Past Articles for November, 2007

Consumers across the UK have been warned to plan carefully how much they will spend on their credit cards over Christmas.

Samantha Owens, head of personal finance at Moneyfacts, suggests that shoppers who are not sensible about they spend over the festive season are likely to find themselves with a serious credit card debt burden in the new year.

Moreover, Ms Owens insists that there are particular debt management risks posed by cash withdrawals using credit cards, given the expensive nature of the practice.

“If you go to a shop that doesn’t accept a credit card, don’t go to the cash machine and withdraw cash off your credit card,” she commented.

“Not only are the interest rates a lot higher than what you get on purchases – but you also get charged from the day that you take cash out: so straight away you’re being charged this higher interest rate.”

Earlier this month, figures from Moneyfacts showed that dozens of credit cards offered in the UK have had their interest rates increased in recent months.

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A major increase in the amount of money spent online has been forecast for next month by the UK’s payment association Apacs.

The organisation is convinced that some £5 billion will be spent via the internet over the course of December 2007, which for many people will mean adding to their personal loan or credit card debts.

Since 2002, the amount of money being spent online has almost doubled, Apacs reports, noting that the increasing prevalence of the practice heightens the risk to consumers of falling victim to fraudsters.

“More and more of us are buying our Christmas presents online and the evidence suggests we like to do so about three weeks before the big day to ensure they are delivered on time,” said Sandra Quinn, director of communications at Apacs.

“The internet allows us to take the stress out of Christmas shopping, but it’s important that people take steps to protect themselves.”

Earlier this year, Apacs launched a guide designed to help parents advise their children on how to avoid unmanageable credit card debt.

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The fall in the number of mortgage deals agreed in October could mean that the Bank of England will opt to reduce the base rate of interest next month, it has been suggested.

Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, is convinced that the latest mortgage lending data from the bank could persuade rate-setters to cut the cost of borrowing before the end of 2007.

Mr Rubinsohn remarked: “Today’s data will strengthen the hand of the doves of the monetary policy committee ahead of next week’s meeting and could just swing the balance in favour of an early cut in interest rates.

“This would provide some welcome relief particularly for first time buyers who are feeling the full force of the credit crunch as lenders become more discriminating in their lending activity.”

According to the Bank of England’s figures, the number of loans handed out by mortgage lenders was lower in October than the monthly average and than was the case in September.

A cut in the cost of borrowing would ease some of the debt management pressure felt by thousands of households around the UK, who have seen the base rate of interest rise five times since August of last year.

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More than ten million British credit consumers have admitted that their personal loan and credit card debts are nearly or actually unmanageable.

Figures from uSwitch.com show that almost a quarter of all British adults are fearful of their financial future because of the extent of their debt management difficulties.

During the past half-year around 5.4 million have missed at least one repayment demand from their respective lenders and UK consumers now have more than £217 billion worth of outstanding personal loan and credit card debt.

“In the run-up to Christmas, traditionally one of the biggest periods of consumer spending, people are feeling less well-off and are worried about the future,” said Ann Robinson, director of consumer policy at uSwitch.com.

“The days of easy credit and the ‘buy now pay later’ culture may be numbered, but they will leave a painful reminder for those left struggling with debt.”

Accountancy firm KPMG predicted earlier this year that a record number of people would enter an Individual Voluntary Arrangement (IVA) by way of a debt solution over the course of 2007.

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More than 10,000 young Britons are now getting to grips with a range of consumer finance issues by taking lessons in the growing academic field, it has been revealed.

The ifs School of Finance has proudly announced that progress is being made in its efforts to encourage greater financially understanding among the UK’s teenagers through a specially designed qualification system.

Highlighting the importance of its own work and the issue of financial competence nationwide, ifs points out that more and more people are contacting Citizens Advice about debt and overall debt levels are continuing to rise.

Anne Kiem, director of external affairs at the ifs School of Finance, said: “The fact that more than 10,000 14-19-year-olds are now gaining the skills necessary to manage their own finances and make informed financial decisions is clearly great news.

“We are not surprised that so many schools are now ensuring they give their students the opportunity to gain such crucial life skills.”

A study by Fool.co.uk recently concluded that British consumers are wasting £3 billion each year by maintaining credit card debt while adding to a savings account.

