Archive for September, 2010

FSA plans could impact on property market

Thursday, September 23rd, 2010

The UK’s financial regulator, the Financial Services Authority, has found itself at the centre of a scathing attack by the Council of Mortgage Lenders recently over its plans to try and restrict mortgage lending in order to cut risks and reduce irresponsible lending.

The FSA has stated that it has plans to bring a number of measures in to restrict mortgage lending in the UK and cut out high risk loans, and this includes scrapping interest only mortgages, capping the amount that consumers can borrow, and slowing down applications.

The Council of Mortgage Lenders has slated the FSA for its plans, stating that these measures could have a serious impact on consumers and house prices. The CML said that many people would lose their dreams of homeownership as a result of the measures, and property prices could be driven down.

The CML said that consumers were right to be concerned about the plans from the FSA, as they could have a serious impact on the housing market as a whole, and could leave many of those hoping to get onto the property ladder out in the cold. The group also said that the FSA had admitted that these plans would probably lead to property values in the UK falling.

Michael Coogan from the Council of Mortgage Lenders said: “This is just one of a number of unintended consequences of the FSA’s well-meaning but misguided proposals that the CML believes the UK’s existing 11 million mortgage borrowers have every right to be concerned about.”

The FSA said: “We are keen to ensure that people who can afford a mortgage can get one, and also to protect vulnerable consumers by making sure that anyone who does take on a mortgage can afford to pay it back.”

Tags: Financial Services Authority, mortgage, Mortgage loan, council of mortgage lenders

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Loans for financially excluded made available through new scheme

Thursday, September 23rd, 2010

A new government backed scheme has been launched to offer small loans to financially excluded consumers who cannot get finance through traditional means. It is hoped that the new scheme, which has been launched by the National Housing Federation, will reduce the number of people that are turning to unscrupulous and unregulated loan sharks in order to get finance.

The scheme, which is being piloted in the West Midlands for now, is called My Home Finance, and has been launched in conjunction with the Department for Work and Pensions. Under the new scheme eligible consumers will be able to borrow sums of up to around £500, and will then make weekly repayments to clear the debt.

Before being approved for the loan consumers will have to take part in a forty five minute interview, and this will enable officials to determine whether the person will be able to repay the loan. However, whilst the scheme could help the financially excluded to avoid loan sharks the rate of interest being charged on the loans is higher than the maximum charged by credit unions.

The interest on these loans will start at 29.9 percent APR. However, after the initial period it will rise to 49.9 percent APR. That said, the service could still prove invaluable for many. My Home Finance will also offer consumers financial and debt advice, which is another service that will prove invaluable to many people.

David Orr, chief executive of the National Housing Federation, said: “My Home Finance will provide an affordable, convenient and trusted option for people on lower incomes looking to build up their savings and borrow modest sums.” He added: “By offering fair loans at fair prices, we hope to offer an alternative to both loan sharks, who cynically prey on hard up families, and doorstep lenders, who are all too willing to lend cash to the desperate at hugely inflated rates of interest.”

Tags: Personal finance, loan, debt, credit

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Why are so many people continuing to rent?

Wednesday, September 22nd, 2010

These days there are many people in the UK who are renting a home rather than deciding to buy their own property, and whilst this is damaging for the property market in the UK there are a number of reasons why many non-homeowners are continuing to rent and are not getting onto the property ladder.

The fact that so many people are now deciding to rent has pushed up the average rent in the UK over recent months, and this has been coupled with the fact that a rising number of landlords have been selling up, resulting in lower supply of rental properties and higher demand.

The mortgage market has been difficult for some time, with many people unable to access affordable mortgages, and this is particularly true for first time buyers who may have wanted to get onto the property ladder but have been unable to get the necessary finance from lenders.

Another of the reasons that many people are not buying property at the moment is because they cannot afford the deposit that is needed to get a mortgage from most lenders, as this has soared over the past couple of years with many demanding a minimum deposit of at least 15 to 20 percent of the property value in order to offer a mortgage.

For many the financial climate and economic fragility simply isn’t stable enough for them to make such a huge commitment as purchasing a property, and this is yet another reason behind the rising number of non-homeowners that are deciding to rent rather than try and get onto the property ladder. Whilst the recession may be officially over many are still in fear of losing hours at work or even losing their jobs, with the coalition government’s cutbacks in the public sector likely to produce job losses both in the public and private sectors, and this has made many too wary of committing to something as huge as a mortgage loan.

