Abacus Daily Debt News

New plans set out in the government’s "Better Deal for Consumers" white paper have been commended on a number of fronts by one expert.

Features of the initiative include increased regulation on store credit cards and prohibiting unsolicited credit card cheques.

Head of loans and debt at comparison site moneysupermarket.com Tim Moss identified a few flaws but said that overall the proposals were welcome.

He said: "Plans to make the whole lending process more transparent are to be welcomed, even if it is a case of shutting the stable door after the horse has bolted."

A number of people that are currently experiencing financial difficulty had mostly taken out loans some time ago, however future borrowers could benefit, Mr Moss added.

Plans to address the issue of loan sharks may not work, he remarked, but on the whole it is important that the government is addressing problems for those who can not obtain credit through the traditional channels.

By Francis Finch

People should not put off leaving money aside for their retirement as they risk financial struggles when they are older, one expert has suggested.

Senior partner at consultancy firm Fostor Denovo Ian Bird said that leaving it too late may mean employees need to continue working for longer than they wish.

He remarked: "There are an awful lot of people who aren’t fit enough to work later in life so you could find that you can’t work and can’t retire."

Those who rent properties may also discover they are unable to support themselves through equity release, Mr Bird added.

State pensions are unlikely to support the growing number of people reaching retirement age, he commented, with some people required to continue working into their early 70s in the future.

Earlier this month, the firm released a report showing that over one-quarter (28 per cent) of individuals in the 25 to 44 age bracket have not put any financial planning in place for when they retire.

By Francis Finch

People in the UK prioritise a comfortable lifestyle over saving for the future, new research has found.

Insurance, pensions and investment group LV= found that the number one financial concern of the average person was ensuring they had enough cash to fund day-to-day living.

Group executive for the organisation Mike Rogers suggested that individuals should consider debt management to ensure their lifestyle does not eat into savings or insurance payments.

He said: "Everyone can take some financial steps, however small, towards protecting the things they love most in life. For example, insuring the breadwinners in the family for loss of income."

Despite the results, there was a disparity between what many people believed important and the action taken.

For example, although home security came in sixth in the nation’s priorities, 70 per cent of homeowners had contents insurance.

This follows recent suggestions from David Elms, chief executive of comparison site Unbiased.co.uk, that the economic recovery could be causing people to take on more debt as optimism about the downturn increases.

By Francis Finch

Financial planning is the best way to avoid debt as you get older, one specialist has claimed.

Chief executive of savings organisation the Children’s Mutual David White said that people should not be taking on more debt in their later years as it will make it very difficult for them in retirement.

He said: "The only way we can turn this whole situation around is … to have people arriving at adulthood with financial capabilities."

This way young adults will be prepared for the financial burden of studying, obtaining a mortgage and pension schemes, Mr White added.

Current problems with pensions have been made worse by parents having to bail out their 18 to 30-year-old children, he remarked.

In recent news, Saga Savings conducted research revealing that grandparents continued to help members of their family with money problems despite the recession.

According to the figures, 70 per cent of those aged over 50 had given financial support to a relative in the last five years.

By Francis Finch

Britain’s elderly are still storing money to support their families despite the recession, new research has revealed.

Saga conducted a survey of 19,000 over-50s, which found that 13 per cent in this age bracket currently put aside money for their grandchildren.

Chief executive of the financial services organisation Andrew Goodsell said it was comforting that people continued to support younger family members in difficult economic conditions.

He remarked: "Despite the current climate our research proves that we are still a financially generous nation when saving for those we love."

The figures showed that 56 per cent of grandparents were saving money to fund university or career development prospects for their grandchildren.

Furthermore, 70 per cent of those older than 50 provided additional financial support to their families over the last five years on top of money saved for them.

This follows a recent study by Aviva that revealed 11 per cent of adults in the UK are willing to give up their life savings to fund the retirement of an elderly relative.

By Francis Finch

Debt in the UK could have less of an impact on the average person due to the government’s ability to borrow at a lower rate, one expert has suggested.

