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• Personal debt `exceeds UK`s GDP`

  Mon, 1 Sep 2008 10:35:28 GMT
  The personal debt possessed by consumers in the UK has exceeded the country`s gross domestic product (GDP) for the second year in a row.
  
  This is according to figures produced by accountancy firm Grant Thornton, which suggest that the total outstanding debt held amassed through mortgages, credit cards and loans has increased by 7.3 per cent over the last year.
  
  It states that the figure owed by consumers rose to £1, 444 billion over the last 12 months.
  
  "Despite the global downturn flattening the growth of personal debt and UK GDP over the past few quarters, debt levels continue to grow at a faster rate than the income the UK generates, " stated Grant Thornton`s chief economist Stephen Gifford.
  
  He went on to suggest that, if the levels of personal debt continue to rise, there will be a significant increase in the number of personal insolvencies.
  
  Meanwhile, figures produced by uSwitch recently suggested that UK workers now have an average of £2, 491 less disposable income than they did last year.
  
  
  

• Energy price hikes `bad news for people in debt`

  Mon, 1 Sep 2008 10:31:57 GMT
  Consumers experiencing debt problems may be adversely affected by the energy price hikes recently announced by two more suppliers.
  
  In a potentially unwelcome development for those in difficulties over their personal finances, npower has raised its prices by 26 per cent for gas and 14 per cent for electricity.
  
  Meanwhile, ScottishPower has hiked its tariffs by 34.4 per cent and 9.4 per cent for gas and electricity respectively.
  
  Commenting on the changes, Tim Wolfenden, head of home services at uSwitch.com, advised: "Consumers should look to pay by direct debit and move to an online plan where possible to get the best available prices."
  
  According to a recent survey conducted by the Chelsea Building Society, the rising cost of living in the UK is preventing families from providing the same level of financial support they would otherwise offer, with 30 per cent of respondents saying they cannot offer money to relatives struggling with money problems.
  
  
  

• September rate cut unlikely, says economist

  Fri, 29 Aug 2008 11:50:10 GMT
  People struggling with debt problems are likely to have to wait a while before they`re offered relief in the form of an interest rate cut, it has been suggested.
  
  Institute of Directors (IoD) chief economist Graeme Leach predicted that the monetary policy committee (MPC) is unlikely to reduce rates when it meets next week.
  
  In fact, he said the best people can hope for is a quarter per cent reduction by the end of the year.
  
  "But don`t expect anything more than that at the moment, " Mr Leach added.
  
  He explained that the IoD expects there will be "a lot more evidence of slowdown" before an interest rate cut is made.
  
  The interest rate has remained static since April 10th this year, when the MPC voted for a quarter point cut.
  
  Those trying to get out of debt have not had an easy ride of late, with the Consumer Prices Index increasing to 4.4 per cent in July from 3.8 per cent the previous month.
  
  The cost of petrol, meat, bread, cereals and vegetables all increased in this period, according to the Office of National Statistics.
  
  
  

• Mortgage debt risked due to insurance `over-estimates`

  Thu, 28 Aug 2008 11:44:45 GMT
  Households who experience a sudden loss of income could be risking mortgage arrears and other debt problems if they do not have appropriate cover, a financial services company has indicated.
  
  According to research carried out by YouGov for Legal & General, nearly two-thirds (65 per cent) of people surveyed were over-estimating the cost of taking out £150, 000 worth of life cover.
  
  The research also found 35 per cent thought adding critical illness cover to the insurance was more expensive that it actually is.
  
  Commercial director for housing at Legal & General Karen Blatchford said the company was "concerned" about the findings, as life cover can start from £6 a month.
  
  She added: "People may wish to consider covering not just their mortgage debt, but their family expenditure and bills.
  
  "Most families would really struggle if there was an unexpected drop in the household income."

• Loans `may help` the squeeze of retirement

  Thu, 28 Aug 2008 11:43:43 GMT
  People worried about debt problems plaguing their retirement years may want to consider the option of a loan from equity release, according to Fair Investment.
  
