions Survey result. Read more

Improve your credit rating, advises expert

People who do not have a very good credit rating should make an effort to improve it, an expert has advised.

Richard Brown, the chief executive of Moneynet.co.uk, has said that lenders will not want to give out loans to consumers who have poor credit ratings, regardless of their job or earnings.

“At the moment, lenders are only really lending money to people who are demonstrating that they can repay it, so the ground rules have changed dramatically in the last 12 months or so,” Mr Brown commented.

He advised people with poor credit ratings to make an effort to improve them by making regular repayments on loans every month and trying to pay off more than just the minimum amount.

According to Credit Action, the average amount of interest paid by each household on their total debt is about £3,790 a year, which is up by £343 from a year ago.

Richest and poorest Brits hit by credit crunch

People at extreme ends of the wealth scale are being affected the most by the current economic turmoil, according to MGM Advantage.

The richest and poorest people in the UK are feeling the pinch from the credit crunch the most, the retirement income specialist has said.

According to research commissioned by the company, 20 per cent of people who are in debt and 25 per cent of those who have assets worth more than £1 million prefer to stash their cash at home rather than putting it in a savings account.

In the survey of more than 3,000 people round the country, it was found that women tend to be more likely to put their hard-earned cash in a savings account than men – 60 per cent of women said they used savings accounts compared to 48 per cent of men.

The Post Office recently reported that people who leave their money in accounts that pay a low level of interest are losing a total of about £8 billion every year.

Consumers must curb borrowing, says Osborne

The shadow chancellor George Osborne has said that people need to make an effort to curb their borrowing and take out fewer loans.

Speaking on Channel 4’s ‘News at Noon’, Mr Osborne said that in order to get inflation under control, people must cut their spending.

“People have to be cautious about entering into long-term financial commitments. For example, looking at how much they’re borrowing and watching the pennies basically,” he commented.

This comes just as MGM Advantage has revealed that 55 per cent of Brits are putting their money into savings accounts, although one in five of those in debt still prefer to keep their money at home than in the bank.

According to a recent survey by the company, at the other end of the scale, one in four of those who have more than £1 million in assets also shun savings accounts in favour of stashing their cash at home.

Clever consumers check their credit reports, says Experian

With attractive loan deals becoming increasingly difficult to come by, Experian has offered consumers advice on how to make sure that their applications stand the best chance of being accepted.

According to James Jones, the consumer education manager at Experian, people should take a look at their credit reports before making a loan application to ensure that all the information on them is correct.

“Lenders are using credit histories not only to decide whether to say yes or no to people but also to decide what rates to charge.

“So, clever consumers are checking their credit reports,” Mr Jones concluded.

Research from CreditExpert.co.uk has revealed that many people do not feel confident that they will be successful when making a loan application.

The company’s study found that 23 per cent of those polled believe they will be refused a loan of £1,000 and 42 per cent think they would not be able to secure a loan of £10,000.

Debt consolidation ‘an option’ for those in debt

People who are looking for a way to deal with their debt may want to consider debt consolidation, Experian has said.

James Jones, consumer education manager at the company, advised people who are struggling with their finances to seek advice from a free advice agency, citizen’s advice bureaus or the national debt line.

“Debt consolidation is one of a range of options,” Mr Jones commented.

“I would encourage people to always speak to their lenders if they are struggling to make payments,” he added, saying that they can help people find solutions to their debt problems.

According to research from CreditExpert.co.uk, 20 per cent of people plan their finances every six months or less.

Commenting on this, Mr Jones recommended that people get into the habit of doing this every month or every three months.

The research also found that one in ten of people are completely clueless about their level of debt.

1 in 10 clueless about their debt

Britain is a nation “in the dark” about its finances, a new report has suggested.

A report published by CreditExpert has revealed that just one in four people can accurately say how much they have left to repay on their loans.

Furthermore, one in ten people are unsure as to their actually level of debt, the study revealed.

The research also highlighted that many Britons are not confident about applying for loans, with more than one in five believing they would be refused credit of £1,000.

Furthermore, four out of ten would not expect to be authorised to borrow £10,000 and 66 per cent of people believe they could not take out a loan of £30,000.

The research follows a further recent study, conducted by Alliance & Leicester which showed that Britons are trying to cut back on their spending and save money in order to improve their financial health as the cost of living rises.

Mind: Debt can exacerbate mental health problems

Consumers who suffer from mental health problems can find their health deteriorates when they get into debt and receive letters from financial institutions, the national association for mental health, Mind, has said.

