Archive for April, 2010

Homeowners pay small fortune for security of fixed rate mortgages

Tuesday, April 27th, 2010

Recently released figures have suggested that many homeowners in the UK are paying a small fortune each year for the security of taking out a fixed rate mortgage. Homeowners that are opting for a fixed rate mortgages are paying around £850 a year more for the security of having this type of mortgage according to industry reports.

There are a number of options available for those that want to take out a fixed rate mortgages, such as two, three, and five year fixed rate deals. The longer the fixed period of the mortgage the more the borrower pays in terms of interest. With the fixed rate deal borrowers enjoy more financial stability as they know exactly what their repayments and interest rates will be for a specified period no matter what happens with the base interest rate.

The nature of fixed rate deals offer peace of mind for many homeowners, especially first time buyers who want some financial stability to get them used to budgeting. However, for those that go for the longer fixed term deals the financial penalties can be huge, leaving them to pay far more interest on the loan, which costs them hundreds of pounds a year.

The interest rates on shorter term fixed rate loans have come down to some degree due to the high level of competition amongst lenders to provide the best fixed rate deals. However, longer term fixed rate deals can be much more expensive, with figures showing that borrowers will pay more than 1 percent more for a three or five year fix compared to a two year one.

One mortgage broker said: ‘whether you think it is a good idea to fix for longer depends on what you think will happen to Bank of England base rate and if you need that reassurance of knowing what your repayments will be. If your situation is likely to change a lot over that period, then it is worth seriously considering if you want to be locked in for that long.’

Those that do want the peace of mind that a fixed rate mortgage can provide are advised to shop around to ensure that they are able to get the best deal possible, as many lenders are now offering fixed rate mortgages but the costs involved can vary relatively widely making a big difference to monthly repayments and overall interest paid.

Tags: interest rates, Fixed rate mortgage, finance, mortgage

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Campaign group wants political parties to focus on personal debt

Monday, April 26th, 2010

Over recent weeks the main political parties that are fighting to lead the country as the next government have been highlighting what they believe to be the highlights of their manifestos, and have been showing their potential voters what they can do to help both the nation and the residents and businesses that live within the UK.

Whilst a number of different areas have been highlighted and discussed by the political parties there are a number of things that many people were disappointed to see were not really mentioned in the manifesto, or were only briefly touched upon.

One campaign group has stated recently that all of the different political parties need to put more effort into focussing on debt levels amongst consumers in the UK. The group, ClearDebt, has stated that the number of people that are harbouring debts in the UK has risen, although the average amount owed per person has fallen.

The data showed that between October of 2009 and March of this year the number of people with personal debt worries had increased by 13 percent compared to the same period the previous year. However, the campaign group also believes that whilst the number of people in debt may be on the increase the level of awareness amongst consumers has increased and this has led to people seeking advice more quickly.

Officials from ClearDebt stated: “The number of people asking us for debt help has increased by 13% between the two periods (October 09 – March 10 in comparison to the same period in 2008/09). What we are seeing is more people than ever before seeking help but with lesser debts. For me, Britain’s personal debt issues are getting more worrying, not less.”

Tags: ClearDebt, Consumer debt, debt, finance

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Mortgage restrictions lead to increase in buy to let activity

Saturday, April 24th, 2010

For many people being able to buy their own property is an impossible dream at the moment, and this is because there are still so many restrictions within the mortgage industry and things are really difficult for those looking to get onto the property ladder. Increased deposit demands, more stringent lending regulations, and the increased caution being exercised by lenders is leaving many would be buyers out in the cold.

For many of those that are unable to buy a property due to these restrictions the only way that they can put a roof over their heads is through renting. The waiting lists for council properties and registered social landlords can be very lengthy, and for this reason many people are opting to rent within the private sector.

This increase in the number of people looking for properties within the private sector has impacted on buy to let mortgages and properties, with the number of landlords investing in buy to let property having increased in order to meet the rising demand of consumers that want to rent in this sector. Figures show that 10 percent of landlords said that they would invest in buy to let property in the first quarter of the year, but this increased to 12 percent for the second quarter of the year.

The data was released by the Paragon Group, which said: “Demand for property investment has remained strong during the recession and has improved since house prices stabilised. Landlords know that the long-term forecast for tenant demand is extremely healthy, with socio-economic and demographic changes leading to growth in the number of households calling the private rented sector home. Government figures show that the private rented sector is the only housing tenure that is currently growing.”

