by News Team on January 20th, 2011
The first priority for anyone with a disposable income and the chance to use it to improve their financial circumstances should be paying off debt, an expert has said.
Director of financial charity Credit Action Richard Talbot said the current base rate means the benefits of reducing what people owe are greater than those of saving money up, as the latter option attracts very little interest at the moment.
He stated: “I would have thought with the low interest rates on savings and the high interest rates on debt that, if people can do one or the other, they would try and pay down debt.”
Mr Talbot emphasised that this does not mean people should not have some savings, stating that there is a need to strike a “balance” and ideally people should have some money put aside for a rainy day.
One risk of not doing this is that a higher level of debt can arise if people have to borrow to pay for emergency spending – such as repairing an electrical appliance – when savings could have covered the cost.
But once an emergency fund is in place the priority must be “to pay off the highest interest rate debt first”, Mr Talbot concluded.
Some may find it beneficial to pay off more debt before interest rates go up, as this would mean they do not find payments rising as much as they would and can concentrate more on savings later when returns are higher.
A Lloyds TSB survey at the start of the year found sorting out finances – including saving and borrowing levels – was the most popular new year’s resolution after losing weight and getting fit.
By James Francis
Posted in Personal Debt | No Comments »
by News Team on January 19th, 2011
The number of repossession cases in the UK could rise as the jobless total increases.
A second successive quarterly rise in the number of people out of work was recorded in the three months to November 2010, the Office for National Statistics revealed today (January 19th).
This showed a 0.2 per cent rise in the proportion of people of working age out of employment to 7.9 per cent, with the total figure growing to hit the 2.5 million mark.
At the same time, the number of people in work was 0.3 per cent down, to 29.089 million, or 70.4 per cent of the workforce.
While such figures may be relatively small, any upward trend will mean more people facing potential economic hardships and greater difficulties paying bills, which for some could include mortgage payments.
This could increase the threat of repossession for some people, while others could need help do deal with the possibility of bankruptcy or a county court judgement.
And the employment data also showed average weekly earnings only rose by 2.1 per cent in the year to April 2010, less than the Consumer Prices Index (CPI) rate of inflation.
With CPI now at 3.7 per cent, it may be the case that earnings have continued to lag behind prices, making it increasingly hard those with debt to pay it back while also meeting everyday living costs.
Responding to the jobs news, employment minister Chris Grayling said the government is working to tackle the situation by “rebalancing the economy and supporting private sector jobs growth”.
By Joe White
Posted in Houses and Mortgages | No Comments »
by News Team on January 19th, 2011
The rate of inflation in the UK is going to go on rising, it has been predicted.
Following news yesterday (January 18th) that the consumer prices index (CPI) figure was 3.7 per cent last month – up 0.4 per cent on November – Moneysupermarket.com predicted the trend will continue to be an upward one in the months ahead, something that could push the Bank of England’s Monetary Policy Committee (MPC) into raising the base rate.
Noting the CPI rate has been substantially above target for over a year, head of banking at the site Kevin Mountford said: “With increases in VAT and soaring petrol and commodity prices throughout the world, it is likely that inflation will increase further before it falls.”
He added: “And this can only lead to pressure on the MPC to increase the Base Rate in order to tackle the problem.”
While rising prices may themselves make it harder for those in debt to pay off what they owe while dealing with rising bills, a base rate hike could add more trouble for people with mortgages as well.
It could mean some who have managed to get by and stay in their homes in the recent past may face the prospect of repossession as their home loan repayments climb.
VAT is one factor the MPC may take into account when it considers its policy, as this is a one-off addition that will drop out of the reckoning a year from now.
However, the Trades Union Congress has argued the rise in living costs faced by many people means this would be a good time for chancellor George Osborne to reconsider the VAT rise.
By Amy White
Posted in Houses and Mortgages | No Comments »
by News Team on January 18th, 2011
A group of MPs has signed a House of Commons motion calling for caps to be placed on the level of interest lenders can charge, amid concerns that individuals could face very severe debt problems due to so-called legal loan sharks.
