Inter Financial Weblog

 

Archive for April, 2008

New Hope for Mortgage Seekers

Monday, April 21st, 2008

The Bank of England has announced today that it will be offering £50bn in government bonds to banks and home loan lenders. This is aimed at softening the credit crunch throughout the UK.

Currently banks and lenders are reluctant to take on mortgage debt, but this BoE scheme will allow them to use government bonds, enabling them to operate normally during the credit crisis and rumoured world recession.

BoE Governor, Mervyn King, is confident that this move will raise liquidity on the money market and improve financial confidence.

The scheme allows lenders to swap current mortgage debts for the bonds, and whilst it is only applicable for existing loan business on lender books, it will still free up funds for first time buyers who are currently unable to secure a mortgage.

The scheme has the full approval of Gordon Brown, who said: “We can get markets working again in a way that we can ensure that jobs can be continued, and of course businesses can have the finance they need.”

Since the American sub-prime mortgage crash, worldwide investors have been reluctant to allow their funds to be invested in the UK home loan market. This has left a shortage of funds available for mortgages, with even banks being reluctant to lend to each other.

The Council of Mortgage Lenders warned, however, that this move would not necessarily see cheap loans reappearing on the market.

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

Huge rise in number of credit card fees

Wednesday, April 16th, 2008

It has been revealed that credit card companies have introduced an astonishing 31 different fee rises recently, a move that could end up costing consumers millions of pounds collectively.

The changes were revealed by Moneyfacts which showed that there had been large rises in fees charged for withdrawing money from cash machines as well as rises in cash interest rates. It has also been revealed that Banks and Building Societies have also increased the commission charged for foreign use as well as increasing balance transfer fees.

Alliance & Leicester implemented the largest cash fee rise, upping its rate from 2.25% to 3%. This means that withdrawing £250 with your credit card will now cost £7.50. Other banks have also upped their charges with the AA, Bank of Scotland, Halifax and Intelligent Finance all putting up their rates from 2.5% to 3%. Nationwide, Smile, and Yorkshire Building Society also increased fees from 2% to 2.5%.

Smile has increased its cash rate by the greatest amount, pushing up the interest rate for cash withdrawals on its Gold Visa from 14.9% to 23.9%. The problem with withdrawing cash using your credit card is that it is very expensive, first of all you incur a fee and then there is no interest free period. So it is best to avoid taking money out using your credit card at all costs. Comparisons with overdrafts and personal loans, show that borrowing money in this way has always been extremely expensive.

Balance transfer fees have also gone up with Alliance and Leicester increasing its balance transfer fee from 2.25% to 3%.

These new fee and rate rises plus the credit crunch are behind a massive customer move away from credit cards towards debt consolidation loans. Many borrowers are finding it necessary to tighten their financial belts, and this includes clearing old card balances and cutting up cards.

Posted in Bad Credit, Balance transfer, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt Consolidation, Debt management, Financial news, Financial products, interest rates, Personal debt, Personal loans, Secured loans, Spending, UK Finance | No Comments »

Fall in number of insolvencies and repossession

Friday, April 11th, 2008

Despite a large number of warnings that repossessions and insolvencies were on the rise as a result of higher interest rates and the fallout from the credit crunch, recently published figures actually show that the exact opposite has happened.

The figures which were released by the Insolvency Service show that 26,072 people were declared insolvent in the three months after the credit crunch hit. This is a fall of 3% on the number of insolvencies in the previous quarter and a fall of 5% of the same period the previous year.

While the number of bankruptcies had increased by 2.2% on 2006 to a total of 15,833, the number of individual voluntary arrangements (IVAs) was actually down by 14.3% to 10,239. The large drop in IVAs, which allow borrowers to write off some of their debt in return for creating a payment schedule with creditors, could be explained by the fact that most lenders dislike the schemes since they are then forced to write off bad debts. With banks needing to claw back as much money as they can, they are refusing to allow personal loan and credit card customers to ‘go bad’.

While it is not clear which lenders were behind the majority of rejections for IVAs it is believed that Northern Rock is on of the main contributors rejecting all applications for IVAs. This is unsurprising, given its recent history.

HSBC has also changed its policy to IVAs. In the past, repayments for IVAs came in somewhere around 25p for every £1 owed to the lender. HSBC has now upped its threshold to 40p for every £1 borrowed.

As a result of these changes borrowers are now more likely to enter into debt management plans with their creditors.

Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial news, House repossession, Housing news, Insolvency, Missed payments, mortgages, Personal debt, Property, Secured loans, UK Finance, Unsecured loans | No Comments »

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