The Financial Blog

Around 6.5 million people have consolidated debts in the last 3 years in order to try and keep in control of their debts. The new research from www.moneyexpert.com also shows that 1.29 million of the 6.5 million people have unsecured debts of more than £20,000. So that’s debts run up on personal loans, credit cards, store cards and overdrafts.

By ‘consolidation’ this research shows that 14 per cent of people have consolidated all their unsecured debts with 1 bank. www.moneyexpert.com also say that demand for secured loans has increased significantly over the last 6 months. Often people who are struggling to keep up with their debts turn to secured loans or homeowner loans in order to pay off unsecured debt with a loan secured on the equity in their home. The problem is something like 60 per cent of people who do this then continue to use credit cards and apply for personal loans stretching their finances to breaking point.

Chief Executive of MoneyExpert.com, Sean Gardner, offers some sensible advice. He said: “Anyone who is juggling a range of debts with money owed on credit cards, store cards and loans should be acting to get their debts under control.

“It is encouraging that so many people have taken action as you can make significant savings by moving all your debts to one place.

“With average standard credit card rates at 17.01 per cent compared to average unsecured loan rates of 8.44 per cent it is clear that borrowers can cut their monthly interest bill by moving.

“However it is crucial that borrowers see consolidation as a wake-up call to get debts under control. It shouldn’t be something you keep on doing simply to tide you over from year to year.”

Just a few weeks back the Financial Services Authority Financial Services Authority (FSA) hinted that getting cheap credit would no longer be an option in the future. Unfortunately for us they seem to be correct!

The latest research from http://www.Moneyfacts.co.uk reveals that unsecured loan costs are still increasing.

Analyst at http://www.Moneyfacts.co.uk, Michelle Slade, said:

• Unsecured personal loans
  “In the last year rates on unsecured personal loan interest rates have continued their upward trend. Average rates for all loan amounts are now up to 4.6% higher than they were in March 2007.
• “Smaller loans have seen the most severe increases. Twelve months ago, the highest rate for loans of £1K to £2,999 was 19.9% on loans from Marks & Spencer Money, Sainsbury’s Bank and Britannia BS. In March 2008, the highest rate has surged to 27.9% with the online loan from Black Horse.
• “Rates for larger sums have not escaped the rate hike, although the increase in rate for borrowing in excess of £3,000 has been less severe. In March 2007 Masterloan was offering rates of 5.9% for loans of £4K to £15K. Now the best deal available is 6.7% from Moneyback Bank on loans of £5K to £15K.
• “Anyone looking to take out a loan in 2008 is going to find themselves faced with having to shell out more by way of monthly repayments than they would have done over the last couple of years. The ongoing credit crisis has seen institutions concentrating on getting money in the door and becoming more expensive and selective when lending money out.
• “In May 2006 Northern Rock Northern Rock was offering rates of 5.6% for all loan amounts. This means that consumers taking out a £25K loan now compared with then will be paying a staggering £1,655 more.
• “As with all other areas of the lending market, banks and building societies will have been reviewing and tightening their lending criteria. With 97% of loans offering typical or personal pricing, consumers with less than perfect credit scores may find themselves offered rates higher than those advertised, or declined completely.

Secured loans

• “The secured loan secured loan market has also been feeling the pinch. Eight lenders including Alliance and Leicester, Money Partners and Picture Financial have all stopped offering secured loans in the last few months.
• “In line with the mortgage market, the amount that the lenders are prepared to offer has been slashed. Loans of 125% LTV are no longer available and only a handful of lenders will consider 100% LTV loans.
• “In March 2007 rates as low as 5.9% could be found. Now the best deal on the table is 6.4%.
• “With Bradford and Bingley announcing today that it is pulling all of its 100% LTV mortgages it will be especially worth keeping an eye on this market.
• “As borrowers are finding it more and more difficult to find a mortgage at 100% LTV they are likely to turn to secured loans to top up their borrowing.”
• “With the effects of the credit crunch continuing to bite, it seems likely that rates for all types of borrowing will continue to increase.”

6% loans are getting harder, if not impossible to find but there are still some good loan rates around, especailly if you take the time to compare loans via a comparison site.

