Past Articles for July, 2008

New research has found almost 5.3 million people – eight per cent of consumers – are spending more than they earn, potentially heading towards debt management problems, arrears and bankruptcy.

The study released by Legal & General found 57 per cent of people are now earning more than they spend on bills and debts, a decrease of two per cent since the last review.

Across the UK, respondents were worse off than in 2005, the findings show. Those living in the north and in the east Midlands are currently faring the worst, with 17 per cent of people finding they have funds left over after paying everyday expenses.

Legal and General’s Director of Wealth Customer Marketing Jonathan Latham said: “We would urge customers to review their finances and carefully look at their spending and savings habits. With some careful budgeting it is possible to keep on saving, even a small amount.”

He added people who are experiencing difficulties should seek professional debt advice.

According to the survey, women are adapting better to the credit crunch than men.

By Morwenna Kearns

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An expert has suggested the credit crunch has pushed divorce rates down as people fear facing mortgage arrears and debt management problems alone.

Consilium Financial Planning said while remortgaging was a financial option for couples going through a divorce prior to the UK’s economic slowdown, tighter regulations on mortgage deals now mean “this avenue leads to a cul-de-sac”.

Managing director Kevin Morgan said divorces may decrease “simply because invariably the ‘equity’ in the relationship is property and if it can’t be sold, it’s substantially more difficult to release funds”.

According to the Office for National Statistics, England and Wales have seen a seven per cent decline in divorce rates since 2005 and a decrease for two consecutive years. The rate is at its lowest since 1984.

Records for 2006 show divorce rates for men and women under 40 have fallen the most, with decreases of ten and nine per cent respectively.

By Morwenna Kearns

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According to new research, people over 50 are helping the younger generations get through the credit crunch by providing financial help.

Figures released from Mintel indicate ten per cent of baby boomers have adult children living at home and seven per cent do not receive financial contributions from their stay-at-home children.

Furthermore, nearly a quarter (23 per cent) of parents over 50 regularly give financial support to their adult offspring.

James McCoy, consumer research manager at the group, said: “Children are hanging around for longer in their parents’ home, so that many mums and dads are providing financial support for longer than they may have hoped.”

Additionally, 23 per cent of grandparents are providing care for their grandchildren and a total of eleven per cent of those over 50 help with DIY and cleaning, rising to 17 per cent of those aged 55 to 65.

Mintel said the difficulties in getting on the property ladder have contributed to the trend. Young people may also use the situation to remain debt free.

By Morwenna Kearns

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The first half of 2008 saw a 47 per cent rise in cases of application fraud where new finance was approved, it has been reported.

Cifas, the UK’s fraud prevention service, said the identities of innocent people may have been used to obtain money illegally. Equifax, releasing the figures, has warned that those targeted by fraudsters may have suffered damage to their credit status.

Neil Munroe, external affairs director of Equifax said: “More often than not you don’t know you have been a victim until you are rejected for credit or you receive a letter from a debt collector.”

He said it was “vital” to keep a professional eye on credit information to ensure there have been no changes.

A poor credit rating may restrict accessibility to loans and credit cards which may ultimately lead to debt if borrowing is essential to future plans.

Mr Munroe recommended his company’s low-cost monitoring service to keep abreast of personal credit information.

By Morwenna Kearns

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The government’s scheme to help people get onto the property ladder may benefit some first-time buyers, an expert has said.

The Rent to Home Buy scheme announced recently by the government would allow certain households with an income of less than £60,000 a year to rent a property for 80 per cent or less of the market rate for two to three years, allowing tenants to save for a deposit for their own home.

People concerned about unaffordable rent resulting in debt management issues may be interested in the proposals.

While full details have not been released, the chief executive of First Rung, an informational website for first-time buyers, said the scheme “doesn’t appear to be a sting in [the] tail”.

However, Paul Holmes went on to say not everyone would qualify for the scheme.

“Whilst some priced out first-time buyers may feel encouraged by the scheme, there’s a vast amount that will still be priced out and this concept will not be applicable to them,” he commented.

This month prime minister Gordon Brown pledged three million new homes would be built by 2020.

By Morwenna Kearns

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British people are avoiding running up credit card debt by cutting down on holidays, a travel website has said.

While main holidays are still popular, shorter city breaks are losing their appeal during a time of increased instances of bankruptcy and debt, according to comments from TravelSupermarket.com.

Spokesperson Bob Atkinson said flight prices have gone up due to climbing fuel costs, resulting in a decline in short city holidays.

Mr Atkinson said people are still keen to take one main holiday a year, however, as a means of escaping financial stress.

“[People] work hard and they want to get away and relax. With the credit crunch and all the news about prices going up et cetera, there’s also an element of wanting to get away from that,” he said.

He added people may cut down on things they consider “luxuries” if it means saving money for a holiday.

According to research from Kayak.co.uk, 98 per cent of people polled said they would be prepared to cut out luxuries to pay for travelling.

By Morwenna Kearns

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New research has shown the average student heading to university this September will have nearly £1,500 of belongings, leading an insurer to recommend freshers have sufficient cover to remain debt free.

The research, carried out by ICM and released by esure.com, also found nine per cent of students would be taking over £3,000 worth of gadgets and accessories to university.

Among the most popular high-value items include a mobile phone or PDA – owned by 81 per cent of students – and a laptop or desktop computer, owned by 74 per cent.

If valuable possessions such as these were stolen, a student loan would take a hit to replace them, Mike Pickard, head of risk and underwriting at the insurer said.

“It is very important that parents make sure they have sufficient contents cover in place to protect their child’s belongings - either by checking whether it’s included in their current policy or taking out separate insurance,” he warned.

The insurance company said sporting expensive watches and jewellery may attract thieves.

According to the study, students in the south-east have the highest-value attire and possessions, worth £1,634, while those in Scotland have the lowest (£831).

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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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The cost of living increases are a “massive contributory factor” to the rising numbers of people moving abroad for their retirement, the director of Shelter Offshore has said.

Rhiannon Davies said day-to-day living costs and inflation levels were “spiralling” and working people are finding it difficult to cope, meaning pensioners would be finding the situation even more wearing.

“The large and truly significant rise in the numbers of retirees moving abroad has probably got more to do with fiscal fundamentals than anything else at all,” she said, adding places like Cyprus are cheaper than home for British retirees.

Ms Davies’s comments come after a report from the Joseph Rowntree Foundation found a state pension supplies around three-quarters of what it considered a sufficient income for a retired couple.

The shortfall may result in debt management problems for older people who may be urged to seek debt advice.

The foundation’s report, released earlier this month, said a single person required £13,400 per year to maintain a basic but acceptable standard of living.

By Morwenna Kearns

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Homeowners worried about facing debt management problems due to negative equity may be interested in new research indicating house prices may increase 25 per cent by 2013.

According to the National Housing Federation’s (NHF) Home Truths 2008 report the property market will regain its health in the next 18 months and average prices will begin to rise again.

First-time buyers may be negatively affected if the estimates are true, however, as mortgages will be more expensive.

The rise is due to a greater demand for new homes caused by higher numbers of people getting divorced, marrying later in life and living longer, said David Orr, chief executive of the NHF.

Quoted on First Rung, Mr Orr said the government must work with housing associations to create affordable housing.

“It’s clear that even with house prices falling, affordability hasn’t improved one iota. In recent months, we have seen mortgage arrears increase, the number of repossessions grow and new mortgages become more difficult to acquire,” he said.

The report found the highest prices in 2013 will be in London, where the average will hit £408,200.

By Morwenna Kearns

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