Lending figures expected to see mixed reactions

Over the past decade Britain has become addicted to borrowing, and up until the onset of the global credit crisis most people – including those with damaged credit – were able to get finance pretty easily with banks and financial institutions eager to loan money to anyone that wanted it. This has, of course, resulted in a huge personal debt mountain that has left many people struggling with their finances and unable to keep up with their debt repayments.

The Bank of England is set to release figures later this week relating to mortgage lending and consumer credit. It is widely thought that the figures will show that lending and consumer credit levels are very low. It is thought that whilst some people will find that the figures make for very bleak reading indeed there are many others that will see the subdued lending data as a positive sign.

Many city officials are likely to see the low lending levels as something that could dampen the economic recovery and reduce consumer confidence levels. However, some people will see them as a sign that Britain is not as addicted to debt as it once was and that consumers are now focussing on trying to clear their debts and live within their means rather than borrowing money at the drop of a hat to buy things that they cannot really afford.

Peter Dixon, strategist at Commerzbank, said: ‘Within the context of rebalancing the economy away from personal debt, these low figures may be no bad thing. Those who argue that borrowing should be stronger are missing the bigger picture.’

Ross Walker, economist at Royal Bank of Scotland, said: ‘The British household sector needs to de-leverage. This is happening, but at a snail’s pace. That said, a more rapid correction would probably be associated with recession in consumer and property markets.’

Tags: decade britain, week, city, Britain, mountain, credit, drop of a hat, business

Should there be caps on charges for payday loans?

Payday loans have become increasingly popular over recent years. This is not because they provide great value for money on borrowing or anything along those lines. The reasons for their popularity is clear – they are easily accessible for those that work because no credit check is required, they enable struggling consumers to get the money that they need pretty much right away, and they offer short term loans to tide people over until they get paid, which suits many of those that simply cannot make their monthly wages stretch quite far enough anymore.

The rise in the cost of living, the increase in VAT, cuts in wages, and potential job losses have all taken their toll on consumer finances, and this has left many people unable to make their budget stretch far enough to even afford the basics. Many of these people are turning to finance such as credit cards and overdrafts. Others are turning to payday loans, which come with extortionate APRs but are often the only possible short term solution for those with poor credit.

There are now set to be discussions in the House of Commons with regards to whether increasingly stringent legislation should be brought in with regards to the charges made for credit by payday loan provider and home credit lenders. The House of Commons is set to vote on the backbencher motion later this week. The move comes as consumer prepare for another year of hardship and worry over jobs, benefits, debt, and other financial issues.

It was reported recently that one in every ten people were unable to make their wages stretch for the whole month, and their wages tended to run out on the 20^th of each month, leaving them with more than a week without money.

Tags: accessible, check, backbencher, week, solution, hardship, great value, caps

Over one and a half million live rent free with parents and friends

According to the results of recent research carried out by Abbey there are over one and a half million people aged between eighteen and thirty four that are still living rent free with the friends or parents in the UK. Read more

Tags: adult living, current climate, Mortgages, abbey mortgages, kidults, week, rent free

Government confirms second bailout for banking industry

In a week that saw Royal Bank of Scotland reveal losses of around £28 billion, and saw share prices in banks plunge amidst fears over instability, the Prime Minister has announced the second bailout of the banking industry in the space of just a few months, and once again this will come at the taxpayers’ expense. Read more

Tags: bank bailout, fears, single one, week, Minister, government help, plan, prime minister gordon brown

Enquiries to IFAs increase under credit crunch

The number of consumers seeking advice from an independent financial adviser (IFA) has recently increased as people are being hit with financial difficulties due to the current credit crunch, says IFA Promotions.

Requests to the organisation for contact details of local IFAs are currently reaching about 10,000 a week and around 600,000 enquiries a year as people look for advice on how to increase returns on their money, according to chief executive David Elms.

The areas where people are seeking the help of IFAs include mortgages, property, pensions and investments, cash as an asset class and protection needs, although the popularity of these investments depends on which sector is performing well at the time.

