Abacus Daily Debt News

"Desperate" sellers will drive down property prices and make buying a home more affordable for UK borrowers over the coming months, it has been claimed.

Paul Holmes, the chief executive of Firstrung, predicted that the low activity currently being seen in the housing market will boost affordability.

First-time buyers will be able to get onto the ladder for a "reasonable" price, with a mortgage they can handle, he stated.

"I see the future as being very bright for the property market, but not in the fashion that it has been allowed to run amok over the past five or six years," Mr Holmes remarked.

He added that people will be more able to pay off their debts within 25 years and own their houses outright.

Recently, Nationwide reported that UK house prices had fallen by 15.9 per cent in 2008 to their lowest level since spring 2005.

Many people who are looking to buy their first property are unaware of the meaning of the terminology used to describe mortgages, research has found.

A survey by Halifax discovered that two-thirds of first-time buyers could not define the acronym KFI, which stands for key facts illustration.

This is an obligation on lenders to outline the details of a mortgage product in the same format, to make it easier for borrowers to compare loans.

However, four out five of those questioned correctly guessed the meaning of the term ‘completion date’, which is the day ownership of property is transferred.

Jaedon Green, head of mortgage development for the firm, said that understanding such "jargon" can be difficult for borrowers.

"Our experience shows they need a combination of advice, expert knowledge and mortgage deals which help make the first steps on the property ladder easier," he commented.

Meanwhile, research from Abbey Savings has found that many first-time buyers intend to save up for a deposit this year.

Households headed by people aged 75 or over spent an average of 40 per cent of their weekly outgoings on food, energy bills, council tax and housing in 2007, according to newly-released figures from the Office for National Statistics (ONS).

The Pension Trends report also showed that households led by people aged 65-74 paid out more than 30 per cent of their income on these goods and services.

However, these figures were compiled before energy prices rose in 2008, the ONS noted, suggesting that the level of expenditure could now be even higher.

It explained that older people’s spending on items such as food, tax and bills rises with age as they are paying out similar amounts from lower incomes.

Commenting on the new report, Age Concern director general Gordon Lishman said: "Despite inflation falling, many of the oldest and poorest have yet to see a reduction in their weekly bills, as the cost of basics such as food and energy continues to fall more slowly than other goods."

Net mortgage lending by the high street banks rose by £2.9 billion in December, new figures from the British Bankers’ Association (BBA) have shown.

This was lower than November’s levels and also below the previous six months’ average, the body noted.

It revealed that consumer credit remained "subdued", declining by £0.4 billion, while personal deposits increased by £4 billion.

However, the BBA stated that the latest figures are less indicative than previous reports due to the Bank of England base rate cuts and the turbulence in financial markets.

Statistics director David Dooks said that the data showed that mortgage lending has become more "concentrated".

"The banks approved less than half the 2007 number of loans for house purchase, reflecting falling demand from households facing greater economic uncertainty," he remarked.

Recently, the Treasury unveiled a comprehensive package of support aimed at helping banks through the economic downturn and boosting lending.

By Jamie Price

Announcements from several high-street lenders that they are to cease offering single premium payment protection insurance (PPI) have been welcomed by industry representatives.

The decision was made by Barclays, Alliance & Leicester, The Co-Operative Bank, Halifax, Bank of Scotland, Lloyds TSB, NatWest and the Royal Bank of Scotland.

British Insurance Brokers’ Association spokesperson Peter Staddon said the move will help providers realise that single premium PPI - often sold alongside loans - is "bad value".

"We believe that single premium PPI policies should be outlawed and urge the rest of the industry to follow suit," he remarked.

He added that disapproval over the policies expressed by the Financial Services Authority was justified, as single premium cover can result in borrowers facing higher costs.

Citizens Advice also welcomed the banks’ decision, stating that the PPI products can be "very expensive" and can "add substantially to the cost of a loan".

Consumers should be looking to pay off their debts rather than put their money into a savings account, one financial expert has stated.

According to head of personal finance at Fool.co.uk David Kuo, the current financial situation has made savings rates so low that it makes more financial sense to pay off high-interest debts.

"What people need to do … is to try and pay down as much of your debt as possible," he remarked, noting that "most people" are likely to owe money as a result of Christmas spending, mortgages or personal loans.

Those who currently owe money to lenders but are hoping to become debt free in the future may wish to follow Mr Kuo’s advice and look to increase their mortgage, loan or credit card repayments.

The advice follows that of Carl Kroger from the Relax Group, who urged Britons who are struggling financially to keep written records of their outgoings so they are aware of how much is being spend on bills and mortgage repayments each month.

By Tom Musk