The good news is that whilst the lack of buyers in the property market may be driving up rental prices due to increased demand the same situation is also helping to drive down the cost of purchasing a property because of the lack of demand amongst buyers coupled with an increase in people trying to sell their homes, and recent reports have indicated that asking prices have now fallen for the third consecutive month, which is good news for those that do decide to buy.

Tags: mortgage, Property ladder, first time buyer, Mortgage loan, Renting

Posted in Featured Articles, Mortgage News | 1 Comment »

Consumer confidence levels in mortgage and property markets still low

Thursday, September 16th, 2010

It has been announced that the level of consumer confidence in the mortgage and property markets is still low, despite claims that lenders may be easing up on mortgage lending to some consumer groups. Although there have been some recent improvements in the mortgage markets in the UK consumer confidence is still suffering, according to a recent report.

New figures have been released by the Building Societies Association, with officials stating that a large number of people in Britain are still not confident when it comes to the mortgage and property markets. The figures were compiled as part of the September 2010 BSA Property Tracker Survey. The figures showed that the number of consumers who lacked confidence in the markets increased from 21 in June to 26 for this month.

A large number of Brits do not believe that now is a good time to invest in property, according to officials involved in the survey, and there were many others who cited a number of factors as barriers to being able to purchase a property. These barriers included lack of job security in the current financial climate and difficulties in raising a deposit given the high level of deposit that some lenders were still demanding. More than 56 percent of respondents to the survey gave these reasons.

The BSA said that whilst access to mortgages was now better than it was earlier in the year many people were still left out in the cold due to factors such as job security, their credit history, and their debt levels.

BSA head of mortgage policy Paul Broadhead said: “It is clear that concerns about future falls in property prices are having a significant impact on consumer confidence.”

Tags: Mortgage loan, mortgage, Consumer confidence, Personal finance

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Mortgage lending to fall before increasing

Thursday, September 16th, 2010

An industry official has recently predicted that mortgage lending levels in the UK will fall before they rebound again in the coming months. The prediction has been made by Andy Pratt, chief operating officer at Alexander Hall, who claims that the August mortgage lending figures will show a decline in lending levels from mortgage companies, and that this will continue before any rebound in lending levels is seen.

His comments come following data that was released by the Council of Mortgage Lenders, which showed that there had been an increase in mortgage lending for the month of July compared to the previous month. July saw 56,000 approved home purchase loans compared to 52,000 approvals in June. However, Pratt believes that this trend will not continue when the August figures are released.

Lenders were thought to be easing up on restrictions relating to mortgage lending levels, but criteria is still very tight for many groups including first time buyers, many of whom cannot afford the repayments despite lower interest rates, and many others who cannot raise the high deposit that lenders are still demanding for their most favourable rates. Lenders are still being very cautious over who they lend to, leaving many first time buyers unable to get onto the property ladder.

Mr Pratt did add that there were signs that lenders may be intending to offer a wider range of mortgage products at higher loan-to-value ratios in the future, and this could help to reverse the trend of falling mortgage lending levels over time. However, he said that the sector would see a fall before any increase was seen.

He stated: “From the feedback that I am getting from everybody in the market, the applications in August were worse than the seasonally adjusted expectations. I think this is probably the lowest point.”

Tags: mortgage products, Mortgage loan, mortgage, finance

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Increase in calls to debt advice agencies

Thursday, September 9th, 2010

The huge public deficit in the UK is causing big headaches for the new coalition government, which blames the former Labour government for the problem and is making huge cutbacks to try and reduce the deficit. However, there is also the matter of spiralling personal debts, which are causing the same headaches for households and consumers that simply cannot cope with their debt levels any longer.

Figures have shown that the number of calls being made to the National Debtline run by the Money Advice Trust has more than doubled in the past year, as consumers struggling with their rising debt levels and sinking income struggle to keep up with repayments. Since 2008 the number of calls being made to the advice line has soared according to officials, with the global financial crisis and the recession both having taken their toll on consumer finances.