IFAs are authorised and regulated by the FSA and offer advice on products from the whole of the marketplace in contrast to ‘tied’ advisers who can only recommend products from certain financial institutions.

Commenting on the type of people who usually seek this type of advice, Mr Elms said: “They are typically ABC1, so they’re middle-to-top rather than middle-to-bottom [income]. But the age range is 25-65, very easily split between males and females.”

Tags: popularity, pensions and investments, credit, local ifas, week, promotions, IFA Promotions.Requests

BoE to cut interest rates next week?

The increasing downside risk due to the credit crunch is one of the reasons behind a possible interest rate cut by the Bank of England (BoE) next week, financial analysts have predicted.

Experts from six financial institutions including the Centre for Economic and Business Research, Global Insight, Nationwide and Barclays Capital, all anticipate that BoE’s monetary policy committee (Mpc) to cut rates by 0.25 per cent in April.

Lloyds TSB and HSBC said that there would be no change in rates this month.

Howard Archer, UK chief economist at Global Insight, said: “We believe that the increasing downside risks to UK growth stemming from tight credit conditions will prompt the Bank of England to trim interest rates by a further 25 basis points to 5.00 per cent at its April meeting.”

The decision by the Mpc on interest rates will be announced at 12 noon on April 10th after its monthly two-day meeting.

Currently interest rates stand at 5.25 per cent.

Tags: April, Lloyds Banking Group, month, UK chief economist, week, economist

Link between base rate and mortgage rates “severed”

An expert has suggested that mortgage rates are no longer influenced by the Bank of England’s base rate of interest.

Melanie Bien, director of Savills Private Finance, said that despite the Bank’s monetary policy committee choosing to maintain the base rate at 5.25 per cent, Abbey has announced its mortgage rates will be rising from next week.

“It proves that the connection between base rate and mortgage rates has been all but severed as lenders look to improve margins rather than market share,” she claimed.

Consequently, even if the base rate comes down further this year, this may not feed through to mortgage products, the expert suggested.

In order to make the most of the best deals currently available, need to “act quickly” before lenders remove them from the market.

Paul Holmes, chief executive officer of Firstrung, said that people are unlikely to be able to take out 100 per cent-plus mortgages any more.

However, despite some people criticising such products, Mr Holmes said that they were “very good” in some circumstances.

Tags: Savills, Link, abbey, week, market

Over a £1bn spent on Valentine’s day

Over a £1 billion is expected to be spent on Valentine’s day, despite over half of consumers saying the day has become ‘over-commercialised’, according to new research.

Findings from research by Alliance & Leicester covering customer activity on the Valentine weekend last year indicate that debit card spending on flowers, restaurants and jewellery rose by 60 per cent compared with the previous week.

Last year men spent more than 36 per cent the normal amount in florists on Valentine’s day

Emma Walkley, senior current account manager at Alliance & Leicester, said: “Although people say Valentine’s day has been spoilt by over-commercialisation, spending patterns show that we still make an effort to celebrate it in some way.”

She added that consumer figures from last year reveal a ’spending rush’ on the day and those preceding February 14th in 2007, a trend expected to be repeated again this year.

Meanwhile, research from Halifax has shown that the average male spender is expected to pay £42 on flowers and £82 on eating out during February.

Tags: week, Flower, trend, customer activity, Jewellery

Student debt “unlikely” to affect first time buyers

Having a student debt is “unlikely” to restrict students’ abilities to make their first steps onto the UK property market, one expert claims.

Financial solutions specialist Firstrung said that despite recent reports that student loans will be incorporated into people’s credit files, this is not likely to result in loans being turned down.

Paul Holmes, chief executive officer with company, said: “It’s unlikely to hamper students’ ability to buy, and secondly, I think quite frankly a lender would dismiss that kind of commitment in a month.”

He added that despite the figures the “media often likes to paint and shock and bore us with”, the reality of student debt is quite low when they come out of university.

However, although students’ ability to buy property is unlikely to be hampered, Firstrung expect finances to be “raked over a lot more intensely” due to the current economic climate.