Gemma Petlow, a senior researcher at the Institute for Fiscal Studies (IFS), commented that while the amount people owe is expected to go up it may not have a significant effect on servicing the national debt-to-GDP (gross domestic product) ratios.

She said: "In some sense the additional burden is being mitigated by the fact that the government can borrow relatively cheaply."

Debt is expected to reach "historically high levels" in the next couple of years, but having started at a point where the share of debt to GDP was low it could give the UK some leeway in the short term, she added.

This follows Budget forecasts by Alastair Darling on April 22nd that net public sector borrowing will reach £175 billion in 2009 and represent 11.9 per cent of GDP the following year.

By Francis Finch

A ten percentage points difference between loan-to-value (LTV) mortgages of 75 per cent and 85 per cent may mean customers have to pay a premium on top of the extra loan amount, according to one comparison site.

PR and communications manager Andrew Hagger of Moneynet noted that on a five-year fixed-rate mortgage spread over 25 years where the house is worth £200,000 the extra amount customers would need to borrow to get an 85 per cent LTV deal would be substantial.

Over the first five years buyers must pay an additional £236 a month to receive the £20,000 difference between a 75 per cent loan and an 85 per cent deal in this instance.

Using Nationwide Building Society as an example, he stated that £6,431 of this was the result of interest loading on the higher amount.

This could lead to mortgage owners being charged with loaded interest rates despite making payments on time due to their property value decreasing.

Earlier this month, head of mortgages at comparison site moneysupermarket.com Louise Cuming stated that recent activity in the level of rates provided by lenders was unlikely to help consumers.

By Francis Finch

Debt among the under-24 age range is increasingly accounted for by women, new research has shown.

Accountancy firm Wilkins Kennedy announced that females currently make up 55 per cent of those in debt in this age bracket. This represents a 6.7 percentage points rise on five years ago.

Director at the company Anthony Cork remarked this could be due to women being under increasing pressure to prove their independence.

He said: "Young men don’t seem to feel the social pressure to either spend conspicuously or to set up on their own to the extent that women do."

This has led to a number of ladies taking out mortgages that they cannot afford with their salaries, he added.

Mr Cork also suggested another contributing factor could be the influence of celebrities such as Victoria Beckham and Paris Hilton whose prolific spending habits may be emulated by younger women.

This follows recent news that young people might be encouraged to rent instead of buy properties due to debts incurred as a student.

By Francis Finch

Mortgage providers may be hiking the rates on fixed-rate deals to curb the amount they are lending, one expert has suggested.

Ray Boulger, senior technical manager at mortgage adviser John Charcol, said that a lack of funds could be influencing the behaviour of suppliers.

"The other factor that is influencing lender’s pricing policies is how much they want to lend and the increase [in interest rate on mortgages]," he said.

Raising prices is an obvious way of controlling the amount that is borrowed, Mr Charcol added.

He also remarked that consumers should be prepared to wait for rates to settle down before deciding on a fixed-rate agreement.

Activity in the mortgage borrowing market has continued to decline, according to the Bank of England’s June Trends in Lending report published on June 18th. This was likely due to a lowering in the levels of remortgaging activity.

Increases in the number of fixed-rate deals means that the overall rate on new mortgage lending has stayed around four per cent since the start of 2009.

By Francis Finch

The number of home repossessions is expected to peak at 25,000 to 30,000 a month in 2011, according to one expert.

Ian Shepherdson, an independent economist speaking at the Chartered Institute of Housing Conference and Exhibition, said that while repossessions had actually come down in recent months, unemployment was likely to drive levels up again.

He remarked: "I hope and I think that they won’t go as high as they did in the early 90s … but they will go substantially higher and we are going to have a big repossession wave."

Prices in the housing market are still overvalued and recent results showing increases in the average cost of properties are probably anomalies in an obvious negative trend, he added.

Mortgage providers repossessed 12,800 houses in the first three months of 2009, according to statistics released by the Council of Mortgage Lenders (CML) in May.

This is over 4,000 more than the CML recorded in the first quarter of the previous year.

By Francis Finch