Tags: Renting, mortgages, Landlord, Private rented sector, Investment, buy to let

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Hung parliament could see mortgage costs and other costs increase

Saturday, April 24th, 2010

Concerns have been expressed in recent report over what might happen to the UK’s economy in the event of a hung parliament in the up and coming general election. Many are concerned that this could rock the nation’s already fragile economy and could lead to soaring mortgage costs, higher interest rates, and a far weaker pound.

The possibility of a hung parliament is very real at the moment, with the usual two horse race between the Labour and Conservative parties having now turned into a genuine three way competition with no clear winner evident as yet. Whilst some, including the leader of the Liberal Democrats, Nick Clegg, are not overly concerned about a hung parliament others think that this could spell disaster.

According to reports a hung parliament could see interest rates soaring from the all time low of just 0.5 percent to 3.5 percent or more. Homeowners that are still paying off mortgages could see their mortgage repayments increase by hundreds of pounds a month, and the British economy could be severely affected and could struggle for many months to come.

There are also concerns that the British pound would take a nosedive as a result of a hung parliament which would be bad for the economy as well as for travellers. The weak pound would also mean that consumers would be paying more for things such as petrol, the price of which is already causing severe financial problems for many drivers.

The CEBR said: “Of course we just don’t know what will happen. We are in unchartered territory. It could be OK. Or it could be absolutely awful. But most people don’t seem to realise how fragile the economy is. And now is not the time to sort out the deficit by taking a stab in the dark with a hung parliament.”

Tags: economy, mortgage, Politics, British pound, parliament

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More people could struggle as unemployment rate increases

Friday, April 23rd, 2010

The number of people struggling to repay their debts and mortgages could increase in the UK after it was revealed that the unemployment rate has increased to its highest level since 1994. The jobless rate has surged to its highest level since before Labour came into power, and the threat of further job losses is still high.

Over the past couple of years the financial crisis and recession has seen many people suffering financially, with many accruing high levels of debt and many others unable to cope with the debt that they already had. During the three months to February the unemployment rate increased by 43,000, and this could further impact on the abilities of tens of thousands of people to make debt repayments.

The data was released by the Office for National Statistics. The figure also showed that whilst the unemployment rate had increased the number of people claiming unemployment benefit fell dramatically in March, showing a higher than expected fall of 32,900.

Youth unemployment has been increasing according to the figures, and in the December to February period there were 929,000 people aged between sixteen and twenty four out of work. There was also an increase in economically inactive people, which are those that are out of work and not actively seeking work. Yvette Cooper, the Work and Pension Secretary, commented on the figures.

Cooper stated: “What this shows is that we are not out of the woods yet. That’s why it is so important that we keep increasing the support for the unemployed, but also that we sustain the overall support for the economy.”

The jobless figure has given the Tory party more fuel to verbally attack the Labour government, with the shadow Work and Pension Secretary stating that Labour policies were clearly not working.

Tags: government, unemployment, debt, figures

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Dealing with mortgage arrears

Thursday, April 22nd, 2010

Those of us that managed to buy our own homes may be counting our blessings for getting onto the property ladder before getting a mortgage became increasingly difficult, as it is now, but there are other problems that homeowners have to worry about, namely how to ensure that they keep on top of their mortgage repayments.

Whilst it’s all well and good to have your own home, your property could disappear in a puff of smoke it you fall behind with repayments and already many people have lost their homes over the past couple of years because they have been unable to keep on top of repayments on their mortgage.

Over the past year things have been very difficult for many homeowners in the UK, with many suffering as a result of the recession, which resulted in massive job losses. The added pressure of the credit crunch added to the financial problems that many homeowners were experiencing, and regrettably many were unable to keep up with their repayments.

With banks clamping down more seriously than ever on mortgage arrears many quickly found themselves losing their homes, which were swiftly repossessed by the banks who were desperate to shore up their own finances by selling them as quickly as they could.

Whilst the situation as eased off a little now, partly due to pressure from the government to use repossession only as a very last resort, there are still many people who may be finding it difficult to make their mortgage repayments and could end up losing their homes eventually unless steps are taken to rectify the problems.