  The company stated that some pensions are "pathetic" and an additional income is necessary to live a comfortable debt-free life.
  
  Homeowners have the choice of two kinds of equity release schemes, it said, the most popular being a lifetime mortgage. This is a loan secured against the property which is repaid once the house is sold – an attractive choice as it means the owner still has possession of the house until death or a decision to move out.
  
  Alternatively, the house can be sold to a reversion company or individual who allows the former owner to stay on as a tenant.
  
  Sharon Bratley, chartered financial planner at the Fair Investment website, said: "Pensioners are finding it tough and releasing equity from property may be the only way to survive through retirement for some."
  
  This week the pensions minister Mike O`Brien said some over-60s are missing out on support to which they are entitled.
  
  
  

• More rate increases for unsecured personal loans

  Thu, 28 Aug 2008 11:42:50 GMT
  People considering unsecured personal loans as a means of consolidating debts may be interested to know two more lenders have put their rates up.
  
  Moneyback Bank has increased loans on the £3, 000 to £4, 999 tier from 10.8 per cent annual percentage rate (APR) to 11.9 per cent APR – an increase of 1.1 per cent.
  
  It has also increased the APR on its loans between £5, 000 and £15, 000 by 0.8 per cent.
  
  Meanwhile, Alliance & Leicester has also pushed its APR up to 8.7 per cent – a one per cent increase – on loans on the £7, 500 to £15, 000 tier.
  
  Comparison site uSwitch, citing the increases, said borrowers should research the best rates for their situation and fixed rates may be beneficial.
  
  Simeon Linstead, head of personal finance at the site, commented: "In this volatile credit market, borrowing on a fixed rate loan or consolidating debts can offer borrowers the peace of mind that their interest rate and monthly payments are fixed for the term of the loan."
  
  Debt consolidation may be one option for people with debt problems. For more serious personal finance problems, an Individual Voluntary Arrangement may help people get out of debt.
  
  
  
  

• Lending down by billions in past year

  Wed, 27 Aug 2008 11:35:21 GMT
  Figures released by comparison site uSwitch show the amount of money lent to British consumers in the form of mortgages and unsecured personal loans has dropped by nearly £11 billion in the past 12 months.
  
  Unsecured personal loans have decreased by an average of £283 million (39, 338 loans) during each quarter of the past year. This decline totals £1.1 billion (over 157, 000 loans) when one compares the second quarter of 2007 with the corresponding period in 2008.
  
  Furthermore, mortgage lending declined by nearly £20 billion, when the period of July 2006 to June 2007 is compared with July 2007 to June this year. Head of personal finance expert at the site, Simeon Linstead, said borrowers have found unsecured loans and mortgages to be more expensive.
  
  "However, the market is vast and there are still competitive rates for those who take the time to compare the offers available, " he added.
  
  The research also found an increase in credit card use, most likely to make up for the difficulty in finding unsecured loans.
  
  This may suggest more people are finding themselves in credit card debt. This week Sainsbury`s Bank said credit card companies should make reward schemes easier to understand.
  
  
  

• Tenants hit by repossessions

  Wed, 27 Aug 2008 11:34:17 GMT
  Figures released by the Council of Mortgage Lenders has revealed repossessions of buy-to-let properties are increasing twice as quickly as the mortgage market in total.
  
  The charity Shelter, citing the statistics, said tenants are now being hit by their landlords` debt problems.
  
  Chief executive Adam Sampson commented: "These figures show the shadow of repossession is no longer just cast over homeowners, but also thousands of innocent renters who have no idea how close they are to eviction."
  
  He went on to say that mortgage lenders should make both landlords and their tenants aware of repossessions before they occur.
  
  Furthermore, the government needs to take action to help renters who have been made homeless due to the property owners` debts.
  
  Losing a home – and a deposit – could also mean debt problems for tenants as well as potential homelessness.
  
  People struggling with mortgage repayments may wish to seek professional advice. A number of options are available to get through debt.
  
