Abacus Daily Debt News

Those in debt appear to be trying to save money by reducing spending on everyday items such as food and drink, according to new figures.

Data from the Office for National Statistics has revealed that expenditure on groceries has dropped by 4.6 per cent - the biggest fall since 1977 - to stand at £16.3 billion in the second quarter of 2009, the Daily Mail reports.

Money saved from such actions in that period totalled £13.4 billion, which is the highest amount since 1997.

Furthermore, during the quarter, the largest decline since 1982 was seen in the alcohol and tobacco markets, which registered a fall of 6.5 per cent.

Earlier this month, however, it was suggested by Unbiased.co.uk that the recession has done little to emphasise the problems with borrowing money, following a rise in debt levels for the second quarter of 2009.

According to the organisation, £5.5 billion - nearly twice the amount for the first quarter - was taken out.

By Sarah Adie

New research has revealed that more and more people are being afforded assistance in paying their water bills, with an 80 per cent increase in successful applications for the WaterSure tariff in the last two years.

Figures from industry regulator Ofwat have shown that, over the past 12 months, 29,000 people needing help paying their bills were successful in claiming for WaterSure. This compares to just over 16,000 during 2006.

Policy manager for the Consumer Council for Water Andy White remarked that the recession has played a hand in making debtors look at how they can save, although this increase can also be put down to the enhanced promotion of the scheme.

"WaterSure is available to everyone who needs it. That’s not to say that everyone who needs it is aware of it," he remarked, adding that a campaign is being launched today (September 29th), to draw consumers’ attention to moneysaving tips and ways to cut down on bills.

By Sarah Adie

Borrowers must be vigilant of their energy suppliers, following the discovery by consumer group Which? of a system that allows companies to increase tariffs without informing their customers for over two months.

This suggests that indebted people could be put at a greater disadvantage through unknowingly paying premium prices on their bills, tactics that Which? is suggesting to the government and Ofgem should be banned, the Daily Mail reports.

Senior policy advisor at the organisation Dr Fiona Cochrane noted that it was unreasonable for people not "to be warned in advance of price increases", or for their deals "to be guaranteed for at least the time it takes to switch supplier".

The suppliers’ rules also make it harder for consumers to shop around for better deals, Which? suggested.

Earlier this month, borrowers were warned against taking in lodgers to assist with their money problems as it could make it harder to get adequate home insurance.

By Sarah Adie

Debtors and those considering entering into debt have been advised by the financial regulatory body that they could benefit from being more involved in the lending process.

Dan Waters, director of retail policy and conduct risk with the Financial Services Authority (FSA), remarked that the organisation’s discussion paper, released in 2008, outlined how consumer responsibility was considered in terms of policy-making.

He stated that the FSA intends to move forward in its financial capability agenda as a result of the publication but noted that the industry and the public will both benefit from consumers becoming "more engaged, demanding and discerning" in relation to issues in the sector.

Earlier this month, a consultation document aimed at finding the best ways to help those with debt problems was issued by the Ministry of Justice. Both creditors and debtors may be benefited through the new government proposals, which include the implementation of more consistent charges.

By Sarah Adie

A cap should be placed on the amount of debt an individual is able to accumulate, according to one expert.

Rowan Capital Management’s head of research Tim Cockreill wrote for the Observer about the extensive problems that can be caused by debt when it gets out of control and said the mortgage market practice of lending based on ability to pay should be rolled out across the credit sector.

"Being in debt can bring huge stress, cause breakdowns and families to break up and, as we know, it’s been at the centre of the financial crisis," he remarked.

However, Defaqto banking specialist David Black said he would be opposed to such a system, claiming credit is necessary in case of emergencies and that it can be "a useful asset" as long as it is treated responsibly.

According to the latest figures from Credit Action, the average household in the UK owes £58,280, including mortgages.

By Chris Trimble

An increased number of people experiencing debt issues are logging onto the internet in order to find independent financial advisors (IFAs), it has emerged.