Industry experts are warning those that do experience difficulties in making mortgage repayments not to bury their heads in the sand and hope that the problem will go away. Instead, homeowners that are in financial trouble need to get advice as quickly as possible in order to try and sort the problem out before it gets to the repossession stage.

One option for homeowners is to speak to their bank or lender about their situation, being honest about finances and making suggestions about how they might be able to sort things out. Most lenders will be sympathetic about homeowners’ situations as long as they are made aware of the problem.

For those that do not get any joy from their lender there are also a number of debt advice charities that can help, such as the Consumer Credit Counselling Service or the Citizen’s Advice Bureau.

Tags: Banking, advice, finance, debt, mortgage, repossession

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Fewer personal loans being used for consolidation

Thursday, April 22nd, 2010

Recently performed research has indicated that compared to two years ago far fewer personal loans that are taken out in the UK are being used for the consolidation of other debts by consumers. The research was carried out by Sainsbury’s Finance, with the results showing a marked change in the number of people using personal loans to consolidate their other debts.

The research from Sainsbury’s Finance showed that a couple of years ago one pound in every thirteen pounds taken out by customers in the form of personal loans was used towards consolidation of other debts. However, this has now dropped to one pound in every fifty pounds, which marks a significant drop in the number of people using personal loans for debt consolidation.

Officials from Sainsbury’s Finance have said that whilst people are still taking out personal loans they are being used more for other purposes now rather than for consolidation of other debt. Home improvements are a popular choice for the use of personal loans, and more people are also using these loans more for the purchase of a new vehicle.

A Sainsbury’s spokesperson said: “Debt consolidation has always been one of the most common reasons for people to take out personal loans. But while more and more people are taking out a loan for other reasons, there has been a sharp decline in the proportion of people borrowing money in order to consolidate their debts.”

The spokesperson also went onto to state that consolidation was still something that those with a lot of debt should consider, as it could cut their monthly repayments down to an affordable level and could reduce the overall amount of interest that they pay on their debts. He added that it was important for consumers to shop around for the best rates when considering personal loans for any purpose.

Tags: debt consolidation, Sainsbury's, credit, loan, finance

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Many people in the UK hiding debt problems

Thursday, April 22nd, 2010

A recent report has suggested that there are now many people in the UK who are hiding their debt problems, with many of them struggling to make ends meet financially and hiding their debt issues from their families and loved ones. It is thought that around one in three people could be hiding problems relating to their debt levels and struggling as a result of their debts.

According to the report the value of this so called hidden debt mountain could be an astonishing £55 billion, adding to the already huge level of personal debt that consumers in the UK have overall. The average personal debt in the UK is now said to be just under £10,000.

Industry officials are now concerned how people with hidden debt will cope in this turbulent financial climate. Whilst the recession is over many people are still struggling financially, and the threat of job losses is still very real. For those that do have huge secret debts there is nobody close to turn to if things get unmanageable and this could create further problems for these people.

Those that do have high levels of debt that they cannot manage are being advised to seek advice from a debt charity or group, where they may be able to learn about alternative options that are available to them or get advice on better managing their finances and their debts.

One borrower who has a massive £36,000 of personal debt said: “None of my family know about the debt that I am in. A couple of years ago things got really tough so I had to go into a debt management plan, and my family still don’t know about my debt. I will be paying on the plan for about twenty years before I clear my debts. That’s a long time to keep a secret.”

Tags: debt, secret, credit, finance

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Sharp fall in popularity of fixed rate mortgages

Monday, April 19th, 2010

In the past many people that were buying homes opted for a fixed rate mortgage because of the increased peace of mind that these mortgages provided. Whilst the interest rates charged on fixed rate mortgages were slightly higher than on variable rates these loan types gave the borrower increased financial stability and peace of mind.

With the fixed rate mortgage homebuyers were able to relax in the knowledge that for a set period of time their mortgage interest rate, and therefore their monthly mortgage repayments, would not change even if there were changes to the UK base rate. Whilst this also meant that the rate and repayment could not fall most buyers were happy knowing that it would not go up.

However, due to existing market conditions it seems that the popularity of fixed rate mortgages has declined, with a sharp fall reported in the popularity and take up of these mortgages. For over a year now the base interest rate has stood at its lowest level in the history of the Bank of England, at just 0.5 percent. With this in mind many have decided that it is no longer viable to opt for fixed rate deals.

