Past Articles for October, 2008

Those struggling during the current credit crunch have been advised to implement a budget plan by one finance charity.

The Consumer Credit Counselling Service (CCCS) - which provides information to those in financial difficulty - has urged people to take this option, rather than selling items to reduce their debt or increase disposable income.

“By cutting out luxuries … your margin of surplus should increase and allow you to meet your priority obligations such as rent, mortgage payments, utility bills and food,” spokesperson for the CCCS Tom Howard explained.

Mr Howard went on to say that those concerned about their financial situation may wish to organise a meeting with a debt adviser to help create a money management plan.

Such advice may be useful for those struggling with credit card debt, or facing bankruptcy.

Recent research carried out for MoneyExpert.com revealed 56 per cent of Great Britain’s population applied for financial products over the last six months, 13 per cent of which were rejected.

By Tom Musk

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Small businesses are struggling in the current economic climate, with one in ten unable to afford to continue operating, research from insurance group RSA has revealed.

According to the data, 11 per cent of small and medium-sized businesses (SMEs) in the UK are unable to continue running, while 56 per cent have had to increase the price of their products or services due to rising outgoings.

“Increasing costs, a decline in consumer confidence and a lack of credit all add to the difficulties SMEs are facing,” small business director at RSA Mark Skinner explained.

Owners of SMEs may wish to discuss a debt management plan with their bank, with Mr Skinner noting that owners can “talk to their insurance brokers for advice on cover options and risk improvements that can help save them money”.

The British Bankers’ Association recently announced plans to help prevent SMEs from bankruptcy, while informing MPs of the action its members plan to take over the issue.

By Tom Musk

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Nationwide has announced a new partnership with the Citizens Advice, which will result in 1,300 volunteer finance advisors being trained during the next three years.

The building society is to invest £3 million in the scheme, which will enable the staff to provide advice on financial issues such as bankruptcy and debt to local people through the use of community centres and groups across the UK.

According to the charity, the scheme has been established to help consumers understand the wide range of financial products on offer, in order to prevent them from falling into financial difficulties.

“Debt problems continue to be the number one issue seen in [the] bureaux,” chief executive of Citizens Advice David Harker explained.

“This is a unique and extremely ambitious project which delivers on our commitment to do more to help people avoid getting into financial crisis,” he added.

Property expert Aaron Turner has stated the country’s middle classes are at increasing risk of having their homes repossessed due to the fact that they are struggling to meet mortgage repayments

By Tom Musk

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Mortgage borrowers looking to reduce their debt have been urged to resist the temptation to switch to an interest-only package by a price comparison website.

Moneysupermarket.com has advised those considering of making the move - possibly in an effort to avoid bankruptcy - to do so as a “last resort”, as it will result in the cost of the mortgage increasing “dramatically” over the long-term.

Head of mortgages at moneysupermarket.com Louise Cuming acknowleged that many people may see interest-only mortgages as a way of making “some extra cash” available.

“Unless you really can’t afford to continue making repayments at the current level it could be a very expensive mistake,” she stated, adding that switching in order to fund their current spending habits should not be considered as an option.

The government recently announced the launch of an £11.5 million scheme to educate young people about the importance of managing their money, both now and later in life.

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Alliance & Leicester has announced a reduction in the interest rate on a number of its mortgage packages.

According to the firm, the new range of fixed-rate finance options will see reductions of between 0.2 per cent and 0.3 per cent, which could attract homeowners seeking a more effective debt management strategy for their property.

Included in the new products are a two, three and five-year fixed-rate loans, with interest rates of 5.79, 5.94 and 6.59 per cent respectively.

Head of mortgage products at Alliance & Leicester Richard Taylor described the offerings as “great news for people looking for a new deal”.

“These new mortgage products offer customers a number of options to choose from, including deals which benefit from no fees,” he added.

Earlier this month both Natwest and the Royal Bank of Scotland reduced the interest on their fixed-rate mortgages, lowering them 0.35 per cent to 0.60 per cent.

