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.

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.

A recent survey by Nationwide has shown that the effects of the higher interest rate are causing the growth in house prices to stall. In June house prices grew by 11.1%, in July prices grew by only 0.1%. This has therefore cut the annual rate of growth to 9.9%.

This has been surprising as in the past three months house prices have been up by 2%, compared to the three months before that and down from Junes comparable figure of 2.2%. The survey has shown that house prices should be lower in the second half of the year.

The Bank of England has raised interest rates five times this year in an attempt to decrease inflation. The Banks key rate is now at 5.75%, it believed by analysts that the rates will reach 6% before the end of the year.

Consumer spending and house prices should slow down in the second half of the year. The sharp slowdown in house prices in July may show that homebuyers will start to think twice before straining due to the higher interest rates.

With Housing being top of the political agenda, currently, Prime Minister Gordon Brown has planned to provide more long- term, fixed rate mortgage deals as an important measure to control the potential affordability problems.

It was in fact, Mr Brown, as chancellor in 2003, asked Professor David Miles to report on why there were not very many long- term, fixed- rate mortgage deals available on Britains market. Mr Brown had said that if there were more of these deals around they would help to iron out the problems with the volatile property market.

In 2004, Professor Miles did seem to agree with the idea that more long- term borrowing would be a better thing but only if it could be made cheaper.

Mr Brown does still wish to make fixed- rate deals more commonly available with house prices on the increase and the ever- increasing problem that first time buyers are faced with. Industry experts are not sure that Mr. Brown’s solution will work as expected.

Mr Brown wants to make it possible for banks and building societies to borrow more money from the financial market.  Formally known as covered bonds, the theory behind these is actually quite simple. The bonds are basically a more complex version of I.O.U’s, these are issued by companies and the government as an alternative to putting up taxes or borrowing from a bank. A covered bonds eventual repayment is secured by a mortgage. The bonds can be issued directly by the lenders (banks or building societies), by companies, or the government. The bonds back their own lending having been bought by the lender.

The Governments subtle idea to effectively increase the availability of covered bonds, that can then be used to finance long term mortgages can be offered to the public. Another idea is to allow building societies to gain more money in the financial markets to improve their ability to lend. This would also bring Britain into line with the EU measures, the way that UK companies account covered bonds on their balance sheets- making it easier to issue the bonds in the first place.

Therefore, this should allow house buyers to borrow more money from the lenders in the form of 15 to 25 year mortgage products.

It has not been obvious as to how these plans for longer term deals will, in fact solve the house price situation. The reaction from the industry experts is showing a certain amount of scepticism. The overall benefit for consumers for long- term, fixed- rate mortgages is not quite known. These deals have been unpopular in the past due to interest rates on the mortgages being substantially high.

It seems people in Britain are not to keen on the idea of tying themselves to such a long term deal.

According to the Council for Mortgage Lenders, mortgages that are fixed for five years or more account for 8- 10% of new mortgage lending. Only 25 lenders offer a 10 year deal, four lenders offer a 15 year deal, two offering a 20 year deal, three offering a 25 year deal and only one offering a 30 year fixed rate deal. This is quite a contradiction when compared to the US and EU where long- term, fixed rate deals are very common.

However, making these long- term, fixed- rate deals commonly available on the market will not necessarily mean consumers are more likely to ask for them. The consumer’s appetite for these deals is just as important as how these deals are funded. These changes are in their infancy and it is too early to say whether there will be a shift in the market to the long- term deals.

With interest rates on the rise customers have been seen to choose fixed rate deals, in the past year, as borrowers have sought to protect themselves, against possible increases.

Fixed- rate deals are currently used by 89% of first time buyers and 73% of homeowners that have moved. In total, almost half of mortgage deals are fixed rate in one shape or another, however, most being of the two- four year variety.

It seems at the moment homeowners are unlikely to commit to a long term mortgages, they normally consist of 5 years, let alone 25 years.

A recent survey completed by Halifax has shown that in the last three months up to June, house prices in London have risen by 4.9%, taking the average house price up to £3000, 000 in London.

The survey shows that this means that the capitals average house price is above the threshold for inheritance tax, currently at £3000, 000.

According to the survey house prices are rising fastest in Northern Island. There has been a rise of 8.5% in the same three months and an increase of 47% in the past year.

As well as the rise in house prices reaching the inheritance tax threshold, the recent rises has pushed the average prices above £250, 000 watermark for 3% stamp duty, for the South East.

Due to the governments continuing failure to increase the inheritance tax and stamp duty thresholds, the typical homebuyer in London and the South East will be forced to face the oncoming tax burden, caused by the current house inflation.