One mortgage broker, Ray Boulger, said that today’s fixed rate deals were more expensive than they were a year ago despite the lower base rate. He also said that the percentage of clients at his firm that were taking out fixed rate mortgages had plummeted from a healthy 80 percent to a paltry 20 percent, with many realising that tracker products were the best bet at the moment.

Mr Boulger stated: “I think you will see the proportion of fixed-rates continuing to fall on the CML reports for at least the next two or three months.”

Tags: fixed rate, interest rates, mortgage, mortgages

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Spending could lead to increase in IVAs

Saturday, April 17th, 2010

It was recently reported that over the past few weeks Brits have been whipping their credit cards back out and hitting the High Street and Internet shopping sites with a renewed confidence. Whilst the recession is not long over and the effects of the global financial crisis are still affecting the nation consumers seem determined to spend their way out of the financial gloom.

However, whilst this increased spending may prove to be good news for the retail sector, which has suffered massively over the past year, it could also lead to consumers burdening themselves with debts that they will struggle to make repayments on. Some consumers are already burdened with debt, and additional debt could tip them over the financial edge.

There are now concerns that increased spending by consumers in the UK could lead to more and more people finding that they can no longer cope with their debts or make repayments on the amount that they owe. Officials believe that this could lead to an increase in the number of people applying for an IVA, or an Individual Voluntary Arrangement, which is a softer form of bankruptcy.

An IVA can have a profound effect on the credit rating and the financial future of the borrower, and should only be used as a last resort by those that are experiencing financial difficulties. However, the more people borrow the more they are likely to be desperate to escape their debt, and for some this may seem like the easy way out, as many fail to recognise the long term repercussions.

Of course, this doesn’t mean that those that have genuine problems with their debts and who are seriously struggling to make repayments do not have some form of help at hand. In actual fact there are many alternatives that consumers could look at which would not have as profound an effect on their financial future as an IVA or bankruptcy.

One potential solution is to contact creditors directly in writing or person, explain the financial situation, and look at making a reasonable repayment offer over an extended term – most lenders will consider this especially in the current climate.

Another option is to go to a debt management agency, preferably a charity run or government run one that does not charge fees. You may then be able to get advice to help you to manage your finances more effectively or may be able to get onto a debt management plan.

Tags: debt, credit, individual voluntary arrangement, finance

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Divorce numbers plunge due to debts and finances

Saturday, April 17th, 2010

A recently released report claims that the number of divorces filed in the UK has been plummeting over the past couple of years. However, whilst this could indicate that couples are enjoying stronger relationships officials believe that the falling divorce rate is more about finances than about a loving relationship.

According to the report many couples that may wish to get divorced now have so much debt that they are forced to continue living with one another in order to be able to maintain repayments on their debts. The divorce rate has hit its lowest levels since the 1970s over the past couple of years, but this does not necessarily indicate happier marriages.

Whilst one of the major factors attributed to the drop in the divorce rate is couples being forced to live and remain together due to their debt levels there are also other financial factors that are thought to have played a part. Officials believe that due to the financial climate over recent years, fewer couples have been able to afford to get married in the first place, which means that there are fewer couples to get divorced.

In addition to this the recession and financial strains on couples means that some may not have had the financial means to get divorced, particularly in cases where there are children and assets involved and where the services of a solicitor may be required, as this can work out to be very costly. One official from Atlantic Financial Management said that without selling the house it could be difficult for couples to separate.

He said: “In addition to removing one or other party from the deeds on a property, the task of splitting responsibility for joint household debts can be very traumatic. Clearing credit card debts and other joint loans is generally not possible unless the property is being sold and the assets split.”

Tags: finances, Divorce, debt, Marriage

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Pre-election property sales rush is on

Friday, April 16th, 2010

A recent report has shown that a rising number of homeowners in the UK are now rushing to try and sell their properties before the general election takes place on May 6th. Officials from the Royal Institute of Chartered Surveyors claim that homeowners that were only considering selling previously were now determined to sell as quickly as possible.

With the very real threat of a hung parliament following the general election next month homeowners are panicking about what might happen if they wait around to sell their homes. It is thought that many of these people may have been considering selling for close to two years and that the up and coming election may spur them on.