Last week, mortgage company mform.co.uk warned that that more first-time buyers will be turned down for loans as student loans will be incorporated into people’s credit files.

Tags: mortgage, week, market, lot, debt consolidation, shock, student debt, Firstrung expect finances

Personal debt soars

Britons are paying a whopping £93 billion a year in interest on borrowing, it has been reported this week.

That is an increase of £12.7 billion on the figure for the same time last year, raising widespread concerns that many people are going to be unable to manage their levels of debt.

Increasing domestic fuel bills combined with tightening borrowing conditions – and the short-term effect of Christmas spending – have led to a particularly tough environment.

The average household now pays £3,744 per year in interest on borrowing alone – an increase of £517 compared to last year.

According to uSwitch, which carried out the research, around one in four people acknowledge that repayments on their debts are not manageable.

Accountants KPMG have also warned that personal bankruptcies are likely to increase to 130,000 in 2008.

Spokesperson Mark Sands told the Daily Mail: “Those in difficulty will find that their options are becoming limited.”

Tags: Financial services, debt, week, spending, spokesperson, personal debt, Christmas spending, repayments

Tips offered on mortgage protection

Don’t borrow more than you can afford and seek independent advice before buying are just two of the mortgage protection tips offered by industry experts, LifeSearch.

The guidance arrives as consumer confidence has been affected by the Northern Rock crisis. Interest rates are also near a six-year high at 5.5 per cent, despite coming down last week.

Matt Morris, LifeSearch policy adviser, said: “Many people consider protecting their mortgage, but they usually select a policy that will pay it for them when they can’t work.”

He added that what they actually should be protecting is their income, which not only pays the mortgage, but also pays all the other bills and the everyday cost of living.

LifeSearch also advises consumers to check employee benefits, not to buy Mortgage Payment Protection Insurance without considering Income Protection and ultimately take some form of action.

LifeSearch is a life insurance and protection specialist which was established in 1997. It currently has over 200,000 customers and more than £13 billion worth of cover arranged.

Tags: Many people, life, Financial economics, mortgage, specialist

Buy-to-let lending continues to thrive

Buy-to-let mortgage lending is booming, in spite of widespread concern about the state of the market.

With the Royal Institution of Chartered Surveyors (RICS) warning that house prices are falling at their fastest rate for two years yesterday, many believe that the buy-to-let sector will contract.

However, new data published this week suggests that many investors continue to believe that buy-to-let remains a good deal.

New figures from the Council of Mortgage Lenders (CML) showed that £7.8 billion was taken out in loans under their ‘other lending’ category in August – of which buy-to-let is a major component.

The sum makes up almost 25 per cent of the £34 billion borrowed that month, and is 37 per cent up on the figure for the previous month.

The CML said: “Total lending has been buoyed by a strong buy-to-let market.

“[Other lending] covers buy-to-let which has continued to be underpinned by house price increases, tenant demand, rent increases and landlords’ willingness to take long-term investment decisions.”

In the same period, the CML’s figure showed that borrowing for new purchases fell by 11 per cent on the previous month, while remortgaging borrowing fell by 12 per cent.

Tags: cml, yesterday, GBP, month, short, week, buy-to-let

New gambling laws labelled “bad for good causes”

TV gambling advertisements, which are to become legal later in the year, could have a knock-on effect on charitable donations through damage done to National Lottery sales.

Various financial experts have already advised on the effect that the adverts might have on the UK’s mounting debt problem.

In a letter to the Guardian, Council for the Advancement of Arts, Recreation and Education Denis Vaughan said that “the decision to loosen up the regulation on advertising for gambling is a regrettable one, most of all for the National Lottery”.

Just last week, financial advisors Chase De Vere labelled the UK’s debt problem as being “worse than ever”, with more and more borrowing unsustainable amounts through unsecured loans and credit cards.

The new gaming legislation comes into effect later in the year. Reforms to the existing legislation have proved controversial, and widespread public resistance has already provided the impetus to Gordon Brown’s dropping of plans to build a new supercasino in Manchester.

