Broken rung on the property ladder

A new report has shown that the UK’s property ladder has a serious broken rung, which is namely the first rung that so many first time buyers are anxious to get their foot onto. A new report entitled ‘Broken Ladder’ has been released by the Home Builders’ Federation, and its contents show just how serious a problem it has become for potential first time buyers to realise their dreams of homeownership.

Shockingly the report suggests that in the current climate someone looking to get onto the property ladder would have to spend every penny of their income saving for two years simply to raise the deposit that most lenders were demanding, and in London this figure increased to three years. This would mean having no money for rent, food, clothes, or living expenses.

Over a five year period first time buyers would still have to save 50 percent of their income to put aside towards a deposit in order to raise the amount that lenders wanted, and again this would be even higher in areas such as London. The Home Builders’ Federation has said that the situation has now become critical at a time when the property market is already in turmoil.

A spokesperson for the Home Builders’ Federation said: “These figures reveal the extent of our housing crisis. First-time buyers – the life-blood of the housing market – are almost entirely shut out. The lack of mortgage availability is further strangling a market already choking on a lack of supply. We desperately need an increase in lending and a properly functioning and sustainable mortgage market. At the same time, the Government must ensure that the new planning policy and incentives they are basing the success of their housing plans on are put in place immediately. Without more houses and more mortgages, young families will be unable to have the security of a roof over their heads and the housing crisis will very quickly reach the point of no return.”

 

Tags: realise, young families, food, incentives, income, Home Builders, Real estate economics, situation

Whopping overdraft charges from Halifax

The High Street lender Halifax is to increase its borrowing costs from December of this year, and this will see customers having to spend a small fortune on the cost of borrowing, with the lender planning to hike up borrowing costs significantly. Read more

Tags: interest, charging structure, halifax bank charges, income, halifax, bank charges, overdraft facility

First-time buyers turn to families for help

First-time buyers are increasingly being forced to ask family members for help in raising a deposit as the mortgage market tightens under the global credit crunch. Read more

Tags: First-time, housing ladder, family, income, mortgage lenders, business

Growth in the use of equity release in the UK is “only a matter of time”

Increasing numbers of consumers are expected to use equity release over the next few years, one financial expert has claimed.

According to the Safe Home Income Plans (SHIP), the increased use of equity release is only a matter of time, given the extent to which consumers have preferred property over pensions as a method of saving for retirement over many years.

The SHIP added that the quality and standards of equity release schemes have improved over a similar time scale has meant more savers are comfortable using the schemes.

Andrea Rozario, director general of SHIP, said that declining levels of private pension provision and smaller state pension benefits will drive more people in this country to explore alternative ways to top up their income in later life.

She added: “Some will work longer, but a very large number are already planning to use the value in their property.”

Last week, a report from the Council of Mortgage Lenders called for the government to do more to encourage the take up of equity release schemes after it noted the relatively slow use of them compared with the Australian and US markets.

Tags: United States, SHIP, home, Australia, law, income, pensions, time scale

UK consumers saving less

Concerns about the future of the economy has led to UK consumers putting less money into their savings,

Findings from Sainsbury’s Bank show that those in work are saving 6.6 per cent of their income while those who do not have jobs are only putting away 4.8 per cent.

An estimated 16 per cent are saving less than a year ago compared with six per cent who are saving more, according to the figures.

Neil Cameron, savings manager with Sainsbury’s Finance, said: “Many people are clearly finding it difficult to save, with a worrying number unable to set aside anything at all.”

“It is concerning that many people have decreased the amount that they are putting aside in savings since last year,” he added.

On a regional basis, people in Yorkshire and Humberside are saving the least, putting aside on average 4.7 per cent of their monthly income into savings, while people in the East Midlands and Anglia are saving the most at 6.7 per cent.

Meanwhile, more research from the firm shows that spending on cars is set to decrease by £11.1 billion over the course of the next six months.

Tags: income, savings manager with Finance, work, United Kingdom, regional basis, jobs, east midlands, yorkshire

Average Brit ahead of international average when saving for retirement

A new survey published today shows that the average British consumer begins planning for their retirement up to five years ahead of the international average.

