Many banks and card companies to be sympathetic over postal delays

Over recent weeks the UK has been hit by a number of postal strikes, which has disrupted many services.

A number of banks and credit card companies in the UK have stated that they intend to be sympathetic with customers who may have suffered as a result of the postal strikes in terms of payments coming in late because of the postal delays. Although banks have suffered a fair amount of bad press lately some of the leading banks and credit card companies stated that they would take the postal strikes into account when it came to customers’ accounts.

The postal strikes were set to go on for two week in total, and this means that those paying by cheque will find that their payments may be delayed, which could result in their bank accounts exceeding the overdraft limit or their credit cards going over the credit limit due to late payment. Banks and credit card companies are urging consumers that experience this problem to contact them, stating that they will ensure that they are sympathetic when it comes to the removal of charges that were applied as a result of late payment because of postal delays.

One Barclaycard official stated: ‘We will take an understanding approach and if anyone does incur a fee they should come and talk to us.’ Lloyds TSB, Halifax, and HSBC have also stated that they will treat each case sympathetically, and that customers that have experienced postal problems that have affected their accounts should contact them as early as possible. Other banks have added that customers may want to look at alternative methods of payment whilst the postal strikes are underway.

Consumers are warned that trying to dupe the banks into thinking that payment is late because of postal strikes will not be easy. One bank spokesperson stated: ‘We will treat every customer individually and do our best to be sympathetic. But if someone is always in the red, the postal strike will probably be just another excuse and will be seen accordingly.’

Tom Smith
17th September 2007

Tags: charges, credit, payments, red, delays, cards, strike, interest

Many people permanently in the red with overdrafts

A recent report has highlighted that by the 20th of each month many Brits find themselves running out of cash and having to rely on their overdrafts to see them through the rest of the month until payday.

In some cases, once payday comes around, Brits are able to slide back into the black for several weeks. However, there are also many Brits that will go straight back into the red, even after their salary has been paid in, because their accounts are permanently overdrawn.

Around two million consumers in the UK are always in the red, unable to pull themselves out of their overdraft debt and therefore having to rely heavily on their overdraft facility. In the past year, according to research, around ten million people in the UK have used their overdraft on at least one occasion. Rising interest rates and repayments may have contributed to this figure, with more and more people having to dip into their overdrafts in order to stay afloat due to rising repayments.

One industry professional stated: ‘It’s no surprise so many people are permanently in the red – with interest rates having risen five times in the past year consumers are not doubt feeling the squeeze. People often dipping into their overdraft need to watch the Effective Annual Rate as some can be punitive and they may find they are better off spending on a 0% credit card in the future.’

Those aged 55 years and over were found to be the best at staying out of the red, with an impressive 64% in this age group managing to stay in the black. This compared to 40% of 18-24 year olds. In the 45-54 age group 5% were permanently in the red.

Tom Smith
31st July 2007

Tags: credit, savings, red, current, purchases, accounts, card, bank, personal, debt

Endowments Still Failing

Despite the last four years seeing a rising stock market, millions of endowment policies are still unlikely to be worth enough to pay off the mortgages they were meant to cover.

 There have been soaring share values around the world, and record growth in commercial property, but for six million mortgage endowment policy holders in Britain it will still not be enough.

The Association of British Insurers has produced figures that reveal that to the end of 2006, two thirds of endowment policies in force were still in the red band – that is, they will not deliver the target sum upon maturity. Those achieving a green rating were only 18%, and should deliver the target amount. The figures are only marginally better than at 2004, when 71% were red and 14% were green. Amber policies make up the rest – these are at risk of not paying the intended maturity value. The booming stock and property markets do not seem to have had much of a positive effect on these policies.

Deeper investigation shows that the overall trend disguises huge differences between insurers. Where there are some companies forecasting that nearly all their endowment policies will hit the targets, others have only a meagre number that are expected to deliver the goods.

Sadly it is some of the bigger companies, who between them number two million endowments, who are failing. Norwich Union, Standard Life and Friends Provident are those with the highest number of prospective shortfalls.

One couple in Fareham, Hants have two endowments they hoped would pay off their £41,300 mortgage. A Legal & General policy started in 1983 is due to mature next year and is expected to beat its target of £22,800 by around £2,000. The other policy was taken out with Royal Insurance in 1988. It is now run by Phoenix, part of Resolution. Due to mature in 2013, the latest projection in spring suggested it would fall short of its £18,500 target by somewhere between £5,000 and £7,000. They will have to re-invest the £2,000 from Legal & General to help pay the shortfall of the Phoenix policy.

The Phoenix policy’s recent performance has been poor, giving returns almost less than investment. How can that be the case with such good growth in the markets in recent years?

Most endowment policies are invested in “with-profits” funds. These spread the money from savers across a number of assets that include shares, bonds and commercial property. In the past five years shares have managed average returns of 10%, and commercial property has average returns of over 15% in the same period. Bonds only grew by an average of 4.6% per annum, and the in past twelve months have actually gone down in value. The problem was that many insurers got cold feet in the share and property market in 2002 and 2003, and transferred large parts of their funds to bonds. Thus, the funds have failed to take advantage of the rising stock market and commercial property prices.

Small companies Wesleyan and Liverpool Victoria have no policies in the red, and Legal & General now has half of its policies in green, up from 20% in 2002. Conversely Standard Life has 88% policies in red, up from 68% in 2002.

It seems that most endowment investors have missed out as equity markets have soared.

Tom Smith
18th July 2007

Tags: invest, Mortgages, shortfall, red, endowments, profits, short, equity, shares

Rate rise will hurt homeowners

The fallout from yesterday’s (May 10th) interest rate rise is being felt today, with many organisations warning that the increase could leave homeowners in the red.

The Bank of England announced that the base rate would rise by 0.25 per cent, taking it to 5.5 per cent – the highest it has been since April 2001.

Experts are warning that those with a mortgage are likely to suffer the most, especially as more and more people are taking out loans that stretch them to the absolute limit.

As house prices continue to grow and buyers take out mortgages which leave them financially stretched, Citizens Advice is warning that this latest interest rate rise may tip some homeowners over the edge.

“Today’s interest rate rise will put added pressure on some homeowners. Our evidence shows it only takes a very small change in people’s circumstances to tip them from manageable credit commitments into serious debt,” said Peter Tutton from the organisation.

“Citizens Advice is seeing a rapidly growing number of people falling behind with mortgage payments and in some case threatened with repossession.

“Housing debt is one of our fastest growing problems and it increased by 20 per cent in the last year,” he added.

Borrowers are being advised to talk to their lender if they are struggling to make payments, while those considering taking out a mortgage should check thoroughly that they can afford it.

Tags: interest rate, loan, Citizens Advice, interest rate rise, stretch, edge, red, mortgage