  
  

• Brits have `less disposable income`

  Tue, 26 Aug 2008 11:55:03 GMT
  Households in the UK now have less disposable income, according to research released by uSwitch.
  
  The average UK household`s disposable income – the remainder of gross income once essential household expenditure, social contributions and taxes have been taken out – is now £14, 520, a total of £2, 491 less than last year.
  
  Furthermore, it is the first time the figure has dropped since 1997, despite average salaries increasing.
  
  Director of consumer policy at the company Ann Robinson said it was a "lose/lose situation" because inflation is rising above salary levels.
  
  "People now have less money in their pockets than at any point since 1997 and British consumers are facing an autumn of discontent, " she said.
  
  Ms Robinson added people may be likely to choose to move away from the UK but declining house prices and the difficulties people are experiencing in selling may damage such plans.
  
  An increase in loans may be expected as people struggle to pay to maintain their lifestyles.
  
  While a consolidation loan may be suitable for people who want to get out of debt, secured and unsecured loans may bring in extra cash. However, last week uSwitch said unsecured personal loan rates have risen recently.
  
  
  

• House prices `35% above level of affordability`

  Fri, 22 Aug 2008 11:17:20 GMT
  People may be getting into mortgage arrears due to high house prices, according to comments made by the chief executive of Firstrung.
  
  Paul Holmes of the company, which specialises in helping first-time buyers, said: "At the moment house prices are 35 per cent above the trend line for affordability."
  
  He went on to say that the house prices of last year`s peak need to be considered and over a quarter needs to be taken off to bring them down to more affordable levels.
  
  Mr Holmes added that "the market is due" for a price correction but new-build flats would be hit hardest as a 35 per cent drop would "only take us back to 2003-4 when first-time buyers were still struggling".
  
  At the moment, buying a typical home requires a total of £27, 738 up front, a sum that would see a first-time buyer couple having to raise over 100 per cent of their joint take-home pay if they were earning lower quartile earnings (totalling £27, 516 after taxes), a survey from the Royal Institution of Chartered Surveyors found.
  
  
  
  
  

• Borrowers hit by unsecured personal loan interest

  Fri, 22 Aug 2008 11:16:05 GMT
  Rate increases for unsecured personal loans may be hitting people seeking consolidation loans, according to information from uSwitch.
  
  Statistics from the comparison service found borrowers have seen rates for loans of £1, 000 increase from 16.55 per cent annual percentage rate (APR) to 19.99 per cent APR over one year.
  
  Furthermore, citing information from YouGov, the study found people taking out the average loan of £7, 194 over five years are likely to pay £285.60 more in interest, if today`s best buy loan is compared with last year`s. This equates to a global cost of £1.2 billion, it said.
  
  The figures may create concern for those planning to take out a loan but who want to avoid serious debt problems.
  
  "However, the market is vast and there are still competitive rates for those who take the time to compare the offers available, " said head of personal finance Simeon Linstead.
  
  He added that small loans are often hit with high APRs and other options like credit cards may be a viable alternative. Searching online for loans may also turn up cheaper deals, he said.
  
  This week, Which? said price comparison sites could be confusing for borrowers.
  
  
  
  

• "Previously creditworthy people" being turned down for loans

  Thu, 21 Aug 2008 11:50:37 GMT
  Tighter controls over lending are stopping more people being accepted for mortgages and loans, a new report has shown.
  
  GE Money has said the crunch has seen people who would previously have had few problems securing a loan now classed as a credit risk.
  
  Citing research undertaken by TNS, up to 450, 000 people have applied for loans and mortgages four times or more before being accepted.
  
  Overall, over 3.4 million customers were rejected for remortgages, first mortgages, unsecured and secured loans in 2007 and the first half of 2008.
  
  It could be suggested that borrowers are being forced into deals with higher rates of interest – or even into rented accommodation instead of their own homes – which may cause debt problems.
  
  Head of mortgage marketing at GE Money Gerry Bell said "reputable" professionals should be used when arranging loans.
  
