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BOE governor warns on borrowing and lending
July 9, 2007 by admin
Filed under News, News-Banking
The Governor of the Bank of England, Mervyn King, has stressed the importance of consumers being careful not to borrow money that they cannot afford, and lenders being more careful about who they lend money to.
Mr King stated that consumer debt levels in the UK could lead to a major debt crisis. And with another interest rate rise due in July – which will be the fifth interest rate rise since last August – many more people in the UK could find themselves struggling with unmanageable debt.
Speaking at the Mansion House Banquet in London, Mr King addressed families and individuals, stating: ‘be cautious about how much you borrow’.
He also addressed lenders stating: ‘be cautious about how much you lend’.
At last month’s Monetary Policy Committee meeting Mr King actually voted for a quarter percent rise in interest rates, but the majority vote was to keep interest rates stable in June. However, this month’s meeting is likely to see a different result, and a further quarter percent rise is widely predicted.
At the dinner – also attended by new Prime Minister Gordon Brown – Mr King stated: ‘Be cautious about how much you borrow is not a bad maxim for each and every one of us here tonight.’
He also addressed lenders, adding: ‘Excessive leverage is the common theme of many financial crises of the past. Are we really so much cleverer than the financiers of the past?’
One LibDem spokesman said: ‘A combination of an economic slowdown and higher interest rates could spell disaster for large numbers of heavily-indebted families. If interest rates rise further, many home owners will simply not be able to pay.’
And the Shadow Chancellor added: ‘Millions of people are struggling as the cost of living is rising faster than their incomes.’
Tom Smith
9th July 2007
Variable rate borrowers could be heading for a fall
July 7, 2007 by admin
Filed under News, News-Mortgages
Industry professionals are warning consumers that they could be heading for a fall if they have high levels of variable rate debts, from mortgages and secured loans to credit cards.
With four interest rate rises over the past year the Bank of England base rate has gone from 4.5 percent to 5.5 percent between last August and this May, and further interest rate rises have been predicted by experts before the year is out.
Many borrowers with variable rate loans and cards have seen their interest rates rise, and for many this has resulted in real financial difficulties when it comes to making repayments. Many consumers seem to have been banking on interest rates remaining stable in order to comfortably afford repayments on their borrowing, and the four interest rate rises since last August have really taken their toll.
The Governor of the Bank of England stated: ‘Anyone who borrows at a variable rate should recognise that the interest rate they will pay in the future may vary. It is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels.’
To many, this is something of a warning that further interest rates are indeed on the way, and those planning to take on more debt should be very careful as they may not be able to afford repayments should the interest rates continue to rise.
One economist stated: ‘Rates are going to go higher. A base rate of 6% is not necessarily the top. Borrowers should brace themselves for another increase. I would be surprised if base rate hit 7%, but not if it reached 6.5%.’
An official from the London School of Economics stated: ‘Base rate will peak towards the end of the year at or close to 6%. As long as inflation is under control, it could come down in a couple of years.’
Tom Smith
7th July 2007
Banks may be acting illegally over bank charges
July 1, 2007 by admin
Filed under News, News-Banking
Over recent months there has been a battle raging between banks, campaigners, and consumers, with the banks standing firmly on one side, and consumers and campaigners fighting in unity on the other side with regards to unfair bank charges.
Campaigners have been urging consumes to fight back against the banks and reclaim bank charges that were deemed unlawful and unfair by UK financial regulators last year, and many consumers have already done this, with some receiving thousands in backdated charges that go back up to six years.
However, although the banks have been paying up, albeit with some pressure in some cases, this is something they have been doing reluctantly. And in the latest move to try and put consumers off from making claims for the refund of charges, banks have been sending out threatening letters.
According to recent reports some banks have been contacting customers that have already been awarded refunds on their banks charges, and have been informing them that if they try to claim again in the future their bank accounts may be closed. However, officials claim that this is a move that could be classed as illegal.
The Royal Bank of Scotland has sent out letters of this nature, and the letter reads: ‘Any charges that properly accrue in the future will be applied to your account in line with our published tariff and in accordance with your agreement with the bank. Should you be unwilling to accept any such charges, then we may need to consider if we are prepared to continue to provide you with your existing banking facilities. Instead, we may offer you a simple account that does not offer borrowing facilities or other services that can result in charges.’
A spokesman for RBS stated: ‘If a customer is unwilling or unable to pay the charges for the services we provide or is considered a particular credit risk, then it is wholly appropriate for us to consider whether their existing account is best suited to their needs. As a responsible lender it may be appropriate to provide them with a more suitable account.’
Tom Smith
1st July 2007