The mainstream loans are heading towards 7% APR and the best loan rates I can find today start at 6.7%, take a look below;

A Loan of £5,000 over 4 years

Moneyback Bank http://www.moneybackbank.co.uk 6.7% TYPICAL APR

Barclaycard personal loan http://www.barclaycard.co.uk/personal-home/loans 6.8% TYPICAL APR

Your Personal Loan https://www.yourpersonalloan.co.uk 6.9% TYPICAL APR

Alliance and Leicester Loan http://www.alliance-leicester.co.uk/loans 6.9% TYPICAL APR

After the personal loan rates of around 6.9% there is an increase to 7.9% to 8%. These are the lenders offering loans;

Barclays personal loan http://www.barclayslowloan.co.uk 7.9% TYPICAL APR

Abbey personal loan http://www.abbey.com/loans 7.9% TYPICAL APR

Lombard Direct Online loan http://www.lombarddirect.com 7.9% TYPICAL APR

Sainsbury’s Bank loan http://www.sainsburysbank.co.uk/loans 7.9% TYPICAL APR

If you’re unsecured loan application is rejected you may have a bad credit rating so you’ll have no choice but to apply for a secured loan.

secured loans are available to people with a poor credit rating but only homeowners who are currently paying a mortgage. The loan is secured against the equity in your home so you are more likely to be accpeted for a secured loan. You should however remember that your home may be repossessed if you do not keep up repayments on your loan. Missing payments will have severe consequences and could make obtaining credit more difficult in the future.

You should always compare loans to find the best deal for your circumstances and seek professional financial advice if you are not sure.

secured loans are for homeowners who are currently making regular mortgage payments. The loan is secured against the level of equity in a property. For example if your house is worth £250,000 and your mortgage is £150,000 you have £100,000 worth of equity in your house.

Secured loans are an attractive way to release the equity built up in your home because they are usually quicker to arrange and can sometimes offer low rates of interest because the loan is secured against your property. Lenders are happier to provide secured loans because in most cases they can recover the full loan amount if a customer defaults on their repayments.

You can use the finance raised from a secured loan for anything you like, because the money is yours! In the majority of applications people use the money for home improvements like a new extention, conservatories, kitchen or bathroom. These will often add value to a property further increasing the level of equity.

If you have a poor credit rating poor credit rating a secured loan may be a viable option for you simply because it is less of a risk to the lender. If you’ve had problems applying for an unsecured loan you could be eligible for a secured loan if you have equity in your property. You should however ask yourself why you’re unsecured loan application was refused in the first place. If it’s because you’ve missed payments in the past or have CCJ’s or defaults then a secured loan might not be a wise choice.

You’ll have seen the warnings on every web site and secured loan application secured loan application form; THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

These warnings are not there for the sake of it! Industry experts are predicting 45,000 repossessions in 2008 so don’t be tempted by high street lenders or building societies offering low loan rates. Never take out a secured loan or mortgage unless you can comfortably afford the repayments.

I’ve found an interesting peice of research by Virgin Money, apparently they publish a Football Fans Infaltion Index, every 3 months which covers the costs of things like a gallon of petrol, match tickets, train tickets, food, alchohol and football shirts. Virgin Money poll over 2000 football fans to understand their spending habits and how much they spend, of course, over a year.

Across all footballing divisions the average cost of following your team for a year is £1080 according to the new poll research from Virgin. They say that’s equivalent to approximately 5 per cent of the average annual salary.

As you might expect the average price for Premiership fans was more like £3,000 and that’s just for match tickets let alone the cost of travel and food, over a year I’d estimate that figure hits £5,000 easily. Around 7 per cent of football fans end up spending between £300 and £500 a year on club merchandise so scarves, hats, shirts and so on.

I remember the football seasons of the early nineties when a ticket cost around £10, in fact I’ve still got some of the ticket stubs. Virgin say that £10 then is equivalent to around £16 today, taking into account rising salaries. The cheapest match tickets today start at £30 - £35. If you want to get to a champions league match the cheapest tickets I’ve seen today are around £40 and the further your team progresses in the tournament the more it will cost you.

Chairman of the Football Supporters Federation, Malcolm Clarke, said: “We applaud those clubs taking action to bring down ticket prices. We also welcome the Football League’s ‘Fans of the Future’ initiative.

“However those clubs, particularly in the Premier League, who have put them up this season like Manchester United, Spurs and West Ham United, should hang their heads in shame. With the huge new broadcasting deal what possible excuse can there be for making football even more unaffordable?

“How can football possibly justify more than doubling ticket prices in real terms at a time when the game is swimming in television money? A time will come soon when football will look around at all the empty spaces in the stands and ask itself, ‘Where did they all go?’ That’s a real worry.”

The real worry for me is that most football fans would probably get into debt rather than miss out on supporting their team and in the current financial climate spending thousands of pounds on football matches could lead to a financial meltdown for the average football fan.

http://www.hsbc.co.uk has lost out to the tune of £8.7 billion because of their involvement in the US sub prime mortgage market.  Annual profits were still up 10 per cent on last year to £12.2 billion dispite this loss.