Tags: decision, week, Manchester, adverts, new gaming, guardian, National, UK's debt problem

Customers advised to check on dormant bank accounts

Customers can easily lose track of their bank accounts just by being “a little bit disorganised”, a financial expert said today.

The comments, from money education charity Credit Action, came after Halifax announced that it would be attempting to re-unite customers with money that they held in inactive, or ‘dormant’ bank accounts.

A bank account is automatically classified as “dormant” if it remains unused over a 15-year period.

Deputy director at Credit Action Chris Tapp said that dormants accounts were generally created “when there’s a change of circumstance: if somebody moves home, particularly if they move abroad. In the confusion of those changing circumstances, people just forget – it’s almost as simple as that.”

He also suggested that the fact that “banking has become so much more complicated”, with many holding multiple accounts, as a reason behind the dormancies.

The Unclaimed Assets Register, maintained by creditors Experian, tracks dormant bank accounts, estimating that a total of £15.3 billion is held in them.

A Treasury Select Committee also recommended this week that money sitting in such accounts should be reinvested in good causes.

Tags: today, GBP, committee, financial expert, change, tracks dormant bank, week, confusion

Urban vehicles “less likely” to be insured

The Motor Insurers’ Bureau (MIB) has pointed out big regional variations in the number of uninsured vehicles on the road.

MIB records show that the “hotspots” for this illegality occur almost exclusively in urban centres, with London alone accounting for around a quarter of the nationwide total.

Head of communications at the MIB, Susan Beck, said that the higher urban rates were “probably a reflection of inner city life where if you look across all levels of crime – not just those who drive without insurance – you would probably see higher incidents in large cities than in smaller towns”.

She also slammed those drivers who remained illegally uninsured, calling them irresponsible and selfish in the extreme.

“Uninsured drivers are putting their own life at risk and also the lives of other road users ,” she said.

The Association of Chief Police Officers (ACPO) also revealed this week that 78,000 uninsured vehicles were seized by the police last year for not having insurance.

Tags: association of chief police officers, big regional variations, week, Vehicle insurance, police

Text message banking makes balance checking easier

New banking systems using mobile phones are helping in the fight against debt, it was claimed this week.

First Direct said that its more recently introduced services such as mobile phone and internet banking were proving popular with customers.

According to the company’s own figures, almost 400,000 of its 1.2 million clients use the text message service, with about 2.6 million messages sent out every month.

Customers can set up alerts for when they become overdrawn or when their salaries are paid, as well as using the service to check their balance.

Spokesman for the company Rob Skinner said that the service helps customers “manage their money a little better”.

“The mobile phone is something which we carry around with us, it’s almost a remote control for our lives”, he added.

However, Mr Skinner maintained that telephone banking remains popular with some First Direct customers, who “still like to speak to a real person at the end of the phone.

“Ultimately it’s up to the customer to choose the method which suits them best.”

Tags: week, phone, IPhone, mobile banking, Telecommunications, Electronic commerce, spokesman

100% plus LTV mortgages set to grow in popularity

The 100 per cent mortgage market is set to grow, according to industry experts.

Brokers were polled by Alliance & Leicester, which reveals today, with 78 per cent predicting that increasing amounts will be taken out in future.

Almost three quarters said that they had already advised clients on the product, which is at present only offered by five lenders.

Mortgages of 100 per cent or more LTV (loan to value), the purchase of which means that no lump sum or deposit need initially be paid, might prove especially popular with first-time buyers.

Jeremy Claridge, head of specialist mortgages at Alliance & Leicester, said: “We are pleased to see that most brokers predict this market will grow within the next two years as these products offer a great opportunity for borrowers who need some additional funding.

“The mortgage market is continually changing and there is an ever-growing need to find more flexible products to allow people to get on the housing ladder or to manage their existing borrowings in a better and more efficient way.”

The rise in popularity could be seen as a consumer response to runaway increases in house prices. The latest government figures, released earlier this week, show that the average house in London was almost 15 per cent more expensive than this time last year.

