Government wants longer term fixed rate mortgages to be available

The government, under new prime minister Gordon Brown, has announced that it wants more longer term fixed rate mortgages to be made available in light of the five recent interest rate hikes that have left homeowners struggling to keep up with rising repayments and have made the prospect of purchasing a home even more difficult for first time buyers on a limited budget.

Alistair Darling, the new Chancellor of the Exchequer, has stated that longer term fixed rate mortgages are more important than ever in light of the current state of the economy, as these will enable property purchasers and homeowners to benefit from stable repayments that will make financial management easier and reduced the risk of crippling repayments stemming from further interest rate rises.

Earlier in the week Alistair Darling stated: ‘When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility.’ He also spoke of the profits that some brokers and lenders are making by offering shorter time fixed rates that have to be renewed every few years, netting them thousands of pounds in profit: ‘Brokers want you to come back every two years, rather than every ten or 20. The Financial Services Authority has identified this as a problem.’

In light of the announcement made by government officials the Nationwide Building Society has just announced the launch of a 25 year fixed rate mortgage. However, there are concerns over how many people will want to take on a fixed rate over such a long period in case interest rates start to fall.

Tom Smith
31st July 2007

Some people may never own their own home

According to recent reports future homebuyers could face house prices that are up to ten times the amount of their salaries, which means that many of today’s younger people could face the prospect of never being able to purchase their own home.

The research from the government backed National Housing and Planning Advice Unit (NHPAU) indicates that in order to avoid this situation many more homes will have to be build, otherwise millions of people will be left out in the cold when it comes to home ownership in the UK.

According to the research over a third of those that do not own their own home at the moment are doubtful that they will ever be able to afford to buy their own home. Another 20% of non-homeowners believe that they will have to wait a minimum of five years before they can afford to consider getting onto the property ladder. The purpose of the government run National Housing and Planning Advice Unit is to offer advice on improving affordability in the housing market.

The figures indicate that just seven years ago the average house prices was around four times the average salary of the consumers. However, with prices set to rise to ten times the average salary future generations face a very bleak future when it comes to the possibility of home ownership.

According to the chairman of the NHPAU: ‘First-time buyers have seen a big rise in the deposit needed to buy a home and the amount of their income spent on mortgages. Demand for housing is growing and unless action is taken, pressure on the market will only get worse.’

Tom Smith
4th July 2007

Finance management skills being taught to your students

With many adults and households now struggling to keep up with debt repayments, a high number of people struggling to manage their finances effectively, and a record number of bankruptcy and IVA applications being filed, schools in the UK are trying to address the issue of consumers debt at its roots by educating youngsters in how to manage finances. At present, children aged just eleven and upwards are being taught about effective financing, which should give them valuable skills and knowledge for the future and could help them to avoid the levels of debt that many of today’s adults are having to deal with.

One school in Pickering, Yorkshire is already enjoying the benefits of this addition to the curriculum, and students seem to find it very useful. The school is working with the Personal Finance Education Group, which aims to bring a better grasp of personal finance into the national curriculum, aided by fifteen million pounds in funding from the Financial Services Authority.

The Regional Director of the Personal Finance Education Group stated: “It’s helping them understand what financial information they need and then how to apply it. If you look what the financial situation looks like for the under-40s it is very different to the way it was some twenty or thirty years ago. A young person aged 18 can clock up credit cards at an alarming rate without much reference to their financial situation and
the important thing is to let people know how to manage their financial situation.”

The children at the school have had some very positive things to say about the new aspect of education that they are receiving, and many are already aware of how this type of additional education could help them in the future.