Mortgage defaults are yet to peak

A recent report has suggested that whilst many people may already have fallen behind with their mortgage repayments the level of mortgage defaults in the UK has not yet peaked, and that it could be some time before the level of defaults hits its worst. Read more

Tags: mortgage arrears, government, United States, crunch, recent report, mortgage defaults, england

Virgin Money applies to become bank

Virgin Money has put in an application to become a fully fledged bank according to a recent report. The company, headed by Sir Richard Branson, already offers a number of financial products, but now wants to become a full service bank and has put in an application to do so. Read more

Tags: Virgin, banking service, virgin money, crunch, virgin money bank, Financial Services Authority

Credit crunch alters eating habits of Brits

A major credit card provider has recently carried out a study, and claims that the results of the research show that the global credit crunch, which continues to take a hold in the UK, has had a dramatic effect on the eating habits of Brits. Read more

Tags: credit crunch, uk, eating habits, crunch, eating out, abbey credit cards, british eating habits, official

New credit cards can ‘ease the pinch’

The global credit crunch may be prompting both consumers and lender to tighten their belts, but a number of new credit cards have recently been launched which could help ‘ease the pinch’, it has been reported.

According to the online resource Thrifty Scot, a number of credit card companies have brought out new products which could benefit consumers.

The website highlighted the Halifax all in one product, the Saga credit card, the American Express card and Abbey’s Zero credit option.

However, the news provider also pointed out that an industry official remarked Abbey’s card is not necessarily the best option around:

“Around 80 per cent of credit cards offer a lower standard APR on purchases compared to Abbey’s Zero card…its standard balance transfer rate of 18.9 per cent is among the highest go-to rates on the market.”

Meanwhile, recent research by Fairinvestment.co.uk revealed that 21 per cent of people surveyed say zero per cent balance transfer is the most important feature of a credit card.

Tags: transfer, zero card, consumers, online resource, Financial services, Saga credit card, belts, crunch

Britannia: Beware headline-grabbing rates

Britannia building society has warned consumers to be wary of “headline-grabbing rates” on savings accounts as they may not be a good long-term option.

Jayne Dono, a spokesperson for Britannia, said that a number of organisations have been attracting new savers with high initial rates on their savings.

“There’s no doubt that there are some great deals available for savers at the moment, with organisations competing against each other for business,” said Ms Dono.

However, she warned that although people may benefit in the short term, “they should also be aware of the long-term prospects and whether these organisations really have their best interests at heart”.

Recent research from the Building Societies Association (BSA) shows that the majority of building society bosses are optimistic about the year ahead, despite the credit crunch.

Building societies have experienced record savings inflows over the last eight months and they expect the trend to continue as consumers seek safer saving options, according to the BSA.

Tags: term, year, number, record, Business and Economy, new savers, building societies association

“Shop around online” for discounts, advises expert

A personal finance writer has advised consumers to avoid spontaneous shopping trips and impulse buys, instead saying people should “try and shop around online” to find the best discounts on a range of products.

With more people finding themselves in financial difficulty as a result of the global credit crunch, Cliff D’Arcy says they should use the internet to find bargains and “get more bang for [their] bucks”.

The comments follow research from Monolink, which found that British consumers aged between 16 to 34 years old are struggling to pay off their credit card debts as they try to keep up with their friends and lead a fashionable lifestyle.

According to the survey, 14 per cent of respondents have bought clothes on a credit card which they are still trying to clear and 13 per cent have bought a car when they still have debt on their credit card.

Shopping online can result in discounts of between 30 and 50 per cent, says Mr D’Arcy.

Tags: credit, research, global credit crunch, crunch, internet, credit card debt, finance

BRC: Credit crunch leading to “cash comeback”

More people are using cash to pay for their purchases amid growing consumer concerns about how much money they are spending, the British Retail Consortium (BRC) has claimed.

The global credit crunch is causing consumers to be more cautious with their money, says BRC spokesperson Richard Dodd.

New figures from the organisation show that cash is now used for 60 per cent of all transactions, an increase of 54 per cent from 2007.

Cash now represents 34 per cent of all money spent in the retail sector, compared with 32 per cent a year ago.

Recent research from uSwitch shows that on average, credit card holders owe £1,812.

With ten per cent of all cardholders paying the minimum on their cards, the company estimates 3.5 million people will spend close to the next 30 years clearing their credit cards.

“People’s enthusiasm for using cards is slipping. That’s because people are not only reluctant to borrow, they are also reluctant to use cards,” concluded Mr Dodd.

Tags: Recent research, Richard Dodd, spokesperson richard dodd.new, crunch, organisation, Business Finance, spokesperson

Bradford & Bingley: Arrears on the up

UK lender Bradford & Bingley has said that mortgage arrears are continuing to rise as more borrowers are facing difficulties in repaying their loans.

