Mortgages Direct

Millions of people found it hard to pay their bills on time in 2007 as household budgets became tighter. With the rising costs of gas and electricity, a study by YouGov for MoneyExpert.com found 1.3 million people who had difficulties paying their energy bills on time.

In addition to the 2.3 million people who either failed to pay, or paid their council tax in the second half of last year, nearly 3 million people in the UK also faltered in making their credit card payments. YouGov statisitics provided by MoneySuperMarket.com show that credit card users paid out £35 million in late payment fees.

Sean Gardner, Chief Executive of MoneyExpert.com, said, “Paying one bill late is not something to panic about. But if you find this is becoming something of a habit then you need to take action. Missing bills can have serious consequences, whether it’s losing a service altogether or even ending up in court.”

The financial advice website cautioned that as the ongoing credit crunch continues into 2008, many people may find themselves falling further behind in paying off bills.

As average savings rates fall below inflation, Nationwide Building Society demands introductory savings rates expirations should be well revealed to those individuals counting on the introductory rates.

The demand from Nationwide follows the interest rate cute in December, which reduced the rates of savers by more than 0.25% off the base rate. Customers who pay little attention to their accounts and the return they receive on their savings are the primary victims of the rivalry taking place between firms, claimed Nationwide.

Matthew Carter, Director for Savings at Nationwide, said, “The savings market is a highly competitive one and providers are vying to take market share. Some providers seem more interested in boosting profit and achieving best buy status than actually offering long-term good value to their customers.”

“Consumers are told when their mortgage deals are due to change and it shouldn’t be any different for savers. With introductory deals becoming more common-place, the society is concerned it is becoming even harder for savers to make the best decision.”

The building society wants savings providers to alert customers when their account interest rates dip and provide improved customer service when better deals are available. Currently, many banks and building societies attract customers with initially high interest rates on savings accounts, with the usual duration of the rate lasting for a year. After the first year, savings interest rates fall well below the Bank of England’s base rate. But for those individuals striving to keep their finances sound in a very rushed society, the sudden drop in interest paid for their deposits often comes at a great surprise and additional stress.

“Often a simple no strings account will offer an equally good return, without the need to jump through hoops or navigate a maze of complex terms and conditions,” said Lisa Taylor, at personal finance information firm Moneyfacts.co.uk. Instead of constantly needing to research each promotion, she advices customers to find accounts with steady interest rates which will perform well over time.

“With such a fast changing market, unless you are prepared to move your savings on a very regular basis, a consistently good performing account will offer a good return, without all of the time and effort of constantly searching the market.”

“Some savers have seen their rates axed by more than double the base rate cut. And with many of the accounts already offering uncompetitive rates, the proportion of the rate shaved off is much higher,” added Ms. Taylor. “Many of the worst hit accounts are no longer heavily marketed and are probably held by long standing customers who have held the account for many years. It’s just another example of when loyalty does not pay.”

“Take the example of the Halifax Liquid Gold, which saw a 0.36% cut. When we consider the rate was only 1.36% in November, the cut means more than a quarter of the whole rate vanishing.”Obviously Halifax’s “gold” is less “liquid” than they make it sound.

Other lenders to cut savings rates include big names such Alliance & Leicester, Abbey, HSBC, Halifax, Lloyds TSB, NatWest, and the Royal Bank of Scotland. The firms with highest assets, apparently seek to gain the most from their individual depositors, who, in today’s economy, can often afford veiled banking practices the least.

Ms. Taylor also offered, “Moneyfacts.co.uk average savings rate is currently 3.77& (no notice at £1K), which is already lower than the current rate of inflation. Too many savers are keeping their hard earned savings in accounts which will in the long term see their savings fall in value.”

But there is still great power in consumerism for those who take a little extra time and shop for the best banking rates – and those individuals will reap the greatest rewards.

Homeowners across the UK are showing increasing interest in using an equity release to supplement their income, stated a financial services company. There is a rising concern among professionals, however, that homeowners could be damaging long-term financial stability.

