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Tue 5th Aug, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, mortgages, Remortgaging, Homeowners, House buying, Property, Financial news, Borrowing, Equity release, Secured loans, Negative equity at 12:59 pm by admin
It’s been a turbulent year so far on the housing market, with Nationwide reporting prices showing their biggest annual fall since 1991, the year of Nationwide’s first survey.
The average home has now dropped by £17,000 in the last year, according to Nationwide – bad news for anyone hoping to sell and re-buy using equity in their home: The equity may just not be there any more.
Homeowners who took out interest-only or 90% or greater home loan deals are particularly at risk of losing everything if they fall behind on loan repayments. Those who need to sell up and were banking on rising prices to give them equity for a new home are having to stay put or face negative equity.
Fionnuala Earley, Nationwide ’s chief economist said: “The weakening economy and poor housing market sentiment do not suggest that the market will recover quickly.”
However, the National Housing Federation has said that it expects house prices to rise by 25% by 2013, due to the lack of new houses being built. Demand is expected to outstrip supply in a few years, pushing prices back up.
In the meantime, economists are predicting that the Bank of England will be forced to cut the base rate as a means of curbing inflation, as fuel and food prices continue to rise.
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Fri 1st Aug, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, UK Finance, Credit Card, Consumer debt, IVAs, Financial products, Spending, Unsecured loans, Financial news, Borrowing, Personal debt, Secured loans, Debt management, Budgeting, Missed payments at 10:35 am by admin
TDX Group, the organisation behind the Group Debt Index, claim that there has been a significant rise in the number of debt management plans taken out in recent months.
The Group claim that debt management, such as Individual Voluntary Agreements (IVAs) will rise by a further £5 million by Christmas, growing steadily by year end.
Mark Onyett, chief executive of the TDX Group said: “We’re already seeing far higher numbers of consumers struggling with personal debts and the pressure is set to intensify over the coming months.”
The research showed that an increasing number of people with financial problems are finding it difficult to make repayments on loan and credit card debts.
This accords with research showing the house repossessions are steadily climbing and a rise in people approaching debt charities for advice.
Since the start of the credit crunch many people have tightened their belts, but it simply isn’t enough.
Whilst most families are wise enough not to extend their credit with further personal loans, the increases in the cost of living has pushed many families deeply into debt.
Unfortunately, this Christmas could see many families hard pushed to pay their bills, let alone have the festive season of their dreams.
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Tue 15th Jul, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, Debt Consolidation, Homeowner Loans, UK Finance, Credit Card, Consumer debt, IVAs, Unsecured loans, Financial news, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Debt management, Missed payments at 12:44 pm by admin
The high levels of debt that Britons have built up over the past few years are finally coming back to haunt many households. The impact of the credit crunch is starting to take its toll on borrowers according to experts and it is expected that things are going to get much worse as the year progresses.
The accountancy firm KPMG has said that it is predicting that over 130,000 people are going to be declared bankrupt or enter into individual voluntary arrangements with their lenders. This will be up from the 109,615 who did the same last year.
When people enter into individual voluntary arrangements (IVA) they are allowed to restructure debts such as personal loans, credit cards and hire purchase so that their debts can become more manageable. Monthly repayments are made for a fixed period of time with the remainder of the debt being written off at the end of the period.
It is estimated that as many as 2,500 people have debt in excess of £100,000. In 2007 the average amount owed by individuals entering into IVAs was £50,300.
KPMG found that the average repayment for a loan on an IVA was 38% of debt. The average debtor repaid £19,000 of their debt and as a result £1.3bn had to be written off by creditors.
The high average level of debt indicates just how bad lending has been in the past few years. Most debtors owe so much that they have no realistic way of actually repaying their debt.
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Mon 30th Jun, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, UK Finance, Consumer debt, Spending, Unsecured loans, Financial news, Borrowing, Personal debt, Debt management, Overdrafts at 12:58 pm by admin
One of the benefits of being old has to be experience: the credit crunch that most people are experiencing with the UK’s economy has all been witnessed before. What is going on today with financial institutions last happened in the early 1990s, but even before that the older generation have witnessed times when wanting something meant saving up, not taking out yet another cheap loan.
Whilst we hope a full blown recession won’t be seen, the boom times seem to be definitely at an end for now and that means a change in financial habits. We are finally getting a wake up call that we cannot continue to borrow indefinitely and have to live without some of the things that we feel entitled to.
This adjustment should not be too difficult to take on board for older generations, but it might be a bit more of a tough adjustment for younger people. The young will have little recollection of the late eighties when the economy last went into recession and no memory of the days when loans were something only for businesses or buying a house.
The nation as a whole has grown used to the concept of regular holidays, new cars as a luxury, not a necessity, and splashing out on meals and clothes whenever the need takes. However, for many of those older than the ‘baby boomers’ (those born post-war), the memories are still fresh of the days of ’scrimp and save’.