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Repossession levels increased during the second quarter of 2008, new figures from the Financial Services Authority have revealed.

According to the new data, instances of homes being repossessed - which may have occurred due to owners falling into debt or becoming bankrupt - increased by 71 per cent during the period, resulting in over 11,000 people losing their homes.

The same period last year saw 6,746 people have their property repossessed due to failure to meet mortgage payments.

And 312,000 people are now in mortgage arrears, the report revealed, a 16 per cent increase on figures from the second quarter of 2007.

The Homeowners Advice Centre has urged property owners struggling to meet their mortgage repayments to talk to their lender “as soon as possible”.

Advisor for the body Al Elliot suggested that people in such as position may wish to consider switching to interest-only payments until they are able to repay the full amount.

By Tom Musk

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Increasing numbers of consumers are seeking independent financial advice (IFA) during the current economic downturn, research has revealed.

Data from Unbiased.co.uk has shown over 125,000 people sought advice on various financial topics over the last three months, with 29 per cent requesting help regarding planning for retirement and 23 per cent seeking assistance over their investments and savings.

Personal protection, which may include advice on becoming debt free, was seen as the biggest growth area, with 18 per cent more people seeking advice on this issue when compared to figures from the fourth quarter of 2007.

Chief executive of Unbiased.co.uk David Elms explained that customers are becoming increasingly worried during the credit crunch.

“As fears of recession loom, consumers need expert advice more than ever, and whole of market IFAs are the best-positioned to serve these needs,” he explained.

Debt among young people is a contributing factor towards society as a whole not contributing enough to savings, insurance expert Al Elliot has claimed.

By Tom Musk

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Property repossessions are set to increase before the end of 2008 due to many owners defaulting on their monthly repayments, one property expert has predicted.

Aaron Turner of look4aproperty.com has stated the country’s middle classes will suffer as a result, especially those who rely on self-certification mortgages usually issued to the self-employed.

“These mortgages - known as Alt A - are one up from subprime, the riskiest category,” Mr Turner explained, adding that because nearly three million loans in the UK are used for such mortgages, “professional people” will begin to feel the threat of repossession.

And those worried about such action occurring may wish to seek debt advice from their bank or a financial advisory service.

Mr Turner’s views are shared by Al Elliot, advisor for the Homeowners Advice Centre, who recently stated that repossessions will increase in the coming months if lenders do not put their customers’ needs ahead of the desire for profit and pass on the recent interest rate cuts.

By Tom Musk

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Applying for loans to ease debt issues during the current financial crisis is a “risky strategy” according to the Consumer Credit Counselling Service (CCCS).

Tom Howard, spokesperson for the body, stated that loans should not be relied upon as there is no guarantee lenders will accept applications and people looking for a debt management strategy should only consider a loan if they are certain they can keep up with repayments.

However, Mr Howard also remarked that many people are responding to the credit crunch in the right way so as to avoid getting into debt.

“[They are] being thrifty, recognising overspending and cutting back on any past excesses and unnecessary luxuries,” he noted, adding that the CCCS advises consumers to “live within your means whenever possible”.

Recent research carried out by YouGov on behalf of MoneyExpert.com revealed lenders have rejected almost five million applications for new credit cards or personal loans over the past six months.

By Tom Musk

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Homeowners who are struggling to make their mortgage repayments have been urged to contact their lender over the issue as soon as possible by the Homeowners Advice Centre.

Advisor for the body Al Elliot noted that, in order to reduce the risk of repossession, homeowners who cannot meet their payments need to talk to their bank or other lender “sooner rather than later” about getting mortgage debt advice.

“[Talk] about swapping to interest-only payments as most lenders will refuse to do this if you are in arrears,” he advised.

And he also urged those who do move to interest-only payments to switch back as soon as their financial situation allows, otherwise the homeowner will become liable for the full mortgage balance once the loan period expires.

Research conducted for Cheltenham & Gloucester in September revealed 42 per cent of homeowners worry about the lack of mortgage options available to them

By Tom Musk

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