The charity has said that unless unemployment growth is halted these debt problems could continue to soar. However, with the coalition government having made huge cutbacks in the public sector, and with this expected to have a serious effect on employment levels in the UK the debt problems being experienced by consumers and households could get worse.

The Money Advice Trust also touched upon the debt problems that are being experienced by elderly homeowners, and suggested that a solution in these cases would be to release equity from their homes in order to settle other debts and reduce outgoings.

An official from MAT said: “There can be no doubt that continuing high levels of unemployment are contributing to the personal debt problems faced by the British public. We have grave concerns that households witnessing a fall in income due to unemployment will start to default on debt repayments, and that we may start to see a sharp rise in personal insolvencies.”

Tags: Money Advice Trust, unemployment, finance, debt

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UK households struggle with debt

Thursday, September 9th, 2010

According to a recent report UK households are increasingly struggling with personal debt problems, and many have no solution to help them out of their debt problems. A report has been released by the debt charity, the Consumer Credit Counselling Service, showing that nearly one third of people seeking assistance from the charity have been told that there is no solution to their financial problems.

Over 96,000 clients were counselled by the charity in the first six months of the year, and of these over 30,000 were told that there was no solution to their debt issues. The charity said that in cases such as these consumers needed to earn more but in many cases this simply wasn’t possible.

On average those that could not be helped had outgoings that were around £449 higher than their income. This was for a variety of reasons, such as losing income, having hours shortened at work, or having an extra expense such as a baby.

Debt problems in the UK have been further highlighted in a report from the UK’s Office for National Statistics, which showed that nearly four million households, equating to 20 percent – had no adult in work living in the household. The situation could be worsened as a result of the job cuts expected due to the cutbacks being made in the public sector as part of the emergency budget to cut the public deficit.

The Money Advice Trust said: “We have grave concerns that households witnessing a fall in income due to unemployment will start to default on debt repayments, and that we may start to see a sharp rise in personal insolvencies. Research undertaken by the University of Wales last year found there were 2m ‘iceberg bankruptcies’ in the UK – employed people who could not afford any fall in income without defaulting on debt repayments.”

Tags: Consumer Credit Counselling Service, debt, households, credit

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Consumers should shop around for personal loans

Wednesday, September 8th, 2010

Officials from a financial group have recently reiterated the importance of shopping around for the best deals for consumers who are looking to take out a personal loan. The advice comes from Sainsbury’s Finance, with officials from the firm stating that consumers could potentially save a small fortune by taking the time to shop around for personal loans rather than going for the first loan they come across.

Personal loan rates are said to have been rising recently despite the fact that the base interest rate is at an all time low of just 0.5 percent, and this is particularly true for smaller personal loans of less than £5000. Some consumers may find therefore that they are better off going for a slightly larger loan and paying less interest than a smaller loan that comes with a higher rate of interest.

With interest rates on personal loans on the rise it has become all the more important for consumers to compare the different rates and terms on loans from a range of providers before making a decision or commitment. Steven Baillie, head of loans at Sainsbury’s Finance, said that consumers looking for a loan of around £10,000 could potentially save a massive £1000 by shopping around.

He said that many people were paying over the odds for a personal loan even though they didn’t have to, and that by shopping around they could have saved a fortune on their overall cost of borrowing. With Sainsbury’s consumers are able to apply for a personal loan of between £7500 and £14999 with a typical APR of 7.8 percent.

Baillie said: “Ultimately, you must make sure you’re getting the best possible rate for your requirements and not paying over the odds, because you don’t have to.”

Tags: finance, loan, credit, Interest, Sainsbury's

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How do shared ownership mortgages work?

Wednesday, September 8th, 2010

Shared ownership is an option that is now being considered by many first time buyers looking to get onto the property ladder. Buying a property outright in the traditional way has become impossible for many first time buyers, and this is due to factors such as mortgage restrictions, high deposit demands, and high house prices, all of which have affected buyers’ ability to get the mortgage that they need.

Shared ownership is a scheme that has given first time buyers a chance to get onto the property ladder gradually, and for many is the ideal solution because there is no huge deposit or mortgage required as there may be when buying 100 percent of a property. With shared ownership buyers only have to take out a mortgage for part of the property value depending on the share that they are buying, which means that the repayments are more affordable, the likelihood of getting the mortgage is higher, and the deposit is not as much as it would be with a fully mortgage.