According to findings from AXA, Brits start saving for their post-work future at 28 years-old, compared with workers in France and Spain who do not start planning for life post-work until they are 34.

Up to three in four (71 per cent) of working Brits have started preparing for their retirement financially, a percentage higher than the global average of 54 per cent.

Steve Folkard, head of pensions and savings policy at AXA, said: “It is encouraging to see that Brits lead the way when it comes to retirement planning but not surprising given that state benefits in the UK provide a very modest retirement income compared with many other countries.”

The research also shows that people have found alternative ways to save for the future.

New methods include opening personal pension schemes (45 per cent) and putting money aside in equities and bonds (45 per cent).

Meanwhile, the Policy Exchange has warned that the pension crisis is worse than originally feared as it faces a perfect storm.

Tags: Termination of employment, life, Financial economics, modest retirement income, spain, head of pensions, Labor, income

Parents can help children buy property

First-time buyers can receive financial help from their parents when paying for a property without any inheritance tax implications, one mortgage expert claimed.

Bestinvest said that if a child’s funding for purchasing a house is assisted by their parents, then they are “party” to the mortgage.

Because of this, parents would rather give them some money and ensure the mortgage is in the child’s name, stated the firm.

Peter O’Donovan, mortgage manager for Bestinvest, said there would be no inheritance tax implications if a property is in a child’s name.

“Even when the parent uses their income to assist [with mortgage payments], the mortgage might be in three names but the property will just be in the child’s name,” he added.

Research released by Abbey earlier this month found that first born children are more likely to receive financial help for a home purchase than their siblings.

Up to 17 per cent of first-borns are given money towards their first home compared with 12 per cent of second-born children.

Tags: mortgage, mortgage expert, income, month, personal finance

‘Danger thresholds’ show borrowers most at risk

An industry expert has highlighted the fact that many people falling outside “defined thresholds” could be adversely affected by credit crunch.

Fool.co.uk urges mortgage borrowers to recognise the risks they could face from the wider impact of global credit problems by taking guidance from the Bank of England’s Financial Stability report.

It states that those with repayments of over 55 per cent of their total household income are most at risk, standing outside the defined thresholds.

David Kuo, head of personal finance at Fool.co.uk, advised: “Consumers should draw up a Statement of Affairs immediately to get a useful snapshot of their finances. The snapshot will tell, at a glance, whether you fall into one of the ‘at risk’ categories.

“Failing to draw up a Statement of Affairs in the current difficult financial climate is tantamount to driving a car without shock absorbers.”

The Financial Stability report speaks of a “tightening” in the money markets, pointing to the need for more focus on liquidity management and better stress testing among other things.

Tags: testing, fact, report, income, Head of Personal Finance, bank of england, The, loan

Consumers advised to inflate earnings to get mortgage

A recent report has revealed that many consumers in the UK are being advised to lie about their earnings on mortgage applications forms in order to enable them to get a larger loan – one that many cannot realistically afford based on their actual earning as opposed to the inflated amount that they state they earn.

This advice is being given to those that self certify, which means that they state their own income and this is often not checked out or verified by the lender.

A number of industry professionals, such as brokers and advisers, have been found to have been advising consumers to put down that they earn far more than they actually do, and this means that they get a larger mortgage loan. However, it also means that the repayments are far higher, as the lender will have based affordability on the earnings reported on the application form.

One man told investigators that he had managed to get a mortgage for eight times his salary by stating that he earned £50,000 per year as advised to do so by his financial adviser – he was actually earning half of that amount. As a result, stated the consumers, he was left repaying a huge mortgage that takes up the vast majority of his income, and has even had to deal with the threat of repossession through difficulties with affordability.

Campaigners are now urging financial regulators to look into this practice and put a stop to it, as it could add to the problems that have spread from the sub-prime market in the United States, leaving many of those in the sub-prime sector unable to cope with their repayments. The practice came to light following an investigation conducted by the BBC.

Tom Smith
24th October 2007

Tags: increase, loan, huge, salary, earnings

Savers missing out on tax breaks

Almost half of all British adults are knowingly paying too much tax, but refuse to do anything about it, Britannia has claimed.

