The Big Money Guide

Tag: serious debt

Save Money with a Fixed Rate Mortgage

With a large number of Britons struggling with debt problems, the news that the Bank of England might well increase its base interest rate in 2015 was certainly not welcomed by anyone.

Homeowners who are on the Standard Variable Rate (SVR) offered by their lender or are approaching the end of their current deal can save themselves a lot of money if they take action soon, says the comparison website MoneySuperMarket.

The site’s Dan Plant commented that homeowners should reconsider the options they have at their disposal as far as mortgages are concerned before the Bank of England decides to hike its base rate.

He added: “The minute the base rate rises, and possibly even before, lenders will increase their rates as well, resulting in an increase in mortgage payments.”

Plant went on to say that people who want to control their monthly expenses have no better option than to opt for a fixed interest rate, which will avoid future shocks and protect them against rate increases.

The site did some research and came to the conclusion that borrowers who are currently paying 4.99% interest on an SVR loan could save as much as £4,749 if they changed over to the best deal that is currently available in the UK: a 2-year fixed rate mortgage offered by HSBC at only 1.49% per year, with a £1,999 arrangement fee.

Someone who currently pays 3.99% would save up to £2,609 over a 2-year period with the same deal. If the base rate increases during that time, he or she would save even more.

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November 20, 2014
One More Reason Why Britons are Sliding into Debt

What would happen to a nation if its citizens were to gradually earn less instead of more? A logical answer to that question would be that they would eventually succumb to debt and that many of them will in the end face bankruptcy.

The sad reality is that we are not talking about a theoretical nation here. According to the results of a new study by the TUC, the level of real earnings in the UK has been dropping consistently over the past seven years.

The study reveals that since 2007, there was a drop of 8% in average real earnings in the country after taking into account escalating prices and an absence of wage growth to compensate for the former.

This means the latest pay squeeze is worse than what happened during the Great Depression. It is, in fact, the worst since the start of the Victorian era around 150 years ago.

The fall in real spending power of British consumers was shown to be more than double the reductions recorded during the financial crises of 1865-1867, 1874-1878, 1921-1923 and 1976 to 1977.

During the worst of these recessions real income dropped by only 4%. The latest downturn is also lasting much longer than any of the recessions quoted above, which makes it fair to say that we are living in the worst recession in recent history.

Frances O’Grady, the secretary general of the TUC, called the situation ‘shocking’ and said: “The government says the economy is growing again, but there’s no evidence of any recovery in ordinary workers’ pay packets.”

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November 18, 2014
Tenants Have Less Protection Against Financial Disasters

New research by insurance firm Aviva reveals that many of the seven million people in the UK who are currently renting a property are more vulnerable to debt problems should they suffer a sudden and unexpected loss of earnings or incur unforeseen expenditure.

The study revealed that, while 13% of those living in a home with a mortgage have income protection, only 2% of individuals who live in rented accommodation have this type of insurance. For further advice, consult a real estate attorney.

When it comes to critical illness cover, the situation is much the same, with 19% of homeowners having cover, compared to only 3% of those who rent.

A similar picture emerges when we look at life insurance: just over half (51%) of those who live in a home with a mortgage have life insurance, while the percentage drops to 23% for those who are renting.

There is also considerable disparity between the two groups when it comes to home contents insurance, with 73% of home owners financed with mortgages being protected by this type of insurance, compared to the 40% of those who rent accommodation.

The company’s protection director, Louise Colley, said: “When someone takes out a mortgage they are often asked to consider how they might pay it if they were seriously ill or if sadly an income-earner was to die.”

She added: “If a family rents, these conversations may not happen, so there’s a risk that if a renting family loses an income, they may not have the protection that could help to pay the rent and cover the bills.”

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November 13, 2014
Insurer Highlights Increasing Debt Levels Among Individuals Over 55

In a recent article we reported on research carried out by the British charity StepChange, which showed that problem debt is costing the UK in the region of £8.3 billion a year. Traditionally, debt has been a much bigger problem in the under-40 age group, but a new study recently revealed that debt among the country’s over-55 population is rapidly increasing.

According to insurance firm Aviva, debt among this age group has surged by nearly 20% over the last year, as Britons seem to have once again adopted a lifestyle of high spending.

The average individual in this age group now owes about £1,680 in unsecured debt, significantly higher than the figure of £1,420 recorded a year ago.

While overdraft debt has also shown an increase, the problem areas mainly seem to be credit card debt, which has increased by 10% compared to the same time last year, and personal loan debt, which has surged by nearly a third over the last year. To help save you need to ensure you are not signed up to unnecessary prescriptions too.

The insurer ascribes the relatively high debt levels to people whose house prices have increased rapidly and they now feel confident to spend their savings.

Aviva issued a stern warning that individuals approaching retirement age should under no circumstances waste their savings in the belief that house values will continue to appreciate, thereby increasing their overall wealth.

The thought that this might make up for any shortfall in pensions could be completely erroneous.

That is sound advice for those who are not yet in debt. Those who have already slipped into debt should get expert debt management advice before their credit ratings are severely damaged.

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November 6, 2014
Chorley Residents have 4th Highest Per Capita Personal Debt in the UK

Although the latest figures about per capita personal loan debt in the Chorley region do not cover all building societies and banks, they are nevertheless quite worrying.

Data compiled by the Council of Mortgage Lenders and the British Bankers’ Association shows that the average resident of Chorley has a personal loan debt of more than £1,400. There are only three regions in the UK where this figure is higher: London, Newcastle-upon-Tyne and Peterborough.

Nine major banking groups and building societies took part in the voluntary survey.

Chorley Council is doing its best to help residents to cope with debt problems. The council wants to force loan sharks out of business and it plans to ban all advertisements from payday loan companies on the advertising websites it owns.

A credit union shop has also been opened by the council in the centre of the town to provide locals with an alternative to payday loan firms and loan sharks. The shop has already been doing business for more than a year and support from the community is growing steadily.

Lindsay Hoyle, the MP for Chorley, said that it was extremely disturbing to learn that residents of the town have such high debt levels and ascribed the situation to current economic circumstances.

Chorley added: “The Credit Union has done a fantastic job in the town and I want to promote the work they have done. It’s vital people use the services on offer rather than going to loan sharks and pay day loan companies, the credit union is a safe way to borrow money.”

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October 30, 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