A spokesperson for the organisation said that people in debt are not just receiving one letter a week, but a barrage of phone calls throughout the day from different people, which can feel “quite intense” for some people.

Recent research by Mind found that the biggest reasons for people getting into problem debt were mental health problems (66 per cent), living on a low income (66 per cent) and difficulties in managing money (58 per cent).

Mind said that it has been working with the Financial Services Authority to change the way in which lenders treat their customers who have mental health problems and fall into debt.

“We are calling on banks to keep to… a code of practice, about responding appropriately to things like missed payments and treating people who are worried and have anxiety and depression appropriately,” added the spokesperson.

Debt cycle ‘carries on’ with payday loans

Regularly using payday loans to get through until the next paycheque can lead people into a spiral of debt, National Debtline has warned.

Spokesperson Beccy Boden Wilks said that payday loans can have high interest rates and consumers can often find cheaper borrowing options.

Ms Boden Wilks warned that people using payday loans on a regular basis may have a more serious underlying debt problem and advised them to have a close look at their budgets as well as to possibly seek advice on how to deal with their debts.

“If you’ve run out of money [ahead of your next paycheque], so you feel that you need to use these sorts of services, then there’s obviously a problem,” she commented.

Ms Boden Wilks added that people using these services should review their spending and budgets.

The take-up of short-term payday loans has risen by 55.4 per cent since last September, according to Moneysupermarket.com.

CAB: People struggling to meet basic living costs

The Citizens’ Advice Bureau (CAB) has said that more people are seeking help because they are struggling to pay basic household bills as the credit crunch tightens.

A spokesperson for the charity said the combination of soaring household expenses and rising housing costs is putting extra pressure on people’s budgets.

The CAB said that the number of people approaching the organisation for advice on mortgage arrears problems rose by 35 per cent in the first two months of 2008 compared with the same period last year.

Many people are also having difficulties paying for essentials such as gas, electricity, water and council tax.

“We believe these trends reflect recent increases in the cost of living, suggesting a significant number of households are struggling to meet their most basic living costs,” said the spokesperson.

According to the Office for National Statistics, UK consumer inflation reached its highest level in 13 months in April due to high food and fuel costs.

Alliance & Leicester launches new bond

Alliance & Leicester International has announced the launch of a new one-year fixed-rate bond, which the firm claims will meet the needs of its customers. Read more

Building society lending down

The number of loans being handed out by building societies has fallen, according to the Building Societies Association (BSA).

Adrian Coles, director-general of the BSA, said: “Lending at building societies was down year on year. This is partly due to building societies withdrawing products and increasing rates on new lending so that they do not become overly competitive.”

He added that some building societies have found themselves “inundated with applications” and were forced to limit their lending to preserve “high levels of service” as other lenders withdrew from the market.

Mr Coles also believes that the situation may be a product of the “greater level of uncertainty in the housing market” causing prospective buyers to wait.

The announcement comes as the Council of Mortgage Lenders (CML) praised HSBC’s recent offer to match the interest rate of any borrower coming to the end of a fixed rate deal as “a good example of market innovation”.

A spokesperson for the CML said that the offer highlighted that “there is still competition in the market despite obvious pressures”.

IVA not always best solutions, says expert

An individual voluntary arrangement (IVA) is not always the best solution for people facing crippling debt, according to a financial expert.

IVAs are seen as an alternative to bankruptcy, allowing people to settle their debts without damaging their credit rating to the same extent, however there are also drawbacks.

With an IVA, people are tied into paying their creditors for a period of 60 months, or five years. If they fail to make a payment, the arrangement can be withdrawn.

“Many people who take out an IVA initially go in with the intention of paying off their debts, but because it is so onerous they eventually fail anyway,” says David Kuo, head of personal finance at Fool.co.uk.

Record numbers of people are seeking help with debt concerns, with more than 215,000 new debt problems being reported in the first two months of this year, according to a new survey by Citizens Advice.

Mr Kuo noted that around 120 people are having their homes repossessed each day and that these were the most likely to be vulnerable and considering an IVA.

However, he said that in some cases it is best to declare bankruptcy from the outset.

Postgrads could be hit by credit crunch

Postgraduate students and those taking their second undergraduate degree may face financial problems due to the credit crunch as a number of lenders are withdrawing from the professional studies loan market, the National Union of Students (NUS) has warned.

There is very little state funding for postgraduate students and some of them take out loans to fund their studies, according to Directgov.