“It is true to say that there is a general lack of understanding of equity release with the general public,” explained Mark Gettinby, Financial Services Director of Help the Aged subsidiary of intune group. Mr. Gettinby also noted that many people are using an equity release to pay off mortgages and credit card debts without seeking sound financial advice from professionals, which could prove unwise.

Equity release is very similar to loans in that it provides homeowners with additional income. However, Mr. Gettinby warned that, “As equity release is a major financial decision we would always encourage the public to seek independent advice from a specialist before proceeding.”

Dean Mirfin, business development director of Key Retirement Solutions, is especially concerned about retired homeowners who should beware of providers more interested in sales than making sure that retirees obtain the best deal available. Mr. Mirfin also recommended that retired homeowners seek advice from professional advisers before committing to a plan and paying too much for their equity release.

A rise in energy prices and environmental awareness could change the way people buy their houses. With the introduction of the Energy Performance Certificate (EPC), the Home Builders Federation (HBF) predicts more home buyers will want to know their purchases are planet friendly. The new certificate allows home buyers to see the money saving benefits of having better energy efficiency.

John Slaughter, director of external affairs at the HBF, said, “I think we have to assume that [the EPC] will have some influence on perceptions of purchases. And obviously, if you go back to [the] point about hiking energy prices at the moment, then people will always take more notice of those things in that climate.”

A “Building a Greener Future” policy was begun by the government to encourage the construction of environmentally friendly homes by offering stamp duty exemptions for carbon-neutral homes.

Mr. Slaughter noted the EPC will “actually raise awareness of the benefits of good levels of energy efficiency and insulation would have – not just running costs but [for the] comfort of the house and so forth.“

With the total UK debt standing at £1,400 billion - according to Credit Action figures - many Britons are being advised to create hard-fast budgets for 2008 to ease financial strain.

The Consumer Credit Counselling Service (CCCS) recommends making a 12-month budgeting plan which should include all annual debts, including car insurance payments and quarterly bills, and then dividing by 12 months to establish monthly needs and avoid much financial anxiety.

“Sit down and do a budget,” recommended Frances Walker, spokesperson for CCCS, who also added, “You need to do an annual budget and then divide it by 12 so that you take account of things.”

Many Britons making New Year resolutions have promised to gain control of their financial worries – and for those who stick to it, will surely feel some financial ease by the end of the year. Ms. Walker stated that people paying over 20% of their incomes towards monthly repayments are overextending themselves.

Ms. Walker added, “It is also a good time to look at income maximisation.” As households are better able to forecast expenditures, many will see their incomes being used more effectively.

For those with existing debt and seeking to lower monthly outgoings, a consolidation loan can be a reasonable way to reduce monthly repayments and ease budget strain

A price comparison website and David Kuo, the head of personal finance for Motley Fool, warned homeowners that any base rate cuts may not mean lower mortgage payments.

Despite efforts by Chancellor Darling, the Monetary Policy Committee (MPC) decided to hold any changes to the base rate in January, added Mr. Kuo.

With many lenders trying to rebuild “their battered business,” says Mr. Kuo, borrowers may not see relief even if the base rate cut is passed in the future. Lenders are not obligated to pass base rate changes on to consumers and they may be less likely to do so now with recent changes in the economy and rising inflation eating into profits.

Mr Kuo added: “Therefore, many homeowners are unlikely to reap the benefits, even though there are indications that the Bank of England may continue to cut interest rates to stimulate the flagging British economy.”

Although the credit crunch was greatly created by large banking institutions lending monies to individuals who were barely qualified to repay their loans - often in the form of sub-prime mortgages – many banks now seek to recover much of the losses they originally designed for the fast money that was pouring in while the over-lending went unchecked.

With lenders unlikely to lower mortgage repayments and pass some relief to borrowers, the level of personal debt and insolvency is expected to rise this year, according to James Falla, director of advice service Thomas Charles.

Recent upheavals in the lending market have failed to tarnish self-cert mortgage availability, much to the relief of many self-employed business owners in Britain.

