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.

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.

Not only are there huge factors of emotion and stress associated with moving house there are also the burdened costs, that makes the possibility of moving home become a reality. Not to mention the extra cash you will need for the tea and biscuits for the removal men.

Neither the extensive costs nor the sanity strain of moving homes seems to be deterring the British from house- hopping. It appears to be a compulsive quest for Homeowners to continually climb the property ladder. It has been calculated in a survey by Abbey, that Britons will move house an average of 3- 4 times in their lifetime. Excluding property prices, it has been calculated that people who move home around 3- 4 times in a lifetime could be spending up to £54,400, purely based on general moving costs. This nice little some would be enough to buy you a two bedroom apartment in the Costa del Sol, and it is also calculated to be 2.3 years worth of the annual salary based on the average wage, currently.

Homeowners have also said that an average of £16,000 had been spent, when moving last, on lawyer fees, financial advisors, estate agents, removal firms and stamp duty, this cost is additional to what was spent to get their property into a saleable situation. Based on these figures it has been estimated that £28billion alone was spent in 2006 on the general incurred costs of moving house.

There is no secret that moving house is an expensive business, it is undoubtedly the reason why a quarter of the population are loathed to do so. It is astonishing when all the sums are added together from a lifetimes worth of moving homes. Homeowners clearly need all the help they can get, when it is expected that they are likely to spend over two years of the average salary rate.

It advisable for house buyers to look out for the hidden costs when engaging in the decision to move home, it is likely that you may become so caught up in the excitement of moving home that you fail to notice some of the small but relevant costs that arise. It is essential for buyers to ensure they choose the best deal they can find so that they can get the best value. A mortgage is, in most cases, the biggest financial commitment in a person’s life. Therefore, if people are willing to bargain over the fixtures and fittings of there home it will also be a sensible idea that other options are explored to get the best deal when moving home.

It is a good idea to start looking at Early Repayment charges (ERC’s) as they play a part to most mortgages, there are different ERC’s which vary in favourable terms. For example, some mortgages only have ERC’s during the initial competitive rate whilst others can trap borrowers making them pay the ERC’s and the standard Variable rate.

There is no reason why borrowers should have to pay overhanging ERC’s with today’s competitive market giving a wide rang of deals for borrowers to choose. Embarking on a mortgage with ERC’s in the initial terms can make sense but would it not be better still to have no ERC’s at any time? However, you may be likely to pay a little more interest for the benefit, this can be the right decision for those looking for flexibility of freedom.

Exit fees tend to cost around £195- 295, they often come under a number of names including sealing fees, administration charges or deeds- release fees. The charge, however is rising as lenders try to compensate lost revenue from competing rate pricing. It may not seem to be a big sum in the total plan of things but these figures add up, and there has been a rise in the past three years, it is a clear example of the lenders making money out of the consumers. If nothing else it is advisable borrowers should at least aware of what fees are on their deal.

If a higher deposit cannot be provided by the borrower it is important to be aware of higher lending charges (HLC’s). HLC’s are applied by lenders on loans which normally exceed 90% loan value, the borrowers who may not be able to provide a large deposit are viewed as higher risk borrowers and that is why HLC’s can be applied. With today’s market being so competitive it is no longer necessary for first time buyers to pay HLC’s as there are some excellent products, even for those wanting to borrow as much as 100%.

Surveys and solicitors are both crucial in the house buying process, some buyers tend to forget this and find that they receive an inadmissible bill along with a great deal of surprise, which are both very unwelcome at the time. It is important for borrowers to incorporate at least £500 for a typical solicitor’s bill and as much as £900 for a full structural survey.

Another factor that is often erased in borrower’s minds is the re- direction of post. As shocking as it may seem, around a quarter of Britons forget to re- direct their post, putting themselves in danger of identity fraud. It is therefore, not at all surprising that around a half of all identity fraud and theft cases happen at past addresses, in the UK. As already discussed, moving home is stressful and it is therefore absolutely important to re- direct your post. Otherwise you could have a fraudster identifying who you are and your credit information, making you suffer months of misery where you will constantly be turned down for credit and will not even be able to buy something as simple as a new TV.

To solve any issues that may arise with identity theft/ fraud it is important for people moving home to keep on top of their paper work, shred documents that are no longer needed. Contact all financial companies and give a new contact address, make sure that old catalogues that have been used are informed of an address change. The best idea with your post, is to contact the Royal Mail and instruct them to re-direct your post for a year, this will give you chance to inform anyone that has not been told about the change of address and allow for cancellation to be made on things that are no longer in use. Register the new address on the Electoral Roll straight away, also consider registering with the Mailing Preference Services, this will remove your name and address from direct marketing lists that you may have previously been on.

Funding your wedding day can be tedious matter, in today’s society people will often choose homeowner loans to cover the necessary costs, others find it better to save for the wedding themselves, even this can prove to be a challenging task.

One Wedding Planning service has advised people choosing to get married, that they should look around the market before deciding on a homeowner loan, this way they should be able to find the best deal on homeowner loan rates to cover their personal costs for the special day.

Having money readily available from the start is really essential if you are to keep within your budget. It is important for people deciding to pay for their wedding themselves, to work out how much money is needed at the start so that you are able to avoid getting into debt.

A number of homeowner loan providers do offer specific tailored loans for weddings, it is helpful, once you know your budget, to break the different fundamentals down so that you are able to understand which areas are important to you. In the long run this can help make your wedding day special and you will not be worrying about your personal finances.