OFT tackles irresponsible lending

Over the course of the decade leading up to the global financial crisis there was a period of easy credit in the UK, and lenders were throwing cash at people and businesses hand over fist in a bid to get their custom. Even those with damaged credit usually had no problem getting a loan or mortgage during this time. However, when the credit crunch swept the nation things came to a head, and over the coming months the banking industry was brought to its knees bringing with it the worst financial crisis in recent history.

Whilst things have improved and the financial sector is slowly getting back on its feet the days of easy credit are definitely gone, and lenders are being far more stringent about who they lend to. One of the main causes attributed to the financial crisis was irresponsible lending from banks and financial institutions, which had been eager to lend money to people without even running checks on whether they could afford to repay it in many cases.

Of course, the financial crisis is something that the UK does not want to see repeated, and with this in mind banks are now being discouraged from falling back into their old ways of lending to anyone. The Office of Fair Trading has recently produced guidance for banks, a requirement of which is aimed at ending the days of irresponsible lending.

The OFT has told the banking industry that it must not mislead consumers when it comes to providing finance, and that stringent checks must be carried out before any finance is agreed to ensure that the consumer is in a financial position to afford the credit being taken out. The OFT sad that is fully expected the industry to comply with this.

An official from the trade association, the Finance and Leasing Association, said that the new regulation would help to protect consumers, ensure that people did not get stuck with debt that they could not afford to take on, and would help to weed out unscrupulous lenders.

The new regulation has also been welcomed by the Citizen’s Advice Bureau, which tackles many cases relating to debt that consumers cannot afford to repay.

An official from the charity said: “Irresponsible lending plays a significant part in many of the debt problems we see in Citizens Advice Bureaux. The focus on getting firms’ practices and procedures right is a big step towards ensuring consumers are treated fairly and not encouraged into taking out unaffordable and unsustainable credit that lands them deep in debt.”

Tags: new regulation, nation things, lending, Fair Trading, debt, Banking, finance, credit

Buy to let investors to be hit hard by recession

It has been claimed that the buy to let industry is set to be hit hard as a result of the ongoing recession, with buy to let investors expected to lose money and take a real financial hit in the current economic and financial climate. Read more

Tags: uy, Many investors, lending, potential pitfalls, recessions, mortgage, finance, Mortgages

One year high for fixed rate mortgage lending

According to recently released figures fixed rate mortgage lending levels have recently hit their highest level in the space of around one year, as first time buyers and existing homeowners that are ready to refinance try and secure low rates clamour to take advantage of the all time low base rate, which still stands at 0.5 percent, which is the lowest level in the three hundred and fifteen year history of the Bank of England. Read more

Tags: fixed rate mortgages, council of mortgage lendres, higher deposit levels, first time buyers, Mortgages, lending

Interest rate could rise again quickly

The chief economist at the Bank of England has warned that whilst the base interest rate in the UK has plummeted to its lowest level in history over recent months, following a series of six interest rate cuts in as many months, there is a good chance that it could rocket back up again in the future if policymakers decide that the rate needs to go up in order to keep inflation in check. Read more

Tags: access, interest rates, bank of england, Central bank, order, Mortgages, lending, Index

Mortgage arrears to rocket

According to recent reports the level of mortgage arrears in the UK is set to rocket, with some industry reports claiming that there could be a huge rise in the number of people in arrears in 2009 despite the aggressive base interest rate cuts that have been applied by the Bank of England. In fact, around half a million households are set to fall behind with mortgage repayments in the coming year according to the reports, which come from the Council of Mortgage Lenders. Read more

Tags: mortgage, intervention, mortgage arrears, lending, council of mortgage lenders, year's figure, top

Consumers still having to pay high deposits for affordable mortgages

Over recent months getting a mortgage has become increasingly difficult and expensive, with many lenders reserving their best deals and lowest interest rates for those that are able to put down a sizeable deposit as opposed to the traditional 5% deposit. The changes in mortgage lending and costs have come about as a result of the global credit crunch, which swept across the nation last summer. Read more

Tags: lending, arrangement fees, Mortgages, england and wales, interest rates

Mortgage approvals reach ‘record low’ in May

The number of mortgage approvals for house purchases reached a record low last month, according to an industry body.

Figures for May show that remortgaging levels held up, accounting for a record 53 per cent of all mortgages approved, reported the British Bankers’ Association (BBA).

It also found that consumers spent more on their credit cards last month but repayment levels on credit cards were lower.

BBA statistics director David Dooks suggested mortgage activity was lower in May as a result of tighter lending criteria and economic pressures on households.

He added: “Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders.”

Separate research released last week by the housing charity Shelter suggests that more than four million households used credit cards to help meet rent or mortgage costs in the past 12 months.

It also found that over two million households are spending in excess of half their income on rent or mortgage payments.

Tags: lending, finance, economic pressures, number, BBA, repayment, result

‘We need to be doing much more saving’, says expert

With the economic downturn increasingly putting a strain on people’s finances, the country needs to “be doing much more saving”, an expert has advised.