  "The key to successfully navigating through the current storm is to ensure you do your homework, check your credit file looks as good as it can and potentially seek expert advice from a broker, " he commented.
  
  A consolidation loan may be an option for those hoping to clear their debts at a rate they can afford.
  
  
  
  

• Borrowers "confused" by price comparison sites

  Thu, 21 Aug 2008 11:36:12 GMT
  People looking for consolidation loans to clear their debts may be left bemused by comparison sites, Which? has said.
  
  In a study of the three largest websites offering comparisons of loan and credit card deals – as well as insurance, which may protect against debt – the consumer magazine found discrepancies between results.
  
  The cheapest quote varied from website to website in the majority of cases, the report concluded, a situation that could lead to people unknowingly choosing a more expensive option than necessary.
  
  For example, while one price comparison site said the cheapest standard-rate credit card on the market had an annual percentage rate (APR) of 12.9 per cent, another found a card with an APR of 6.8 per cent.
  
  Editor of Which? Money Martyn Hocking said consumers may take the easy option by using price comparison sites.
  
  "But you might be very confused to find that different sites can give you vastly different quotes and often don`t give enough information for you to make an informed choice, " he warned.
  
  Today Which? also gave advice on saving money which may help people with debt problems.
  
  
  
  
  

• Worry for debt future as "finance literacy" worsens

  Wed, 20 Aug 2008 11:17:17 GMT
  Abbey has said UK adults` knowledge of personal finance matters is getting worse.
  
  This summer a group of adults sat a GCSE-level personal finance test set by the bank, with the results suggesting one in seven British people would not achieve a C grade (over 40 per cent).
  
  Last year`s results for the same exercise found one in ten would not get a C in finance, indicating a decline in knowledge for 1.2 million people.
  
  Banking director Steve Shore said the findings were "quite worrying" since the credit crunch has been the hot topic for the past year.
  
  The exam results revealed 88 per cent of people were not aware they had six weeks to repay credit card debts before interest is accrued, while a quarter (25 per cent) did not know that if a secured loan is not repaid, their home may be sold to cover the debt.
  
  In other finance news, drivers may be pushing up their insurance premiums by drink-driving, uSwitch has said, following figures released by the Department for Transport showing a two per cent rise in accidents cause by drink-driving.
  
  
  

• Advice given to personal loan borrowers

  Tue, 19 Aug 2008 11:26:29 GMT
  Finance information website the Thrifty Scot has offered advice to people considering taking out a personal loan.
  
  Secured loans are "straightforward" to agree, it said, if the borrower owns property that a loan can be secured against. While this option may be unappealing for those concerned about debt problems leading to repossession, the article explains the owner will only have to leave the property if payments are not made and the lender chooses to foreclose.
  
  Loans of this kind are also typically spread over a long period, for example 25 years. Payment holidays are also offered by some lenders.
  
  Unsecured loans can be easier and quicker to arrange and are available for consumers with no property, but often have higher interest rates.
  
  For those with debts, taking an unsecured loan as a debt consolidation option may look good to lenders, the article said.
  
  The website also offers money-saving and income-raising tips such as selling old CDs and taking advantage of free offers.
  
  
  

• Personal loan rates increase

  Tue, 19 Aug 2008 11:22:31 GMT
  A number of personal loan companies have increased their rates, according to Moneyfacts.
  
  People hoping a loan will solve their debt problems will not welcome the rate increases, while those planning for the future using a personal loan should be wary of repayments.
  
  According to the independent personal finance provider, borrowers should now expect "the highest levels of repayments seen in the last six years".
  
  Moneyback Bank customers are now looking at an annual percentage rate of 7.6 per cent on a £15, 000 loan over three years – a rise from 6.3 per cent in 2007 and 5.6 per cent in 2006.
  
  This is the cheapest deal available for such a loan and Moneyfacts is concerned some borrowers are not shopping around but taking on higher rates by choosing their regular banks.
  