Britain’s ninth-biggest listed bank said that it expect increased payment strain and falling house prices to result in higher impairment provisions, according to Reuters.

Hours after meeting with Alistair Darling, the mortgage lender, which makes over 50 per cent of its home loans to buy-to-let landlords, said its margins were under pressure and it is starting to pass the higher costs on to customers.

Yet the bank also said that the buy-to-let area of its business is performing well, suggesting that it is homeowners who are being hit hardest by the credit crunch.

Those faced with arrears will be pleased with Abbey National’s announcement earlier this week that it will cut rates on its two-year tracker and flexible mortgages by 0.1 per cent.

“We will continue to review the cost of funding and will look to reflect further changes in our mortgage range going forward,” said a spokesman for the bank, adding that it hopes other lenders will follow suit and take action to stimulate the mortgage market.

Tags: funding, Alistair Darling, range, credit crunch, loan, announcement, house, crunch

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.

Tags: government, professional studies, crunch, undergraduate, National Union, financial problems

Credit crunch makes it ‘harder’ for UK consumers to get cards at low-rates

UK consumers are “finding it harder” to get credit cards with low rates of interest due to the credit crunch, one financial expert has claimed.

Credit Action said that credit is not as widely available as it was 12 months ago and in those places where credit can be found, it is often more expensive.

Chris Tapp, director of Credit Action, said: “So credit cards and all kinds of credit have become a less widely available and a more expensive option for borrowing than they were in the recent past.”

However, he added that the popularity of credit cards is still enduring and they are not about to go away as they are now a “very normalised part” of the way that people manage and borrow their money.

Recent research from MoneyExpert.com released at the beginning of the month shows that 3.2 million of us own five or more credit cards and 28 per cent of us applied for more plastic last year.

The news comes despite mounting concern about debt problems as the credit crunch hits home.

Tags: credit crunch, Credit score, normalised part, director of Credit Action, past, crunch

Mortgage lending ‘drops to lowest levels for 2 years’

Mortgage lending dropped to its lowest level for over two years last month, according to figures from the Council of Mortgage Lenders (CML).

The statistics show a 25 per cent drop on gross mortgage lending compared with November and 21 per cent fall from the same figure recorded for the month last year.

Gross lending only reached £22.5 billion, the lowest amount since May 2005 and down from the £29.9 billion recorded in November.

Simon Rubinsohn, senior economist at the Royal Institution of Chartered Surveyors, said: “2007 may have been a banner year for the mortgage market as the CML data suggests, but the most timely indicators point to a sharp slowdown in demand for property-related loans.”

However, despite the effects of the credit crunch gross mortgage lending during 2007 reached an estimated £362 billion, an increase of five per cent from the £345 billion in 2006.

Meanwhile, mortgage lenders are putting increasing pressure on the Bank of England to help them raise funds to provide potential homeowners with loans reports the Financial Times.

Tags: crunch, gross mortgage lending, Chartered, bank of england, data

Green mortgages ‘not affected by the credit crunch’

Green mortgages have not been affected by the credit crunch, due to the “type of person” who takes one out claims one lender.

Norwich and Peterborough Building Society said that, despite concern over interest rates, there has been no change in the numbers of people taking out green mortgages.

“The reason they’re interested in a green mortgage is because of their personal ethics, so we’ve seen no difference at all,” said Alison Rolls, a spokesperson for the business.

She adds that green mortgages are still very much a “niche product” with growth being much slower than would be good for the environment.

Overall more consumers still need to “put the environment more on their shopping list” and think less about interest rates.

According to Mortgages.co.uk, green mortgages aim to reduce negative impact on our environment.

Lenders that offer this package will often make contributions to charities that support the environment or the welfare of the less fortunate.

Tags: support, Super jumbo mortgage, Alison Rolls, Financial crisis of 2007–2009, credit crunch

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.

Tags: Credit history, awful situation, 12 months, Credit Action, end, crunch, personal finance, bill

Economists give views on where interest rates will go next

There was a sigh of relief across the UK earlier this week when the Bank of England announced that interest rates had been cut by 0.25% from 5.75% to 5.5%.

There are now mixed predictions with regards to what will happen with the interest rate next, with some predicting that 2008 will see another one or two interest rate cuts and others believing that the interest rate could fall as low as 4% in 2008. Financial experts from This is Money interviewed some economists to get their views.

An official from Investec stated: ‘Evidently the MPC is taking much more note of recent signs of a slowdown in the economy and its fears over the possible effects of the credit squeeze have begun to crystallize. The question obviously now is whether rates come down again and if so how quickly. The outlook is very uncertain. We are pencilling two further 25 basis-point cuts over the first half of next year.’