With house prices accumulating in Northern Island, it has been a sudden change in the last two years. With the average house costing in region of £229, 000 it is the most expensive area in the UK outside of London and the South East. Two years ago Northern Island was the second cheapest region in the UK.

At present there are eight towns listed at the top of the list where house prices have risen, in Northern Island. The cost of a house or flat in Newtonards has ascended by 64% in the past year- to £228, 000. This has been followed by various house increases in Craigavon, Newtonabbey, Downpatrick, Carrickfergus, Belfast, Lisburn and Newry.

The survey has shown that this regional expansion was due to a strong economy, immigration and constant pursuit from second time homeowners.

Halifax have raised there house price forecast for this year from 4% to 6%, even thought the interest rights have increased rapidly.

HBOS group which Halifax is part of, made this dramatic change after House Prises rose faster then the year has expected; this is due to stronger economies and shortages of new build.  Even though Halifax have decided to change there forecast Nationwide Building Society are sticking to there guns at between 5% and 8%, this is despite the rise in the property market in the past 6 months.  Halifax have released that prices are now easing.  Martin Ellis explains an increase in mortgage rates have had a large effect on housing affordability and will increasingly bite over the next 6 months.  Nationwide Building Society agrees with this statement.  Fionnuala Earley explains that they believe that house price growth will fall from 11% to between 5% and 8%.

The main borrowing cost has been raised 5 times in the past year by The Bank of England to 5.75%.  The effects of higher rates are filtering through slowly.  In June a new record was reached by the amount of Mortgage Lending according to CML.  Despite 5 increases in the interest rates, the total lending rose by 9% to £34.2bn in May.  CML explained as this is the peak time for house buying the rise was seasonal.  CML added fewer people would move house, while more would re-mortgage, as borrowers begin to fix there mortgage rates.

Fun Walls, Sticky Notes and People Poking, an online phenomenon that has been sending everyone potty.

30m people world wide are connected to Facebook, a site where you can build up a community, all of these your friends, colleagues and family; but could all this mean your money and identity are in danger. Many users enter all of their details onto their own page which also might include a picture that can be changed. Many users would include there address, phone number, home town and also there date of birth, along with these they ask questions like interests, favourite music, films the list goes on; but people feel obliged to enter all of this information and tell secrets from their past.

This all may seen like a bit of fun and games, its just somewhere to meet friends; but what’s the real story behind someone who has added you who you have never met could they be legit or just after your money and identity. Facebook recently was used by Oxford Dons to see if the students where behaving in their post-exam parties and celebrations.

Experian’s James Jones explained that joining Facebook means putting to much information about yourself. Even though this is good fun, people don’t realise how careful they have to be because of the amount of information you need to give out. Research today shows that burglars are just as likely to take sensitive documents, for example bank statements and many bills, just like they would take stereos, Sky Boxes ect.

ID fraud expert from Callcredit, Owen Roberts, adds that users upload information that is like gold to an identity thief, this causes devastation to thousands of people every day. He goes on to explain that when people say that their going on holiday or out for the night this alerts burglars and if the user has an address on the page this would be a recipe for disaster.

According to APACS fraud from banking online has risen by 44% last year to £33.5m; fraud from internet shopping hit £155m. Banks have recently started to ask more serious questions that only the account holder would know, for example, birth place and maiden name, before letting the user into the account over the phone or via the internet.

According to Experian between 5% and 10% of fraud is committed by a friend, relative or colleagues of the victim. Many users just accept people even if they do not know who it is; but there is a 50/50 chance that this might be a fraudster.

Robert advises users to be careful who they accept as friends and make sure your passwords are all different.

Jones also advises putting the odd piece of information that you have made up as this will throw off any fraudster.

Article Author Personal-Finance_Loan.co.uk

In a bid to solve a potential affordability crisis, it has been suggested by the government that there should be an increase of long- term fixed rate homeowner loans, available on the market today.

Some money analyst’s feel that this is a broad solution to tackle the uncertain affordability problem, and it certainly could prove to be a difficult decision for lenders. There are only 141 products out there on the market that offer a fixed rate of ten years or more, most of which being restricted to ten- year- terms for current borrowers. This area of the market is still in its prime and is showing growth, however there is only a 6% section of fixed rate products available on the market.

While some long term packages can provide contentment for borrowers, there may be a potential consequence if rates fall as customers may be left paying a higher level of interest.

Recent hikes have been made by The Bank of England Monetary policy committee which has increased the interest rate to 5.75%, this has been the second increase in three months and the third this year.