Past Articles for June, 2007

Moneyfacts.co.uk claims that while consumers across the country often concern themselves with an array of costs associated with buying a home, the issue of valuation fees is commonly overlooked.

And the money search engine is urging prospective mortgage lenders to take the variations in valuation fees into account as they decide which provider to enter a mortgage deal with.

“The difference in costs between the top ten mortgage lenders, even for the basic valuation, is as much as £360 and for a homebuyer report is £345,” said Julia Harris, mortgage analyst at Moneyfacts.co.uk.

“With such large variations in the size of fees, the valuation must be yet another part of the mortgage package to compare when shopping for the best deal,” she added.

Including mortgage arrears, the average debt management burden for a British adult stands at more than £28,000, according to figures from Credit Action.

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As debt management problems worsen for millions of consumers across the country, HSBC intends to start charging its graduate account customers an annual interest rate of close to ten per cent.

The charges are scheduled to come in from August and while HSBC has not made clear how many consumers will be impacted the figure is estimated to be in the tens of thousands, the Times reports.

A spokesperson for the National Union of Students is quoted as saying: “The period after graduating is tough for a lot of graduates and given the debt students are now saddled with its pretty alarming to think students are going to be hit with a big charge.”

Figures from uSwitch.com released earlier this week showed that UK banks have increased their average overdraft charges by 0.93 per cent over the past six months, which has cost consumers a total of £52 million.

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A study by MoneyExpert found that during the last six months an average of 7,716 people have missed their loan repayments each day in the UK as the cost of borrowing has continued to increase.

Furthermore, the proportion of people with personal loans missing their repayments has risen from two per cent during 2006 to three per cent in the first half of this year, the latest research has shown.

Sean Gardner, chief executive of MoneyExpert, said: “This is yet another warning of real financial distress and a sign that finances are being stretched to the limit by recent interest rate rises.”

“The concern has to be that people are missing repayments on unsecured loans because they believe there’s not as much at stake as missing a mortgage repayment,” he added.

During the first three months of this year there were more than 30,000 people in the UK who entered an Individual Voluntary Arrangement (IVA) or declared themselves bankrupt, according to Insolvency Service data.

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Citing Consumer Credit Counselling Service (CCCS) figures the OFT claims 18 to 24-year-olds in Britain now have an average of £12,790 worth of personal loan, overdraft and credit card debt and the organisation is encouraging young people to become more financially responsible.

With this in mind the OFT is keen to see young Britons become more aware of their rights as consumers and is advising them to shop around to get a better deal on the goods and services they pay for.

“The amount spent by young people is enormous and they are increasingly involved in spending decisions whether it is mobile phones, computer games or traditional areas like clothes,” said OFT consumer education spokesperson Paul Burton.

“Having a skilled group of consumers shopping around and aware of their rights benefits us all,” he added.

Earlier this year, a report from the CCCS suggested that British women are often deterred from entering bankruptcy - even if this is their most appropriate debt solution - because of a perceived stigma.

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Figures from CreidtExpert suggest that consumers in the UK believe tying the knot will cost them around £9,000, despite the average pay out for a wedding standing at close to £17,000.

In addition, the latest research shows that more than 1.6 million people across the country have gone into debt to attend a wedding ceremony.

“Weddings are a time to celebrate but it’s clear that people are increasing their financial stress and spending money they don’t have simply in order to be there,” says Jim Hodgkins, managing director of CreditExpert.

“The cost of getting married and attending other people’s weddings is often underestimated, but it’s a significant outlay.”

Credit Action research shows that the overall debt management burden in the UK increases by around £1 million every four minutes.

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During the first quarter of 2006, Britons borrowed 35 pence for every pound they saved, while in the same period of this year UK consumers took on 41 pence in personal debt for every pound set aside, the latest figures demonstrate.

Furthermore, between January and March 2007 Britons accumulated an additional £100 million in personal loans, overdrafts and credit card debt, in comparison with the final three months of last year.

“Personal debt in the UK continues to rise and, as such, all the conscientious effort being made on saving money is being undone by continued increasing usage of credit cards, loans and overdrafts,” said David Elms, Unbiased.co.uk’s chief executive.

Figures from Credit Action put the UK’s debt management burden at more than £1,325 billion at the beginning of this month.

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MPs from each of the three main political parties have now signed a parliamentary motion calling for government efforts to give the UK’s young people access to “meaningful financial education”.

Liberal Democrat MP and economic expert Julia Goldsworthy said: “Many people struggle to manage their finances effectively, primarily as a result of poor levels of financial capability.

“This has implications not only for the individual concerned but also for the wider community and the economy as a whole.”

Meanwhile, the ifs School of Finance, which offers personal finance qualifications, has welcomed the political focus on the apparent lack of debt management capability among UK consumers.

The Insolvency Service revealed earlier this year that more than 30,000 people in the UK were declared bankrupt or entered an Individual Voluntary Arrangement (IVA) during the first quarter of 2007.

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A study carried out by Scottish Widows has shown that the majority of workers in the UK are not saving enough money to be secure when they reach old age and those with debt management problems are among those struggling to contribute to their pension scheme.

The report also suggests women, particularly those with young children, and self-employed workers are among those who are most vulnerable to financial difficulties during retirement.

“While confidence seems to be returning slowly to the pensions market, 51 per cent of those who should be preparing for retirement are still not saving adequately,” said Ian Naismith, head of pensions market development at Scottish Widows.

Earlier this year, a report from the Consumer Credit Counselling Service claimed the debt management burden in the UK is increasingly shifting to more elderly generations.

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According to the minutes of the most recent meeting of the rate-setting monetary policy committee (MPC), Mr King was one of four members who wanted to see the cost of borrowing increase in June.

However, the five remaining members of the MPC felt an increase was not yet necessary, but many experts are now convinced the pressures on UK consumers facing debt management problems are likely to rise next month.

Chief UK and European economist at Global Insight, Howard Archer, commented: “The minutes give the impression that for some of the other MPC members it was a question of when to raise interest rates again rather than if.”

“There is clearly a very real risk that interest rates will reach six per cent before the end of the year,” he added.

Millions of homeowners across the country have had their financial pressures heightened in recent weeks as a result of the BoE’s decision to increase the cost of borrowing to 5.5 per cent in May.

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Figures from Lloyds TSB show that one in ten UK consumers polled within this age range now make a financially-guided decision over whether to enter higher education.

In addition, a fifth of all 18 to 24-year-olds in Britain now admit to refusing a preferable career path based on financial concerns and one in six currently hold down two jobs to save for a housing deposit, the new research has demonstrated.

“The headlines paint a pretty gloomy picture for first-time buyers and I had just assumed that owning a home was out of my reach unless I made some major sacrifices,” commented prospective first-time buyer, 24-year-old Helen Eagleton.

“I was living with my parents and commuting over two hours a day when I finally plucked up the courage to seek advice,” she added.

Homeowners in the UK have been urged by a number of experts in recent weeks to prepare their finances for the likelihood of a further rise in the cost of borrowing.

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