Last week, energy supplier Scottish Power announced that it would be increasing gas prices by 19% and electricity tariffs by 10%, which would add £175 a year to the average bill. Analysts uniformly predicted that Scottish Power’s rivals would quickly follow suit, leaving customers increasingly stretched in an already difficult financial climate punctuated by spending cuts and tax increases. If this does happen, economists are warning inflation could be pushed higher as a result.
With anxiety about the intentions of the other 5 major energy companies growing, the Government’s energy secretary Chris Huhne has suggested that consumers shouldn’t take price hikes “lying down”, but should hunt for cheaper options. It also seems likely that ministers are looking into the possibility of forcing companies to be transparent with all customers about whether they’re on the cheapest available tariff.
Reports suggest that 1 or more of the other big energy companies is on the verge of announcing a substantial price increase, with the others likely to follow suit in the coming weeks. This comes during a period that has been described by Sir Mervyn King (Governor of the Bank of England) as the most prolonged decline in standards of living since the 1920s.
In order to give smaller companies a better chance of competing in the energy market, the Government is introducing measures to reduce costs and cut red tape. The aim is to make the market more competitive, which should, in theory, lead to better deals for consumers. It’s also expected that energy regulator Ofgem will introduce a range of measures designed to mitigate the domination of the market by 6 big players (Scottish Power, nPower, EDF, Scottish and Southern, E.ON and British Gas).
Scottish Power has attributed its price increases to spiralling wholesale gas and oil prices, which have risen by around 30% in 2011 due to a combination of unrest in the Middle East, the weak dollar, and the demand from emerging markets.
However good you think you are with money, there are several easy mistakes that people often make, resulting in money being wasted. We’ve compiled a list of just some of the ways that people (unknowingly) waste money every day. Hopefully next time you reach for your wallet, you’ll think twice about fluttering away your hard-earned cash.
1 – Grocery shopping on an empty stomach: We’ve all done it at some point, filling the shopping trolley with lots of things that we don’t need, just because we’re hungry at that time. Have a meal before you go and concentrate on buying only the essentials.
2 – Not bothering to find the best deal: Unfortunately, not everyone is blessed with lots of spare time to locate the best deals…but that’s no excuse. Unless it’s absolutely vital that you buy the item there and then, bide your time. Check online and find where the best deals are. The savings will soon add up.
3 – Buying something just because it’s on sale: A good rule of thumb; in most cases, if you wouldn’t have considered buying it at full price, don’t buy it just because it’s discounted!
4 – Paying a dubious bill or added charge without questioning it: Most people keep mental tabs of how much they expect to pay on bills, however vague these might be. If you open a bill and there’s an unexpected charge or the amount seems higher than usual, the chances are that something’s wrong. Make a call and find out exactly what you’re paying for before you make any payment.
5 – Calling 0845 from a mobile: Sometimes, there’s no avoiding it. 0845 numbers always crop up and many of us only use mobile phones. 0845 numbers aren’t included in mobile contract minutes and can cost a small fortune if you’re left on hold. Most companies have numbers to call from overseas. These will quite often be local numbers and there’s nothing stopping you from using that number and using your monthly minutes.
Following up on an earlier post about the Olympic Games ticket farce, it has now emerged that many ticket holders could be paying off mammoth Olympic debts for up to 20 years from now. It was revealed that the average spend on tickets was a staggering £1,250 and a good proportion of those ticket sales were made on credit cards.
Olympic Games tickets have already caused a quite a stir in the headlines over the past few months and have been subject to a great deal of criticism because of their hefty price tags and the questionable fairness of allocation. However, it has come to light that many ticket holders will bear the brunt of the event long after the Olympic flame leaves the city of London.
According to uSwitch.com, the average ticket spend of £1,250 could more than double, if paid for on a credit card and only minimum monthly repayments are met. According to statistics, by the time the opening ceremony takes place, consumers will have racked up over £300 in interest. It is estimated that these debts will take in excess of 20 years to pay off and will end up costing the consumer in excess of £1,500 in interest.
The most expensive tickets are for the closing ceremony and can cost anything up to £2,012. Add this amount to the same credit card and the consumer could expect to incur costs of around £500 each year in interest alone on the average credit card. And this isn’t just the media’s usual scaremongering tactics; it’s actually happening.
Stephen Hunt, an insolvency practitioner (ironically) from Hertfordshire, managed to secure £11,000 worth of Olympic tickets after bidding for £36,000 worth. Since learning of his successful ticket application, Mr. Hunt has had to drastically increase his credit limit, landing him firmly in the red. He claims that he is willing to ‘scrimp and save’ in order to witness the sporting event.
To add insult to injury, ticket holders won’t actually find out which events they have tickets for until the end of June.
The Public Accounts Committee (PAC) has published a new report which forecasts that student debt will treble over the next four years. Due to the number of universities that have decided to charge the maximum possible tuition fees, total student debt could rise from its current level of £24billion to £70billion by 2015-16.
Contrary to predictions made by the Government, the majority of universities will start charging the maximum fee of £9,000 a year from September.
