Financial information services firm Markit has released its monthly Household Finance Index, which shows that British households are seeing their finances decline more rapidly now than when the recession was at its peak.
Markit surveys over 2,000 households each month, gathering data on things like spending, savings, debt, job security, availability of and requirement for credit, and perceptions of inflation.
The latest report indicates that the spending power of UK households has fallen for 3 consecutive months, and is now at its lowest ebb since the first survey was undertaken in February 2009. Between July and August this year, nearly 40% of households saw their finances deteriorate. Less than 6% said their financial situation had improved.
Just 9% of respondents said they had been able to increase their savings, and 34% said their savings had dropped. 22% said their levels of debt had risen, compared with 17% who reported a reduction in the amount of money they owed. 24% believe their property has dropped in value, whilst 7% think their house is worth more now. In this climate, 50% of people are less willing to make a major purchase now than in the past.
Tim Moore, senior economist at Markit, said: “With a global economic slowdown and an escalating eurozone debt crisis lapping on the shores, it was unsurprising to see households’ appetite for major purchases reverting to its lowest since the start of the year.” He added that take-home pay had dropped more sharply in August than in any of the previous 9 months, and said the increasing cost of living had compounded the fall in disposable incomes.
If you are experiencing a deterioration in the state of your finances, don’t let things get out of control. Get debt advice from one of our specialists today.
New data published by the Council of Mortgage Lenders (CML) indicates that the number of home repossessions has fallen by 1%, from 9,100 in the first quarter of the year to 9,000 in the second quarter. However, some people in the industry have warned of an “arrears timebomb”, with disaster set to strike when rates rise in 2012.
Compared with the second quarter of 2010, the latest repossession figure represents a 7% fall. At this stage in 2010, there had been 19,500 repossessions, compared with 18,100 so far this year. The number of mortgages in arrears of 1.5% to 2.5% has increased, however.
Paul Smee, director general at CML, said that the stabilisation of mortgage repayment problems could be attributed to “stable employment and low interest rates.” He added that he felt there was no need to revise current forecasts in light of the current uncertainty in the global financial markets.
The Citizens Advice Bureau has reported that it has dealt with over 100,000 cases where people are in mortgage or secured loan arrears, and says that it has prevented 5,000 people from losing their homes in the past year. Gillian Guy, chief executive at the CAB, said: “With the cost of living going up daily and incomes lagging badly behind, mortgage lenders and the government must focus on helping people stay in their homes. Repossession is a terrifying prospect and should always be the last resort.”
If you do fall behind with your mortgage payments, you should always treat them as the top priority before paying back any other debts. Otherwise, you risk losing your home. Always contact your lender if you are expecting to miss a payment, rather than waiting for them to start threatening you with legal action. They may be willing to reduce your monthly payments in some circumstances.
Additionally, you should ensure you are receiving any benefits or tax credits to which you are entitled. The Government also operates a Mortgage Rescue scheme, through which you be able to sell your home but continue living there and paying rent. You can get more information on this from your local council.
If you are struggling to repay unsecured loans, credit cards or overdrafts, we can provide confidential debt advice.
In this economic climate, many of us are faced with debts, far greater than we’ve ever experienced. The total UK personal debt currently stands at around the £1.5bn mark. The average household debt is approximately £16,500 (excluding mortgages) and it is estimated that 346,000 loan accounts are in arrears. However, even with these grim figures, credit companies are still more than happy to offer credit to anyone, it would seem.
Most of us will recognise the situation all too well; you’re weighed down with the day’s shopping and just about to pay for your goods at the till. Just before you hand over the cash, the cashier offers you a discount on all of your purchases if you sign up for a store card. “It’ll only take a second”. How could you possibly resist such an offer?
However this offer may sound at the time, you should always be wary; unless you are extremely careful with your money, store cards can come back and sting you in the future. In the UK, store cards have an APR of anything up to a staggering 30%.
Many store cards offer an interest free period, usually between 30-55 days. In this time you should aim to clear your balance and reap the full benefit of the discount you made when signing up. If there is a balance on your card after this period, be prepared for the interest to stack up.
With credit being offered left, right and centre, it is easy for debt to spiral out of control. What is being sold as a ‘convenience’ could actually end up putting you firmly in the red.
If you do take a store card, or any other credit card for that matter, make it your priority to make payments on time to avoid substantial late payment charges. Also, refrain from making the minimum payments. Pay as much as you can each month to clear the balance as quickly as possible.
New research from the British Bankers’ Association (BBA) suggests that the amount of money people are saving is dropping due to increasing household bills.
In the first six months of 2011, personal deposits and savings at high street banks increased by £6.1 billion, compared with £15.9 billion during the same period in 2010.
The BBA said this may be linked to rising bills and escalating fuel costs – money that would normally have been set aside for savings is now being spent on essential items, they suggest.
David Dooks, statistics director at the BBA, said that “personal deposits are growing only slowly as some people may be using savings to pay higher household bills.
The situation is unlikely to improve, with recent announcements from three of the big six energy companies that they plan to increase their prices in the coming weeks. At the same time, low interest rates mean that saving money is a less attractive option than it may have been in the past.
The BBA also found that the number of mortgages approved by high street banks in June 2011 was 6% less than June 2011. Mr Dooks said that whilst banks are still lending money for house purchases, it is “self-evident” that the mortgage market is weak currently. He added that “some growth is coming from the buy-to-let sector,” however.
Whether you’re seeking out an organised debt management plan or you’re trying to resolve your debt problems alone, one of the most important things to do is to prioritise your debts.
If you have debts from multiple creditors, deciding which ones are the highest priority can be difficult.
Here are the highest priority debts you should look to clear as soon as possible.
Mortgage or Rent Arrears
The simple fact of the matter is that if you fail to pay your rent or mortgage, you could lose your home.
