There has been a sharp rise in the number of people taking out mortgages, but house prices are still falling, say two pieces of research. The Bank of England said 107,000 new home loans had been taken out in August, an 8,000 rise on the previous month and the highest level for 14 months. The total borrowed reached the highest for a year, at £23.8billion. However, the Nationwide Building Society said house prices remained in the doldrums during September, falling by 0.2pc in the month and only rising at an annual rate of 1.8pc - the weakest it has been since May 1996.
[Daily Telegraph page 38 - 30.09.05. Also reported in The Independent page 56, Financial Times page 4.]

A crackdown on current account penalty charges could slash the cost of banking for millions of customers. The Office of Fair Trading is telling banks and building societies they must follow guidelines on excessive charging for some services or face a formal investigation.
[Daily Mail page 51 - 28.09.05]

More than 2,000 financial advisers at the Co-op Insurance Society (CIS) will walk out for 48 hours next week over attempts to introduce a new bonus scheme. Their union, Usdaw, argues that new contracts could cut members' wages by 20-30 per cent and is threatening at least two further stoppages. The advisers, who are paid an average £37,000 but can earn up to £80,000 a year, argue that the new regime will make them "hard-nosed salesmen" rather than "collectors, administrators and advisers" and could mean they will be out of a job.
[The Independent page 67 - 23.9.05]

BARCLAYCARD TESTS NEW CARD

Barclaycard is testing a new credit card that charges a lower interest rate to customers who pay off more of their balance each month. The new Repayment Rewards card will have three interest rates depending on how much you repay.
[Daily Mail page 49 - 21.09.05]

STUDENTS CASH RIP-OFF

Students returning to university risk being charged rip-off rates to withdraw their own money from campus cash machines. Nearly half of all UK's universities now hosts cash machines that charge for withdrawals. And more than 10pc of universities and further education colleges have more fee-charging machines than free ones within walking distance of their campus. Charges average £1.50, but can be as high as £5. Nationwide Building Society estimates that students will pay more than £4 million a year to access their own money.
[Daily Mail page 49 - 21.09.05]

CUSTOMERS GO TO COURT OVER BANK FEES

Growing numbers of bank customers are turning to court action to reclaim unfair penalty fees for overdrafts and bounced cheques. They argue fees imposed for going over unauthorised overdraft limits bear no relation to the costs incurred by banks for issuing automatic, computer generated letters.
[Daily Express page 31 - 21.09.05]

TRAPPED BUYERS

Around a million former council properties in the UK cannot be mortgaged due to the precast reinforced concrete (PRC) used in their construction. Many of these properties are marked as 'defective' under the Housing Act, unless repaired. The situation has left thousands of ex-council house homeowners trapped and unable to sell or remortgage.
[Daily Express page 40 - 21.09.05]

Today there are 14 million active store cards with only half of card holders paying their balances off in full. The rest are making lots of money for card issuers.

Store cards typically charge much higher interest rates than a regular credit card. They are also only accepted at that retailer making them less useful than a major credit card.

With interest rates as high as 29.9% being charged on store cards, consumers continue to get hooked on these cards through the false sense of savings offered by the retailers through “enrol today and save” discount offers. Any savings at the time of enrolment is earned back many times over by the retailers through high rates of interest that they charge.

Consumers bear an equal amount of responsibility here as well. I don’t know if it is brand loyalty or lack of attention but the reality is that consumers are significantly less sensitive to the actual APR charged by these cards.

Today, there is actually little need for a pocket full of store credit cards. A couple of major credit cards are all that consumers need to play in the credit world. Major credit cards are advantageous because of stronger competitive market pressures that create good pricing plans and of course, universal acceptability.

In the future, as more people come to this realization, the popularity of store cards will begin to decline, just as it did in the US.

In all of my years of assisting people with financial problems I’ve yet to see anyone win by purchasing payment protection insurance (PPI) or credit protection insurance (CPI).

