Abacus Daily Debt News

People in the UK prioritise a comfortable lifestyle over saving for the future, new research has found.

Insurance, pensions and investment group LV= found that the number one financial concern of the average person was ensuring they had enough cash to fund day-to-day living.

Group executive for the organisation Mike Rogers suggested that individuals should consider debt management to ensure their lifestyle does not eat into savings or insurance payments.

He said: "Everyone can take some financial steps, however small, towards protecting the things they love most in life. For example, insuring the breadwinners in the family for loss of income."

Despite the results, there was a disparity between what many people believed important and the action taken.

For example, although home security came in sixth in the nation’s priorities, 70 per cent of homeowners had contents insurance.

This follows recent suggestions from David Elms, chief executive of comparison site Unbiased.co.uk, that the economic recovery could be causing people to take on more debt as optimism about the downturn increases.

By Francis Finch

Financial planning is the best way to avoid debt management issues as you get older, one specialist has claimed.

Chief executive of savings organisation the Children’s Mutual David White said that people should not be taking on more debt in their later years as it will make it very difficult for them in retirement.

He said: “The only way we can turn this whole situation around is … to have people arriving at adulthood with financial capabilities.”

This way young adults will be prepared for the financial burden of studying, obtaining a mortgage and pension schemes, Mr White added.

Current problems with pensions have been made worse by parents having to bail out their 18 to 30-year-old children, he remarked.

In recent news, Saga Savings conducted research revealing that grandparents continued to help members of their family with money problems despite the recession.

According to the figures, 70 per cent of those aged over 50 had given financial support to a relative in the last five years.

By Francis Finch

Britain’s elderly are still storing money to support their families despite the recession, new research has revealed.

Saga conducted a survey of 19,000 over-50s, which found that 13 per cent in this age bracket currently put aside money for their grandchildren.

Chief executive of the financial services organisation Andrew Goodsell said it was comforting that people continued to support younger family members in difficult economic conditions.

He remarked: "Despite the current climate our research proves that we are still a financially generous nation when saving for those we love."

The figures showed that 56 per cent of grandparents were saving money to fund university or career development prospects for their grandchildren.

Furthermore, 70 per cent of those older than 50 provided additional financial support to their families over the last five years on top of money saved for them.

This follows a recent study by Aviva that revealed 11 per cent of adults in the UK are willing to give up their life savings to fund the retirement of an elderly relative.

By Francis Finch

Debt in the UK could have less of an impact on the average person with debt management problems  due to the government’s ability to borrow at a lower rate, one expert has suggested.

Gemma Petlow, a senior researcher at the Institute for Fiscal Studies (IFS), commented that while the amount people owe is expected to go up it may not have a significant effect on servicing the national debt-to-GDP (gross domestic product) ratios.

She said: “In some sense the additional burden is being mitigated by the fact that the government can borrow relatively cheaply.”

Debt is expected to reach “historically high levels” in the next couple of years, but having started at a point where the share of debt to GDP was low it could give the UK some leeway in the short term, she added.

This follows Budget forecasts by Alastair Darling on April 22nd that net public sector borrowing will reach £175 billion in 2009 and represent 11.9 per cent of GDP the following year.

By Francis Finch

A ten percentage points difference between loan-to-value (LTV) mortgages of 75 per cent and 85 per cent may mean customers have to pay a premium on top of the extra loan amount, according to one comparison site.

PR and communications manager Andrew Hagger of Moneynet noted that on a five-year fixed-rate mortgage spread over 25 years where the house is worth £200,000 the extra amount customers would need to borrow to get an 85 per cent LTV deal would be substantial.

Over the first five years buyers must pay an additional £236 a month to receive the £20,000 difference between a 75 per cent loan and an 85 per cent deal in this instance.

Using Nationwide Building Society as an example, he stated that £6,431 of this was the result of interest loading on the higher amount.

This could lead to mortgage owners being charged with loaded interest rates despite making payments on time due to their property value decreasing.

Earlier this month, head of mortgages at comparison site moneysupermarket.com Louise Cuming stated that recent activity in the level of rates provided by lenders was unlikely to help consumers.