With mortgage arrears, you could even face legal action and the lender you take possession of your home.
With mortgage arrears, your landlord could evict you, leaving you without a home and still owing the money.
As soon as you find yourself in any difficulty meaning you cannot afford your mortgage or rent, you should contact your lender or landlord as soon as possible and explain the situation fully. Treat this as a high priority payment.
Tax, National Insurance and VAT
Failing to pay tax could lead to bankruptcy and potentially even criminal proceedings against you.
This is certainly a high priority debt.
Council Tax
Again, this is a debt that should be considered high priority, as failure to pay could result in legal action against you.
Hire Purchase Agreements on Essential Items
While hire purchase payments against non-essential items should be considered low priority, essential items that require a monthly payment should be high priority. Examples include a car that you use for getting to work. Any item where losing it will inhibit your ability to go to work or to live is an essential item.
Gas and Electricity
Gas and electricity companies have the right to cut the supply to your home if you fail to pay and as such this is again a high priority bill.
Of course you should pay your water bill as well – though water cannot be cut off and as such should be treated as a lower priority debt.
According to consumer research group, Markit, families are continuing to feel the pinch of the recession with consumer finances deteriorating at an alarming rate. It is reported that the rate at which consumers’ finances are deteriorating is at its fastest since 2009.
The recent report states that 36%of UK households were in a worse financial situation in May than in April, whereas only 6% claimed they were in an improved situation. As a result, many households have had to resort to using savings and taking out loans just to keep up with the increased living costs. 29% of the households surveyed claimed to have spent more in June and around 50% of all households expect the situation to worsen in the coming months.
83% of households are bracing themselves for further increases in living costs as a result nof increased inflation. The current rate stands at 4.5%, more than double the Government’s target level of 2%. Increased energy costs and fuel prices are largely to blame. 20% of households resorted to credit cards or bank loans in May, the highest rate in over two years.
Job security is still an area for concern, the report suggests. 22% of people felt that their jobs weren’t secure whilst 6% felt more confidence. The East of England has been worst hit by falling house prices with all other regions also reporting drops, excluding London.
An Individual Voluntary Arrangement (IVA) is a government-endorsed solution for people whose monthly debt repayments and living costs exceed their income, allowing them to pay a manageable amount. IVAs are normally chosen by people who are unable to cope with unsecured debts they have taken out, such as personal loans or credit cards.
If you have a mortgage or other secured borrowing such as a debt consolidation loan, the provider has lent you the money on the basis that the value in your property gives them a means of recouping their losses if you stop making repayments. Because mortgages tend to be large sums, providers need a means of offsetting the risk they are taking by lending you the money. Similarly, debt consolidation loans tend to be utilised by those with a poor credit history, so lenders secure the debt to minimise the risk they are exposed to. Therefore, these providers have a legal guarantee which ensures that, in the event you fail to make the agreed payments, they can force you to sell your house in order to repay the loan.
For this reason, it is highly unlikely that these companies would be willing to agree to take reduced payments within the terms of an IVA. Simply put, IVAs are not designed for situations where borrowers are struggling to repay large secured debts.
That doesn’t mean you can’t set up an IVA if you have a mortgage or another secured loan. If you also have various other unsecured debts that you’re having difficulties repaying, we may be able to arrange an IVA that addresses those debts. If you don’t want to lose your home, however, you need to ensure you keep up the monthly repayments on any secured borrowing.
Anyone who has had the misfortune of dealing with bailiffs as a result of Council Tax arrears will no doubt understand what a distressing ordeal it can be. Many of us at some point or another have been left in the red and have been unable to keep up with council tax payments for one reason or another. It is extremely important to keep up with Council Tax payments but in some cases, non-payment is simply unavoidable.
Before you know it, debts soon mount up and bailiffs are brought in to collect the debt. However, many people are unaware of their legal rights when it comes to dealing with bailiffs. There are many complex laws surrounding bailiffs but there are a few main points that should always be remembered.
1 – You don’t have to let bailiffs into your home. As long as you haven’t allowed entry in the past to collect for the current debt, you don’t have to allow entry to the bailiff, regardless of what they tell you. Nor can they forcibly enter your home. Keep windows and doors locked otherwise they can enter through them legally. Contrary to popular belief, bailiffs cannot get the police, locksmiths or nay other means to help them break in. If police do attend, they are there purely to keep the peace.
2 – If you do allow entry to the bailiff, there are only certain goods that they can take. It is not permitted for them to remove items that are rented or items that belong to someone else. They cannot remove goods that are essential for your employment, business or vocation (although this is quite vague and most bailiffs will have a different idea of what this entails). If you think that goods have been wrongfully taken, you should lodge a formal complaint against your bailiff.
3 – Every bailiff should have certain documentations such as photographic ID and written authorisation from their visit from the council. If they fail to produce either of these, do not allow entry under any circumstances.
4 – To avoid removal of goods, you should contact your bailiff and arrange monthly repayments to cover the amount of the debt. You should make sure that the repayments are a realistic and affordable amount. Failure to keep up with repayments could worsen the situation.
5 – Contact your local council with a proposal for monthly repayments. In some circumstances, councils will take the account back from the bailiff and you can repay them directly.
6 – bailiffs will charge for visits to your home and the amount will be added to your outstanding debt. Try to avoid this by resolving the situation as quickly as possible. By law, creditors must give 14 days warning before a bailiff is assigned to an account. In this time, contact the council and arrange repayments to avoid extra charges. For council tax arrears, bailiffs can charge a maximum of £42.50. If the amount exceeds this, you must dispute it.
There are ways of resolving debt situations other than bowing down to the bullyboy tactics of bailiffs. There are plenty of free resources available to find out more about how to deal with bailiffs.
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.
