Mortgage affordability in UK level with other countries

According to industry officials affordability on mortgages in the UK is pretty much on level with that in other countries. A study was carried out by Capital Economics, and suggested that when it came to mortgage affordability the UK was no worse off than other countries.

The company conducted research which looked at mortgage affordability in nine major Western economies, and this included Australia, Denmark, France, Ireland, Netherlands, Spain, Sweden, the USA and the UK. The average amount of take home pay that was used for mortgage repayments on a repayment mortgages in these countries came to 48 percent.

Over the past forty years the level of take home pay going on mortgage repayments in the UK has been around 50 percent. The highest level of take home pay going on mortgage repayments was found to be in Sweden, where 56 percent of pay went on mortgage repayments. The cheapest was in Spain, where 39 percent of take home pay went on mortgage repayments.

One economist involved in the research said that many may have expected the level of take home pay that was being spent on mortgage repayments in the UK to be higher due to high population density and undersupply of housing, but he stated that this was not the case.

He stated: “Our analysis shows that over the past 40 years, long-run average UK mortgage affordability is unremarkable in an international context. To our minds, this casts doubt on the popular view that a chronic undersupply of homes in the UK supports high prices.”

At present the actual level of take home pay going on mortgage repayments in the UK is 44 percent, and this comes from the record low base rate of 0.5 percent, which has reduced mortgage repayments considerably for those on variable rate mortgages.

Tags: pay, Major, Mortgage loan, past 40 years, Repayment mortgage, mortgage, variable rate mortgages, record

Taxpayers pay bonus for Rock employees

Over recent months the government has been using taxpayers’ money for a variety of purposes, sparking concern amongst opposition parties and the public with regards to how the public purse is being used. Read more

Tags: bank, Business Finance, Northern Rock employee bonus, economics, Northern Rock bonus, northern rock

Falling living standards in store for nation

The new deputy governor of the Bank of England, Charlie Bean, has warned the nation that it needs to brace itself for a year of hardship, stating that they will have to face falling living standards over the next twelve months. Mr Bean said that soaring inflation levels and rising oil prices were set to cause further financial misery for consumers, and he added that the nation was facing the toughest time since the early 1990s and perhaps even earlier. Inflation levels have now soared to 3.8%, which is nearly double the government target. Read more

Tags: supply, governor, extra sources, mr bean, couple, pay

Don’t pay through the nose to claim back your bank charges

Experts have been urging bank customers to think carefully before allowing charge reclaim companies to deal with reclaiming bank and credit card charges, stating that often the customer ends up paying a huge chunk of the amount reclaimed in fees to the company. Experts state that some customers are being charged hundreds of pounds but all the company does is fill out some forms that the customer could very easily do themselves. Read more

Tags: company, online, reclaim bank charge, pay, agency, sums of money, work, bank charges

Pay and bills could further affect consumer finances

The Governor of the Bank of England, Mervyn King, has recently warned consumers that their financial situations could become increasingly strained due to rising bills and below inflation pay rises. With inflation levels soaring and the cost of energy, food, and petrol continuing to rise many households could find themselves running into severe financial problems towards the end of the year, especially with wages set to rise at levels below inflation. Read more

Tags: bank, pay, action, Monetary Policy Committee, inflation levels, think, wage increases, challenging year

Negative payment ‘fiddling’ widespread

Recent research shows that a staggering 296 out of 300 credit card providers use a negative payment hierarchy.

According to Fool.co.uk, 99 per cent of people with a regular balance on credit cards with varying interest rates on debts are being ripped off by their provider.

“It is not illegal to fiddle with the order in which payments are allocated on credit cards. But negative payment hierarchy is a devious way to exploit customers’ inexperience,” said David Kuo, head of personal finance at the finance site.

“Our study shows that whilst the vast majority of card providers employ this sly practice, Nationwide and Saga should be applauded for their use of ‘positive’ payment hierarchy,” he added.

Those particularly at risk from negative equity payments are people using zero per cent credit cards for balance transfer as well as purchases and cash withdrawals.

Repayments made on the card will then go towards pay off debts with the cheapest interest first, while debts with heavier interest are left to stack up interest charges and earn the provider money at the cost of the card holder.

Nationwide have revealed that consumers could pay an estimated £500 million on interest without knowing before banks are required to outline the order in which payments are made next year.

Tags: pay, negative equity payments, money, credit, repayments, hierarchy, economics, inexperience

No interest will be charged on A&L overdrafts

Another bank has revealed its new charge structure with regards to overdrafts and bounced cheques. According to recent reports the Alliance and Leicester will now no longer be charging any interest at all on its overdrafts on current accounts.

