30/09/2007 by Dave.

New research from Halifax Financial Services shows that the total value of wealth held by all households in the UK has risen by 127% over the past ten years. Indeed, net household wealth i.e. following deduction for outstanding debt balances - increased from £2.795 trillion at the end of 1996 to £6.336 trillion a decade later. Over the same period, retail prices increased by 30% and average earnings by 52%.

Meanwhile, the total value of household assets rose by £4.343 trillion between 1996 and 2006 from £3.284 trillion to £7.627 trillion. And household debt increased by £802 billion from £489 billion to £1.292 trillion over the period.

The substantial rise in house prices has been a key factor driving the increase in household wealth over the past decade. Housing equity (the value of residential properties minus mortgage debt outstanding) increased by £1.915 trillion (244%) from £787 billion in 1996 to £2.702 trillion in 2006. Net financial assets (the value of financial holdings minus the value of outstanding consumer credit loans) rose by £1.625 trillion from £2.009 trillion to £3.634 trillion.

Housing equity now forms 43% of households’ total net wealth compared to 28% in 1996. Mirroring this rise, holdings of net financial assets fell from 72% to 57% between 1996 and 2006.

Elsewhere, balances of deposit based liquid savings have doubled in the past decade to £960 billion at the end of 2006 - Halifax expecting this total to exceed £1 trillion by the end of 2007. Deposit based savings account for around one quarter of total financial wealth held by households. Total financial savings however are predicted to increase to over £4 trillion by the end of the year. This is more than three times the level of household debt.

Pensions and life assurance policy funds represent by far the biggest proportion of households’ savings, accounting for 55% at the end of 2006. A further 15% are held directly in equities.

Equities’ share of total financial assets has fallen to 15% from 24% at the height of the dotcom boom in 1999. Despite all the talk of popular capitalism, households have been net sellers of stocks and shares, having sold more than they purchased since 1996.

The fortunes of the liquid savings market are closely linked to the equity markets. For example, when stock markets were falling, such as after the dotcom bubble burst in the early 2000s, the liquid savings markets were given a boost as investors sought less risky investment options. Thereforce, holdings of deposit based savings accounts are likely to be boosted by the recent volatility in share prices as financial service providers look to attract funds through offering higher savings rates in the wake of the recent turmoil in the credit markets.

Martin Ellis, chief economist at Halifax Financial Services, comments: “The financial position of households in total has strengthened substantially over the past decade. Whilst much has been said about the rise in debt, it is important to note that the value of households’ assets has risen at a faster pace.

“Housing has played an important part in increasing wealth, but there has also been a significant rise in the value of investments in financial assets in the last ten years.”

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28/09/2007 by Dave.

Despite weakness in the main housing market, buy-to-let remains strong, with rental yields stable, overall returns steady and landlords adding to their portfolios, according to Paragon’s latest Buy-to-Let Index.

Rental yields remain firm at 6%, while the total annual return average has risen to 10.3% from 9.4% three months ago. Landlords continue to buy in softer market conditions, in response to growing tenant demand and rising rents.

The specialist mortgage lender notes that buy-to-let is benefiting from growing tenant demand as potential house buyers are less able or willing to take on the commitment of a mortgage for home purchase in an environment that has seen 5 base rate rises since August 2006. Indeed, recent figures from the Royal Institution of Chartered Surveyors showed tenant demand for rented property is at record levels.

Meanwhile, lender support for investors acquiring new properties or remortgaging their existing portfolios remains strong - recognition perhaps of the superior credit performance of buy-to-let assets as compared with the mortgage market as a whole, says Paragon.

Elsewhere, latest CML data shows buy-to-let arrears in excess of 3 months at 0.63%, compared with 1.06% for the market overall. Paragon says its own arrears level is well below that of its buy-to-let peers and the average loan to value for a Paragon landlord is less than 40%.

Nigel Terrington of Paragon says that the current housing market is in many respects a positive signal for buy-to-let, which has certain counter-cyclical characteristics relative to the mainstream market. Tenant demand remains buoyant and investors continue to invest.

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26/09/2007 by Dave.

Debt consolidation and car finance are some of the main reasons that people consider secured loans, according to one expert.Steve Baillie, head of loans at Sainsbury’s Bank said that although many people consider loans for home improvements and financing a vehicle, debt consolidation remained the “number one reason”.

He added that over 40 per cent of people were now opting for loans, such as secured or homeowner loans, for debt consolidation and that people should not be afraid to shop around for the best deals.

He warned however, that although many people would opt for debt consolidation with loans, consumers should look at their long-term finances.