Every generation has seen greater prosperity in this country and the days of ‘make do and mend’, ‘grow your own’ or clothes made from a penny pattern seem like myth to the youngest adults today.
The concept of going overdrawn was once upon a time considered shocking, and for many of the older generation today that viewpoint still holds. For these people, getting back into old ways of careful budgeting and knowing where every penny has gone will come easily.
For the younger generation, used to falling back on easy credit, or borrowing money to indulge a whim, budgeting is going to come as a sharp shock. The fact is that right now lenders are either unwilling or unable to lend money as lavishly as they used to, so if you don’t look after the money you have, you can’t bank on an easy loan to bail you out.
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Fri 27th Jun, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Homeowners, Financial products, Property, Financial news, Housing news, Borrowing, Secured loans, Bank charges at 1:06 pm by admin
The Chancellor of the Exchequer, Alistair Darling, has indicated that intervention may be needed in order to raise the amount of fixed-rate home loans available lasting up to 25 years.
Mortgage lenders have been accused of lending fixed rate home loans on only a short-term basis in order to maximise their profits. This might be good for the lender but is not good if you are looking for a new mortgage and now the government is considering intervening on the consumer’s behalf.
What lenders are currently doing is negotiating a fixed-rate deal to last only a short period of time and then giving us the option to renegotiate at the end of the period. We as the consumer are then left with the cost of footing the bill for the arrangement fees each time we have to renegotiate.
Although the typical home loan rate is high and still rising, more and more homeowners are looking to change to longer-term fixed-rate mortgages. This gives homeowners more financial stability as it is easier to budget for the future. So far most lenders have only increased the number of short-term fixed-fixed rate loans.
The rest of Europe offers many more fixed rate loans so why do we in Britain not have that option available to us? If the government does intervene homeowners could feel the benefit of much more financial stability as well as not having to face the hassle of going back to the lender every two or three years to renegotiate a new fixed-rate.
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Wed 25th Jun, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Homeowners, House buying, Financial products, First time buyers, Property, Financial news, Housing news, Borrowing, Secured loans at 1:10 pm by admin
While bad news about the property market is easy to come by these days, there must be some good news out there. We round up what economists and experts are saying about the property market.
First of all David Miles, chief UK economist for Morgan Stanley warned that house prices are going to drop by 10% in the coming 12 months. Mr Miles believes that house price growth was largely fuelled by speculation that prices would always continue to rise as well as the belief that the number of people buying properties would increase by 10% in each coming year.
However Mr. Miles also believed that falling house prices would not be such a bad thing for the economy since it would help redress the affordability issue in the market which has spiralled out of control in recent years.
Meanwhile, Capital Economics chief economist Roger Bootle predicted that prices in 2008 would drop by only 3% followed by the same amount in 2009, an optimism that many wish were true.
The reality is that thousands of pounds have alreeady been knocked off the price of the average house in the last six months and prices are set to fall further.
Mr. Bootle says that the drop in house prices has little to do with the credit crunch and more to do with a drop in interested buyers, the number of which have been falling for the past six months. Additionally, with home loan rates still high, despite the three base rate drops since last December, many borrowers are actually unable to get the loan they need to take advantage of lower house prices.
According to Mr. Bootle the two fundamental reasons for the house price slump is the 5 consecutive interest rate rises between August 2006 and July 2007 and the fact that the property market is now too expensive for most potential buyers.
Whatever the reason, there is no doubt that house prices are falling, and in what has been described as an over-inflated market, this is probably no bad thing.
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Fri 20th Jun, 2008
Posted in Consumer Credit, UK Finance, mortgages, Remortgaging, Homeowners, Property, Financial news, Housing news, Borrowing, Secured loans at 12:05 pm by admin
The Financial Services Authority (FSA) has warned mortgage lenders that the credit crisis is going to get worse and there may be more Northern Rock type fiascos to come.
The FSA is urging lenders to cut back on new lending in a bid to strengthen their financial positions as well as not to rush into repossessing borrowers’ homes who are struggling with their loan repayments.
The FSA has found a significant rise in arrears and repossessions in the past few months and bad times are yet to come since there are still 1.4 million borrowers out there on cheap fixed rate home loans that are set to come to an end in the coming year.
The FSA has found that most lenders are taking a blanket approach to customers in difficulty and that this has to stop. The announcements were made by the FSA in a speech delivered to the Council for Mortgage Lenders (CML). The CML called on the FSA to support their calls for the Bank of England to pour more money into the financial system, which has dried up in recent months.
The FSA requires lenders to treat customers fairly and considerer customers on an individual basis. However the FSA has told the CML that there is a consistent picture emerging of many lenders now unwilling to consider cases on an individual basis as well as being unwilling to agree to tailored solutions to borrowers’ individual circumstances and are taking a one size fits all approach to recover arrears.
