Popularity of equity release in the rise

According to a recent report the popularity of equity release schemes is on the up, and experts state that the quality and service in this area is also improving.

Equity release schemes have gained a bad reputation and have been at the centre of controversy, with one equity release provider recently being fined by the Financial Services Authority for giving inaccurate advice to consumers. However, despite its poor reputation equity release is becoming a hit with older homeowners.

According to Norwich Union these equity release schemes are particularly popular with homeowners that are close to retirement. In a survey of 1600 people between the ages of 50 and 56 one in ten stated that they would consider equity release programmes in the future. These schemes were not as popular with those that had already retired, with survey results showing that only one in twenty retired consumers would look at equity release.

One equity release worker stated that the information provided to consumers these days is far more detailed and comprehensive.

She said: ‘The market today is very different. The paperwork given to customers before they sign goes so much further. It really shows what they’re getting into.’

A Prudential equity release customer also said: ‘I was afraid of the financial bits, but my neighbour sat in on one of the meetings. It told me how much I could draw down and I’ve taken about a third of an agreed maximum.’

She added: ‘The compound interest rate is the nasty bit. The man from the Pru worked out that on average I’m likely to live another 27 years. He then told me how much I’d owe, based on the interest rate, if I borrowed varying amounts over various times.’

Alan Wright
26th November 2007

Barclay’s share prices fall amidst rumours

Barclays Bank, one of the UK’s high street banking giants, has seen its share prices plummet to their lowest level in two and a half years.

It is thought that the fall in share prices could be partly due to rumours that the bank has experienced financial problems in light of the recent credit crunch that has swept across the UK. Rumours were sparked back in August when the bank took out two overnight loans from the Bank of England, which was blamed on ‘technical’ problems.

Share prices tumbled by 8% at one point, taking them to 524.5 pence. This was followed by a slight recovery, with share prices at 537.5 at closing, which was a drop of 5.9%. Barclays has denied having any funding problems following the emergency loans. In fact, in order to try and restore consumer confidence the bank’s head of global retail and commercial banking, Frits Seegers, purchased £700,000 worth of Barclay’s shares on Friday.

Ian Poulter at Landsbanki Financials stated: “There are concerns about writedowns and everything else, but the comments Barclays have made to date suggest that is not an issue, as does the fact they are still buying back their own shares.”

The thirty month low in share prices comes just shortly after the crisis that hit Northern Rock, where share prices plummeted by over 80% after it became widely known that the bank had taken an emergency loan from the Bank of England. This fuelled speculation that the bank was on the verge of collapse, and over £2 billion in savings was also withdrawn in addition to a huge tumble in share prices.

Tom Smith
10th November 2007

Future demand for buy to let mortgages could fall

According to a recent report the demand for buy to let mortgages could fall in the future, as a slow down in the rise of property values hits, lumbering landlords with higher mortgage repayments but lower house value inflation and rental income.

However, reports have also indicated that at present landlords are doing very well, and in the past year enjoyed returns of around 13%. Reports indicate that landlords saw the property vales rise on average by around 7.3% and saw rental returns of around 5.5% of the property value.

The figures come from a report issued by Birmingham Midshires. The report indicated that although the 13% property value rise seen was up from the previous twelve months of 11.9% rental payments dropped from 5.7% in the previous twelve months to 5.5% last year. Birmingham Midshires warned that the interest rate rises had led to mortgage repayments being higher than rental payments, and that this could have a dampening effect on the popularity and take up of buy to let mortgages.

One economist from the building society stated: ‘While house price growth in the sector is expected to be more subdued near-term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors. There also remains the potential for healthy long-term capital appreciation in the buy-to-let sector, particularly given the backdrop of more households being formed each year than there are new properties being built.’

Along with homeowners buy to let landlords are likely to be hit hard by the interest rate rises that have been applied by the Bank of England over the past year, as it means higher repayments on the mortgage without higher rental income.