The bank will also be reducing the charges applied for a bounced cheque, which will go down from £34 to £25. Officials from the Alliance and Leicester state that in place of interest charges on overdrafts new daily charges will come into force.

Banking will still be free for customers that keep their accounts in credit, state bank officials. The new charge structure is due to come into force around the third week of October. Some banks, such as Lloyds TSB, have already announced their plans to reduce overdraft charges and fees for bounced cheques, which many think is a direct response to the investigation into bank charges that has been carried out by the Office of Fair Trading.

However, officials from Alliance and Leicester claim that this is not the case, and that they had plans to change the fee structure prior to the investigation.

One official from the Alliance and Leicester stated: “The combination of fees and interest is unnecessarily complex when you are trying to present your business as simple.”

Under the new charge structure customers using an authorized overdraft will be charged 50p per day up to a maximum of £5 per month. If the overdraft is unauthorized then the customer will have to pay £5 per day until the account is brought back into order.

One industry professional stated: “Customers should ask themselves whether the new simplified fee structure does actually save them money in the long-term.  According to our analysis, the new way of charging will result in Alliance & Leicester customers being marginally better off.”

Tom Smith
24th October 2007

Tags: authorized, account, interest, overdraft, balance, unauthorized, bank, fee, cost

Don’t bail out friends and family with loans

A debt advice agency in the UK has warned that lending money to friends and family could have an adverse effect on both the lender and the borrower.

Officials from the Debt Advice Bureau claim that it is better to offer family and friends advice and support when they run into financial problems rather than throwing money at them by way of loans. In many cases these loans are not fully repaid and can put a strain on the relationship, and often this type of action results in people becoming reliant on loans from family and friends to bail them out if they get into financial difficulties.

Officials from the Debt Advice Bureau state that consumers should help family and friends to overcome debt and finance related problems rather than encouraging them to rely on others to help them out financially, as this can simply lead to a cycle of debt, and could even lead to the borrower getting themselves into debt in order to help out the family member of friend, which can make matters even worse.

One official from the bureau said that by lending money to friends and family consumers could be making the problem worse for all concerned.

He stated: “You don’t want to be laying the groundwork that every time they have a slight cashflow problem, you come to the rescue.”

Official figures show that in many cases the money that is lent to friends and family members is not received back in full, and in some cases is not repaid at all.

According to the results of a recent survey, only around 58% of 70% of consumers that had loaned money to family member had been fully repaid. Of the 59% that had lent money to a friend only 27% had been fully repaid. 

Tom Smith
6th October 2007

Tags: owe, pay, back, Loans, debt

Mothers should be able to make pension contributions

More action is required in order to ensure that women are able to contribute to their pensions through motherhood, according to the Fawcett Society.

Company spokesperson Sarah Campbell has claimed that the government and employers need to act on the issue, noting that women who take time out of work during motherhood have reduced access to both private and state pensions.

Her comments follow research by the society that reveal that men save £51.03 more each month than women, while 55 per cent of single mothers were found to have no savings at all.

Ms Cambell believes that the gender pay gap lies at the root of the problem and that mandatory pay checks for all employers should be enacted to prevent the problem.

“Measures are needed to increase access to flexible working for parents and to encourage and enable men to take more responsibility for caring for children, so that this task can be shared more equally,” she added.

A UK campaign group for equality between women and men, the history of the Fawcett Society traces back to 1866 when Millicent Garrett Fawcett instigated a peaceful campaign for women’s votes.

Tags: United Kingdom, women, women's votes, Yvette Cooper, problem, employment, pay

Is fixing your bills a good idea in light of interest rate rises?

The recent interest rate rises enforced by the Bank of England have hit many homeowners really hard, leaving them with very little in the way of finances due to rising repayments. In light of these rises, many people are now wondering whether it might be a good idea to fix not only their mortgage but also other payments as well in order to benefit from increased financial stability.

Interest rates have gone up five times in the past year, with rises of 0.25% each time, and each of these rate rises has added a significant amount to the repayments of many homeowners, pushing many into the red. With these increased repayments along with the threat of further interest rate rises some experts feel that fixing as many payment as possible, including a mortgage, could prove beneficial in terms of financial management, although others feel that this could prove costly in the long run, particularly when interest rates start to fall again.

One industry expert stated: ‘Having certainty of monthly outgoings is worth its weight in gold, especially for people who are stretching themselves to take out the loan. People have been buying two year fixes, but with arrangement fees and other costs so high, we are now seeing more three and five-year fixes being taken out to avoid paying these fees so regularly.’