New research from building society revealed that 48 per cent of UK adults have never had an ISA account and are failing to make the most of tax free savings.

Of those without an account, Britannia was shocked to discover that as many as 30 per cent did not even know what an ISA is.

“Our research reveals that there are many misconceptions about ISAs and people just don’t understand how they work,” said Neville Richardson, Britannia Group chief executive.

“It’s a shame that many of those who are saving are unnecessarily being taxed twice – firstly on their income and then again on their savings. This means 48 per cent of adults are financially worse off by missing out on tax free returns on their savings.”

Customers can open an ISA at any point during the year and are allowed to save £3,000 in cash and invest £4,000 into stocks and shares every year without paying any tax.

As of the beginning of the next financial year (2008/09), adults will be able to save up to £3,600 in tax-free cash and £7,200 in tax-free stocks and shares every year.

Tags: neville, percentage, half, anything, Britannia Group

UK in debt denial

Some four million people are considered ‘overindebted’, but the majority are in denial about their finances and therefore do not seek advice assistance.

A survey conducted by debt management firm Chiltern found that one in 16 Britons spends over a quarter of their income on repaying debt but just one in 45 admit to struggling financially.
“There are lots of people who are officially overindebted, but two-thirds of them don’t think they have a problem,” said Joanne Gill from Chiltern.

“Unfortunately debts don’t go away, they need to be repaid and ignoring them will just make the situation worse. Anyone who is paying a quarter of their income to service unsecured debts should get help to put those repayments on a sustainable footing before the situation gets worse.”

The research found that people aged between 35 and 44 were the most heavily in debt, with East Anglia proving to be the most indebted region.

Whether they admit it or not, it seems that money is still on the brain for many people in the UK. A recent study from Alliance & Leicester revealed that 3.4 million Britons consider money to be the biggest concern in life, with 18 per cent worrying about it every day.

Tags: britons, debt, majority, income, denial, Chiltern

Savings gulf opens up in UK

New research from Alliance & Leicester, released today, shows that Britons hold six times more in savings and investments than they do in debt.

Property was totted up as being worth £4.3 trillion, savings at £820 billion, with other assets including pensions totalling £1.8 trillion. Total borrowings came to £1.3 trillion.

This impressive ratio – gleaned from figures from the Bank of England, the Council of Mortgage Lenders and the government by the pollster YouGov – hides a financial gulf splitting the populace.

While richer households enjoy the property boom and the strong economy, lower income households are saving less as belts are tightened.

Evidence for this is found in savings figures: while the national average comes to £31,300, almost one third of households have no savings at all – pointing to a big split between the “haves” and the “have nots”.

Alliance and Leicester pointed out a general decrease in savings, with the bank’s head of savings and investments Ewan Edwards pointing out that on average just 2.1 per cent of disposable income is currently saved by Britons, when the figure averages out at 6 per cent over the last decade.

“Britons are increasingly losing the savings habit”, he concluded.

Tags: split, bank of england, belts, Council, splitting, income

Life insurance customers must be honest

Customer honesty is imperative when taking out a life insurance policy, an Independent Financial Advisor (IFA) said today.

While customers might be tempted to try to keep premiums as low as possible through selective disclosure of facts, this might well prove costly in the long run.

Kieran Platt, who also co-founded the website Life Direct, strongly recommends that “whatever the situation is when you apply for your policy, you must be totally honest”, with the possibility of claims being invalidated otherwise.

Giving the example of a claimant going wreck diving – “perceived to be high risk” – he pointed out that dangerous hobbies must be declared at the outset.

However, Mr Platt said that taking up a potentially premium-boosting activity such as a high risk hobby after filling the form in would not affect life insurance, provided it could be proved that at the time of taking the cover out it was not being practiced.

“Life policies are underwritten at outset: it’s the complete opposite of income protection insurance, where you have to go back to the insurance company anytime anything changes… With a life policy you don’t, it’s all done at the outset”, he surmised.

Recent figures from life insurers Bright Grey show that around one in three British families do not have life insurance, critical illness or income protection cover.

Tags: activity, Insurance, Kieran Platt, claimant going wreck, premiums

High income mortgage basket to become “more sophisticated”

The mortgage market for those on high incomes will become “more sophisticated” to match the increasingly varying ways that people earn money, a bank said today.