RICS officials claim that the number of homeowners now putting their properties up for sale has increased to its highest level in around three years. The number of sellers is now outstripping the number of buyers, and officials believe that this could help to bring house price inflation under control.

The report for March from RICS showed that whilst the number of people registering to purchase property remained flat 21 percent more surveyors reports a rise in properties being put up for sale as opposed to a fall. This comes after a year of lack of supply to meet demand caused property prices to be pushed up.

A spokesperson from RICS said: ‘With the election approaching and uncertainty growing over the political direction of the country, many vendors now appear eager to put their properties on the market. For the time being, many of the key housing market indicators are still positive or stable. However, with stocks increasing and sales decreasing we may see some modest price falls in some regions although London, the South East and Scotland are continuing to perform well.’

Tags: Royal Institution of Chartered Surveyors, buyers, property, homeowners, general election

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UK recovery dependent on bank lending

Friday, April 9th, 2010

Officials from the Federation of Small Businesses have said that the recovery of the economy in the UK is based heavily on lending from banks, but that banks are refusing to provide finance to many businesses even in cases where the business has a sound business and financial plan in place.

Since the onset of the global credit crunch there have been many issues that have affected the financial industry and both consumers and businesses have suffered when it comes to being able to get finance, which further deepened the recent recession.

The global credit crisis left the banking industry practically in ruins, and in order to shore up their finances many banks are reluctant to lend money to businesses and consumers even if there is just the slightest risk. One economist said that banks no longer had the ‘risk appetite’ and this was affecting their decision over who they would lend to.

The Federation of Small Businesses said that a lot of research had been carried out that indicated many businesses had been desperate to borrow money from banks but that in the difficult financial climate the banking industry had been reluctant to hand out business loans.

However, other reports have indicated that it is not only the banks that are to blame. Some have suggested that the appetite for borrowing money amongst businesses has also dropped, and that one of the reasons behind the poor business lending figures by banks was a reduction in the level of applications.

It is thought that some businesses may be steering clear of borrowing money from banks for one of a number of reasons, from fear of falling behind with repayments to high interest rates or simply a growing lack of trust and confidence in the banking sector.

Tags: Business_Finance, Economics, credit, finance, Bank, financial crisis

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Many families still living on the edge financially

Friday, April 9th, 2010

According to a recent report many families in Britain are still living on the financial edge despite the recession being over and the financial markets said to have improved. For many people even a slight drop in income could result in them being unable to keep on top of financial commitments, and with the prospect of job losses still a concern this could pose a real problem for many households.

According to a recent survey 25 percent of people said that if their household income dropped by £300 a month they would no longer be able to make repayments on their mortgage. With the threat of job losses still very real, and with pay freezes compared to inflation causing problems, this could put many people on the edge financially.

The credit reference agency Call Credit questioned over two thousand respondents with regards to their financial situations, and 26 percent of those questioned said that they would struggle to make mortgage repayments if they lost several hundred pounds off their income.

Research also showed that around 9 percent of those questioned had lied about their income in order to get the credit that they wanted, telling lenders that they were earning more than they actually were in order to be able to get the amount of finance that they needed.

A Call Credit official said: “These statistics are extremely alarming. A significant proportion of people aged 35 to 44, many of who may have families to support, are living on a financial precipice where just one negative event, such as a reduction in paid overtime or an unexpected expense, could have disastrous financial consequences. What is of real concern is that some people are deliberately over-inflating their income to increase their credit limit. If the borrower then maxes out their high credit limit, they are running a serious risk of getting into financial difficulties and being unable to repay the debt.”

Tags: mortgage, income, Personal finance, finance

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Gloucestershire teens taking out illegal loans online

Friday, April 9th, 2010

According to recent reports teenagers in the Gloucestershire area many be going online to gain access to illegal loans. Police authorities in the area have said that they have been approached by four families so far whose teenage children had one online and taken out loans illegally through unregulated lenders.

One police official from the area, Sgt John Skilling, said that fourteen and fifteen year olds in the area had been visiting sites that were not even regulated and putting in details that then enabled them to take out loans for several hundred pounds.

It appears that the parents of the teens that have been taking out these loans have not even been aware of what was happening until they started receiving letters from the unregulated lenders demanding the money back. Sgt Skilling said that the sites could be very tempting for young adults hence their growing popularity amongst the teens.