  Commenting on a rise of almost three per cent on an average rate between 2006 and today, the provider said: "This is extremely bad news for consumers who may be considering consolidating existing debts to try to drive down their monthly expenditure."
  
  In related news, First Direct has launched a new offset mortgage for remortgaging customers only.
  
  
  

• Online banking `may help those in debt`

  Mon, 18 Aug 2008 10:00:53 GMT
  People with debt problems may want to consider doing their banking online, according to comments made by the Association of Payment Clearing Services (Apacs).
  
  Michelle Mayer of the association said people who are trying to stick to a budget can get "an exact picture" of their situation by using online banking.
  
  "Having access to your finances whenever you want and seeing what is going in and coming out puts you in a good place, " she commented.
  
  Online banking is growing in popularity, Ms Mayer added, because consumers are now used to shopping on the internet. Using it for banking and other administration is "a natural progression", she said.
  
  For people worried about debt or trying to keep on top of their banking, checking their income and outgoings online may be a benefit.
  
  Apacs` figures show the number of adults using online banking has risen by 505 per cent in the past seven years.
  
  
  
  

• Arrears hitting building society

  Fri, 15 Aug 2008 11:30:49 GMT
  The number of people falling into mortgage arrears has caused Britannia Building Society`s half-year profits to drop by 38 per cent, it has been reported this week.
  
  Bad debts have taken a chunk out of pre-tax profits, from £81.7 million to £50.5 million, indicating UK homeowners are struggling.
  
  The building society`s mortgage lending has also declined by around a half to £1.9 billion.
  
  Additionally, around 720 homes were repossessed, mostly by the society`s intermediary lender, Platform, the Business Scotsman said.
  
  The credit crunch is expected to continue for a while, according to group chief executive of the society Neville Richardson, who predicted the mortgage market would not return to normal until 2010.
  
  He said: "This is a strong performance in a market that is unrecognisable from the same period in 2007."
  
  Britannia`s figures also showed "a successful Isa [individual savings account] season" suggesting people are still trying to save.
  
  Britannia was founded in 1856 as Leek & Moorlands.
  
  
  
  

• Mortgage loans harder to get

  Fri, 15 Aug 2008 11:29:45 GMT
  The number of mortgage loans agreed in the UK has dropped by around a half in the past year, it has been reported.
  
  Figures from the Council of Mortgage Lenders (CML) show 98, 000 home loans were agreed last June compared with 47, 000 this June.
  
  Bob Pannell, the CML`s head of research, said: "Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand."
  
  According to Only Finance, the credit crunch means potential buyers need larger deposits to be accepted by lenders. First-time buyers appear to be getting priced out of the market, with a 46 per cent drop in first mortgage loans in 12 months, the Business Scotsman said.
  
  Those trying to get onto the property ladder are borrowing over three times their income to pay for their home, potentially running up debt problems such as arrears.
  
  House prices fell 1.7 per cent last month, according to the Halifax Price Index.
  
  
  

• "Bank of Sons and Daughters" to pay for parents` care

  Thu, 14 Aug 2008 11:17:07 GMT
  Saga has released a new report indicating people may find themselves with debt problems following unexpected care costs for their parents.
  
  "The Bank of Sons and Daughters" may replace the bank of mum and dad as older people are not preparing sufficiently for care.
  
  According to the study, carried out by Opinium Research, ten per cent of adults have "seriously discussed" funding for long-term care with their parents. Some 56 per cent with parents in their 60s have discussed care costs.
  
  Furthermore, 47 per cent have underestimated how much care would cost, leading to fears of inheritance money being used.
  
  Owain Wright, head of care funding services, urged people to talk about the matter.
  
  "By not discussing the issue and making provisions, they are neglecting the fact that their parents may be facing a situation where they will be forced to turn to their children for financial help."
  
  Citing research undertaken by Laing & Buisson, the group suggested the situation is set to get worse with care home fees predicted to double over the next two decades.
  
  Earlier this month, Saga said 35 per cent of those over 50 are cutting back to pay for increased energy bills.
  
  
  
  

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