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Mon 16th Jun, 2008
Posted in Consumer Credit, Personal loans, Debt Consolidation, UK Finance, interest rates, mortgages, Consumer debt, Inflation, Homeowners, House buying, Financial products, Property, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Debt management at 1:21 pm by admin
There are mounting fears that the Bank of England is losing its grip on the economy. A combination of rising food costs, fuel hikes and other price rises are stoking inflation which should mean raising interest rates for the Bank.
However as a result of the global credit crunch, banks are starting to hoard money instead of lending which is putting downward pressure on house prices and pushing the monetary policy committee (MPC) towards actually cutting the base rate. Even in this atmosphere of falling house prices, would-be buyers are finding it hard to secure a home loan to make a purchase they can now afford.
The credit squeeze has created much uncertainty in the economy and the nine MPC members seem very reluctant to actually cut interest rates. The members are facing a dilemma in that domestic inflation is heading in one direction while at the same time the international money market is actually going in the opposite direction.
When the Consumer Prices Index went up by 2.1% - which is above the government target of 2% - it would, under any other circumstances, signal an increase in interest rates in order to bring about higher borrowing costs. The interest rate at 5% is still an expansionary rate which will only fuel higher inflation, putting inflation up again to a more neutral level will hopefully neither dampen nor stoke the economy.
However the credit crunch is pulling for interest rates to come down. Uncertainty in the banking sector has prompted banks to cut lending to other institutions and instead hoard cash. Customers are reporting difficulty in securing personal loans, especially for debt consolidation, as lenders are either unable to access the funds, or simply unwilling.
Bank of England governor Mervyn King has warned the MPC that the credit crunch could get even worse in the coming year unless interest rates are cut.
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Fri 13th Jun, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Homeowners, House buying, Financial products, First time buyers, Property, Borrowing, Secured loans at 12:48 pm by admin
Five interest rate rises in a row last year really hit us hard and despite the subsequent drops, many of us are still left struggling to find the right mortgage. The base rate may have dropped, but lenders are still struggling with liquidity issues – meaning they just cannot access the funds to offer as loans – and so the LIBOR (inter-bank lending) rate remains high.
There are a number of options available to anyone seeking a new home loan however, because finding the right mortgage product is very important. The fixed rate mortgage could avoid the risk of further rate rises in the future, but lenders are also aware of this and increasingly fixed rate home loans come with shorter and shorter renegotiation periods as well as increasing renegotiation charges. So whilst taking out a fixed rate mortgage is always an option worth considering it may not necessarily be your best one.
There is no avoiding the fact that as interest rates stay high, our loan repayments will be steep. Add to this the increasing fuel and food costs and many people are worried. So what are we supposed to do to protect ourselves from getting out of our depth and falling into financial difficulties?
Some lenders have introduced a new option that while slightly unorthodox could be worth some serious consideration. Lenders such as Barclays are allowing borrowers to split their mortgage into two and have half on a fixed term basis and the other half of the loan on a tracker basis. This takes out some of the risk for the borrower but will mean taking extra time in searching to find a lender who is willing to make the deal with you.
The arrangement fee could be higher than with a non-split mortgage and the time in finding the mortgage could take twice as long, however you are splitting the risks involved and if you don’t like to take chances with your money than this could be the option for you. With inflation still running high, cost of living rising sharply but no matching rise in wages, it is wisest to play a cautious game when it comes to your mortgage.
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Mon 9th Jun, 2008
Posted in Bad Credit, Consumer Credit, Homeowner Loans, UK Finance, interest rates, Remortgaging, Consumer debt, Homeowners, House buying, Financial products, Credit record, Property, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Missed payments at 1:07 pm by admin
Banks are getting increasingly tough on borrowers, and with high interest rates, mortgages are becoming increasingly expensive to service. So what options have you when looking for a new mortgage deal?
With lending rates so high at the moment and not expected to come down for a while, a tracker mortgage would probably not be the right option for anyone who cannot afford increased payments in the short term. Instead, taking out a short-term fixed rate loan would be a wise choice, to avoid being stung by higher repayments in the coming months.
If you have been in arrears recently then switching might be a bit more of a tricky issue since most lenders are now getting a lot tougher on borrowers with blemished credit records. Bad credit mortgages are available, but after last year’s sub-prime losses in America, these tend to be offered at very high rates.
You might not be able to take advantage of the cheap deals out there if you have recently gone into arrears or missed a payment, however there are still some sympathetic lenders out there who are willing to ignore the odd blemish on your credit history so make sure you shop around when you are looking for a good deal.
HSBC is currently offering something called a “RateMatcher” policy, which allows mortgage customers about to come to the end of fixed-rate mortgage to extend their loan for another one to five years at their current rate. This will prevent customers from switching out of an existing good deal to a higher rate elsewhere and should come as welcome relief to anyone whose cheap-rate home loan ends this year.
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