Speaking on students’ financial situations, the NUS said US bank Sallie Mae has already stopped providing new professional study loans and other banks may do the same.

Banks offering the equivalent of professional study loans in the UK may discontinue them if they want to reduce their exposure to risk.

Commenting on professional study loans, David Malcolm, head of social policy at NUS, said: “They are much bigger amounts of money and there is more opportunity to default on that. The types of students we are talking about are postgraduates and second undergraduate degree students.”

However, Mr Malcolm offered hope, saying that career development loans are likely to be protected as they are government backed and will not be as exposed to the global credit crunch.

British turning to overpriced “payday loans,” says expert

British consumers are increasingly turning to “payday loan” providers, which offer loans at annual percentage rates (APRs) of up to 1,355.

The loans, which are popular in the US, pay customers up to £750 into their bank account with an agreement to repay the loan at the end of the month when their paycheque arrives, according to a financial expert at fool.co.uk.

However, they typically charge £25 for every £100 borrowed, rising to £31.25 if the customer fails to pay it back on payday and can reach £1,400 if a borrower does not make any payments for a year, claims the website.

“These truly ugly loans are overpriced, overused and over here. Brits are falling victim to this form of borrowing when they should be fleeing from it,” Laura Starkey, a financial expert at price comparison site fool.co.uk, told the Independent.

To survive the credit crunch icWales.co.uk advises people to cut down on car journeys to save petrol, switch their utilities supplier and change credit cards to get the most competitive rates.

Debtors should not “hide the problems”

People facing serious financial difficulties should not try to “hide the problems” or assume that they can solve them themselves by using their credit cards even more, says an expert.

A recent report has found that 400,000 people took out new solutions for unsecured debt in 2007, with over half (58 per cent) deciding to refinance or remortgage.

David Kuo, head of personal finance at Fool.co.uk, has advised people to ask their lenders for help to try to solve the initial problem of having borrowed too much money, which they cannot repay in the time period stipulated by the lender.

A possible solution is to extend the length of a mortgage which will lower monthly repayments making it more affordable in the short-term and giving the borrower “breathing space,” although the total amount to be repaid will be higher.

However Mr Kuo advises against taking out secured and unsecured loans, since they may compound the problem.

“Sometimes people are a little misguided about how they solve their problems and they try and throw money at them,” Mr Kuo concluded.

As debt problems increase for many people and lenders tighten their criteria, a survey has found that 18,000 applications for credit cards are being rejected each day, according to MoneyExpert.com.

National Debtline: Fewer balance transfer deals affects other personal finances

The drop in the availability of cheap interest-free balance transfers that have been popular in recent years could have a knock-on effect on other aspects of people’s personal finances, according to National Debtline.

Consumers are finding it increasingly difficult to find cheap balance transfer deals for their credit card debt, which is impacting the number of mortgage arrears as people stop paying their mortgage to counterbalance the problem.

In the past many borrowers would transfer their debt to another near-nought per cent deal, however such cheap, accessible credit is now harder to come by, although the organisation said that some reasonably good deals are still available for those with a clean credit rating.

Commenting on the future outlook for consumers, Beccy Boden-Wilks, a debt adviser and spokesperson for National Debtline, said: “Those cheap credit, nought per cent balance transfers are going to be very hard to come by, if not non-existent.”


Despite the current difficulty of managing large amounts of debt, around 716,600 people will try and transfer around £1.1 billion a month between credit cards this year, according to Sainsbury’s Finance.

Credit crisis may force people to use more expensive lenders

The global credit crunch and more restrictive borrowing terms that many lenders have implemented may force consumers to go to higher-cost lenders, an expert from Equifax has said.

According to Credit Action, personal debt in the UK stood at £1,421 billion at the end of February 2008.

Total lending in February was up by £9.8 billion on the previous month, of which secured lending accounted for £7.4 billion and consumer credit was £2.4 billion.

Neil Munroe, external affairs director for Equifax, said that if banks reject more loan applications people “may be forced into more high-cost borrowing, so forced down into the subprime or near-prime market, whereas before they might not have considered going there”.

However, he also pointed out that banks have an “appetite” to lend people money, they will simply be more cautious when deciding whether to lend to people who they believe may not be in a position to repay the loan.

Interest rate cuts may not affect credit availability, says expert

The Bank of England’s interest rate cuts are unlikely to have an effect on the declining availability of credit, says economic research consultancy Capital Economics.

Lenders reported that during the first quarter of 2008 they had reduced the availability of secured credit to households, and expect to reduce it further over the next three months.