The data also revealed that the overall year-on-year inflation rate for house prices stood at 10.9 per cent.

Tags: Mortgage loan, funding, LTV, week, opportunity, london, housing ladder

How things have changed in last 50yrs

Half a century ago (July 1957) Conservative prime minister Harold Macmillan famously said that the people of Britain “have never had it so good”.

He was talking at a time when rationing had only just come to an end following World War II but Halifax has been comparing the economic picture in the UK in 1957 and comparing it with today’s situation.

Understandably, it has found that massive changes have taken place and concludes that the people of Britain in 2007 really have never had it so good.

The average annual wage in 2006 stood at £31,278, compared to a miser miserly £731 that workers took home on a yearly basis 50 years ago.

More people own their own home today, with 70 per cent of the adult population holding the rights to a property, compared to just 38 per cent in 1957.

We work shorter weeks today, with the average being 38.9 hours, while in the fifties they worked 48.5 hours per week.

Some things were better in 1957, with unemployment figures very low at just 1.3 per cent compared to today, while house prices were fantastically low at just £2,330.

The pound was also very strong in those days, sitting at $2.79.

Tags: world, halifax, United Kingdom, week, July, population, War, pound

Hips hang in the balance

The future of Home Information Packs (Hips) hangs in the balance today (May 16th).

A vote is due to take place in the House of Commons to decide whether the packs should become a mandatory part of the home-selling process from June 1st.

The Conservative party is against their introduction and many industry figures have voiced their concerns of the effect they will have on the market.

The National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the Law Society all oppose Hips in their current form.

Paul Smith, chief executive of estate agents Spicerhaart Group, has raised concerns that Hips could lead to a monumental housing market crash.

“The current legislation is in a mess and will prevent immediate marketing of homes affecting buyers and sellers alike,” he said. “The mandatory requirement to have a full EPC (Energy Performance Certificate) in place prior to marketing will delay the process by weeks, as there are simply not enough trained energy assessors.

“We are calling for the government to allow interim energy assessments to be used for all properties.”

However, the argument has been countered by the Association of Home Information Pack Providers (Ahipp) which says a delay in the introduction of Hips will have a negative effect on the UK’s climate.

“This week’s vote is a result of political game playing and could significantly impact the UK’s climate change over the next few years,” said Paul Broadhead from Ahipp.

“[The vote] will not just impact the future of Hips but the future of the EPC and our environment – the climate change agenda cannot wait, or be made to suffer as a result of political game playing.”

The introduction of Hips in just over two week’s time will be debated by MPs today.

Tags: week, market.the national association, Conservative Party, Association, Environmental Issue, UK's climate."This week, Home Information Pack, group

First-time buyers face unaffordable homes

First-time buyers were faced with the least affordable homes ever during November 2006.

That is according to the Council of Mortgage Lenders (CML), which has compiled data showing that the average homes cost 3.29 times the combined income of the buyers.

These figures represent the situation before the recent interest rate rises, meaning the market is likely to become even harder to get on to.

During November, the average mortgage for a first-time buyer was £113,877, with analysts saying that the recent interest rate rises will add a further £200 per year to the average mortgage.

“Month-on-month we see affordability constraints becoming more pronounced for first-time buyers, and last week’s interest rate rise will increase these pressures,” said Michael Coogan, CML director general.

Homeowners are now spending a record-breaking 17.8 per cent of their income on mortgage interest payments, but this has not stopped people from entering the market.

CML data shows that the number of first-time buyers is steadily increasing. In total, 37,000 people bought their first home in November, up from 35,300 in October.

“First-time buyers are clearly still keen to get on to the property ladder despite the growing financial hurdles, and it is essential that anyone wanting to buy their first home should look carefully at their finances and take a realistic view as to whether they can afford the costs of home-ownership if rates continue to rise,” added Mr Coogan.

Tags: week, Mr Coogan, anyone, Banking, director, Economy of the Republic of Ireland, mortgage interest payments, rate rise