The Government has pledged £12m for a large-scale trial of a free personal finance service that will offer general advice on issues such as managing debt, budgeting, retirement planning and understanding financial jargon on a two-year trial. The “money guidance” pilot project was the main recommendation of the final report of a 14 month long work led by Otto Thoresen, chief executive of life insurer AEGON UK which proposed an impartial, sales-free, personalised advice service to help people better manage their money. The report also claimed that consumers could be more than £15bn better off if they had access to financial guidance over the next 50 years. Over the same period, it could save the government some £6bn through reductions in Pension Credit payments and other benefits and also make the financial services industry £5bn because they would benefit from lower levels of bad debt, a better relationship with consumers and a reduction in advertising and selling costs. The recommendations come at a time when Britons have raked up a record UK personal debt of £1.4 trillion and are increasingly feeling the effects of the credit crunch.
Posts Tagged ‘Credit crunch’
Free financial advice for thousands
Monday, March 3rd, 2008Last lender pulls 125% mortgage deal
Saturday, February 23rd, 2008Lenders have completely pulled out of the 125% mortgage market as the credit crunch continues to bite. Birmingham Midshires Solutions said it was pulling its version of the product, which will lend people up to 125% of their property’s value, due to market conditions. The group had been the only provider to continue offering the deals after Alliance & Leicester, Abbey, Northern Rock, Coventry Building Society and Godiva Mortgages all said they were scrapping them earlier this week. Faced with only limited availability of funds, lenders are keen to concentrate on less risky mortgages, and the problem has been compounded by fears that house prices could fall. There are now just two mortgage providers who will advance more than 100% of a property’s value, with Scottish Widows offering loans of 110% to professionals only, while Dunfermline Building Society is offering 110% to professionals and 105% to graduates but only in Scotland.
Northern Rock nationalised
Sunday, February 17th, 2008The government decided to nationalise Northern Rock today, abandoning a five-month attempt to find a private sector buyer for the ailing bank. “In the current market conditions we do not believe the two proposals deliver sufficient value for money for the taxpayer,” Finance minister Alistair Darling told a news conference. “So the government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership.” The government will put forward legislation on tomorrow to take the bank into public hands — the first major nationalisation in Britain since the 1970s — and trading in Northern Rock shares was suspended.
Egg crackdown on 160,000 customers
Monday, February 4th, 2008Egg annouced it was forced to make an unprecedented move to curb overspending after a review revealed 160,000 customers had a ‘higher than acceptable risk profile’. The cardholders received letters within days warning them their Egg credit cards will stop working in 35 days’ time. Those with a higher risk would typically mean people who spend over their credit limit or fail to make minimum repayments. However, Egg’s actions backfired when hundreds of those affected say they settle their debts every month and incur none of the bank charges which make money for Egg. But the lender defended the move, saying the ‘risk review’ was carried out after the banking giant Citigroup bought Egg last year and the decision was not prompted by the credit crunch. The Office of Fair Trading has yet to receive a complaint. But sources indicated an investigation would be launched within days if a sufficient response is received from customers.
How will banks recoup their dented profit margins?
Tuesday, December 18th, 2007The banks always find various ways to recoup losses through their customers. When credit card charges had to be reduced from as high as £39 to £12, some responded by tagging on an annual fee, some have already started fining customers who are in credit and other like RBS reduced the interest free period their customers have before payments are due. And there have been many others setbacks; mortgage exit fees, miss-sold Payment Protection Insurance (PPI), various bank account charges, and now the US sub-prime mortgage crisis. They have already started by increasing mortgage arrangement fees to as high as 4% of the loan. The banks are very shrewd in finding various ways to pass the buck!
The debt storm is brewing for 2008
Sunday, December 16th, 2007With 1.4 million borrowers coming off their cheap 2-year fixed rate deals in 2008, they would be in for a shock with higher mortgage costs and tightened lending criteria. Borrowers with poor credit history looking for a new deal would find it even harder; Lenders are now asking for 25% equity as opposed to 15% before the credit crisis hit the financial markets. To ensure you get a good deal, first talk to your existing lender so you have something to compare other offers against. Also be sure to take into account the cost of switching lenders; valuation and solicitor’s fees. The easiest comparisons are with deals from other lenders that would pay these costs for you or just obviously much lower rate without extended tie in.
Northern Rock kicked out of FTSE 100
Friday, December 14th, 2007In the UK, Northern Rock’s shares (Britain’s fifth largest mortgage bank) have been the worst hit by the credit crunch dropping from £12 early in the year to less the £1. It will be relgated later this month to the bottom of FTSE 250 index for medium sized companies. Just narrowly missing the index that tracks small sized companies.
Central banks try to regain control
Friday, December 14th, 2007Five of the world’s leading central banks including the Bank of England plan to inject £54bn of cash loans into the money markets. They hope this would ease the interbank rates (the rate used by banks to lend each other money) which has remained stubbornly high despite the quarter rate cut last week. Although some analysts believe this will result in an immediate reduction in the interbank rates (and filtering through to mortgages/loans) others however, warn that it would take time for lender to trust each other again. Probably not while there are still huge bank losses still to be realised from the subprime crisis for some months to come. So will this gesture make a difference or has it come too late? We’ll have to wait and see.