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Would-be homebuyers and people looking to remortgage in the UK have been urged to assess all aspects of a home loan deal before committing to a particular arrangement.

A recent study by Moneysupermarket.com concludes that almost three-quarters of all homeowners across the country base their mortgage deal decisions solely on interest rates and this could be adding to their difficulty in becoming debt free.

The financial comparison firm reports that 40 per cent of homeowners worry about the fees associated with their mortgage deal, while less than a quarter concern themselves with their loan provider’s standard of customer service.

“It’s of grave concern that homeowners are placing most importance on low interest rates,” said Louise Cuming, head of mortgages at Moneysupermarket.com.

“With fees having shot up over the past 12 months, people need to factor in the true cost of a mortgage rather than be tempted by the rate,” she added.

Earlier this year, the Consumer Credit Counselling Service warned that British homeowners would be struggling with debt management throughout 2007.

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The Financial Services Authority (FSA) has called on the UK’s finance sector to ensure that consumers are being accurately informed about the various products available to them as they surf the internet.

Around a quarter of all the financial service firms’ websites assessed by the FSA recently fell foul of the authority’s criteria for the presentation of information to online consumers.

Standards in this respect are improving, the FSA makes clear, but the organisation is keen to ensure that internet users are not risking debt management problems by entering financial arrangements without seeking appropriate advice.

“For many people the internet is the channel of choice for shopping around for financial products,” remarked Dan Waters, director of retail policy and themes for the FSA.

“However, it can expose consumers to high risk as they are able to make instant purchases without advice. This is why it is so important that firms’ websites are fair, clear and not misleading.”

Earlier this week, the FSA revealed its intention to clampdown on mortgage brokers in the UK whose advice is sub-standard and could be putting consumers at risk of debt management disaster.

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British consumers are effectively burning away their own money by adding to savings accounts while at the same time paying off interest on their credit card debts, a new study has made clear.

Figures from Fool.co.uk show that as much as £3 billion is being squandered annually in this way by UK credit consumers who are not managing their debts effectively.

The average Briton sets aside around £300 in some sort of savings vehicle on a monthly basis, but many people are simultaneously paying out hundreds of pounds in credit card interest payments, the financial comparison firm reports.

David Kuo, head of personal finance at Fool.co.uk, commented: “We are often told to put aside money for a rainy day because having a ready source of funds for emergencies is a sensible thing to do - and it is.

“But it makes little sense to have a stash of money earning interest at six per cent a year when a pile of debt is burning a hole in our finances at 15 per cent annually.”

The average amount of interest paid out by a British adult stands at around £29,000, according to data from Credit Action.

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Prospective home buyers have been warned that by entering a fixed-rate mortgage deal they could be adding to their future debt management difficulties.

A fixed-rate home loan protects against rises in the base rate of interest for a specified period of time, but since the next move in borrowing costs looks set to be a reduction, mform.co.uk is advising consumers to take on discount deals from their lender.

People looking to remortgage over the course of the next few months could opt for the certainty that fixed-rate deals offer, but mform.co.uk’s experts are adamant that these arrangements could prove unnecessarily expensive.

Francis Ghiloni, mform.co.uk’s marketing and business development director, said: “Our advice would be that anyone remortgaging should consider discount rates ahead of fixed rates.

“Based on true cost discount rates are already better value for borrowers but if, as expected, rates do drop next year they will become even better value.”

Since August of last year, the Bank of England has increased the base rate of interest on five separate occasions, which has added to the debt management burden of millions of British homeowners.

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Almost half of the UK consumers hitting the high street in search of bargains before Christmas will add to their credit card debts to fund their spending, new research has revealed.

Figures compiled on behalf of American Express suggest that the amounts being spent in preparation for Christmas are on the increase and for many people this will mean adding to an existing debt management burden.

Research from the financial services firm found that UK consumers look set to spend an average of around £50 more over the Christmas period this year than was the case in 2006.

Furthermore, the recent study concluded that British men are likely to spend close to £60 more on festive gifts and goods than their female counterparts.

“Wise men and women should be looking around for ways to make the most of their Christmas spending,” said Tom Allder, vice president of UK lending for American Express.

A total of £53 billion is expected to be spent by British consumers during the run up to Christmas this year, according to the UK’s payment association Apacs.

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