Roger Bootle from Deloitte and Touche stated: ‘Today’s decision by the MPC to cut interest rates from 5.75% to 5.5% is the first step in a prolonged period of monetary easing that could see rates fall very sharply. I previously thought that rates would drop to 5%, but I now think that they could eventually be cut all the way to 4%. Inflation is likely to rise further in the coming months. However, the rise in interbank interest rates means that the risk of a very sharp and prolonged economic downturn is growing by the day.’

A spokesman from Bear Stearns said: ‘We expect another cut in January, with rates to target 5% by the second quarter. UK rates should be at 4.5% by the end of 2008, possibly even lower if the downturn is more severe. This has been a cut to alleviate the credit crunch and provide a rescue remedy for growth. Lower rates should help to put a prop under the UK housing market.’

Tom Smith
10t December 2007

Tags: bank, housing, uk, propert, credit, interest, england

Financial prudence advised over Christmas

Consumers are warned that they must be in control of their finances over Christmas this year.

The Consumer Credit Counselling Service (CSSS) has said that following the global credit crunch, Brits must be more prudent than ever in keeping their under control.

James Ketchell, a spokesperson for the CSSS, explained that Christmas could end up being the “tipping point which pushes people over the edge”.

“People will have to be a lot more careful in their spending than they have been in the past perhaps, and really look at the cost of all the expenses at Christmas…They will have to live within their means,” he continued.

Meanwhile, small loans, which many consumers use to finance the festive season, are set to have increased rates this year, with the average reaching into double figures.

Furthermore, the number of rejections for loan applications has gone up substantially, with moneyexpert.com finding that 1.91 million people had their applications rejected in the six months to the end of September.

Tags: Business Finance, control, crunch, Loans, CSSS, Gift, United States bankruptcy law

King advised Darling not to lend to Lloyds

The Governor of the Bank of England Mervyn King has spoken out about his advice to the Chancellor of the Exchequer with regards to a loan request from banking giant Lloyds TSB.

The high street bank had approached the Bank of England for a loan to the tune of £30 billion in order to fund the takeover of Northern Rock. However, the governor advised the chancellor not to authorize the loan, which Lloyds wanted to take out over two years at competitive rates.

According to Mr King he told Darling that the Bank of England should not be providing loans to a company in order to allow the takeover of another company.

Speaking on Radio 4 Mr King stated: “I said to the chancellor: ‘This is not something which a central bank can do. They don’t normally finance takeovers by one company for another, let alone to the tune of £30bn, which is rather a large amount of money’.”

When speaking on Radio 4 Mr King also added that it could take months before banks get back to normal following the effects of the credit crunch.

He stated: “I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we’re going in the right direction.”

He also added: “There is always, in a period like this, the possibility that a shock from outside the UK, one from the world economy, might create further fragilities, but to some extent there are always risks, there are always fragilities. What I would say is that the situation now is, in my view, different from that in August, though it’s not without risk.”

Tom Smith
15th November 2007

Tags: king, bank, Banking, chancellor, rock, england, crunch, lloyds

Credit card Christmas spending likely to soar

Consumers are planning to splash out this Christmas on credit, and could find themselves in financial difficulties as a result.

Having studied the latest Bank of England consumer credit data, credit reference agency Callcredit found that last Christmas, vast amounts were borrowed on cards.

60 per cent of the whole of 2006’s credit card lending took place in December last year, and Callcredit has warned that this is likely to be repeated this year.

Indeed, with many experts warning that unsecured personal loans are getting harder and harder to get hold of, thanks to the impending credit crunch, this year’s figure could be even higher.

Head of consumer finance at Callcredit, Mark Ward, warned: “From our review of these statistics, and in spite of the widely reported credit crunch, we’re still anticipating that many consumers will turn to credit at Christmas in order to fund their spending.”

“Worryingly, it could be these people who may find it more difficult or expensive to borrow on credit,” he added.

Tags: callcredit, consumer, head, consumers, crunch, vast amounts, christmas, consumer credit data

Barclays offer reduced personal loan rates

Barclays bank has announced it will cut its personal loan rates when many lenders are having trouble maintaining current rates, according to Gary Druggan, managing director at Barclays Personal Loans.

Cutting rates on its entire book, the lending giant steps up competition in a move that takes advantage of its “strong balance sheet”.

The bank reports that Barclayloan Plus loan rates are going down by 0.6 per cent to 6.8 per cent APR typical.

Mr Duggan said: “At Barclays we are able to take advantage of a very strong balance sheet and finance loans from our very strong deposit taking business, enabling us to cut rates for this campaign.”

Personal loan rates have been just one of many things to be affected by recent credit crunch.

With many lenders forced to push rates up by as much as four per cent, borrowers would have trouble finding a rate below 6.9 per cent.

Mr Druggan added that anyone finding better loan rates than offered with Barclays will be refunded the difference and will also receive a bonus of one pound every month.

Tags: offer, crunch, apr, personal finance, borrowers, difference, move, pound