It is worth bearing in mind that not all lenders offer shared ownership mortgages, so you will need to do a little research to find out which ones are able to help. Shared ownership properties are dealt with by housing associations, so you may be able to get advice from the housing association that you are going through with regards to mortgage lenders that may be able to help.

Over the past few years lenders have placed strict restrictions on their mortgage lending, and whilst prior to the credit crisis lenders were offering multiples of up to five times the borrower’s salary this has all changed now, making it difficult for buyers to get the amount they need to buy a home in the traditional way. In addition lenders want far higher deposits, such as 20 or 25 percent of the property value, and this is something that is impossible for many to raise.

With a shared ownership mortgage buyers may be buying a 25 or 50 percent share of the property for example, which means that they only need a mortgage for the percentage of the property that they are buying. The remainder of the home is rented from the housing association, but as and when the buyer is able to afford to buy more of the property it is possible to staircase and take on a larger share until the buyer has purchased 100 percent of the home.

Tags: first time buyer, mortgage, Mortgage loan, Property ladder

Posted in Featured Articles, Mortgage News | No Comments »

Is it worth consolidating your debts?

Wednesday, September 8th, 2010

Trying to deal with a wide range of debts can be difficult at the best of times, but in the current financial and economic climate many people are experiencing real difficulties when it comes to keeping on top of debt repayments. Over the past couple of years many people have built up a range of debts, such as overdrafts, credit cards, store cards, personal loans, and more, and this has left them facing real financial problems.

Those that decide to take action to try and address their debts do so in a variety of ways, as there are a number of options that are open to those that need to sort out their debt issues. Some people who have no hope of being able to repay their debts may opt for solutions such as bankruptcy, Individual Voluntary Arrangements, Debt Relief Orders, and debt management plans.

There are also people who have a variety of debts, but do not want or need to take such drastic action as insolvency or debt management solutions, which could ultimately make their financial future difficult in terms of being able to get credit and finance in the future. For many of these people one effective solution is to consolidate their debts in order to reduce costs and minimise on hassle, and without taking any risks with their financial futures.

Consolidation is not the answer for everyone. For example, for those who have poor credit histories and scores the chances of being able to get an affordable consolidation loan – or any consolidation loan – may be slim to none. Also, those that are severely overstretched on their finances may find that the reduction in monthly cost from having a consolidation loan may not actually be of any real help, as their budgets are still overstretched.

For those that feel that they could comfortably continue making repayments if they wrapped up their other debts with a consolidation loan this could be the ideal solution. In addition to possibly cutting the amount paid out on debts each month these loans will enable borrowers to cut the hassle of having to deal with a variety of debts and creditors, giving them the convenience of having just one creditor and repayment to manage.

For those that do decide to opt for a consolidation loan to bundle their various debts into one it is important to remember that the interest rates, repayment periods, and terms can vary from one provider to another, so it is well worth taking the time to compare different loans and lenders before making any decision.

Tags: debt, debt relief, debt consolidation, finance

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Next year could see more people looking for debt advice

Wednesday, September 8th, 2010

A financial industry group has stated that the number of people seeking debt advice and relief could soar next year, as more and more people find themselves unable to deal effectively with their debts and financial commitments. A number of factors are likely to lead to an increase in the number of people experiencing difficulties with debt repayments, which could lead to more people needing help.

The prediction has come from a spokesperson for Lovemoney.com, who said that amongst other things rising unemployment over the course of this year could lead to more and more people struggling to pay their debts, and these people could end up needing advice on dealing with their unmanageable debts next year.

According to the head of consumer finance at the firm Ed Bowsher unemployment could soar over the course of this year, and this could make it impossible for many people to keep on top of their debt repayments. He said that options would be limited for those that were affected, and they would have to choose from filing for bankruptcy or opting for other solutions such as debt management or Individual Voluntary Arrangements.

He also said that it was likely that banks would end up writing off a lot of personal debt next year, as a result of the influx of consumers that may find themselves unable to meet repayments on loans, credit cards, and other debts. The huge cutbacks made by the coalition government in the recent emergency election are likely to affect job in the public and private sectors according to officials, and this could leave a huge number of people high and dry when it comes to repaying their debts.

Tags: Lovemoney.com, unemployment, finance, debt

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