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Archive for September, 2006

Buy-To-Let Market Increasing

Tuesday, September 26th, 2006

Buy-to-let lenders issued 130,400 loans in the second half of last year. This is a 39% increase over the first six months. The Council of Mortgage Lenders released this information. Overall the figures show that both loans and remortgaging made a significant contribution to the growth of new buy-to-let lending in the second half of last year.  This may have been the result of a softening in the lending criteria.

Many consumers are looking to the Buy-To-Let Market to offer a residual income, pay of their debts, and hopefully, afford them a financially secure future.  This is not always the case. Even if the home remains occupied, increases in taxes, fluctuations in interest, and an increase in utility bills can make the buy-to-let mortgage a risky venture. This is why many lending companies avoid awarding buy-to-let mortgages.  R residential property must earn a minimum of 25% rental profit before the buy-to-let lender will consider the risk.

The CML’s Director General Michael Coogan said:

“There was a notable pick-up in the buy-to-let sector in the second half of last year, so that lending in 2005 modestly exceeded the year before.”

“Despite slowing house prices last year, residential property remains a popular investment, and this is set to continue in 2006.”

There are rumors that the decrease in the overall mortgage market, a total of 18%, may explanation why lenders anticipate in an increase in the demand for rental property.  This could explain why they are opening up their restrictions on buy-to-let mortgages and loans.  Consumers are taking out buy-to-let mortgages and loans anticipating that the increase in rentals will lead to an increase in rental prices, offering them more profit on their investment.

Posted in Bad Credit, Consumer Credit, Homeowner Loans, UK Finance | No Comments »

All out of love

Friday, September 22nd, 2006

Moneynet reports that Brits seem to be falling out of love with their credit cards, with borrowing growth on the decline. For the fourth consecutive month, credit card holders paid off more than they borrowed, with repayments totalling £399 million in August. There was a fall of £77 million in July and over the last six months the average monthly fall has been £143 million. Recent figures from the British Bankers Association shows that loans and overdrafts are also down.

Moneyfacts suggest that rising utility bills and mortgage rates are making homeowners tighten their belts. Weaker consumer confidence has also had an effect on these figures. Moneyfacts researcher Samantha Owens commented: ‘Rising interest rates have impacted on mortgage costs, while energy bills have also been rising. This has forced people to review their finances and cut back on the luxuries that they maybe would have put on their credit card.’

Posted in Consumer Credit, Credit Card, UK Finance | No Comments »

New Proposal Aims to Protect UK’s Poorest

Friday, September 22nd, 2006

The Competition Commission’s proposal promises to introduce more competition into the doorstep lending market.  These lenders target the poor, high-credit-risk consumer, offering them temporary financial relief by lending them small, one year loan.  This segment of the population is not financially educated enough to realize the exorbitant interest rates charged by doorstep lending companies will result in a greater hardship in the future.

Philip Cullum, deputy chief executive of the National Consumer Council (NCC), said: ‘Overall this package of measures should bring more choice and cheaper loans to the poorest households who are excluded from the mainstream credit market. More competition in the home credit market is long overdue.

‘NCC especially welcomes the proposals to oblige home credit lenders to share information on their customers’ payment records – making it easier to switch provider – and for fairer early settlement rebates for customers.’

This is a welcome relief to a market that has not been restructured for 30 years before the 2004 Credit Bill.   The doorstep lenders prey on the UK’s two million poorest. Many of these people borrow money to pay utility bills, or pay off other debts.  The loan not only increases their debt load, but it increase the interest paid on those loans.

If the proposal is passed as it stands, then many consumers who are locked into loans will be able to shop around for a lower interest rate, or even a early settlement plan with a lower pay-out fee.

This is a good move in the light of the doorstep company’s new venture into the internet and television market.  These venues remove the stigma of the ‘door-to-door’ salesman, and makes it easier for the doorstep lending companies to pose as reputable financial institutions.

Posted in Bad Credit, Consumer Credit, Personal loans, UK Finance | No Comments »

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