Private bank and mortgage lender Investec said that high-earning clients were increasingly seeking out more flexible and adjustable mortgages.

Indeed, so great has demand been that they have launched more personalised services such as multi-currency mortgages, limited to those who earn more than £150,000 per year and looking to borrow at least £500,000.

Spokesperson Wayne Preston commented: “Multi-currency mortgages aren’t for everybody…They need to understand markets. They need to understand interest rates… It’s really a more sophisticated type of individual or investor who understands that type of market.

“What clients are looking for is some alternatives in the market today”, he surmised.

Investec also revealed research which suggests that more than 100,000 Britons bring home over £200,000 each year.

Analysing Land Registry data, the bank also says that the number of £1 million homes increased by 48 per cent last year.

Tags: money, Spokesperson Wayne Preston, Britons bring home, Land, sophisticated type

Over one fifth of Brits do not save

Over twenty percent of Brits do not put aside any money in the form of savings according to a recent report. Research has shown that twenty one percent of Brits fail to put aside any money in savings.

The savings survey was carried out by Nationwide in a bid to try and determine how best to tempt consumers into opening and running a savings account. The survey also showed other facts and figures relating to Brits and the way that they save – if at all.

According to the survey, over one in five Brits saved nothing at all. However, the results also showed that thirty five percent of Brits do save money on a regular basis. In addition to this the survey revealed that nearly forty five percent of Brits tended to save on an ‘as and when’ basis, putting money aside into savings whenever they had some spare but otherwise using it for day to day cost of living.

Seventy seven percent of those interviewed as part of the survey stated that their most important consideration when it came to a savings account was a good, long term interest rate. Eight four percent also stated that the account needed to allow withdrawals without any form of penalty being imposed. Nearly sixty percent stated that they would only open a savings account with a well known provider.

Shockingly, the survey also showed that some people still use the most primitive methods of trying to save money, such as stashing their cash in various places around the home – including under the mattress. Those interested in savings accounts are advised to shop around and find an account that offers a good interest rate that reflects the rising interest rate in the UK.

Tom Smith
26th May 2007

Tags: earn, money, income, spend, bank, accounts, britons, uk, interest

Buy-to-let insurance risk warning

With buy-to-let investments becoming an increasingly attractive proposition for consumers, Sainsbury’s Bank is encouraging landlords to ensure they are adequately covered.

With figures from the Council of Mortgage Lenders showing that the number of buy-to-let mortgages has increased to 21 per cent, there are also now believed to be more than three million privately rented properties in the UK.

With the properties being worth a collective £510 billion, landlords are being advised in the strongest terms to ensure that they take out a comprehensive insurance policy.

Sainsbury’s Bank policies ensure against rental income of up to £20,000, while also providing contents cover of up to £40,000.

“Robert O’May, home insurance manager at Sainsbury’s Bank, said: “There has been huge growth in the number of properties rented out and it’s a lucrative venture for many.

“It’s therefore important for landlords to pick a good home insurance policy to protect their investments,” he added.

Tags: home insurance, manager, insurance policy, buy to let mortgages, venture, income, warning, good home insurance

Brits think of retirement first

The majority of Brits are more concerned about their pension than getting a mortgage.

New research shows that the average person in the UK begins putting money towards their retirement before taking their first step onto the property ladder.

A report released by Axa shows that the average person starts planning their retirement at the age of 28 but does not buy a house until the age of 29.

Britain, in fact, is a world leader when it comes to planning for retirement, beating off competition from the US, Canada and Australia.

Although the British attitude is commendable, some industry experts are warning that too many people (one third) are relying on property to secure a retirement income.

“Homeowners have limited options for generating earnings from the property they live in,” said Steve Folkard from Axa.

“Many people don’t take into account how emotionally attached they can become to a family home.

“By the time they retire, people are often loathed to move away from their friends and family or rob their children of their inheritance by handing over their home to an equity release company. This can scupper plans to take an income from the equity in their home,” he added.

Tags: folkard, mortgage.New research, ladder, equity, CAC 40, Steve Folkard, income

Lifetime mortgages popular among Brits

Lifetime mortgages and other equity release products are becoming more popular among Britons.

