Past Articles for the Creditor Behaviour Category

Nine out of the 12 leading mortgage lenders in the UK have recently slashed rates, yet debt-laden people may still be missing out on the savings, it has been claimed.

Head of mortgages at Moneysupermarket Louise Cuming said that while borrowers could be encouraged by the positive news, lenders were “cherry-picking” who they offered debt help to.

“Good news is restricted to customers with a spotless credit rating and a large deposit … meaning the gap between the ‘haves’ and ‘have nots’ in the UK is set to widen further,” she commented.

In the midst of a mortgage crisis, the industry had recognised that rates were too high, she added.

Meanwhile, research from Abbey found that fixed-rate mortgages are experiencing an increase in popularity. Approximately 52 per cent of respondents said they would now opt for a fixed deal compared with 35 per cent six months ago.

By Jamie Price

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There has been an increase in longer debt transfer deals, an industry analyst has claimed.

Michelle Slade from Moneyfacts said that the amount of zero per cent credit card deals available for over 12 months has risen by 11.4 per cent.

Balance transfer deals can be an effective way to handle debt management, she claimed.

“This is great news for consumers as they can have longer to reduce their debt and as a result less marks on their credit file,” she added.

Ms Slade also stated that switching to one of these deals to consolidate debt could cut the time it takes to repay the balance and reduce overall interest.

According to a report from the company, zero interest deals for a year or more made up 47.7 per cent of the market in August.

Meanwhile, M&S Money has launched a new credit card offering ten months interest-free on shopping transactions.

By Jamie Price

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A lack of confidence and increased confusion can lead to borrowers ending up with more mortgage debt, a new survey has claimed.

Cheltenham & Gloucester has released a study that says people are paying higher rates due to worries or concerns about not being able to get a new mortgage.

Of homeowners due to remortgage in the next year, approximately one in three (37 per cent) said they will not even apply to other lenders for fear of being rejected.

In addition, 30 per cent said they would knowingly pay higher rates with their current lender rather than face the possibility of being turned down by a different firm.

Almost half (44 per cent) of the remortgagers said they believed there is a scarcity of deals. A further 15 per cent said they do not understand how companies decide on eligibility.

However, rates have recently been cut on homeowner loans by several lenders, including Abbey and Nationwide.

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The Citizen’s Advice service has welcomed measures announced by the government that could help people avoid repossession.

Chief executive David Harker claimed that the reforms may be an effective way of keeping families in their homes, when unexpected events such as job losses occur.

“Helping people stay in their homes will reduce the risk of social exclusion that arises when families have to enter temporary accommodation”, he commented.

He added that the increased capital limit for the income support for mortgage interest system was particularly important.

However, he warned that for the new introductions to work, lenders must show “forbearance” and treat those in difficulty fairly by negotiating affordable payment arrangements.

Court action must only be “taken where all other options have failed” he concluded.

Meanwhile, in a bid to aid first time buyers, the chancellor revealed that stamp duty will be waived for home purchases under £175,000 for the coming year.

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Many British consumers may enjoy the idea of getting rewards for their spending, but Sainsbury’s Bank has said few people are actually taking advantage of reward schemes.

According to the research, more credit cards now offer a reward scheme, with over half (51 per cent) of card holders having the chance to earn rewards. However, less than a quarter (23 per cent) have claimed their rewards over the past year.

This suggests people are being drawn in by offers that may result in credit card debt.

Sainsbury’s Bank said the three main reasons for not redeeming rewards were that the financial rewards were too small, it was too difficult to redeem rewards and that consumers did not know how to claim them.

Head of cards at the supermarket Donald MacLeod, said rewards may offer “a false value”.

“Consumers have a right to know what their credit card reward schemes are worth in pounds and pence and also how easy they are to use and redeem,” he said.

Last week the CPP said British people are “complacent” about how they use debit and credit cards abroad, risking theft and debt.