This means that borrowers will be faced with putting down bigger deposits for mortgages than before, as well as paying higher mortgage rates.

Similarly, household unsecured credit availability has also dropped over the last three months with predictions that it will also continue to decline in the future.

Vicky Redwood, UK economist at Capital Economics, said that yesterday’s interest cuts would not make “a huge amount of difference” since lenders had failed to pass on previous cuts in interest rates to borrowers.

Borrowers will nevertheless benefit in the short-term from the cuts and lending rates should eventually drop, however Ms Redwood noted that “things are likely to get a little worse before they get a little better”.

Personal loan costs on the up

The worsening credit crisis is pushing up the cost of taking out a ce.co.uk/loans/” target=”_self”>loan, despite cuts in the Bank of England base rate.

Moneyfacts, a financial data provider, claims that the average rate on a three year £5,000 unsecured personal loan has risen by 1.7 per cent in the past year, adding an extra £300 to the bill.

Nearly a third of personal loans taken out in the past year were for debt consolidation. A quarter of those borrowers ran into further debt, and 85 per cent of all those taking out loans were not asked to pay off existing debts by their lenders.

Worryingly, 70 per cent of loan applicants were not asked for proof of income, according to price comparison service uSwitch.com.

Mike Naylor of uSwitch.com commented: “With more than 7,716 loan repayments being missed every day and record write-offs, you might think that lenders had learnt their lesson.”

Figures released by the Bank of England last week showed that new consumer credit rose by £2.4 billion in February, compared to an increase £900 million in January.

Bridging finance has an ‘important role’ when credit is hard to get

Bridging loans can play an “important role” during tough financial times, one financial expert has claimed.

Business Moneyfacts said that bridging finance is “ideal” for any situation where funds are required quickly and for short periods.

Bridging loans can benefit property professionals looking to acquire property quickly at a time when the number of repossessions is increasing due to the amount of properties going to auction, claims the firm.

Lee Tillcock, editor of Business Moneyfacts said: “Investors buying at auction have often used bridging because they are required to complete within a few weeks of a successful bid when conventional mortgages are sometimes unworkable.”

He added that in a financial environment where credit is difficult to secure, the bridging option can provide a short term solution while that “ever-more-elusive long-term mortgage” is finalised.

Meanwhile, figures recently released by the Council of Mortgage Lenders show that in 27,100 homes were repossessed last year.

This is the highest figure since 1999 and a 21 per cent increase on the number in 2006.

Rates for secured loans are becoming as competitive as unsecured deals

Homeowners looking for a significant cash advance can now choose from secured loan deals which are even more competitive than the average unsecured loan rate, financial experts have claimed.

According to Moneyexpert.com, the average APR on a £15,000 unsecured loan is an estimated 8.44 per cent.

However, borrowers with the option of securing the loan against their property have been able to get interest rates as low as 5.9 per cent, almost 2.5 percentage points cheaper than the average unsecured loan rate on the market for balances of £15,000.

Sean Gardner, chief executive of MoneyExpert.com, said: “Historically secured loans were seen as something of a product of last resort.”

“But these days they are far more attractive to homeowners who are looking for a competitive rate of interest,” he added.

Findings from MoneyExpert.com reveal that demand has increased for secured loans in the past six months with an 85 per cent rise in the number of applications seen in the last quarter ending in January 2008.

Meanwhile, further research from finance experts have shown that 1.39 million have switched mortgage provider for a better deal in the past six months.

Lenders to start withdrawing 100% mortgage deals

Following the withdrawal of 125 per cent mortgage deals, many lenders are beginning to remove 100 per cent deals too, one finance expert has claimed.

Moneyfacts.co.uk has said that 100 per cent mortgage deals are becoming expensive and harder to find, and this is a market trend which will affect first-time buyers the most.

Since November almost one third of lenders offering the rate have withdrawn their products from the market, leaving only 28 providers.

Julia Harris analyst at moneyfacts.co.uk, said: “This is yet another example of lenders continuing to tighten their belts even further in what has become a vastly different mortgage market from this time last year.”

Those who are looking to get on the first rung of the property ladder will find there are fewer options without a deposit.

First-time buyers could have to pay a larger premium for the added risk that the lender is taking on, he added.

Meanwhile, the Council of Mortgage Lenders has reported that while gross lending held up well in January, there is still “considerable uncertainty in the housing market” at present.

