UK Personal Finance

A report from the Citizens Advice has shown that it could take, on average, 77 years for people asking for advice from the charity, to recover from their debts. This is because the people asking for help were on half of the national average income.

It seems that low income, combined with poorly informed and badly understood financial decisions are a main cause of debt problems. The charity reported that people were faced with a “lifetime of poverty” caused by the burdens of debt. With many people unable to afford the fee to declare bankruptcy.

Citizens Advice have reported that the number of people seeking advice with their financial problems have doubled in the past eight years. Many people seem to be stuck in the repetitive spiral of low incomes and very high debts.

Citizens Advice has called on the government to introduce Debt Relief Orders (DROs). DROs are intended for people on low incomes, who owe less than £15,000 and have very small assets. They would work like bankruptcy, although they would be very low- cost to initiate. The DROs would be intended to provide reassurance to those unable to afford other debt solutions.

It has been reported by the National Housing Federation that house price will rise by 40% in the next five years, breaking the £300,000 barrier.

The boom may accordingly provide reassurance for homeowners as they could profit from the increase, however there could be nasty consequences as parents may face paying their children’s mortgages. This may cause considerable problems for first time buyers as they could experience considerable personal and financial costs, reports have shown from the National Housing Federation who represents 1,300 housing associations. A generation of first time buyers may be stopped in their tracks as house prices reach exceptional figures.

Oxford Economics have researched Home Truths, which have detailed the current housing market as “distorted and dysfunctional”, showing that the average house price is eleven times the size of the average annual salary and has revealed that four million people are on waiting lists for social housing.

It has been argued that the increase in buy to let properties and second homes is undeniably contributing to the overvaluation of housing.

The government published a green paper , in response to the housing crisis, last month, in which it stated that plans were being made to build numerous three million houses by 2020, 70,000 of these new units being homes for key workers and lower income families. It is clear that the current housing problems are set to stay with Britain for a long time. Recent pronouncements from Gordon Brown have shown a step in the right direction for house buildings and it is now crucial that minister’s promises are delivered to help the current situation.

Reports have shown that the areas that will be hit hard by the boom are the south- east, revealing that the average house price will hit £392,900 com-pared with £247,762 which is the current average. The east will also reach prices of £340,200 against £211,880 which are the averages prices at the moment.

The reports forecasts that there will only be seven areas in England where the cheapest homes cost less than four times the average local salary;

• Barrow
• Burnley
• Hartlepool
• Hull
• Pendle
• Stoke- on- Trent
• Wansbeck

The report shows that in London the average house price will have reached £478,300 compared to the current prices of £318, 864.

London seems to be attracting particular attention from investors in countries such as France, Italy, Russia and Saudi Arabia, who are looking for properties for letting purposes rather than permanent residence.

The report advisors the Government to continue to increase its investments in preventing homelessness and to continue to support the regeneration of England’s most deprived housing markets by investing £400m a year in low- demand areas.

The number of first time buyers, looking for there first home, has fallen at the fastest rate in over three years.

The Royal Institution of Chartered Surveyors (RICS) has reported that searches from first time buyers decreased in July and the number of unsold houses rose.

It is thought that aspiring First time buyers are continuing to rent until the market movement becomes clearer.

 Interest rates have risen to 5.7% causing a failing demand in the property market.

House prices continued to increase for the 21^st month in a row, in July, RICS reported.

As the Bank of England’s Monetary Policy Committee attempts to rein in inflation, analysts are expecting interest rate to increase to 6% by the end of the year.

The RICS report was revealed a day after Government figures show that UK house prices were 12.1% higher in June than the previous year. The growth was the highest since March 2005.

According to the Department of Communities and Local Government the average UK house price rose from £210,793 in May to £214,222 in June.

Which? A consumer group, released information that the 4 big high street banks were not keeping up standards when compared to internet and phone based counterparts.  Barclays, HSBC, Lloyds TSB and NatWest are all on the bad list when it came to the results of a survey of 4,680 of consumer organisation’s members, which asked about how happy they were with the banking society.  61% of the people questioned banked with one of the 4 high street banks, but still scored very low for customer satisfaction.  Which? Adds that interest rates available where also very poor; with most banks only paying 0.1% on credit balances.  This research comes after many banks reported a higher profits for the past 6 months, showing higher levels of satisfaction amongst their customers. 

Interest rates of 2% and 3.04% offered by First Direct and Smile, had the most satisfied customers.  The happiest customers on the high street where found at, Halifax, Nationwide building society and Alliance & Leicester.  The full results of this survey where published in Which? Money last month.  Martyn Hocking, the editor, explains that its time to move banks if people are still with one of the 4 big high street banks.  Many internet and telephone banks seem to treat customers better and people would be able to find higher interest too.  A third of all Which? members stated a better interest rate was why they had moved banks; where as the other two thirds stated they had switched due to the poor service; 72% of the people who have switched have stated that it was easy to change and get better service.

Credit rating agency Fitch have released figures that show 20% of the UK house prices are overvalued, this is compared to the long term average.  Over the past decade house prices have sky rocketed away from incomes.  The UK economy has been made vulnerable to the higher interest rates, due to the high levels of debt.  The UK was ranked third most sensitive to the rise in interest rates out of the 16 countries that were examined.

Economic indicators where used to see if house prices where overvalued and which of the 16 countries examined would be at risk over the rise in interest rates; also Fitch looked at the type of Mortgages that were dominating the market.  Fitch explained that variable rate Mortgages are in vogue, (an example of a country with this would be the UK) would be hit harder by the rising interest rates.  The top 5 most vulnerable countries consist of, New Zealand,  Denmark, United Kingdom, Norway and Sweden.  The top two of these countries, have both have booming houses prices and high levels of personal debt.  Italy, Germany and Japan were all less likely to be hit by the rise in interest rates and debt becoming harder to manage; this is because many consumers have not seen house prices or debt race away to the same extent as the UK.

On Monday The Bank of England explained that UK Mortgage lending had risen in June, which has started to indicate housing market growth.  The total lending has rose by £9.6bn in June, from £8.7bn in May.  114,000 new homeowner loans were give the go ahead, even with the number of Mortgages approved stayed the same in June.  George Buckley from Deutsche Bank explained that, the mortgage lending was holding well against the rise in interest rates robust mortgage approvals, the numbers would weaken toward the end of 2007.