The add-on premiums are supposed to help consumers in times of financial trauma to make or cover the payments, but the policies are notorious for only providing benefits in either limited situations or with such long waiting periods that they are useless.

Recently, Citizens Advice lodged a "super complaint" with the Office of Fair Trading (OFT) over just this issue. They went so far as to call PPI a "protection racket".

According to a recent Times article, "It found that 85 per cent of its clients who had claimed on one of the policies had been unsuccessful, despite the industry claiming that just 15 per cent of claims are turned down."

PPI falls under the old saying, caveat emptor, "Let the buyer beware".

Follow Andrew Stone in his weblog as he starts out on his new business adventure. This is a fun and interesting look at what it really takes to be your own boss.

This is not the first time this week that I had read about or had discussions with others about the shrinking oil and gas reserves. As China and India come online and their demand for oil and gas grows, the pressure that it places on the world’s access to oil and gas is huge.

One environmental attorney in the United States told me yesterday that the projections for outpacing production have been revised downwards. He stated that it would be possible in the next five to ten years to reach a situation where the cost of oil and gas rose tenfold.

Imagine a gas heating bill ten times higher than what you are paying now?

Even British Gas has said that North Sea gas reserves are shrinking. This is a big future problem for many.

The government has said that a 10% rise in fuel prices will force as many as 400,000 consumers back to living in fuel poverty. British Gas is raising gas and electricity prices 14%.

Through Myvesta.org.uk we are offering grants to help reduce fuel poverty. These grants will pay for upgrades in your home heating situation and you would be surprised how much money is available to you to help lower your energy costs. Contact Myvesta UK at 0800 1116 885.

Nothing like a little free fun to idle away moments of life in a numbing mindless distraction.

Unless you have time to kill do not click on the link I'm about to give you. You will find yourself curiously distracted by this site. Clue, put your mouse to work. You'll see what I mean. Whatever you do, don't click here. You've been warned.

Word on the street has it that eBay wants to buy Skype, the internet telephony company. Apparently the price under discussion is £1.6 billion. I wonder what kind of feedback rating you get when you purchase an item of that size.

Maybe eBay should just list Skype for sale on its site? Imagine the final value fee on a £1.6 billion.

So what is this Skype company and why is it such a hot commodity? Skype has emerged as a major player in the voice-over-internet protocol (VoIP) or internet telephony market. They currently offer their service for free and users can place calls all over the world. About 50 million people are registered to use their service.

Google and Microsoft both want into this market because they see the huge potential. Companies like Vonage and Packet 8 have already demonstrated the public acceptance for VoIP.

I wonder, if eBay successfully purchases Skype, will you have to bid to make a call?

It is unfair to communicate, in whatever form, with consumers in an unclear,
inaccurate or misleading manner.

Examples of unfair practices are as follows:

a. use of official looking documents intended or likely to mislead debtors as to
their status e.g. documents made to resemble court summonses

b. leaving out or presenting information in such a way that it creates a
false or misleading impression or exploits debtors' lack of knowledge

c. those contacting debtors not making clear who they are, who they work
for and what their role is

d. unnecessary and unhelpful use of legal and technical language

e. failing to provide debtors or creditors with information on status of
debts e.g. not providing requested balance statements.

We’ve heard about Freeview from Sky TV but now the BBC and ITV announce a new free satellite digital television provider. The new service, Freesat, will provide the range of BBC and ITV channels to viewers.

While over 60% of the UK households receive digital TV, according to Ofcom, more will need to get onboard before 2012 when the Government plans to start switching off the old analogue TV signals.

[More]

The Office of Fair Trading (OFT) is on the hunt for the international credit card association MasterCard for its policy of charging an interchange fee on consumer transactions. The claim by the OFT is that this policy creates an unfair tax on consumers, in violation of British and European competition laws.

If MasterCard is found guilty of this action then guess who will be next up in the chamber, that’s right, Visa. This is a big deal with a lot of money at risk. Don’t expect this to be resolved quickly.

