Past Articles for June, 2007

Over 3.7 million would-be homebuyers say they would be happy to take on a mortgage that amounted to five times the annual wage in order to get onto the housing ladder in the UK, figures from online mortgage search service mform.co.uk suggest.

Furthermore, around 1.38 million UK consumers would be willing to borrow an amount that is six times their yearly income, the latest study shows.

Chief executive of mform.co.uk Eammon Rice commented: “There are still major risks involved in borrowing five or six times your salary. Customers need to ensure they are receiving the best possible deal and that repayments are affordable.”

“There is no point getting on to the property ladder only to have your house repossessed,” he added.

Experts widely expect that the Bank of England will increase the debt management pressures on homeowners and credit consumers in July by raising the base rate of interest to 5.75 per cent.

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Mark Formosa, who intends to stand for the Conservatives in Taunton at the next general election, has made clear that there needs to be more effective help and advice for the millions of people nationwide whose financial problems are getting out of control.

Mr Formosa also suggests that introducing personal finance lessons in schools would be an effective way of helping young people in Britain avoid debt management problems in the future, reports the Somerset County Gazette.

“Personal debt can cause an incredible amount of distress and anxiety to thousands of people,” he is quoted as saying.

“That is why we have launched a campaign offering practical, independent advice, and we are working with debt experts to develop solutions to help more people free themselves from the grip of indebtedness.”

Figures from the Insolvency Service show that there were more than 30,000 people in the UK who entered into an Individual Voluntary Arrangement (IVA) or declared bankruptcy during the first three months of this year.

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With millions pf consumers facing debt management difficulties, the OFT is hoping to make relevant information more readily available to the public by working with the various credit card providers around the country.

Explaining the reasons for the initiative, the OFT’s chief executive John Fingleton said: “Credit card pricing has become increasingly complex, with many new dimensions such as interest free periods.

“While these new pricing dimensions give additional choice and value to consumers, they can make it harder for consumers to make informed decisions.”

The plans revealed by the OFT form part of the organisation’s response to a so-called super complaint it received from the consumer group Which?, that suggested Brits are often unclear about the financial details relating to their own credit card deal.

Figures from the Post Office recently showed that around 60 per cent of the UK’s credit card users do not take advantage of the benefits they are entitled to.

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As debt management problems worsen for millions of consumers around the country, figures from Scottish Widows have shown that 18 to 35-year-olds are the UK’s most wasteful fashion spenders.

Furthermore, around 57 per cent of men and 70 per cent of women admitted in the recent poll that they have lied about the price they paid for a particular item of clothing.

“Shopping may be fun but, as this study shows, a large proportion of the money we spend on clothes and shoes is going to waste in our wardrobes instead of staying in our wallets,” said customer and brand marketing director at Scottish Widows Mike Hoban.

“By simply taking a few moments to consider whether you actually need to buy the item in the first place, you’ll be able to cut down on non-essential purchases and save lots of money in the process.”

More than 1.4 million people in the UK approached Citizens Advice for advice on becoming debt free during 2006, according to the charity’s own figures.

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As debt management problems mount across the country, research carried out by Halifax has found that average council tax rises have outstripped inflation by a number of measures over the last decade.

By the measure of the retail price index inflation has risen by 31 per cent during this period, while average earnings have grown by only 51 per cent since 1997, according to the latest Halifax report.

“Council tax bills have increased significantly faster than either average earnings or retail prices over the past ten years,” commented Halifax’s chief economist Martin Ellis.

“Bills diverge across the country [and] growth rates over the last decade differ by a wide margin between billing authorities,” he added.

According to figures from the Liberal Democrat Party, the typical British household is paying a greater proportion of their income towards servicing their debts than at any point during the last decade.

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Experts at moneysupermarket.com suggest that those mortgage borrowers who fail to secure a fixed-rate deal quickly could face increased financial pressures over the coming weeks and months.

“Borrowers needing the stability of a fixed-rate product should reserve their next deal now if their current mortgage term is set to end soon,” said Louise Cuming, head of mortgages at moneysupermarket.com.

“While fixed rates have been looking pretty good in relation to the base rate, they appear to be going up - and fast.”

The price comparison firm also notes that mortgage borrowers can reserve a fixed-rate arrangement for a period of six months before their current deal expires.

Including mortgage arrears, the average adult’s debt management burden in the UK totals more than £28,000, according to the most recent figures from Credit Action.

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According to the Lib Dems, consumers in the UK are now spending more of their annual income on trying to clear debtthan has been the case since 1997 and debt management problems are mounting as the cost of borrowing increases.

Moreover, the average British household now spends close to nine per cent of its annual disposable income on servicing the interest on their debts and millions of people across the country are being severely stretched financially, claims the opposition political party.

Vince Cable, Liberal Democrat Treasury spokesperson, said: “As chancellor, Gordon Brown neglected to tackle this ticking time bomb and we are already seeing rising numbers of repossessions and personal bankruptcies.

“As prime minister, he must take urgent action to tackle spiralling levels of personal debt before more families find themselves on the street.”

It is widely expected that the Bank of England will raise the cost of borrowing again in July after the bank’s monetary policy committee narrowly voted against such an increase earlier this month.

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With debt management problems being heightened for consumers across the country, there are close to 2.8 million adults in the UK who are afraid to confront their own bank balances, figures from the financial service firm demonstrate.

And the problem, which Sainsbury’s Bank has called “money fear”, has also led to more than two million UK consumers keeping their partners in the dark when it comes to financial details and potential debt management issues.

“Our advice to people suffering from this condition is not to put your financial management off, problems can arise if you don’t keep an eye on things,” said Kevin Barrett, head of channels at Sainsbury’s Bank.

“Take control of your finances now, look at your expenditure, plan your budget and by all means, seek advice or counselling if you need to,” he added.

Research released by MoneyExpert last week showed thousands of Britons are missing their personal loan repayments every day as the cost of borrowing continues to increase nationwide.

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Research by the independent personal finance firm found that only two in five credit card users are happy with the services they receive, while 80 per cent of people who spend money in this way value provider reputation above financial arrangements.

And with millions of UK consumers already facing CREDIT CARD DEBTs, the leading provider in the sector Barclaycard has a responsibility to ensure that the market remains competitive, Fool.co.uk suggests.

“[Barclaycard] must stop talking of introducing annual fees for low-usage customers, which sends out the wrong message to sensible consumers,” said the company’s head of personal finance David Kuo.

“It should not frighten customers into using their credit cards to simply avoid paying annual fees,” he added.

According to research from the Post Office, two-thirds of UK credit card users sign up to what they consider to be attractive deal and then fail to make the most of the subsequent benefits available to them.

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As part of a new initiative, the FSA has called on UK universities to take part in its Money Doctors scheme, which aims to give student advisors the resources they need to help the country’s indebted young people.

Steve Stillwell, an education policy specialist for the FSA, said: “For many young people, university will be the first time they’ve handled their own finances.”

“Getting the key skills, such as budgeting and the prioritising of bills, under their belt can make a real difference to how students approach their future finances,” he added.

The scheme forms part of a wider plan being implemented by the FSA to improve the level of financial capability in the UK and to help consumers across the country avoid debt problems.

A recent report from Alliance & Leicester discovered that young Britons are increasingly opting not to attend university because of concerns about debt management.

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