The Big Money Guide

Category: Finance News

Rate War Predicted for Fourth Quarter

At last there is some good news for debt-ridden British consumers: instead of the expected increase in mortgage rates, about which we have written repeatedly in the past, the rates might actually be heading down in the near future.

The news comes after a survey by the Bank of England released a few days ago predicted a meaningful narrowing of mortgage rate spreads during the final quarter of this year. It also renewed fears over the economies of Eurozone countries.

The IMF warned of a slump in Eastern Europe and the German economy posted weaker than expected results, causing stock markets across the globe to plummet.

This means banks will have no choice but to compete for limited demand from consumers, and cutting interest rates might be the best option open to them.

Credit availability dropped for the first time in two years, which lenders attribute to a changing risk appetite, the Mortgage Market Review and expectations for residential property prices. Lenders reported that they were less prepared to lend more than 90% Loan-to-Value for the first time since the Bank started asking this question last year.

The survey also mentions: “Many lenders noted that operational issues associated with the implementation of the Mortgage Market Review had pushed down on credit availability over the summer.”

Credit score criteria were also reported to have become stricter during the third quarter, which is consistent with the drop in availability.

Lenders, however, expect both approval rates and loan availability to increase during the fourth quarter because of ‘market share objectives’.

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October 21, 2014
Expensive Bills and Mortgages Prevent Britons from Becoming Homeowners

A new study reveals that nearly 25% of tenants now have no other choice but to spend half or more of their income on rent. The study also found that 30% of tenants consider their rent bills to be unaffordable.

SpareRoom.co.uk, who conducted the study, also discovered that nearly 20% of tenants never expect to be able to afford their own home. This is double the number recorded in 2011.
A lack of mortgage availability, rising house prices and increasing rents all play a role in the negative sentiment among renters.

According to the latest statistics published by the Land Registry, the average house now costs £178,000 – very close to the record level of 2007. In London this can be as high as £500,000.

A director of SpareRoom.co.uk, Matt Hutchinson, stated: “For nearly one in five of Britain’s ever-growing population of renters, aspirations of home ownership are slipping away.” He also called the increases ‘unstoppable’ and says that first-time buyers are particularly hard hit. Many Britons, he added, would simply have to reconcile themselves with becoming lifetime tenants like their European counterparts.

This might be easier said than done. Britons are used to owning their own homes, and they would do just about anything to make that dream a reality, including emigrating. A recent Santander study found that more than a million people were prepared to emigrate if that would mean being able to own a home. Others were prepared to cut down on new cars and holidays.

Apart from not being able to buy a home, an increasing number of Britons are nowadays slipping into debt, usually harming their credit ratings in the process. Many of those individuals would benefit from professional debt management advice to get their financial affairs back on track if they ever hope to save enough for a deposit on a home.

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October 16, 2014
Problem Debt Costs the UK £8 Billion Per Year

StepChange, a national debt charity, has carried out extensive research on the cost of what it calls ‘problem debt’ – and the results are quite astounding. After studying the files of more than 100,000 of its clients, it calculated that the total cost to the UK taxpayer is in the reign of £8.3 billion per year.

The charity identified job related problems and housing issues as the two main culprits causing people to get into serious debt. It says the government alone could save as much as £3 billion if it offered better assistance to people with problem debt.

StepChange defines problem debt as debt taken on by individuals that they cannot afford to repay as agreed with the lender., and believe this puts severe strain on the country’s employment, mental health and housing systems.

The single biggest problem that individuals with problem debt often face is having to move to more affordable housing after falling into arrears on rent or mortgage payments. As a result, many then have to be paid housing benefits by the state.

Next on the list are employment-related costs such as individuals taking time off work because of the stress caused by unmanageable debt, as well as the benefits such people have to be paid if the job is eventually lost. The charity says this costs the country around £2.3bn per annum.

In its survey, StepChange also accounted for the cost of children being taken into care, divorce settlements and NHS mental health treatment caused by problem debt.

The debt charity believes that the government should do more to help, but a Treasury spokesperson pointed out that the Money Advice Service already plays a key role in this regard.

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October 14, 2014
Consumer Confidence Remains Weak Despite Strong Economic Growth

According to forecasts by the Bank of England, the British economy is likely to grow by a very healthy 3.5% in 2014. If this figure does materialise it will be the highest growth rate the country has experienced in the last ten years. However, the average British consumer is not sharing the much publicised euphoria about the country’s economy.

A survey released by research firm GfK last week indicated that the morale of British consumers has declined from a recent high in September as British families become less optimistic about the outlook for the country’s economy as a whole, and their personal financial situation in particular. The company’s headline consumer confidence index showed an unexpectedly large drop to minus one last month, after posting a reading of plus one in August, on par with the 9-year high reading of June.

The decline in September was mainly driven by a large drop in household expectations regarding personal financial situations and the outlook for the economy over the next year.

According to Gfk’s MD for social research, Nick Moon, it was likely that the index would remain around this level because consumers were not seeing the benefits of strong economic growth in the form of wage growth or improved living standards.

He added: “Many people are not themselves feeling any better off despite the growth in GDP, and this may be tempering the impact of positive media coverage of the economy.”

British households also continue to struggle with personal debt issues and many individuals are now seeking professional advice about debt consolidation, IVA’s and bankruptcy.

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October 10, 2014
Debt Management and Collection Qualification Available

Personal debt mismanagement is a growing problem in the UK often affecting individuals who can ill afford to get it wrong. Last year consumer debt in the country increased to a staggering £1.43 trillion! This is one of the reasons why the FCA decided to take over responsibility for the regulation of personal debt.