OFT sends out ’scam’ texts to warn consumers

The Office of Fair Trading (OFT) has announced it is to send out fake ’scam’ text messages to consumers as part of their Scams Awareness month.

According to the OFT, an estimated six per cent of scam victims are aged between 15 and 24, which is part of the motivation for the campaign.

Mike Haley, director of consumer protection at the OFT said that young people can be vulnerable to consumer scams offered through new forms of technology.

“We hope that our innovative approach of sending fake scam text messages will remind young consumers to be on their guard if they receive a suspicious offer,” he said.

The text message reads as ‘Urgent! U may have won £1k cash with ‘2 Good 2 B True’ and is expected to be followed by a second message making it clear that there is no prize and that the message has been sent by the OFT to warn about scams.

According to the OFT, up to three million consumers are victims of scams per year.

January – the most popular month for taking out loans

January is the most popular month in the year for consumers to take out an unsecured personal loan, claims one financial expert.

Findings from Halifax reveal that, compared with other months, almost double the number of loans are taken out during the first few weeks of the year.

According to Halifax, the percentage of loans taken out for debt consolidation also increases during January.

Neil Chandler, head of Halifax Unsecured Personal Loans, said: “For many people, the start of the year is a time to get personal finances in order – transferring debt from more expensive products such as store cards or other loans.”

The research showed that men are more likely to apply for a debt consolidation loan than women regardless of the time of year.

Consumers aged between 20 and 29 years old are the most likely to take a loan for debt consolidation purposes closely followed by those aged 30-39 years old.

Meanwhile, Halifax is working with Experian in an attempt to re-unite customers with funds held in dormant banking and saving accounts.

At the start of the campaign, in March 2007, 110,000 accounts were identified as being dormant.

Bridging loans “should not be employed”

Bridging loans should not be employed “unless absolutely unavoidable” claim a legal body.

AA Legal Services said that although broken property chains remain, they should never be considered a routine factor and if one is obtained as a last resort, it should only be used where the period is limited.

James Molloy, product manager for AA Legal Services, said that the market will never be rid of aborted transactions and broken chains.

“Certainly not without reform around making the commitment to proceed legally binding earlier in the process – as in the Scottish process,” he added.

However, in all cases, and with all financial products appropriate advice in individual circumstances is essential.”

Research from the Times estimated that one in three property chains is broken.

According to new research from Hometrack, house prices dipped for the fourth month running while the average time it takes to sell a property is on the rise.

Switching loans could save consumers money

Consumers with unsecured personal loans could save up to £1.25 billion in interest by switching to a different provider, according to new research.

Findings from uSwitch.com reveals that those borrowers with an £8,000 loan over five years could save £166 by switching to the current best buy interest rate of 6.5 per cent.

Mike Naylor, personal finance expert at uSwitch.com, blamed “confusion and apathy” for holding consumers back from making savings on their existing loans.

“2.5 million people think the savings from switching a loan mid-term are too small. 1.6 million loan customers said it’s too much hassle and the most the discouraging news is that 14 per cent wouldn’t even consider doing it,” he said.

uSwitch urged consumers to consider changing their loan provider while they still can as many providers are now operating personal pricing, an option which prevents customers comparing prices.

Meanwhile, figures from the Office of National Statistics revealed that disposable income is at its lowest level in a decade.

Bank loss in court case could bring debt to the consumer

If the Office of Fair Trading’s (OFT) court case into the overdraft charges of eight banks goes against the firms, then the long term banking climate could be affected for the worse for the consumer claims one financial expert.

FinanceDaily.co.uk said, that while the legality of the case needs clarification, if the banks lose they maybe required to make pay outs up to £1 billion in compensation.

Dale Lovell, editor of FinanceDaily.co.uk, said: “If the banks lose the case it will almost certainly be the end to ‘free’ banking in the UK because the banks will have to find alternative ways of earning money back from customers.”

He added that the interest paid by banks on current accounts could end while the introduction of monthly standing charges for current accounts is also a distinct possibility.

The application for the declaration is brought against Abbey National, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Nationwide Building Society and Royal Bank of Scotland.

According to industry commentators, the banks make an estimated £10 million per day in charges.

Households to be worse off in 2008

Households will be financially worse off in 2008, according to Ernst & Young ITEM Club’s latest forecast for the UK economy.

The research, using the Treasury’s own economic model, describes public finances as a “mess” and anticipates the situation to get worse with slower growth and slower tax revenues predicted.