It is estimated that the cost of this interchange tax passed onto consumers adds £500 million to the cost of goods sold.

The Revenue is putting a big push to find those that sell from the car boot and on eBay to gently, or not so gently, persuade them to pay the taxes they owe from these sales avenues.

According to the insurer Prudential, about £1.5 billion exchanged hands just at car-boot sales. We you add the selling activities of the 50,000 registered Britons on top of that, the sales volume is substantial.

A recent Timesonline article stated, "Millions of people are involved in the informal economy, making a "bit on the side" to subsidise their income — and if you are one of them the Revenue has you in its sights. You could face hefty penalties and interest charges, as well as a bill for unpaid tax."

Apparently, these investigatory techniques have Revenue investigators working more like private detectives rather than civil servants. They are actively on the hunt for people that may simply not be aware of the regulations or who have had a hobby turn into a business.

When it comes to ferreting out innocent citizens that are trading on eBay, Revenue investigators are using the feedback ratings to track back sales to catch you.

News out lately about growing insolvency and/or bankruptcy rate in the UK. Nobody should be surprised that the number of people in financial trouble will continue to increase as more and more people carry greater balances on all sorts of debt instruments like loans, credit cards, etc.

Insolvency is the by-product of debt but while figures will surely continue to rise, it will not become a major problem for creditors unless the percentage of people going bankrupt becomes a significant figure. The reality is that if you look at any creditors overall extended credit, those that file for bankruptcy protection are a very small percentage of that portfolio

The number of bankrupts will always sound like a big number because it is higher than before. But you have to ask yourself, the number is big but compared to what? It is like saying that the number 4 is alarming compared to 2 but not compared to 1,000,000.

For example, in the US the number of people that file bankruptcy is huge and always proclaimed as the highest number ever but when you look at the number of bankruptcy filers compared to the adult population that number is only about 6/10 of one per cent of eligible citizens that file for bankruptcy.

No doubt about it, bankruptcy is a bad thing to live though and on an individual level each person in that type of financial distress needs care, love, understanding and compassion. In that context, every person that files out of financial trauma is one to many.

For recent articles on the subject visit:

IC Wales

Times

Insolvency Statistics

Latest data out on credit card usage revels that women are more likely to use credit cards to pay for everyday items while men use them for luxuries and socialising.

In just the past three months there has been a 10% rise in the use of credit cards for routine purchases, says Morgan Stanley.

Total UK personal debt broke through the £1.1 trillion barrier (£1,100,000,000,000) in June 2005. This is 11 months since it broke through the £1 trillion barrier in July 2004.

Britain's personal debt is increasing by £1 million every four minutes.

At the end of July 2005 the total UK personal debt was £1,114bn. The growth rate remains strong at 10.7% for the previous 12 months. 2004 saw the largest single-year increase in debt (£116bn) since the Bank of England was founded in 1694.

Total secured lending on homes in July 2005 was £923.8bn.

Total consumer credit lending to individuals in July 2005 was £189.8bn.

Total lending in July 2005 grew by £7.7bn. Secured lending grew by £6.5bn in the month and consumer credit lending grew by £1.2bn in the month.

Average household debt in the UK is approximately £7,684 (excluding mortgages) and £45,085 including mortgages.

Average owed by every man, woman and child in the UK is approximately £18,611 (including mortgages).

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,072 per average UK adult at the end of July 2005. This figure translates into a 10% increase on the previous year's levels and a 45% increase since 2000.

The rapid increase in households’ borrowing has raised total debt to close to 150% of annualised aggregate post-tax income according to the Bank of England. They predict debt may continue to increase more rapidly than income over the next few years.