By Francis Finch

Debt among the under-24 age range is increasingly accounted for by women, new research has shown.

Accountancy firm Wilkins Kennedy announced that females currently make up 55 per cent of those in debt in this age bracket. This represents a 6.7 percentage points rise on five years ago.

Director at the company Anthony Cork remarked this could be due to women being under increasing pressure to prove their independence.

He said: "Young men don’t seem to feel the social pressure to either spend conspicuously or to set up on their own to the extent that women do."

This has led to a number of ladies taking out mortgages that they cannot afford with their salaries, he added.

Mr Cork also suggested another contributing factor could be the influence of celebrities such as Victoria Beckham and Paris Hilton whose prolific spending habits may be emulated by younger women.

This follows recent news that young people might be encouraged to rent instead of buy properties due to debts incurred as a student.

By Francis Finch

Mortgage providers may be hiking the rates on fixed-rate deals to curb the amount they are lending, one expert has suggested.

Ray Boulger, senior technical manager at mortgage adviser John Charcol, said that a lack of funds could be influencing the behaviour of suppliers.

"The other factor that is influencing lender’s pricing policies is how much they want to lend and the increase [in interest rate on mortgages]," he said.

Raising prices is an obvious way of controlling the amount that is borrowed, Mr Charcol added.

He also remarked that consumers should be prepared to wait for rates to settle down before deciding on a fixed-rate agreement.

Activity in the mortgage borrowing market has continued to decline, according to the Bank of England’s June Trends in Lending report published on June 18th. This was likely due to a lowering in the levels of remortgaging activity.

Increases in the number of fixed-rate deals means that the overall rate on new mortgage lending has stayed around four per cent since the start of 2009.

By Francis Finch

The number of home repossessions is expected to peak at 25,000 to 30,000 a month in 2011, according to one expert.

Ian Shepherdson, an independent economist speaking at the Chartered Institute of Housing Conference and Exhibition, said that while repossessions had actually come down in recent months, unemployment was likely to drive levels up again.

He remarked: "I hope and I think that they won’t go as high as they did in the early 90s … but they will go substantially higher and we are going to have a big repossession wave."

Prices in the housing market are still overvalued and recent results showing increases in the average cost of properties are probably anomalies in an obvious negative trend, he added.

Mortgage providers repossessed 12,800 houses in the first three months of 2009, according to statistics released by the Council of Mortgage Lenders (CML) in May.

This is over 4,000 more than the CML recorded in the first quarter of the previous year.

By Francis Finch

Energy customers have been urged to consider switching their prepayment meters by one agency.

Consumer Focus, a fair deal organisation, suggested that those in debt with their current supplier should think about changing to an online direct debit account.

Principal policy advocate at the establishment Zoe McLeod said: "If you switch to direct debit payments you save around £110 a year and if you switch to online payments direct debit you should save around £190 a year."

For those who owe £100 or less on a prepayment meter, options to swap still exist as part of the debt assignment protocol, she added.

Her comments come after the National Housing Federation (NHF) yesterday revealed that energy suppliers had overcharged £464 million to prepay meter consumers over a three-year period.

NHF lawyers announced that this could be a breach of EU policies, with some prepay households being charged up to £500 more than online debit customers.

By Francis Finch

Childhood poverty could be a reality for those whose parents have not adequately prepared financial cover in the event of their death, suggests new research.

Bright Grey, protection specialists, found that 15 per cent of those surveyed admitted they had not thought about how their children would cope if they were to die.

Proposition director of the firm Roger Edwards said: "People don’t want to think about the financial consequences of themselves or their partner not being around, but it is one of the most important areas of your finances to get right."

Many individuals may consider taking out cover too time-consuming or expensive, however, life insurance costs have reduced in the last two years, he added.

According to the survey, 64 per cent of parents believed they had not made sufficient arrangements for their children if they were to die or become seriously ill.

The Post Office recently revealed that more than six million people fear the financial implications incurred by a relative’s death.

By Francis Finch