For many years the self-employed have depended upon self-cert mortgages to purchase property and homes. The Economic and Social Research Council reported that of the 29 million people employed in Britain, 13% are self-employed and eligible for self-cert mortgages.

Fortunately for this group of financial pioneers, the self-cert mortgage market has remained unaffected by the tightening of lending criteria in the mortgage industry, noted Andy Pratt, a spokesperson for Alexander Hall.

Mr. Pratt added that nonconforming lenders have been hit hardest by changes in financial markets but this has not affected the subprime industry.

Self-cert mortgages are generally backed by more established lenders, which allow them to adapt to changing conditions more favourably. Mainstream lenders that have been unaffected could give borrowers with good credit records the best chances of being approved for loans, the broker representative offered.

“All those clients who would have got a self-cert mortgage before have been able to get them even with the credit crunch,” he maintains. This is good news to self-employed Britons who are often unable to qualify for more conventional mortgage loans.

The size and tier of the loan people sign up for may save money, according to Defaqto, a financial services research company. 

Lower tier loans are often for smaller sums of money and charge the highest interest rates, and usually give the shortest amount of time for repayment. Borrowers may pay more money for less, especially when lenders have two tiers ranging from £1,000 to £5,000.

David Black, a principle consultant of banking for Defaqto, offered, “Borrowers should take care when choosing the size of loan they want, as a little effort in researching the interest rates charged on different tier levels could save them a considerable amount of money.”

Larger loans often come with the convenience of longer repayment schedules and can save borrowers as much as £1,000. When borrowers are looking at loans, Defaqto advises them to “be on their toes” when dealing with larger tier rates, which may have the best competitive rates.

Defaqto commented that “credit cards reward disloyalty” since credit card users are often able to switch balances from old cards to newer ones, and for better interest rates. Taking out a loan could bring more stability to the financial plans of individuals who are accustomed to constantly switching credit cards for lower interest payments.

Over-spending naturally accompanies the holiday season, however the strain and financial burden of such events can damage long-term plans for many families, says the Department for Work and Pensions (DWP). As families struggle to pay increased bills after Christmas, the children of many households are adversely affected.

Recently the DWP revealed an initiative to take on child poverty in the UK and has gathered statistics of government measures that have taken 600,000 children out of poverty over the previous ten years. As families look forward to expensive events such as the festive season, the DWP says that insufficient planning can leave people struggling even harder to pay the consequential bills.

Susan Clark of Jobcentre Plus stated, “Struggling to pay the bills after Christmas is a situation that many people find themselves in, and it can be very stressful.”

Difficulties after the holidays are common all across the UK, with the north-east, north-west, and Wales all effected, according to the DWP. On average, over 50% of people in the UK overspend at Christmas.

One way of avoiding the anxiety and difficulties which arise from overspending is to develop a plan to control finances. As the old saying goes, “A pinch of prevention is worth a bucket load of cure.” But for those who remain challenged in accepting our elders’ advice, consolidation loans are an effective way of repaying existing debts - and releasing families from the burden of after-holiday worries.

A survey by Fool.co.uk shows nearly 1 out of 10 potential home buyers are moving their plans to purchase a house forward – with current housing prices being lower and thus, a good time to take advantage of purchasing power. Fool.co.uk is a company looking to assist people with finding the best financial solutions for their needs and guiding buyers on how to be smart about their money.

Over the next two years, the survey shows 38% of people currently planning to buy houses want to secure the deal this year and another 34% plan on purchasing their home in 2009.

David Kuo, head of personal finance at Fool.co.uk, said, “The long-overdue correction in the property market will allow many people who have been waiting to move house to finally realise their dream. Quite often people will ask how much they can borrow when they want to buy a property. But that is altogether the wrong question. Instead, they should ask themselves how much they can afford to repay.”

It is expected that sellers will outnumber buyers for the next five years, with only four home buyers to every five sellers, according to the survey. Under such conditions, home buyers could realize some great savings overall, if they shop carefully to procure the best home and financial products available to them.