It was sponsored jointly by Labour MP for Walthamstow Stella Creasey and Swindon North Conservative member Justin Tomlinson, the Guardian reports.
Those who have signed it include former Labour leadership contender David Miliband.
Ms Creasey told the paper: “People who are shut out of mainstream credit are sitting ducks for these companies. There are so few of them dominating the market that there’s no proper competition.”
Attention has been focused on lenders such as Wonga, who charge over 2,600 per cent for a payday loan, although its television adverts do carry text stating these are short-term arrangements and not designed for long-term borrowing.
Ms Creasey recently joined in criticism of the decision by London mayor Boris Johnson to permit Wonga to sponsor the free public transport on offer in the capital on New Year’s Eve, a move Mr Johnson had defended as the company is a lawful one.
She said the firm had written to her opposing her support for legislation to stop such lending practices.
Mr Tomlinson has also been active in dealing with debt, joining with fellow Tory MP for neighbouring Swindon South Robert Buckland in organising a seminar last month to help advise people on where to get advice on debt management and dealing with financial problems.
By James Francis
Posted in Creditor Behaviour | 1 Comment »
by News Team on January 17th, 2011
A consumer failed to get her debt wiped out over a five-year period because she did not have an individual voluntary arrangement (IVA) in place, an expert has stated.
Writing for the Daily Express, Maisha Frost highlighted the problems faced by Elizabeth Bastow, who sought a debt management plan in 2002 when confronted with debts of over £18,000.
However, the plan was not a successful one and she was still left owing over £11,000 in 2007, with no prospect of being debt free until 2012.
And because the deal had been arranged before new regulations appeared to tighten up on the provision of such debt help, she was unable to seek recompense via the financial ombudsman.
Now such rules are in place, consumers may feel confident about the help they can get, but for Ms Bastow, the situation is still a severe one and Ms Frost noted the absence of an IVA was central to this.
Ms Frost said such a move could have frozen the interest and charges, with the debt clear by 2007.
Since the problems emerged, Ms Bastow has switched to ClearDebt, whose spokesperson Andrew Smith noted: “If an IVA had been do-able, by August 2007 we have calculated Ms Bastow would have paid £12,000 and the remaining debt written off.”
The use of IVAs has been tipped to rise in 2011 by Justine Modray of finance website Candid Money.
She recently suggested the effects of government spending cuts on employment will leave some people in a situation where they will need extra help and many will take this route.
By Joe White
Posted in IVAs | 1 Comment »
by News Team on January 17th, 2011
The Bank of England’s Monetary Policy Committee should avoid putting up interest rates in the next few months, despite the temptation to do so to curb inflation, it has been argued.
In its latest quarterly report, the Ernst and Young Item Club said the MPC could jeopardise the economic recovery with such a move by increasing the value of the pound.
Chief economic advisor to the Item Club Peter Spencer suggested the Consumer Prices Index (CPI) rate could leave the body “agonising” over whether or not to keep the 0.5 per cent base rate, which has been in place since March 2009.
Despite many upward influences on inflation creating such a “tense” situation, the MPC should “hold firm”, he stated.
Mr Spencer argued: “These are temporary pressures, domestic cost inflation remains low and CPI inflation will come back to heel in 2012 once the VAT increase falls out of the figures next January.”
A continued low rate of borrowing could help consumers avoid repossession by holding down the cost of mortgage repayments, while those trying to get debt free who own their homes may find lower housing costs make it easier to make cash available to reduce other borrowing.
Last week, the MPC revealed it was holding the base rate at 0.5 per cent for the 22nd month in a row.
In recent months the only member of the body to vote for a rise has been Andrew Sentance, who has consistently argued for a 0.25 per cent hike.
The minutes of the latest meeting will be published on January 26th, revealing whether Mr Sentance is still on his own in calling for a tighter monetary policy.
By Amy White
Posted in Houses and Mortgages | No Comments »
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