Speaking to the Independent, Peter Spencer, chief economic adviser to the ITEM Club, said: “Now that the economy is slowing sharply, the public finances will deteriorate equally rapidly.”

He added: “We have revised our forecast of this year’s current deficit up to £14 billion, compared with the Treasury’s pre-Budget report forecast of £8 billion.”

Experts have predicted that the Bank of England will cut interest rates at least three times to 4.75 per cent, or to a figure even lower, from the current 5.5 per cent over the course of the year or by 2009 if the economy continues to slow.

Meanwhile, research from property expert Right move shows that house prices are rising at their slowest rate for two years.

“Incredibly important” for debtors to be aware of solutions

It’s “incredibly important” that those seeking debt help are made aware of all solutions available to them, says a debt advice service.

Debt Help UK said that being aware of all the solutions that are available can make the difference between finding an appropriate solution and having a solution forced upon her.

Iain Wrenshall, director of Debt Help UK, said: “As your situation degrades, then your options generally become narrower and, ultimately, your creditors have the sanction to make that choice for you.”

“It is important that people don’t bury their heads in the sand, but look for free advice which is going to help them understand the solutions and the options open to them,” he concluded.

According to research from uSwitch.com, almost one in four UK adults are finding debts unmanageable - 9.5 million have maxed out on one form of credit in the last six months and 38 per cent have had a credit card application rejected.

Pensioners increasingly in debt

Despite the credit crunch, borrowing levels have continued to rise and debt levels are increasing with the over-55s being the worst offenders, according to financial experts.

Research from Callcredit reveals that the elderly are the most uncertain about their future with 16 per cent of respondents over-55 financially unaware and unable to define their debt levels.

As a result the pensions gap is continuing to increase, claim the organisation.

Mark Ward, consumer debt expert at Callcredit, said: “It is essential that people start to borrow more carefully in order to avoid having to owe more than we are able to pay back.”

Over 1.5 million of those aged 55 and over claim they can’t afford to retire at state retirement age due to a lack of pension savings.

Another 1.1 million retired homeowners in the UK have outstanding mortgage on their home, with an average debt of £38,000.

Callcredit is a consumer credit reference agency and forms part of the Skipton Information group.

Lending to get tighter in the New Year

The effects of the credit crunch will see lenders “tightening up” and looking at minor misdemeanours which may well have been ignored in the past, claim financial experts.

Equifax has said there could be an increase in the number of loan applications in the New Year, as lenders look more carefully at a person’s payment history.

Neil Munroe, external affairs director for Equifax, said: “Any negativity that might not have been a problem in the past might rise in prominence.”

He also warned consumers that an increase in the number of applications within a short space of time can look suspect.

Repeated searches on a consumer’s history have the potential to affect a person’s credit rating.

The latest figures from Credit Action show that total consumer credit lending to individuals in October 2007 was £222 billion. This has increased 5.8 per cent in the last 12 month.

Total lending in October 2007 grew by £8.8 billion.

Borrowing from friends affects both young and old

Both young and old are liable to borrow money from other people says a financial expert.

Research from online company Paypal reveals that “the person we turn to most for borrowing money is our mother”, while 16 per cent of UK consumers have fallen out with family members after lending money to them.

The findings also showed that there is “a huge chunk of us” that go to our friends to borrow money. This means the closer a person is to someone the more likely they are to borrow from them, claims Paypal.

Cristina Hoole, a spokesperson for PayPal, said: “The key thing is that if you do borrow money or if you lend money, that shouldn’t affect the relationship that you have with that person.”

“So make sure you don’t create a risk, especially over money, it’s not really worth it,” she concluded.

Research from YouGov showed that the average amount people in the UK have lent to friends and family in the last 12 months is £898.52.

Borrowing to continue despite credit crunch

Consumers will continue to keep borrow, despite the credit crunch and its potentially ill effects, claims a financial expert.

Colin Jackson, director of Baronworth Investment Services, has said borrowers “get into a spiral” which could result in debt being built up.

Many people are now using credit cards to pay off their mortgages which is “the most awful situation to be in”, according to Mr Jackson.

He added: “If you’re using your credit card because you haven’t got enough money at the end of the month to pay anyway then you’ll run up bill on your credit card and where do you go next? Another credit card.”

Mr Jackson also said that consumers are finding it “very tough” to put money aside due to rising costs of day-to-day living.

The latest debt statistics from Credit Action shows that total consumer credit lending to individuals in October 2007 was £222 billion.

This figure has increased by 5.8 per cent in the last 12 months.

Next Page »