Tom Smith
1st August 2007

Brits losing a fortune by failing to put their cash in savings accounts

In the olden days stashing your money in various cunning locations around the house seemed to be the norm, as many people did not have access to savings accounts as they do today.

However, according to a recent survey there are still an alarming number of Brits that insist on keeping their cash in the house, which not only raises security issues but also means that collectively Brits could be losing out on millions of pounds worth of interest from banks and building societies each and every year.

A recent survey was carried out by Virgin Money, and according to the result of the survey around one in every six adults in Britain are still keeping cash in the home rather than opting to place it in a savings account. The results indicate that if these people were to put the cash that they have kept in the house into an average Internet savings account they could be accruing around £174 million each year in interest collectively. Instead, this money simply sits around earning nothing for them, and increased the risk of financial losses through theft in the event that the cash is stolen by a visitor or the house is burgled.

The survey showed that one percent of Brits that were surveyed admitted to having up to one thousand pounds in the home, whereas two percent of Brits stated that they had up to five thousand stashed in the home. Experts warn that since inflation has been on the rise, and the money is simply lying around failing to accrue any interest, it is in danger of losing its purchasing power, so consumers are doing nothing to help themselves by leaving it in the home.

Industry professional add that there is around three and a half billion pounds in total that is lying around the homes of Brits rather than being placed into savings account, and that this amount could depreciate by two hundred million pounds within the next three years.

Tom Smith
10th June 2007

Protect your expensive wedding gifts

A new report has highlighted the importance of home insurance for newly weds, citing the cost of ever extravagant wedding gifts as the main reason for needing to get home insurance cover pretty much right away following the wedding.

According to reports wedding gifts are getting more and more extravagant, and with gifts as expensive and luxurious as plasma screen TVs and the like being purchased as wedding gifts in some cases, home insurance cover is more important than ever for newly weds with thousands of pounds worth of presents.

Research was carried out by NFU Mutual, which showed that under ten percent of newlywed couples actually check their insurance policies immediately after the wedding, which means that millions of pounds worth of extravagant wedding gifts could be at risk, as it could be left in the new homes of newlyweds as they jet off to enjoy their honeymoon still caught up in the excitement of the wedding.

Research also showed that many newlyweds couldn’t remember whether they had checked their policies or not following the wedding. Officials reports that millions of pounds are spent on wedding gifts each year in the UK, and those gifts could be at risk from damage or theft – particularly if they are being left in the house whilst the couple go on honeymoon – which could mean huge financial losses for the newlyweds just as they embark upon their married life together.

One official from NFU Mutual stated: “There is a great deal of excitement in the run up to a wedding and naturally, the practicalities of checking your home insurance can sometimes be forgotten.”

Tom Smith
31st May 2007

You could get a better deal with annual travel insurance

According to officials from MoneyExpert buying annual travel insurance cover could work out cheaper than opting for single trip cover, although experts do warn that consumers need to carefully check the policies to see what is and isn’t covered before making any commitment.

According to researchers from MoneyExpert some annual travel insurance policies can work out cheaper than single trip policies, but consumers must check that they are adequately covered.

One MoneyExpert official stated: “Holiday makers often think that single trip cover is simple and cheap, but the truth is it’s often not best value for money. You are certainly paying for a quick fix. As with all insurance, the quality of cover will always vary so like-for-like comparisons are quite difficult to make. Nevertheless it remains the case that you can get annual travel insurance for the whole family without breaking the bank. Focusing on price alone can mean holidaymakers will be left with insurance that is not worth the price. Insurance policies are only tested when you need to make a claim. You don’t want to find out when you are making a claim that you’ve saved money at your expense.”

MoneyExpert officials have warned that although it can be cheaper to take out annual cover, consumers should take into consideration the quality of the cover as well as the price. It is important to ensure that you compare different policies, and know exactly what you are and are not covered for in order to ensure that you get proper value for money with your travel insurance policy.

According to Sean Gardner from MoneyExpert: “Average prices provide a guide as to what to look for. It is then up to holidaymakers to probe a little deeper to find the policy that suits them best.”

Tom Smith
26th May 2007