Philip Calvert, founder of IFA Life, observed that social networking sites and web-based forums are starting to be used more by people in the search for IFAs, after other traditional methods such as search engines.

"A search on a social networking site will result in real people responding with personal recommendations and reviews - often within seconds," he noted, adding that this development will mean those in the industry must strive to be "seen as credible, helpful, trustworthy and professional".

Research conducted by IFA Life revealed that over 95 per cent of IFAs admitted neglecting to ask customers about their internet usage, although Mr Calvert did remark that 30 per cent of advisors now have a Facebook account, a rise from less than ten per cent a year ago.

Earlier in the month, it was found by protection specialist Lifesearch that the majority of those who sought advice were rewarded by finding better policies.

By Sarah Adie

First-time buyers and other debtors have been thrown a lifeline by one of the stars of the BBC’s Dragons’ Den, who has invested in a service offering interest-free loans.

James Caan has bought stakes in website Look4AProperty.com, which is soon to launch Look4AProperty/Money - a programme that will make loans available through estate agents.

Speaking about the new scheme, Mr Caan told My Finances that "a healthy housing market is the lifeblood of the UK economy", adding that the country needs to be resourceful in order to "get things moving again".

Funding has been provided to support £1 billion worth of loans in order to cover legal fees and stamp duty, which is regarded by some as an extra hindrance to many would-be buyers.

Earlier in the month, research from uSwitch.com revealed that fewer loans are available to people than there were a year ago. Currently, there are 36 on the market, compared to the 57 which could have been obtained at this time in 2008.

By Sarah Adie

Loans for first-time buyers are harder to come by, despite improvements in the lending market, an industry expert has said.

According to Nicholas Leeming, director of propertyfinder.com, the fact that more money from creditors is being transferred to home buyers is "positive news [that] is not shared universally" and first-time property owners are "still getting a very raw deal".

He added that, although this demographic is integral to the recovery of the housing market, only those already on the property ladder are feeling the effects of the improvements thus far.

Despite an expected rise in transaction levels in the near future, obstacles to a full revival still remain, Mr Leeming said - including a shortage of properties being put up for sale.

His comments follow a recent report from the Council of Mortgage Lenders, which revealed that home loans approvals had increased by 19 per cent in July on the same month in 2008, which Mr Leeming noted was "encouraging".

By Sarah Adie

The deals currently available on the mortgage market could potentially tempt customers into opting for one that is not necessarily right for them, it has been suggested - indicating that without shopping around for relevant products people risk sliding into unnecessary debt.

According to Hannah-Mercedes Skenfield of moneysupermarket.com, there appears to be a trend in the sector towards targeting "for marketing impact", rather than the benefit of those taking out loans.

She went on to say that "the market is cluttered with products that look great in the branch window, but are not adding value to consumers".

Ms Skenfield’s comments follow the release of a 1.98 per cent tracker and a 2.99 per cent two-year fixed rate mortgage by Woolwich and Halifax respectively.

Earlier in the week, loan rates were called "obscene" by Paul Holmes of Firstrung, a company that specialises in deals for first-time buyers, who noted that banks are often unwilling to lend unless it is completely in their favour.

By Sarah Adie

The economic downturn has done little to impress upon people the problems of borrowing money, a new report has suggested, with recent statistics showing a rise in debt levels.

Findings from new research by Unbiased.co.uk revealed that, during the second quarter of 2009, £5.5 billion was borrowed by people, almost twice the amount in the first quarter of the year.

"The financial turmoil of 2008 prompted a dramatic retreat from savings in favour of repaying personal debt. The first half of 2009, in contrast, has seen consumers … shift back into borrowing," Unbiased.co.uk’s chief executive David Elms said.

However, he observed that Britons are starting to save their money again, irrespective of low interest rates.

Last month, Hetal Mehta of the Ernst & Young Item Club noted that the Bank of England’s Monetary Policy Committee is sure to keep the UK’s base rate down, with inflation expected to fall below the government’s two per cent target.

By Sarah Adie