Another stated: ‘Fixed rates are going up as lenders factor in possible future base rate rises. Trackers are cheaper, but you have to accept that the rates are likely to go up before coming down, so you have to make sure you can afford higher monthly payments. The rates for three and five-year fixes are quite similar, so the key is to do your homework to get the best deal and make sure you are clear how long you want the fix to last for.’

Tom Smith
1st August 2007

Tags: increase, rate, bills, house, rises, pay, debt, home, cost

BOE governor warns on borrowing and lending

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

Tags: england, interest, rates, loan, bank, rise, increase

Happy birthday debit card

This beginning of June marks the twentieth anniversary of the debit card in the UK.

It is difficult to imagine how the nation managed without the debit card, but until 1987 this is exactly what we did. At the beginning of June 1987 Barclays launched its Connect Card, revolutionizing the way that consumers accessed their cash. Soon bank customers everywhere were able to access their money instantly and easily, as well as being able to make purchases quickly and conveniently.

Within a year of the launch of the Barclays Connect Card, a million debit cards had been circulated in the UK, and this has steadily grown over the years with nearly seventy million debit cards now in circulation, two decades after the initial launch. According to APACS around 143 purchases per second are now made through the use of a debit card in the UK, with people paying for everything from holidays and electrical to petrol and groceries with their plastic.

Debit cards are more popular than credit cards in the UK, and 85 percent of consumers in the UK have a debit card compared to 66 percent of consumers that own a credit card. Nearly seven billion transactions each year are carried out on debit cards.

A spokesman from Barclays stated: “The massive change when debit cards were introduced was that people were able to leave their chequebooks at home. It gave people the convenience to access their current accounts anywhere in the world. It was a massive convenience for the retailer as well.”

He added: “Without payments moving to an electronic platform, internet retailing could not have taken off. The ability to make a payment accurately without having to send off a cheque has created this online channel for retailers.”

Tom Smith
12th June 200

Tags: shopping, switch, payments, pay, bills, cards, credit, debit

Interest rates frozen

Interest rates are to remain at 5.25 per cent after the Bank of England decided not to increase the rates further.

Last month the bank surprised everyone by announcing an increase of 0.25 per cent, but today’s decision had been widely anticipated.

The Bank of England’s Monetary Policy Committee (MPC) has increased interest rates three times in the last six months, as it tried to bring inflation rates under control.

Today’s decision to freeze interest rates will be welcomed by those who have a mortgage, but there are warnings that future rises are almost inevitable.

“Today’s MPC decision to maintain the base rate at 5.25 per cent will come as a welcome relief to borrowers, but many market analysts will view this latest decision by the Bank of England as a mere delay of an inevitable further rate rise,” said Mehrdad Yousefi from Alliance & Leicester.

“Inflationary pressures on the economy remain strong, including some above inflation pay deals, and they will play a key part in future base rate decisions.

“The consensus of opinion is that it is very likely that we will see another rate rise in the first half of 2007, so it is crucial that borrowers assess what impact any possible future base rate rises could have on their finances,” he added.

In January it was revealed that inflation was running at levels not seen since 1997 when the Bank took control of setting interest rates from the chancellor.

People borrowing money should be sure that they have the financial flexibility to cope with a sudden rise in interest rates.

Tags: inflation, today's decision, england, yousefi, base rate, Mehrdad

Interest Rate Rise Could Mean Nearly £300M More To Pay For Homeowners

A recent study carried out in relation to the recent interest rate rise enforced by the Bank of England has shown that mortgage payers in the UK could be paying nearly three hundred million pounds more collectively in monthly repayments on their mortgages. The interest rate hike was recently announced, after Bank of England officials increased it from 4.75% to 5%.

The figures with regards to the monthly rise in total mortgage repayments came from an analysis carried out by Egg. Officials from Egg have advised consumers to start shopping around for a better deal on their mortgages in order to try and save money on the amount that they will otherwise have to pay out as a result of the interest rate increase. Those on a variable rate mortgage could find that the 0.25% rise in the base rate could make a significant difference to their monthly outgoing based on the value of their mortgage.

According to the report from Egg, those with variable rate mortgages in the UK will each pay an average of around £35.92 more each month as a result of the interest rate increase. With over eight million mortgage payers currently on a variable rate, this could mean a rise of around £292 million per month on total mortgage repayments.

Officials state that by doing a little research and shopping around for a more competitive mortgage deal consumers could cut back on the financial impact that the interest rate rise has on their monthly outgoings. There are a number of deals available on the market at the moment, and some consumers may prefer to opt for a fixed rate mortgage to avoid further financial implications in the event that the interest rate rises again early next years, as predicted by some financial experts.

Tags: rise, deals, Mortgages, england, bank, rate, pay