Skilling added that these children could see how easy it was to get their hands on some cash, and because the companies that they were using were not regulated they were exploiting these youngsters. He said that awareness needed to be raised amongst parents with regards to the temptation of these sites and the ease with which teens were getting cash.

Skilling said: “Children see how easy it is to get money. If they went to a regulated, reputable company they would be asked for references and bank details, but there are sites out there which enable you to get unsecured loans. It’s exploitation of young people.”  

He added: “It could be as simple as ‘do you want to play this game online? Text 1234 to 1234’. Then, in small print, ‘Texts will cost £5’. Parents need to be aware of how tempting these can be to young people and how easy it is for them to get hold of money. Once it’s in place, someone has to pay the loan.”

Tags: illegal, credit, loans, online

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Getting a property in a difficult climate

Friday, April 9th, 2010

Over the past couple of years the mortgage market has really suffered, and as a result of this those that are looking for mortgage loans have also suffered with many being unable to get the finance that they needed to buy a home, and many others having to pay way over the odds in order to get a mortgage loan. The property market has been suffering since the onset of the global credit crisis, which swept across the UK in 2007, and it is only recently that it has started to recover.

Whilst some form of recovery appears to have positively affected the mortgage and property markets there are still many challenges that face buyers that are looking to get some sort of mortgage. Certain groups have suffered more than most, such as first time buyers and lower income families who have been unable to raise the high deposit levels that lenders have been demanding.

However, with spring now in full swing more and more people will be considering either buying a new home or moving home, and this means that more people may be looking for a mortgage in order to fund their purchase. Many of those considering purchasing a property may be looking at ways to improve their chances of getting a mortgage in the current challenging climate, and there are a number of ways through which you may be able to boost your chances of success.

For many people now is the perfect time to buy a home, not just because of seasonal reasons but also because the stamp duty exemption threshold has been increased, which means that buyers can now avoid having to pay stamp duty on a property up to the value of £250,000, which represents a potential saving of up to £2,500.

The first thing to remember is that this stamp duty holiday will bring a rising number of people to the property market, and competition for properties that are for sale will become tougher. You can stay one step ahead of the competition by getting a mortgage agreed in principle, which would make you a more attractive prospect to sellers compare to someone that puts in an offer before having any idea of whether they can get a mortgage.

In order to improve your chances of getting a mortgage make sure that you check your credit report to ensure that all information is accurate and up to date so that this does not adversely affect your chances. Also, make sure that you save as much as possible towards a deposit, as lenders these days want to see some form of financial commitment in order to provide people with mortgages.

Tags: finance, property, mortgage

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Increase in property sales in February

Monday, April 5th, 2010

Recently released figures have shown that the level of property sales in February picked up. The data was released by HM Revenue and Customs, and showed that there was a 14 percent increase in completed property sales in February compared to the previous month. (more…)

Tags: stamp duty, British Bankers Association, housing market, Alistair Darling, property sales

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Many borrowers turning to high interest sub-prime credit cards

Sunday, April 4th, 2010

There are concerns that many borrowers in the UK are now turning to sub-prime credit cards that charge astonishing rates of interest because they are unable to get finance through more traditional routes. According to a recent report around one million people that have been desperate to get finance but have been turned away by traditional lenders have turned to these credit cards, some of which are charging rates of interest that are as high as 60 percent.

One firm that offers credit cards for those with damaged credit ratings is Provident Financial, which offers the Vanquis credit card. The company claims that it has been receiving a massive 2700 applications a day for its credit card, which charges some consumers an astonishing rate of interest based on their credit rating and risk. With so many people getting turned down for credit, and others having their credit limits slashed or their accounts closed, firms like Provident are enjoying a roaring trade.

Provident now has over four hundred thousand borrowers on its books, although officials from the company said that it had also had to turn down well over three quarter of a million applications from desperate applicants. The figures from Provident have raised concerns that more and more people could be forced into finding finance from companies such as door step lenders where the rates of interest charges are extortionate.

An official from the debt charity, Credit Action, said: ‘These people are not being served by the high street banks and it just goes to show the appetite that there still is out there for credit. The rates on these cards are very high if you cannot manage your debts. The fear is that while some of these people will hopefully have been put off, many will have to turn to doorstep lenders or pay day loans companies which can charge exceptionally high amounts.’

Tags: interest rates, credit history, credit, Credit card, finance

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