Since the start of 2005 in just over 5 years (based on figures available at 1st September 2005):

Total UK personal debt has increased by £505bn (83%) from £609bn to £1,114bn

Total secured lending on homes has increased by £430bn (87%) from £494bn to £924bn

Total consumer credit lending has increased by £75bn (65%) from £115bn to £190bn

Total credit card debt has increased by £24bn (75%) from £32bn to £56bn

Base Rate has decreased by 1.5% from 5.5% to its current rate of 4.5%

Average house price has increased by £86,311 (90%) from £96,340 to £182,651

Plastic card / Personal Loans: Total credit card debt in July 2005 increased to £55.87bn.

According to the BBA the proportion of credit card balances bearing interest was 75.4% in June 2005.

The average interest rate on credit card lending is currently 15.75%, around 11 percentage points above base rate.

2.4 million personal loan agreements totalling £13.5 billion, were entered into in the first quarter of 2005 (compared with 192,000 home loans during the same period); most were for cars (30%), home improvements incl. goods & furniture (24%) and debt consolidation (20%); the total balances outstanding on personal loans at the end of March 2005 was £93 billion; Personal loans are typically available between £1,000 and £25,000 with the average loan size currently at £5,500. The average interest rate on a personal loan of £7,000 stands at 7.9%.

According to the latest annual report from the APACS nearly two thirds of adults have a credit card and multiple card holding is a growing phenomenon in the UK. More than six in ten card holders held more than one card in 2004, with one in ten holding at least five.

Plastic cards in issue were 190m in 2004. This works out at an average of 4.1 plastic cards for every adult in the UK.

There are more credit cards in the UK than people according to the APACS. At the end of 2004 there were 74.3m credit and charge cards in the UK compared with around 59 million people in the country.

270 plastic transactions took place every second in the UK in 2004.

Servicing Debt: The figures for the second quarter 2005 show that the total number of individual insolvencies has increased by 36.8 per cent on the same period as last year and has risen to its highest level in 45 years. Bankruptcies have risen by 27.5 per cent and Individual Voluntary Arrangements (IVAs), an alternative to bankruptcy, have risen by 69.6 per cent when compared to the figures for the same period last year. The number of people who have become bankrupt or entered into an Individual Voluntary Arrangement (IVA) in England and Wales in the last 12 months is 54,227. Personal bankruptcies have broken the 40,000 barrier for a 12 month period for the first time.

According to the latest Department of Trade and Industry (DTI) Survey:

8% of Individuals have monthly repayments on unsecured borrowing > 25% of gross income

9% of Individuals have monthly repayments on secured and unsecured borrowing > 50% of gross income

5% of Individuals are finding their household’s debt repayments a ‘heavy burden’

4% of Individuals currently in arrears on at least one credit commitment/ domestic bill for more than 3 months

In December 2004, 1.2 million electricity and 1 million gas domestic customers were repaying debts to their gas or electricity supplier. The average debts were £161 and £149 respectively.

One in five people say they regularly avoid checking their bank balance because they are too scared to find out how much money they have according to Lloyds TSB.

The number of people looking for help managing their debts nearly doubled during May compared with the previous year. The Consumer Credit Counselling Service (CCCS) said a total of 25,000 people rang its helpline for advice during the month, up from 13,000 in May 2004. CCCS is the UK's largest debt charity, and last year received 170,000 calls on its helpline.

Money is the most common cause of arguments (44%), most respondents argued about spending priorities, particularly if not working according to Relate. Low income couples are more than twice as likely to argue over money issues than middle/high income families. Money related arguments are also more common if the couple have children under 10. More women than men were likely to argue over trust and secrecy issues related to money. Equal proportions of men and women argued about lack of money.

According to the FSA Financial Risk Outlook 2005 over a quarter of families have at least one credit card where the outstanding balance is not cleared each month, owing nearly £2,500 on average (14% higher than last year). Student Loan Company outstanding debt rose sharply, and is now 27% higher than in 2003.