This situation has of course created a huge market for firms offering debt management advice and services such as debt consolidation, but until now there has been little in the way of training opportunities for individuals working in the field. That has now changed, with students now being able to acquire a formal qualification in debt collection and management. The course is to be provided by IFC University College with the qualification in CertDC (Certificate in Consumer Debt Collection).

The sometimes controversial subjects of debt collection and debt management will no doubt prove to be rather challenging for many students, however, the fact that they will have relevant work experience while they follow a structured curriculum will certainly improve the level of expertise available in the marketplace. This should also serve to improve the image of the industry as a whole.

The vice principal and head of faculty: banking, finance and regulation at the college, Martin Day, stated: “The growth in consumer debt and changes in the regulatory environment have resulted in a need for a new qualification which addresses the key legislative standards and the essential skills for professionals working in consumer debt collection.”

The really good news is that the first group of students commenced the course during September.

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October 9, 2014
House sales in the UK are set to rise
According to the Royal Institution of Chartered Surveyors’ house sales in the UK are set to rise. The next three months are looking positive for the UK housing market.

Rics have predicted a rise in UK house sales and have put this down to the support for mortgage lending. In recent months the Bank of England have launched their Funding for Lending scheme which has worked to support the UK housing market and mortgage lending.

The scheme is designed to help lenders by making cheap funds of around £80bn available to mortgage lenders. The lenders are then required to lend money to both commercial and personal borrowers. By doing so they are helping to boost lending rates and making mortgages more readily available.

The rise in house sales is set to be the highest since May 2010. This is really positive news for those who are looking to purchase a property. A spokesperson for Rics has said, “Although we would caution against reading too much into this, there are some grounds for believing that activity could pick up over the coming months.”

Money management

If you are currently saving to buy a property then this will be good news for you. When looking to take out a mortgage it is important that you speak to an expert. Understanding the best mortgage rates for you and your financial affairs is essential.

If you are struggling to manage your current monthly budget, and are planning on purchasing a property, then you may wish to get some expert advice. There are many different ways to handle your debts and a debt management plan could help you to take more control of your finances.

Failure to keep up the repayments on your mortgage could result in repossession. That is why staying on top of your monthly repayments is key. But a better understanding of your finances will help you to keep on top of your budget and ensure that you maintain your repayments.

Here are a few tips to stay in control:
- Check your current direct debits to make sure you are not paying out for things you no longer use
- Try to reduce and limit any unnecessary spending
- Try to pay off your credit card as soon as you can
- Do not stretch yourself too far. If you feel your mortgage repayments could be more than you can afford then speak to an expert
- Shop around for a good savings account
- If you are struggling to pay off your debts speak to a debt management company
There is no need to suffer in silence. Always speak to an expert and get advice on your financial matters. It could help to save you money and protect you from further debts.

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February 22, 2014
Are PPI claims likely to end in 2014?

Banks in Britain are currently trying to lobby the Financial Services Authority (FSA) to impose a deadline on customers making claims for compensation after being mis-sold payment protection insurance (PPI). So, are PPI claims likely to end in 2014 as the banks want them to? If so, what should you do?

The proposed PPI deadline

The discussions about a potential time limit on how long banks will be expected to continue compensating PPI mis-selling claims, have taken place between the British Bankers’ Association (BBA) and the FSA. This raises the prospect that the time to claim PPI compensation could be coming to an end. This will act as a wake up call to those who have been thinking about claiming PPI money, but who are yet to apply.

At the time of writing, there is no overall deadline on claiming PPI. Despite the fact that there are currently limits that stipulate that you must claim PPI within six years of taking out the loan associated with it, most people are still successful with claims relating to older loans. This is because any claim can be made up to three years after becoming aware that you can claim. Recently the big banks have started writing to customers to make them aware of the PPI scandal, which will make it easier for them to argue the three year ‘awareness’ time limit in the future.

So, are PPI claims likely to end in 2014?

The press have likened the requests to end PPI claims by early 2014 to allowing criminals to choose their own punishment. The FSA appears to be opposing the idea that the banks will be able to choose when the claims can end.

The FSA has said that it will listen to consumers before it makes any decision. There are even press reports that the banks themselves are starting to worry about the bad publicity and the likely deluge of claims that will follow an announcement of a PPI deadline.

Gillian Guy, the Chief Executive of Citizens Advice, said that, “For years PPI was mis-sold to people who either couldn’t use or didn’t even ask for it in the first place. A deadline could only be fair if, in exchange, the banks contact every customer who was sold PPI to tell them they may be entitled to make a claim.”

This all seems to mean that the banks’ request to end PPI claims within the next year is optimistic, however, we have seen that the banking industry is treated very differently to others when it comes to some matters. Compensation for mis-selling PPI could ultimately cost banks around £40bn, so they are desperate to put a lid on the scandal.

How should I claim PPI?

It is still important that you apply for any PPI compensation that you believe that you are owed as soon as possible. It is likely that even if the spring 2014 deadline is turned down, the banks will launch a publicity campaign to ensure that all their customers are aware of the situation. Under the current rules that will mean that PPI compensation claimants would be likely to have until some time during 2016 to complete the claim procedure. This may sound like a long time, but it can take many months to get compensated. If there is a rush of more claimants it could take even longer to make a successful claim, so it is well worth starting the process immediately.

Claiming compensation for mis-sold PPI is something that you can do yourself. All the advice you need is out there on the internet already, there is no need to get a claims management company involved. A great place to start researching PPI mis-selling is Martin Lewis’ Moneysavingexpert.co.uk or the Citizens Advice website.

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February 22, 2014