Students could end up owing an average of £50,000, and this could ruin many people’s chances of getting a mortgage or making pension contributions, according to the PAC. This has led shadow ministers and student representatives to voice their dismay at what could be unmanageable levels of debt for many. The PAC report warns that students will be under increased financial pressure, and that universities themselves could be “at serious financial risk” in “the new funding environment.”
The Committee also estimated that 30% of the student debt that has been amassed by 2015-16 will never be repaid to the publicly-funded Student Loans Company. That means British taxpayers will have to foot the bill for a £21billion shortfall. In other European countries, student loans are granted by private sector banks, repayment starts within 6 months, and there is a 10 year deadline for repayment.
The repayment schedules offered to UK students are generous compared with Europe, and compared with other forms of personal debt available here. Graduates don’t have to start paying off their student loans until they start earning £21,000 or more, and if they don’t repay it fully within 30 years, the debt is written off. The high default rate that has been predicted is likely to be impacted heavily by foreign students and women taking career breaks, according to the PAC.
As with other loans, legal action can be taken if repayments aren’t made when they are due. The SLC can pursue borrowers through the civil courts, but if defaults occur on the scale envisaged in the PAC report, they won’t have any chance of recovering all the money owed to them. Ultimately, that’s going to mean more cuts or higher taxes in the future.
A debt management plan (DMP) is an informal arrangement that isn’t recorded on your credit file in itself. However, if you are considering a DMP, it is likely that you have already encountered problems making repayments on any personal debts you may have. If that’s the case, there will already have been an impact on your credit score.
Whether or not you have signed up to a DMP, if you fail to make the monthly repayments that you agreed with a lender in full, then your credit score will suffer.
If your account is in arrears, a lender can issue a Default Notice, which stays on your credit file for 6 years and will normally have an adverse impact on your credit score.
Ideally, therefore, you should still be making at least the minimum monthly repayments you originally agreed to, even if you are making those payments through a DMP.
As a debt management company, we can negotiate with lenders on your behalf in order to get interest and penalty charges frozen. Ultimately, that means you should be able to get out of debt quicker, and that you will be able to improve your credit score more quickly than you would otherwise have been able to.
At the end of April 2011, personal debt in the UK amounted to £1,452 billion – the current sum total of personal debt is almost equal to the country’s entire GDP for 2010.
The average household debt stands at £55,854 (or £8,121 if mortgages are excluded) – a property is repossessed every 14 minutes in the UK and landlord possession orders are made 265 times a day. £179 million is paid in interest every 24 hours, and an individual is declared bankrupt or insolvent every 4.36 minutes.
The total amount of lending in April 2011 increased by £1.2 billion (there was a £700 million increase in secured lending and a £500 million increase in consumer credit lending). At the end of April, total secured lending had reached £1,241 billion and total consumer credit stood at £211 billion.
In the past year, £9.5 billion of loans were written off by UK banks and building societies, which is equivalent to £20.71 million every day, and the Citizens Advice Bureau deals with nearly 10,000 people struggling with debt problems daily.
Redundancy is fuelling increasing levels of debt, with 1,384 people made redundant every day and 850,000 unemployed for 12 months or more.
For many people, a credit rating can be the bane of their lives. But what is it, who decides it and what implications can this elusive score have on your life?
Credit rating is the score given to an individual that gives an indication to lenders as to how likely the borrower will be able to keep up with repayments. Obviously, this is important information to the lender, but this is by no means the ultimate be all and end all when it comes to approaching a lender.
Credit ratings are used when companies assess whether someone is eligible for taking out a loan, mortgage, store card, credit card, mobile phone contract, car insurance etc. The list is endless. Most of us will have had our credit ratings checked by a third party at some point, but perhaps were unaware.
IN the UK, there are three main bodies that hold information about our credit history. They are Experian, Equifax and Call Credit. Each of these credit agencies gather various pieces of important information to sell on to lenders in order for them to predict our financial behaviour when lending. So, what information do these agencies have about us?
Credit reference agencies take information largely from past credit accounts. This gives them vital information such as name, age and address. They also have access to information about when your credit report has been looked into by potential lenders. Although they do not hold information on whether the application was successful, it could be quite obvious that you have been denied if there are a number of checks over a short period of time. Each credit report check stays on the report for up to two years.
Details of your current account provider will be included on your file but information is limited. They can provide relevant information, such as if you’ve entered into an unauthorised overdraft. In addition, public record information can be applied to your report for up to six years, including bankruptcy, county court judgements and property repossession.
There are countless myths surrounding credit ratings such as the existence of a ‘credit black list’. In reality, each credit reference agency scores people differently and this score is just one factor that is considered when ultimately deciding whether you should be eligible for borrowing.
If you do find yourself being refused credit, there are ways to remedy the situation, but it will take time. The best place to start is to check your credit report with the various agencies regularly, perhaps once a year, so you know exactly what position you’re in. Go through your details with a fine-toothed comb and weed out any mistakes that could be detrimental to your report. Make sure you are on the electoral register. If you fail to sign up, you will find it extremely hard to get credit anywhere.
If you have no credit history you should start now. Find a good deal on a credit card and use it wisely. Make payments on time and always stay within your credit limit. This is also a good way to boost a poor credit rating, but the most obvious and effective method by far is to reduce your debts.