The number of consumer debt problems dealt with by Citizens Advice Bureaux has risen by nearly three quarters over the last seven years, figures released today by the national problem-solving charity reveal. Consumer debt issues seen in bureaux stood at 706,700 in 2003/4 compared with 405,800 in 1996/7 – a rise of 74%. Bureaux dealt with nearly 1.1 million debt-related issues last year, a figure that also includes housing, utilities and benefits-related debts. But consumer debt is by far the biggest type of debt problem for which people come for help.

A quarter of those in debt are receiving treatment for stress, depression and anxiety from their GP.

Students / Youth: According to the National Union of Students (NUS) the estimated average student expenditure for academic year 2005/06 (39 weeks) is £10,493 in London and £8,810 outside London

One in three prospective students underestimates the cost of university and a quarter expect their unprepared parents to foot the bill, research showed today. The survey by the Association of Investment Trust Companies (AITC) showed young people expected their debt on graduation to stand at £7,208, while their parents estimated it would be £9,741. However, research by Barclays bank puts the average debt for those finishing university this year at £13,501.

One in four parents say they have adult children who are still living at home. Student debts and the difficulty in getting a foothold on the housing ladder are often blamed for offspring being unable to leave home. The study suggests one in seven parents with adult children have remortgaged or taken out a loan in an attempt to help. The modern-day dilemma has spawned the term kippers, standing for "kids in parents' pockets, eroding retirement saving".

Parents who give cash to their offspring to help them out if they are struggling financially could be doing more harm than good according to research by NatWest. Children who accept handouts from their parents are 25% more likely to go overdrawn than those who never accept help. Overall a third of young people said their parents had never taught them how to manage their money.

Housing: According to the Office of Deputy Prime Minister the average house price in the UK in June 2005 stood at £182,651 (£193,165 in England). UK annual house price inflation fell to 5.0 %. Annual house price inflation in London was 1.8%.

New research by Halifax shows that the cost of owning and running a house rose by 5% in 2003/04 to £5,948 which is more than four times the rate of CPI inflation, the government's preferred inflation measure. Rising council tax bills accounted for more than 30% of the total increase in housing costs in 2003/04, the single biggest increase during the year. There is a wide disparity in the cost of owning and running a home across the country. At £7,691 per year, London housing costs are the highest, 77% above annual housing costs in the North East, the cheapest region at £4,358 per year.

Halifax estimates the cost of owning and running a home rose by 6% in 2004/05 to £6,303, driven by higher mortgage servicing costs and rising council tax bills. Halifax forecasts a further 2% rise in annual housing costs to £6,406 in 2005/06 with a likely fall in mortgage servicing costs partially offsetting rising utility and council tax bills.

A report published in May by the National Housing Federation shows that average house prices in England rose to almost eight times the average salary last year. House prices have increased by 125% since 1997, but incomes have gone up by just 18% in the same period.

Housing data has been fairly consistent this month:

According to the National Association of Estate Agents (NAEA) the average time taken to sell a property between instruction and exchange of contracts now stands at 19 weeks.

The Council of Mortgage Lenders cut its forecasts for house price growth and now believes property values will fall 2% this year.

The average mortgage rate for June was 5.46%.

Based on repayment loans, in the UK, repayments as a percentage of income for first time buyers were 23.3% and for former owner occupiers, repayments represented 20.6% of income.

Rightmove said asking prices fell in August by a further 0.2% (£367). 118,000 new sellers adjust prices to undercut growing competition as unsold stocks rise

The average loan approval for house purchase in June was £132,700

Housing 1st Time Buyers: The average house price in the UK in June 2005 for first time buyers now stands at £150,356 which is an annual increase of 6.7%.

The Council of Mortgage Lenders (CML) estimate in July 2005 that the first time buyers average new loan is 87% of the value of the property and that they borrow 3.21 times their income (based on income figure provided by buyers in their mortgage application and may reflect one or more incomes).

First time buyers only accounted for 8% of all house sales in July. The number of first time buyers has tailed off over the last three months indicating that the positive effects of the stamp duty reductions were short lived.