That is according to Safe Homes Income Plans (Ship), which says that a record-breaking £1.2 billion worth of lifetime mortgages were sold in 2006.

The firm has revealed that 2006 was a record year and, considering the way the market is growing, it expects to see that figure rise to £1.7 billion in 2007.

“The equity release market has come a long way over the past decade and has made very real strides in its attempt to rid itself from the scepticism that surrounded it in the early years,” said chief executive of Ship Jon King.

“Equity release has never been cheaper, more accessible or – with full regulation imminent in 2007 – safer.

“Modern drawdown products are a far cry from the inflexible, poor value products of the past,” he added.

A fall in the cost of lifetime mortgages due to increased competition is being touted as one of the main reasons behind their surge in popularity.

Tags: rise, real strides, Jon King, britons, past decade

Making sure that you have adequate mortgage protection cover

Recent surveys carried out in the latter part of 2006 seemed to indicate that many homeowners in the UK had failed to take out adequate mortgage protection insurance, and experts warned consumers to make sure that they looked into the type and level of insurance cover that they had for their mortgages. For most people in the UK a mortgage is a long term financial commitment and property purchasing is one of the most costly and important investments that they will make, which is why protecting both is so important.

Most people don’t think about the possibility of not being able to meet repayments on the mortgage when they first take out this loan, but there are many unexpected situations that can arise, which can render is unable to keep up with repayments. For instance, sickness, accidents, and redundancy could leave us unable to earn an income for a certain period of time, which would leave most people struggling to repay the mortgage. Being diagnosed with terminal illness or a critical illness could mean that you can no longer work or earn an income. And if you were to die your family may be left struggling to meet repayments without your income to keep them going. All of these circumstances could result in the loss of your home.

There are different mortgage protection plans available on the UK market these days, and consumers should ensure that they have as comprehensive a plan as possible in place in order to enjoy full peace of mind. Mortgage life insurance is a type of cover that decreases over the term and will ensure that your mortgage is repaid in full in the event of terminal illness, critical illness, or death. Mortgage repayment protection will cover your repayments for a specified period if you are unable to work due to redundancy, sickness, or injury, giving you time to get back on your feet and start work again without worrying about your mortgage.

Tags: cover, home, Insurance, Mortgages, house, lose, income, unemployed

Only quarter of Brits have adequate insurance cover against loss of income

A recent study carried out has shown the low level of insurance protection cover amongst Brits against loss of income in comparison to the reliance of British households on more than one income. According to the study almost fifty percent of households in the UK rely on more than one income in order to cover living costs, spending, and expenses. However, only a quarter of Brits seems to have adequate insurance cover to protect against the loss of their income.

The data comes from the Scottish Widows Protection Report. The information from the report showed the low level of protection amongst Brits when it comes to insuring themselves against loss of income due to situations such as illness or death. The report also showed that the majority of Brits had less than two months salary in savings to cover them in the event that they ended up losing an essential income.

According to the report: “These findings show that if a breadwinner becomes long-term ill – or dies – the average household in the UK does not even have their essential expenditure covered – let alone enough money for those little luxuries.” The report also indicated that even those with over thirty thousand pounds in savings shouldn’t get too complacent about how they would manage in the event of a loss of income: “Many people aspire to do more than just ‘survive’ a crisis – they wish to maintain their current lifestyle.”

A spokesperson from Scottish Widows stated: “The majority of the population is walking a financial high wire without a safety net. Nobody knows what is around the corner, but we have to accept that all too often illness does strike and accidents do happen. If people don’t start to take responsibility for their own financial futures then they could be left in a position where they can’t even cover the essential expenditure in their lives.”

Tags: employed, expenditure, payment, company, scottish widows, cover, income, Insurance

Debt Consolidation Loans – What Are They?

Debt is an interesting thing, it quite often creeps up on you before you realise what’s happening and then it drags you under, gripping hold of you like a drowning person and under you go before you’ve had a chance to catch your breathe. Read more

Tags: advertising, ccj, Credit card, income, consolidate debts, debt consolidation loans, payment protection insurance, debt consolidation