“If you are going down the consolidation route you have to be strict with yourself so that you’re not just deferring the problem for future months and years,” he said

A recent study conducted by Credit Action revealed that the UK average for consumer borrowing through credit cards, motor and retail finance deals, overdrafts and unsecured personal loans per average at the end of July this year had reached £4,515.

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24/09/2007 by Dave.

Rising job security is helping to maintain consumer confidence, despite the ongoing credit market turmoil, according to the latest Consumer Barometer from Lloyds TSB Corporate Markets.

The survey, conducted 10 days ago, found consumers feel more secure in their jobs than they have done for two years. This was demonstrated by a rise of the balance of respondents feeling more rather than less secure in their jobs to 2%, a level not been seen since July 2005.

At the same time, the balance of those regarding UK job prospects as better rather than worse than a year ago rose to -17% which, although negative, is equal to the highest reading since December 2005. These findings were matched by a rise in September’s official employment figures.

Confidence was also underpinned by an increasing consumer belief that interest rates may have peaked, on the back of the Bank of England’s unanimous decision to maintain interest rates at 5.75% in September.

While 75% of consumers still believe that interest rates will rise, the balance of those predicting higher rather than lower interest rates in a year’s time fell by 2% in September to 67%, the lowest level since July 2006.

Yet, despite improvements in sentiment, consumers still believe that prices will be higher in 12 months time with the balance rising to a 17 month high of 78% in September.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “The recipe for consumer confidence is a secure job and ability to pay the bills and, despite the credit market turmoil, we have seen increasing optimism in both these areas in September.

“Strong official employment data, coupled with the rise in job security, has gone a long way in keeping confidence afloat. Meanwhile, the decision to maintain interest rates in September meant consumers will not, for the time being, see further increases to their mortgage payments and other debts.”

Williams adds however that the outlook for the rest of the year and 2008 is less encouraging. With signs of weakness in the housing market beginning to materialise, it is likely that we may see confidence beginning to deteriorate in coming months.

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23/09/2007 by Dave.

Research from insurance outfit, NFU Mutual, reveals that 23% of people have never reviewed their level of home contents cover. And with an increase in the number of households having plasma screen televisions and state of the art electronic equipment, this could mean that some households are in fact now under insured.

The research also showed that there are a number of different reasons why people haven’t been checking that they have adequate cover. Indeed, 22% find it simpler to just keep the same level of cover year after year and a surprising 18% didn’t know that they should regularly check their level of cover.

Not surprisingly, there are some significant regional differences when it comes to home insurance. Worryingly, 30% of Londoners have opted out of having home insurance completely, so wouldn’t be covered in the event of theft or weather damage.

Those in the South West, on the other hand, are much more sensible, with 88% of those surveyed saying they do have home contents insurance.

When it comes to checking whether they have the right sum insured, those in the North East are least likely to check (28%) but their neighbours in the North West fare better with 78% having reviewed in the past. However, it’s not all bad news as of those who have reviewed, 63% did so annually at the point of renewal and 19% did so when they changed their provider.

Laura Wood at NFU Mutual says, “As well as annually, other good times to review your level of cover could be when you make a large purchase, move house, begin living with someone or after a milestone event like a wedding. All of these things can make a difference to your sum insured.”

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22/09/2007 by Dave.

The average 2.4 family is a dying breed, with 63% claiming to be outside of the norm, according to new research from mortgage lender Birmingham Midshires.

At a time of unprecedented growth in the number of single occupancy households; and over 18,000 civil partnerships having taken place last year, Birmingham Midshires has explored opinions of what being average means in Britain today as part of its Not So Average Joe campaign, which champions the needs of people with non-traditional lifestyles.

Extended families living under one roof and single parents, as epitomised by The Slaters in EastEnders, are more likely to exist than the 2.4 set-up of the traditional family unit.

Wales is home to the most individuals, with 67% of people claiming not to be average, whereas Yorkshire is the average centre of the UK, with 39% of people in the region putting themselves in the mainstream.

When people who don’t conform to the norm were asked how they felt about being individuals, they described themselves as happy to be different (63%), proud of their individuality (56%) and empowered (49%). Meanwhile, those who describe themselves as average say their normal status makes them feel accepted (54%), safe (50%) and included (44%).

The lender then asked the two groups to describe their perception of people that fall into the opposite category to themselves. Those who class themselves as individuals have a negative perception of their average counterparts, describing them as unimaginative (56%), safe (48%) and not very brave (37%), while just 3% thought average people were lucky to fit in.

Conversely, many people who think of themselves as average have a positive opinion of people who are individuals and may even envy them. Although one in two (54%) say individuals are attention seekers, they are also described as go-getters (31%) and brave (30%).

