Abacus Daily Debt News

Less people are willing to take out unsecured loans in the wake of the credit crunch, new figures have suggested.

New business within this sector dropped 45 per cent in February compared to a year before, according to data published by the Finance and Leasing Association (FLA).

This may be partly due to reluctance on borrowers’ part to agree to repayment plans in the current climate, it noted, but added that lenders have also restricted the supply of loans due to the higher risks posed by job losses.

Head of research and chief economist for the FLA Geraldine Kilkelly remarked:
"Rising unemployment and low consumer confidence have led to a further drop in unsecured loan new business in the last two months."

Secured loans were also impacted, falling 83 per cent year-on-year in February.

Meanwhile, March saw the supply of mortgages weakening, the British Bankers’ Association has revealed.

By Jamie Price

Borrowers have been advised to look at the "true cost" of a homeowner loan, rather than being attracted simply by "headline-grabbing" rates.

Yorkshire Building Society mortgage manager Tom Girling noted that promotions do not necessarily reflect the real expense faced by the customer.

He urged homeowners to consider charges such as valuation fees, arrangement fees and cashback offers before making a decision.

Mr Girling said that gaining an oversight of costs that will be accrued "over the course of a deal" could aid people with their debt management.

It will enable them to "see exactly how much they will be paying," he explained.

Meanwhile, borrowers have been encouraged to make overpayments on their mortgages while interest rates are low.

Peter Bolton King, chief executive of the National Association of Estate Agents, said that people may wish to take advantage of the situation before rates begin rising again.

By Jamie Price

The fall in house prices appears to have slowed, it has been noted, which may be a relief to homeowners facing the threat of negative equity.

Figures from Hometrack showed that values dropped by 0.3 per cent this month, the smallest decline recorded for a year.

Commenting on this, content editor for Findaproperty.com Michael O’Flynn said that a "modest" improvement has been seen in the sector, although there is a "seasonal element" to the data.

But he stated: "It’s encouraging to see that prices are falling at a much slower rate and that there is more activity in the market."

Mr O’Flynn explained that low interest rates and reduced house prices have led people to believe that the market is close to hitting the bottom.

Over the past year, property values have declined by 10.1 per cent, while homes are being sold for around 89.6 per cent of their asking price, according to the Hometrack report.

By Jamie Price

People struggling to handle money in a recession become "desperate" and may turn to criminal activities, it has been noted.

Neil Munroe, the external affairs director for Equifax, stated that crimes such as fraud and identity theft usually rise during an economic slump.

"The logic behind this is that people become increasingly desperate when their financial circumstances get worse," he remarked.

In addition, he explained that consumers become more attracted by discount offers during a downturn and may take more risks with their personal information.

Becoming a victim of identity theft in this manner could result in debt being built up in a person’s name without their knowledge.

Recent figures from Cifas, the UK’s Fraud Protection Service, showed that there has been a sharp rise in facility takeover fraud, in which criminals gain access to an account.

Overall, fraud grew by 16 per cent in Britain last year, the organisation revealed.

By Jamie Price

The government has been accused of condemning Britain to a "decade of debt" by leader of the Liberal Democrats Nick Clegg.

He said that the measures outlined by the chancellor in this year’s Budget show that ministers are "incompetent" at helping UK consumers.

Mr Clegg claimed that the "biggest disappointment" of the Budget is its failure to "put money into people’s pockets to help them make it through this recession".

He argued that taxes in this country are too "heavy" for people who cannot really afford them and too "easy" to be avoided by the rich.

And he criticised the Labour government for sentencing the UK to "years of unemployment and a decade of debt" due to its massive amount of public borrowing.

Elsewhere, National Association of Estate Agents chief executive Peter Bolton King likened the chancellor’s efforts to aid the housing sector as trying to put out a fire with a "water pistol".

By Jamie Price

Retail prices index inflation – which takes home loan repayments into account – has fallen below zero for the first time since 1960, the Office for National Statistics has revealed.

The figure went into negative territory in March, partly because of a drop in the level of interest payments made by mortgage borrowers - a result of the recent Bank of England base rate cuts.

In addition, consumer prices index inflation – which includes items such as household services – dropped to 2.9 per cent during the month, with gas bills being a large downward pressure on this.

Fuel and transport costs, as well as lower prices for food and drinks, also had an effect on the figures as they were cheaper than levels seen a year ago.

However, the Alliance Trust reported that elderly people are still struggling with higher rates of inflation than the young, with food prices being a factor.

But older groups are beginning to benefit from reductions in gas and electricity costs, albeit slowly, the organisation noted.

By Jamie Price

A financial institution has written to the chancellor urging him to raise the stamp duty limit in tomorrow’s Budget in order to aid the property market.

Nationwide Building Society wants the threshold for the tax to be increased to £250,000, a move that it said would boost activity in the housing sector and help borrowers.

Chief executive Graham Beale said that lowering the figure will "reduce the burden that stamp duty places on first-time buyers in particular".

He continued: "The time is now right for reform," arguing that implementing the changes now will have a lesser effect on tax revenues than it would at the "height of the market".

In addition, the building society wants the Budget to encourage people to save their money, calling for an overhaul of the Individual Savings Accounts system.

Meanwhile, the Child Poverty Action Group has urged the government to support low-income households through the Budget announcement.

By Jamie Price

The government has been called upon to use this year’s Budget, due to be announced later this week, to offer more help to low-income families.

Kate Green, chief executive of the Child Poverty Action Group, said that despite the economic downturn, the chancellor "still has the resources" to aid poor households.

"We cannot afford a ‘do nothing’ Budget for struggling families. Family security and economic security are inseparable," she argued.

She urged the government to act "decisively" in order to avoid a repeat of the 1980s recession, in which unemployment and industrial collapse "left a legacy of intergenerational poverty".

The charity has unveiled a report claiming that extra benefits support for those who have lost their jobs could have a "stimulus impact" of over £10 billion.

Chancellor Alistair Darling will present his Budget announcement to the House of Commons on Wednesday April 22nd at around 12:30 BST.
By Jamie Price

It is still possible to obtain low rates on a mortgage despite the effects of the economic downturn, it has been suggested.

Catherine Hearnden, director at MyMortgageDirect, said that affordable prices can be found in the home loans market.

She claimed that a rate of between four and five per cent is a "good" deal, adding that people should take time to consider what amount they are willing to settle for.

"As long as you get a rate that you think is affordable and you are happy to pay for three, four or five years, then take that rate," she advised, recommending that homeowners opt for a fixed mortgage.

Ms Hearnden also urged borrowers not to rush in before making a decision, adding that they should not feel under pressure to agree to anything.

Recently, the British Bankers’ Association reported that 28,179 mortgages were approved in February, up from 16.1 per cent the month before.

By Jamie Price

A consultation has been launched as part of steps to promote responsible lending, the government has announced.

The European Consumer Credit Directive has been proposed as a means of introducing common standards for unsecured loans and other forms of credit across the EU.

And the Department for Business, Enterprise and Regulatory Reform is now seeking views as it aims to ensure fair treatment.

Proposals include a requirement for lenders to fully explain products in order to allow borrowers to make informed decisions, as well as a right to cancel an agreement within 14 days without incurring a penalty.

Consumer minister Gareth Thomas remarked: "We want to further promote responsible lending and responsible borrowing. These measures will help with that objective."

The government recently announced that those seeking debt help are now to be given 30 days before collectors can contact them, a move welcomed by the Consumer Credit Counselling Service charity.

By Andy Mackay