First-time buyers need to save harder and for longer to get on the first rung of the property ladder, despite a cooling housing market. Typical first-time buyers saving 5% of their quarterly earnings now need to save for 4.75 years to afford the standard minimum 5% deposit on their first home. This is three months longer than just six months ago and nine months longer than a year ago, indicating how house prices have continued to outstrip incomes and savings rates.

High Street Spending: The RAC estimate the cost (including depreciation) to run a privately owned car from new for a period of three years with an annual mileage of 12,000 is £424/month for a 1201cc – 1500cc car and £627/month for a 2000cc car.

The average wedding costs around £16,000, yet 45% of couples - some 117,000 nationwide - have no financial planning to pay for the big day, a study by stockbrokers Brewin Dolphin Securities found.

Switch estimate that the average guest can expect to spend a total of £300 on all the expenses that a wedding entails (including £55 on the wedding gift, £90 on travel and accommodation, and close to £100 on a new outfit and £30 on alcohol, as they toast the success of the happy couple). This figure rises to £465 for those included in the pre-wedding celebrations as well as the day itself.

More people in Britain have two cars than no car at all, according to the National Statistics' annual social trends research. 29% of people have two or more cars while approximately 26% of people are without a car.

Money Education / Financial Literacy: According to Standard Life over half (57 per cent) of UK adults say they have not drawn up a will meaning they would die 'intestate'. A further 19 per cent have had a change in circumstances since drawing up their will, meaning it could now be out of date.

Nearly four out of five people do not know that APR refers to the interest and other costs of a loan, four in ten admit they do not understand mortgages or ISAs, and a third lack confidence in their financial affairs. These are some of the results of a survey conducted recently by Mori. One in five did not understand the concept of inflation. Nearly a third did not know that insurance products are designed to protect their owners from unforeseen events. Only 30 per cent could calculate four per cent interest on £2,000 over two years.

Savings: The majority of Britons would be unable to cope financially in the event of a minor household emergency according to the Alliance & Leicester. Just 28% said they had money put aside which could be used to replace household appliances, such as a cooker or fridge.

Long-term saving is an alien concept to two thirds (65%) of UK adults, according to research from IFA Promotion. And it’s not just the younger generation who live for today; a worrying three quarters (74%) of 30-50 year olds and nearly half of over 50s (43%) have never saved for anything for longer than a decade. 4.6 million UK adults (10%) admit they have never saved for anything at all, and this rises to a larger proportion (17%) of under 30s who have grown up with today’s credit culture. Saving seems to have fallen out of fashion in favour of instant consumer gratification.

Over eight in ten (81 per cent) Britons contributing to a pension - some 16.7 million nationwide - expect a pension shortfall when they retire, according to new research commissioned by Brewin Dolphin. On average, people are expecting a 30 per cent deficit in their pension pot.

Compiled monthly by Richard Talbot

A flat tax might actually be headed to the UK. Eleven countries in Europe have already adopted the concept including Hong Kong, Russia and Eastern Europe.

Germany is the first major Western country to be on the edge of adopting this simple approach to paying taxes. When Russia adopted a flat 13 pc tax rate, tax revenue doubled.

Imagine, a world without confusion and complexity when it comes to paying taxes. Not a bad idea is it?

The tragedy in New Orleans is substantial and devastating. Take it from someone that has visited New Orleans, many times. It’s not just property that has been destroyed, but an entire urban economy.

Water damages business, business lays off workers, workers can’t pay bills, workers lose home, and on and on. You can see there are more ripples after the storm than during.

The financial tragedy caused by Katrina in the past few days will change lives forever, many for the worse. If you feel it in your heart to give, please consider giving to one or all of the following organizations.

Modest Needs Foundation
Red Cross
United Way
Salvation Army

We’ve already given a substantial donation to help, can you please give something to help those in trouble and in need? Every little bit helps. Please help.