HSBC Chairman, Stephen Green, said; ‘The outlook for the rest of 2008 is uncertain.’

‘The economic slowdown and the credit outlook in the US may well get worse before they get better.’

HSBC has branches in the USA and it says that business there is challenging due to current market conditions, mainly the downturn in the housing market and rising unemployment. It’s because of HSBC’s large involvement in the USA that the write down of £8.7 billion is the highest of the UK’s big 5 banks.

Ofcom is looking into unfair and unclear charges made by telecom and internet companies in a attempt to get them stopped.

This has come about due to complaints from consumers about additional charges for services because customers have paid by cash or cheque or becasue they’ve ended a contract early or paid a bill late. Ofcom say that any additional charges should be fair and clear to the customer.

If these charges are unclear Ofcom say that the companies should only be able to to charge for the cost of providing the service and not essentially  ‘bolt-on’ these additional charges.

This can only be a good thing for UK consumers and it won’t come a minute too soon in my opinion! Companies should be open and honest when it comes to the fees and charges they make to their customers, after all with no customers there wouldn’t be a business for these companies in the first place. The industries Ofcom is looking at are home and mobile phone companies, broadband and pay TV.

Which? The consumer guide says that people who shop and interact on social networking web site are at more risk of having their personal information stolen.

Neil Fowler, the Which? Magazine editor, found that there was a shocking amount of information available to a researcher who dug a little deeper, using his name and occupation, they found out the names of people in his family and floor plans to his house.

People who use social networking sites and complete the full profile information requested are most at risk, especially if they leave the settings on ‘default’ which means that they are publicly accessible. This obviously makes it very easy for fraudsters to gather basic information on people and then use it to attempt to get pin numbers for bank accounts and so on.

I remember this subject was covered on BBC’s Watchdog programme around a month ago and using one of the biggest social networking sites around the researcher was able to gather enough information to attempt to open a credit card or get a personal loan in somebody else’s name. It literally took a few hours of researching.

Companies that collect personal data must tell their customers exactly how the data will be stored and used. Which? Is concearned that Oyster card customers do not know that their journeys are recorded and that Virgin Mobile customers are not told exactly how their personal information will be used.

One of the problems is that it’s not compulsory or law for private companies to admit when personal data security is breached or when personal data is lost.

Neil Fowler, Editor, Which?, says: “It was a real shock to see how much personal information about me could be found online, which could potentially be used by crooks to commit fraud. We all need to take steps to protect our data – both online and offline - by being more aware of how our personal data could be used and taking care who we share it with.

“Which? is concerned that some private companies aren’t complying with the Data Protection Act and we urge them to tighten up their processes, so that consumers can be reassured that their data is in safe hands.”

The Which? checklist to reduce your risk of ID theft and fraud

• Regularly check your personal credit file to check it’s accurate
• Check bank and credit card statements to make sure there are no unfamiliar transactions
• Cancel lost or stolen cards immediately
• Use a shredder to get rid of documents you don’t need
• Never give personal or bank details to anyone who contacts you unexpectedly
• Don’t use the same password for more than one account
• Make sure you have up-to-date security software installed on your computer
• Don’t tick ‘yes’ to share your details with third parties
• Give away only the minimum details on social networking sites and make sure you understand the privacy settings

The drinks industry warned that the average price of a pint of beer might hit £4 because of the rise in production and distribution costs.

Sound familiar? (British Gas!). The good point here is that at least we don’t need to drink beer to keep ourselves warm or power our homes. We can choose to avoid the pub, something I’d seriously consider if prices hit £4 a pint!

The British Beer and Pub Association said customers should not be surprised if the price of their pint increases by £0.80 in the coming months. The change in the use of farmland, originally used to farm hops is now being used to produce biofuels and other environmentally friendly fuels instead.

The temporary nationalisation of Northern Rock is going to cost us taxpayers £110 billion. It was revealed on Yesterday in the press that tax payers will be repaying the bill for years to come.

Northern Rock’s new boss Ron Sandler is paid £90K per month, he’s a former Lloyds TSB boss, no wonder he’s not with Lloyds TSB anymore if Northern Rock are coughing up £90K a month for him to run the company! Mr Sandler wouldn’t comment on the claims made in the press yesterday that up to half the 6,000 staff employed at Northern Rock may loose their jobs.

Mr Sandler said “Public ownership is not about running down this bank. It’s about stabilisation and building it back from a sound, solid platform”.

So the government’s idea is to privatise Northern Rock again, after the next general election in May 2010.

Hopefully we’ll all have been brain washed by then and have forgotten about the £110 billion we’re repaying for their mistakes by then Heh?…