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Archive for November, 2007

British lack knowledge about personal finances

Thursday, November 8th, 2007

According to the latest research from Abbey most of us here in the UK don’t know much about our own personal finances.
In a survey of more than 1000 British adults a 10 question personal finance exam was set with a grading system similar to that of the GCSE standard. Questions on the survey ranged from credit card interest, secured loan repayments and negative equity.

One in ten Britons had deficient knowledge of their own personal finances scoring below a C grade. 25 percent achieved an A*, 30 percent scored A and 21 percent scored a B.  The remaining 24 percent who scored below a B grade are in danger of making bad financial decisions due to their lack of information.

A bank spokesman claimed that the questions chosen were ones that Abbey felt everyone who has a current account should be able to answer. The hardest questions on the survey are related to pay back time of credit card balances before fees could be charged, which is 6 weeks in case you are wondering. Almost half of those surveyed did not know what negative equity meant and possibly the most worrying of all was that 23 percent of us are unaware that non-repayment of a secured loan could possibly lead to losing the house the loan is secured against.

So before you go and get yourself a loan make sure you understand all the terms and conditions. Otherwise you could be in for quite a shock.

Posted in Banking, Borrowing, Consumer Credit, Credit Card, Debt management, Financial news, Negative equity, Personal debt, Personal loans, Secured loans, UK Finance | No Comments »

More People Renting

Friday, November 2nd, 2007

The strong demand in the rental industry is shown in the latest figures on void periods (the number of weeks that a rented property remains empty each year). Voids have been falling steadily over the past nine months, according to research by Paragon Mortgages. The annual average void period is now between 2.6 and three weeks. Tenant demand will remain high as property prices increase.

Keith Astill, managing director of UCB Home Loans, a subsidiary of Nationwide building society, said:

“People are renting for longer because it’s more difficult to afford to buy, which is in turn providing a boost to the buy-to-let sector.”

Halifax claims that UK property inflation is 10.7%. The figure is higher in Scotland, where house prices are have been increasing 15.9% a year.

Higher prices boost the value of the property, but also squeeze yields, decreasing the percentage of house price covered by the rental income. Yields dipped to 5.5% over the past 16 months, from 5.7% in June 2006, according to Birmingham Midshires.

This despite the fact that rents are on a steady increase, with the average increase of 4.5% in the last year to an average of £651 a month.

Tim Crawford, group economist at Birmingham Midshires, said:

“The fundamentals underpinning the buy-to-let sector remain sound. While house price growth is expected to be more subdued near term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors.

“There also remains the potential for healthy long-term capital appreciation in the buy-to-let sector, particularly given the backdrop of more households being formed each year than there are new properties being built.”

Posted in Buy to let, Consumer Credit, Financial news, First time buyers, Homeowners, Housing news, mortgages, Property, Tenant loans, UK Finance | No Comments »

Affordability issues increasingly a problem for first time buyers

Friday, November 2nd, 2007

Two set of figures out this week show that an increasing amount of first time buyers are facing a difficult path ahead with the gap between earnings and house prices continuing to grow.

Mortgage repayments have consumed the greatest proportion of take home pay for the last 17 years. The lowest earners as well as first time buyer couples now typically need to use their joint salaries in order to be able to afford the repayments on a home loan according to research out by the Royal Institution of Chartered Surveyors (Rics).

A separate study out this month from the TUC also shows that the average price of a house in the UK has gone up more than four times faster than that of the wage of the average UK employee over the past 10 years.

The Rics study found that in order to cover the stamp duty, cost of a deposit and legal fees, a first time buyer will typically need to save £25,600. A couple in the lowest earning bracket will earn roughly £25,899 a year between them which is only £299 more than the minimum required to purchase a house.

Some areas of the UK are better for affordability than others. In the North-West upfront buying costs make up 72.9% of the average couple’s joint income, but in other areas there is a very different story.

London which has been the driving force behind massive house price inflation also has the worst affordability issues with the average upfront buying cost in the area of 112.1% of joint take home pay.  For these people, even getting an interest-only loan on a property seems an impossible dream.

Posted in Borrowing, Consumer Credit, Financial news, Financial products, First time buyers, Homeowner Loans, Homeowners, House buying, Housing news, mortgages, Property, UK Finance | No Comments »

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