Jamie Elliott, coordinator at Transact, which is a UK-wide network for people committed to promoting financial inclusion, pointed out that Brits have one of the lowest saving ratios in the world.

“It’s a huge problem and we need to shift from a culture of borrowing and seeing borrowing as the solution to our problem[s], to living within our means.”

He added that people should also be saving for “difficult times” and the financial industry will be making efforts to encourage this, for example by allowing people on low incomes to open bank accounts with the government adding a maximum of about £250.

Recent research by Credit Action revealed that total secured lending on homes was £1,207 billion at the end of April this year, which represented an increase of 8.7 per cent over the last 12 months.

Tags: business, recession, lending, year, secured lending, Transact, problem, GBP

HSBC: Rate matcher offer extended

HSBC has announced that all UK homeowners who are due to come off their fixed-rate mortgage deals before August 31st will now be able to apply for the bank’s rate matcher mortgage offer. Read more

Tags: hsbc ratematcher, Financial services, finance, mortgage repayments, head, fixed rate mortgages, lending

Mortgage market “still buoyant”

The mortgage market is “still buoyant” despite the recent financial crisis due to the amount of remortgage business available, claims one expert.

Despite the market being healthy, Bestinvest said that it is becoming increasingly harder and more expensive to look at remortgaging property. .

Peter O’Donovan, mortgage manager for Bestinvest, said: “There are still plenty of people looking to buy houses, it’s just the cost of doing so, and once again making sure they understand exactly what it is they are entering into.”

Previously a remortgage would only cost a couple of hundred pounds but now the average fee is a £1,000, he added.

According to the Council of Mortgage Lenders, the credit crunch has resulted in funding difficulties for a number of mortgage lenders, reducing their capacity to lend.

Lenders have responded by reappraising the risks involved in lending, resulting in a tightening in lending criteria and a widening in mortgage margins to parts of the market.

Tags: funding, lending, amount, expert, crisis, UK mortgage terminology, manager

Reduction in approvals ‘less dramatic than expected’

There has been a less substantial tightening in the mortgage market than was previously thought, according to the Council of Mortgage Lenders (CML).

In the Bank of England’s report today, the number of approved mortgages was shown to be steady, despite predictions that there would be a significant tightening of the market.

While there has been a slowdown, it is not unusual for the time of year and also reflects a slowdown in funding, explained Sue Anderson, head of member and external relations at the CML.

“To that extent this is pretty good news. It shows that the level of lending is looking as if it is holding up to a greater degree than some of the pessimists have been expecting,” she said.

The Bank of England report showed that net consumer credit in October this year was up on September as well as the average for the preceding six months.

Meanwhile, net credit card lending was up by £0.2 billion, which fell short of the net increase for September.

Tags: significant tightening, Offset mortgage, Real estate, bank, increase, number, lending, reduction

CML: Mortgage lenders to feel the squeeze

Mortgage lenders will feel the pressure of the credit crisis on the market, the Council of Mortgage Lenders (CML) has said.

The CML warned that this “testing time” is yet to come despite gross mortgage lending being up in October, standing at £32.4 billion.

Furthermore, the Building Societies Association (BSA) has revealed that £4.65 billion was lent for mortgages last month, down significantly on last year’s figures for October.

The BSA also reported the highest ever savings levels last month.

CML director general, Michael Coogan, commented: “The next few months will be a testing time as ongoing pressures in financial markets feed through into the wider economy.

“Funding constraints will continue to restrict lending activity and make loans more expensive.”

The Inflation report recently published by the Bank of England added to speculation that rates may fall, which Mr Coogan explained “should provide some relief for borrowers sooner rather than later”.

Tags: economy, gross mortgage lending, lending activity, Mortgages, report, lending, Inflation report

Money education ‘needed to reduce debt’

More education on money management and borrowing is required to help young adults in the UK avoid getting into debt, it is claimed.

According to Credit Action deputy manager Chris Tapp, Britons need more advice on the pitfalls of building up debt but stops short of calling for increased regulation on financial lending.

Too many Britons have “been educated into debt but not about debt”, he believes, calling for better advice to be provided by the government through the education system.

Sufficiently knowledge on the risks involved should be enough to help the UK’s younger adults to think more carefully about their financial management, Mr Tapp added, while the recent credit crunch, although not a good thing, could have provided a necessary wake up call to prompt people to think seriously about their money.

He concluded: “If people were better educated to the risks and people were able to manage their money more carefully … that would be more effective than further regulation.”

The National Union of Students has recently speculated that graduate debt in the UK could rise to £33,708 by 2011 because of the impact of top-up fees and recent increases to the cost of living.

Tags: lending, United States public debt, financial management, graduate debt, government, money education, education, deputy manager

Car Loans

Houses are the single biggest purchase you are likely to make in your life. The second isn’t so cut and dried, but it’s fairly likely to be a car. Given that you’ve probably already got quite a lot of credit and debts, and so there is a good chance another personal loan would be turned down by one of the regular banks is now the time to turn to a specialist car finance package? If so, are they really just for those who can’t get finance elsewhere?

Read more

Tags: lending, car loans, credit, apr, var fnance, showroom, PCH stands, hire purchase