By Morwenna Kearns

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People looking for a consolidation loan to clear debt may be in for a shock this month, following reports that rates have hit their highest levels in six years.

Moneyfacts’ study of personal loan rates found the cheapest deal on the market this month is from Moneyback Bank, which offers a rate of 7.6 per cent on a £15,000 loan over three years.

This rate has risen from 6.3 per cent in 2007 and 5.6 per cent in 2006 – again, the cheapest loans on the market.

Independent finance information provider Moneyfacts said people could be paying much higher rates if they are going straight to their banks rather than shopping around.

“This is extremely bad news for consumers who may be considering consolidating existing debts to try to drive down their monthly expenditure,” said the service.

In other news, homeowners thinking of remortgaging may be interested in a new offset deal announced by First Direct.

By Morwenna Kearns

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An economist has said changes to interest rates are not expected until the end of this year.

Capital Economics said November or December may bring a rate change after “inflation fears fade [and] inflation peaks”.

UK economist at the research consultancy Paul Dales said: “The committee can certainly turn its attention to supporting the real economy which seems to be in dire states and will probably be more so towards the end of this year.”

The comments may be of interest to people with debt management issues who wish to stay up-to-date with interest news.

Currently, the interest rate stands at five per cent, which was held last month. The last change to the UK bank rate was on April 10th when it was reduced by 0.25 percentage points. The next decision on rates is due to be made today (August 7th).

Capital Economics provides financial research on the USA, Asia and Europe.

By Morwenna Kearns

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Many consumers believe the Bank of England’s monetary policy committee (MPC) will increase interest rates over the next year.

According to a poll by Lloyds TSB, 66 per cent of consumers expect interest rates to rise in the next 12 months rather than fall or stay at the current level of five per cent.

Furthermore, 88 per cent of people questioned by the bank said they are expecting food and fuel bills to continue increasing.

Chief economist at Lloyds TSB Corporate Markets Trevor Williams stated that consumer spending will slow considerably in the coming months as consumers predict further inflation rises.

He remarked: “Should the MPC be forced to increase rates over the months ahead, then at least this will come as no surprise to consumers.”

Mr Williams also said that when it comes to household spending, consumers are getting ready “for the worst”.

The MPC is to reveal the outcome of its monthly two-day interest rate meeting on Thursday.

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The credit crunch may have affected the housing market and availability of credit cards but in other areas people are showing varying degrees of impact, according to a new poll.

The survey, undertaken by Norwich and Peterborough Building Society, indicates while many people are cutting back on luxuries remain debt free, others are spending the same as last year.

Some 44 per cent of people have not changed their holiday plans, while 40 per cent are considering taking fewer trips and 13 per cent have scrapped travel plans.

Over a quarter (27 per cent) of respondents said they have started a household budget and 16 per cent have found extra work to make ends meet. However, 37 per cent said they made no changes.

The building society’s group product manager Gary Lacey said: “It is interesting that a large proportion of those who took part in our survey don’t appear to be taking drastic measures with their finances just yet.”

The poll found families are the worst hit, with 75 per cent spending more on everyday bills and shopping.

By Morwenna Kearns

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A new study from Yorkshire Building Society says the average British adult would survive debt-free for 52 days if they were not able to work.

Over a third of people (36 per cent) have savings of less than £500 – equating to 11 days’ living expenses, the research said.

The building society also highlighted 90 per cent of people do not have income protection in case income is stopped due to reasons such as illness or redundancy.

It points out more people have life insurance to provide after death than have protection for life.

“In the current economic climate, this research paints an extremely alarming picture for those consumers without any protection products in place,” said Tanya Jackson, corporate affairs manager.

Divorced people are the most vulnerable to the savings gap and will survive for an average of 35 days, while widowed people could rely on their savings for 120 days without worrying about bankruptcy or running up credit card debt.

Earlier this month, Fool.co.uk urged people to prepare for the predicted recession.

By Morwenna Kearns

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