Tim Hague of BM makes the point that many mainstream mortgage providers still work on the model of having married applicants with 2.4 children but, as the research shows, the majority of people are no longer average.

Not everyone is the same, and therefore no one mortgage deal is right for everyone.

“We would urge people whether they believe themselves to be average or unique - to seek the advice of a regulated mortgage intermediary to ensure they get a mortgage deal that is right for them.”

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20/09/2007 by Dave.

With stamp duty, mortgage fees, moving-in costs and essential household bills, the average new homeowner should expect to spend over £11K in the first year alone, according to lender, GE Money Home Lending.

Homebuying costs such as stamp duty, mortgage and solicitor’s fees, surveys and checks, cost about £3K for the average buyer, whilst moving in and setting up home costs are even more with the average new home costing almost £5K once bought.

Aside from mortgage costs, essential bills equate to approximately £3.5K per year on an average UK property. However, according to the research, carried out on behalf of GE Money by the Future Foundation, the average prospective homebuyer expects to spend £3,488 more than this on costs such as stamp duty fees, furnishings and appliances, as well as the ongoing essential bills and services.

Stamp duty is the biggest setback in terms of getting on the ladder, costing the average buyer back some £1,200. Solicitor’s fees are also a major burden and potential borrowers should expect to spend close to £900 on a solicitor and close to £600 on mortgage arrangement fees and surveys.

The costs associated with buying one’s first home do not, of course, rest at the house purchase itself. Buyers must also take into account the products and services needed to make the home both a functional and a desirable place in which to live. Although these costs are often ongoing, the research suggests buyers need to find a further £4,721 to cover the cost of moving and equipping the new home. Again prospective homebuyers overestimate these costs by over £1,300.

Meanwhile, mortgage repayments have become a hefty monthly outgoing for home-owners, with the average first time buyer now having to dedicate 22% of their annual income to steadily pay off their mortgage loan. However, first time buyers must also factor into their monthly expenses the cost of running a household, in line with the lifestyle by which they wish to sustain.

The total monthly cost of running a household is £285 with the largest monthly outgoing being council tax followed by utility bills. Together, these two costs account for a sizeable 59% of a buyer’s monthly household running costs, with the remainder going towards more lifestyle expenses such as internet access and digital TV.

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18/09/2007 by Dave.

Homeowners who don’t search for a better mortgage at the end of their fixed rate deal could find themselves facing higher repayments, if they stick to the lender’s standard variable rate (SRV).

If they continued on these increased payments for two years then households would incur costs of around £2,600 according to research from moneysupermarket.com.

Louise Cuming, head of mortgages at moneysupermarket.com, said: “This shows how vital it is for homeowners to find the most competitive product when their fixed rate deal comes to an end. Providers have long played on the fact that homeowners can be slow to react when their deal ends.

“People should bear in mind for just a little work comparing mortgages, the rewards can be huge. Anyone coming to the end of a fixed term product should be looking for their next deal now and not leaving it until they have languished on a SVR for a while. lenders will sting you for laziness.”

The research found that one in every five homeowners are on a SVR and she said it was “crucial” for people to look for a better deal.

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17/09/2007 by Dave.

Hips, which were launched in August and now extend to all properties with three or more bedrooms, are a collection of information that the homeowner must supply when selling their property.

However, a survey by Abbey Mortgages has found that four million people plan to market their home as a two-bedroom purchase to avoid the need for a Hip, with a popular choice being to disguise the third as a study.

The news may also be pertinent to home improvement loan customers thinking of renovating part of their house.

And while disguising a third bedroom may seem like an effective way to avoid the Hip requirement, head of mortgages at Abbey Nici Audhlam-Gardner explained why it is not such a good idea.

“By remarketing your home as a two-bedroom house with a study, you’ll become invisible to thousands of potential buyers that are searching online,” she said.

“You might also make your property seem overvalued.”

Hips were originally planned to become compulsory in June but this was later pushed back to August.

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15/09/2007 by Dave.

The process for obtaining loans in the past six months has “tightened a lot” due to bad debt provisions made by high street banks, it has been claimed.

James Ketchell, a spokesperson for the Consumer Credit Counselling Service (CCCS), said that the UK loans market has become stricter with regards to the number of people given credit.

He particularly noted that the credit card industry has tightened up its criteria lately due to bad debt issues, citing one company as an example.

“Barclaycard has a very high rejection rate for any new customers that want to take out a Barclaycard,” Mr Ketchell explained. “Lenders are being a lot more particular in the way that they lend.”

The news may be useful for those considering a debt consolidation loan, which can often be a more effective way of repaying debt than with a credit card.

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