Past Articles for May, 2007

With debt management problems facing consumers across the country, figures from checkmyfile suggest that the number of people unhappy with the service from their mortgage lender has increased by around 20 per cent over the course of the last year.

Furthermore, experts at the company behind the latest study claim that the level of dissatisfaction among mortgage borrowers is likely to increase still further given the current environment of rising interest rates.

Barry Stamp, joint managing director of checkmyfile, said: “As interest rates and the cost of living start to bite and as we see the gradual upward trend in repossessions gaining momentum, more mortgage customers will come into contact with their lender.

“Our survey results show that some will find their mortgage lender far less understanding than may be expected.”

Debt solution problems have been heightened for many mortgage borrowers in the UK this month in the wake of the Bank of England’s decision to raise the base rate of interest by a quarter-point.

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While millions of Brits are facing increasingly difficult debt management problems, one fifth of the 500 single citizens quizzed by Parship.co.uk recently cited these issues as their biggest concern, compared with over a half (52 per cent) of respondents who voted for loneliness.

And according to the online dating firm it is loneliness and not debt problems that give single Brits the most sleepless nights.

Despite these assertions financial difficulties are a serious problem for many thousands living in the UK and more than 1.4 million people approached Citizens Advice about debt last year alone.

Furthermore, debt management problems have been compounded for many UK homeowners this month with the news that interest rates have been upped to 5.5 per cent.

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With millions of British consumers already facing credit card debt, the country’s largest provider of these services could soon be charging a fee of £10 or £20 to customers who never or rarely use their plastic products.

“We think this is a fair approach and gives customers a choice,” said a spokesman for Barclaycard.

However, there is concern among some expert observers, including the director of financial services at uSwithch.com Nick White, that if Barclaycard introduces an inactivity charge the practice will spread throughout the industry.

Mr White said: “Implementing a fee for an inactive credit card customer is not the key issue here, the problem is the level of transparency displayed around the criteria used to select the customer charged.”

Earlier this month, the Insolvency Service revealed that credit problems have seen the number of people in the UK entering into Individual Voluntary Arrangements rise by 23 per cent between the first quarter of 2006 and the same period this year.

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The practice is referred to as ‘purposely hiding what I’m looking for’ (Philfing) and is the most irksome online tactic employed by website owners, according to 64 per cent of respondents to a survey commission by MoreComputers.com.

And with debt management becoming increasingly difficult for many consumers across the country, the poll found that “hidden surcharges” levied against customers paying by credit card has become an issue for many British internet shoppers.

Brian Trevaskiss, operations manager at MoreComputers.com, said: “Shopping online is without doubt quick and convenient.

“However this growing trend of Philfing is so annoying for consumers that they abandon their baskets at Philfers sites and shop elsewhere.”

Earlier this week, research carried out by YouGov for the Retail Trust charity revealed that millions of British consumers risk debt management problems by spending money to relive feelings of stress.

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Many British consumers have been pushed further into the debt management mire by having additional charges levied against them and now banks are trying to deter those who try to claim these fees back, according to Ingrid Gubbay from the consumer group Which?.

Ms Gubbay, who is the principal campaign lawyer at Which?, suggest that in the wake of the win for Lloyds TSB in court battle over alleged unfair charges, other banks are trying to warn customers off taking a similar course of action.

“Some banks are being a lot more aggressive about the way they flourish the case in the face of the potential claimants or customers,” she told the BBC’s Wake up to Money programme on Radio Five Live.

“That has a huge impact because people are more frightened and deterred… [but] each case should be confined to its facts.”

Meanwhile, the UK payments association Apacs recently marked the tenth anniversary of the launch of online banking services in the UK.

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Recent research from the independent comparison service found that annual fees are now being levied by one in eight credit card suppliers operating in the UK on one or more of their products.

And Money Expert is convinced that the prevalence of these fees is likely to increase as financial service providers aim to improve their profits, but this could make a debt solution more difficult to find for many of the UK’s credit consumers.

“We thought we’d seen the end of annual fees on credit cards, but we think there could be a return sooner rather than later,” Sean Gardner, chief executive of Money Expert, remarked.

“Credit card companies will be under pressure to improve profits and reduce bad debts, and that could mean finding customers who are prepared to pay for credit,” he added

Meanwhile, figures from Credit Action demonstrate that consumer borrowing in the UK increases by close to £318 million each day.

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Recent research carried out by the Council of Mortgage Lenders (CML) found that around 35 per cent of prospective homebuyers say they would need to borrow money from their parents before they could afford to get on the property ladder.

Furthermore, around 28 per cent of these children in need of financial assistance from their parents suggest that they are unlikely to get it, the CML has revealed.

Head of research at the CML Bob Pannell remarked: “Over the past few years, parents have already been providing significant help to younger home-buyers, and there is uncertainty about whether they can do even more.”

Meanwhile, the Bank of England increased the financial pressure on British credit consumers aiming to clear debt earlier this month by raising the base rate of interest by a quarter-point to 5.5 per cent.

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Figures from Prudential show that around 60 per cent of all work-age female British citizens do not contribute to either a company or personal pension, compared to 46 per cent of their male counterparts.

And with debt management problems facing millions of consumers nationwide, the financial service firm suggests that British women are part of a “pensions underclass”.

“Retirement is now roughly 25 years long for the average person, so people need to not only review what their pension will deliver, but also think about all the other sources of wealth available to them, such as property and other savings,” said Gary Shaughnessy Prudential’s managing director of retail life and pensions.

Earlier this year, the Consumer Credit Counselling Service warned that the burden of debt management is increasingly shifting to older generations across Britain.

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Figures compiled by YouGov for the Retail Trust charity show that close to a quarter of people around Britain take a trip to the shops in an effort to ease their anxiety and young adults (18 to 24-year-olds) are the most common stress-relief spenders.

Furthermore, working in the retail sector does not appear to lead to conservative spending habits, as eight per cent of shop staff have revealed that they owe 71 per cent or more of their annual income to creditors.

Retail Trust chief executive Nigel Rothband said: “It is estimated that an astonishing one in five people in Britain work in the retail industry and the survey results reinforce the fact that there are a large number of people in need of help and advice.”

Meanwhile, the accountancy firm KPMG has forecast that more than 130,000 UK consumers will apply to enter an Individual Voluntary Arrangement over the course of this year.

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According to the minutes of the MPC’s most recent meeting, an increase in the cost of borrowing to 5.75 per cent was up for discussion as the committee assessed the right way to counter rising inflation rates.

In the event, the MPC was unanimous in its decision to raise interest rates by a quarter-point to 5.5 per cent, but this increase has already heightened the financial pressures on consumers facing debt management difficulties around the UK.

The minutes of the May meeting of the MPC read: “For some members, the question was whether bank rate should be increased by 25 basis points or whether there was a case for a rise of 50 basis points – given the upside risks to inflation over the medium term and the buoyant outlook for growth and demand.”

With millions of credit consumers struggling to clear debt arrears in the UK, the MPC has raised interest rates by a quarter-point four times since August of last year.

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