Help My Debt

According to Alliance & Leicester Mortgages, London will remain the most lucrative property investment region in the UK in 2008. Meanwhile, Scotland and the north of England are expected to see the most rapid expansion.

However, traditional homebuyers will not be the ones to benefit, research revealed. Instead, it will be the professional landlords in the buy-to-let market who gain the most. Their large portfolios make them the most financially secure, with some even able to put a portion of their rental income aside for personal use.

In fact, almost 50% of landlords who owned 20 or more properties earned enough from their rental properties to supplement their primary savings. Of the other half, nearly 40% made enough money from their property portfolios that they were able to rely on it as their main source of income.

Rental properties in central London once again proved to be the most successful. Yields in the capital city can be up to four times higher than amounts generated from properties in the south-east of England.

Alliance & Leicester’s results further predicted that Scotland would see an increase of 5% in rental yields in 2008, with the north of England close behind at 4%.

Overall, 71% of those surveyed expected good results in the new year.

Jeremy Claridge, head of specialist mortgages at Alliance & Leicester, commented on the situation: “It is encouraging that buy-to-let landlords indicate they are feeling buoyant about the outlook for 2008.

“Regardless of a tough financial year, it is clear the buy-to-let property market is still healthy for longstanding landlords, especially for those in the south-east of the country.”

Although a slowing housing market has encouraged rental growth, the demand has fallen away from flats due to oversupply, the Royal Institution of Chartered Surveyors (Rics) revealed today. 

The latest data from the Rics quarterly Letting Survey shows that the demand for houses has risen 25.2% since the last quarter, while the demand for flats has dropped by 20%.

This is good news for landlords, who are riding the wave of demand in relative comfort, with gains from rising rents offsetting the erratic market.

However, the survey also warned of some uncertainty for landlords in the future as tightening lending criteria and successive interest rate hikes begin to hit the buy-to-let market.

Meanwhile, those hoping to invest in real estate are increasingly discouraged by the lack of incentives and the unstable property market. 

Jeremy Leaf, spokesman for Rics, commented: “With rents still on the increase, many would-be buyers will find accessing the housing market even more difficult as they struggle to raise the capital for that first important purchase.”

The Bank of England’s recent cuts have led to rates being reduced on two more mortgages.

Standard Life Bank will lower its Freestyle Standard Variable rates by a quarter of a percent to 7.21% as of January 1, 2008.

HSBC is also planning to reduce its variable mortgage rates by a quarter percent - from 7% to 6.75% as of December 24, 2007.

On December 6, following the Bank of England’s decision to cut the interest rate, HSBC was one of the first lenders to react - immediately reducing the rate of its tracker mortgage. The bank’s newest reduction puts its variable mortgage rate at least 0.24% lower than most of its high street rivals.

Financial comparison website Moneyfacts.co.uk reported last week that 31 providers had implemented changes to their interest rates following the cut. Twenty-five reduced rates by more than 0.25%.

However, analyst Lisa Taylor criticised the response of the banks, saying current changes compared unfavourably with reactions in past years.

The last time rates fell back in August 2005, 46 lenders announced changes to their rates.

According to mortgage broker John Charcol, tracker mortgages are better value than fixed-rate contracts because borrowers are not permanently committed to lender rates. 

Ray Boulger, senior technical manager for John Charcol, claims trackers have “really come into their own” following the Bank of England’s recent cut to interest rates. With only a few lenders lowering their rates accordingly, a variable mortgage provides a lot more protection. 

Boulger noted: “We have seen over the last few years there is always a proportion of lenders who do not move their rate in line with the Bank’s rate.” 

“Most of the time a tracker mortgage is a quarter of a [percentage point] higher than a fixed rate mortgage, providing the starting point is good.”

Looking ahead, Boulger predicts that trackers will continue to sell strongly in the near year despite some lenders reducing the number of mortgages in their portfolio due to the credit squeeze.  Lenders are not expected to place restrictions on them as base rates fall. 

Boulger does not expect there to be a significant rise in the number of people switching mortgages in 2008. 

He added: “The reality of people deciding to look at their mortgage product is based on whether the value of a discount mortgage is cheaper than a tracker mortgage or vice versa.”

Despite a recent crackdown on mortgage exit fees, customers are being warned to be careful when changing lenders. 

Mortgage website mform.co.uk has completed research showing that the average cost of closing a loan remains about £150. This is regardless of efforts made by the Financial Services Authority (FSA) in August to make the process clearer to customers.

The website’s analysis covers all major lenders. Although a few such as Royal Bank of Scotland group, Standard Life Bank, Lloyds TSB and Cheltenham & Gloucester have abandoned fee schemes, most continue to charge over £100. 

According to mform’s report, many mortgage companies were not making charges clear on their websites. 

FSA is still pushing to make lending terms more transparent and has ruled that next year customers may reclaim exit fees if they paid more than the amount agreed to in the original terms and conditions of their contract.

Francis Ghiloni of mform praised lenders who have eliminated exit fees and attributed the improving situation to the FSA’s work. 

“They should be considered at the start rather than come as a nasty surprise when it’s time to move on,” Mr. Ghiloni said, referring to the hidden fees many borrowers encounter when trying to wrap up their mortgages. 

Borrowers are finally waking up to the fact that such charges are part of the price of the mortgage deal - they don’t relate to any administration costs. 

Improvements spearheaded by the FSA would be especially helpful to people who regularly remortgage and move from lender to lender.

Mr. Ghiloni advised borrowers to learn what they could at the outset of their loan and to “take into account exit fees as well as application fees and other costs which will have an impact on the true cost of their loan.”

According to credit card provider Egg, late holiday shoppers are set to exceed their budgets by an average of 39%, or £150 per person. Egg research shows that a frantic rush for gifts will send around 4 millions Britons to the shops in the last week before Christmas. More than 800,000 of these will leave their spending to Christmas Eve.  In total, holiday shoppers are expected to overspend their budgets by a collective £594 million.

Poor planning is the major culprit, says Alison Wright, Chief Marketing Officer at Egg. “Each year we get 12 months advance warning that Christmas is coming, but still often resort to last minute panic buying. Consumers need to try to find ways to drive down the overall cost of Christmas - one way seems to be by avoiding those last minute shopping sprees, when lack of choice and panic buying are rife.”

Egg research also found that, despite popular belief, there is no difference between men and women when it comes to last minute panic buying. Women are just as bad as men about failing to plan ahead for the holidays.

The ongoing situation in the credit card sector is convincing consumers to withhold their plastic in favour of funding their holiday purchases with cash instead. 

According to figures released yesterday by cash machine network operator LINK, daily ATM withdrawals for the first ten days of December are up by 7.1% over the last month - previous years’ figures have been closer to 5%. 

This trend goes against predictions made last month by payments association APACS. The company predicted an increase of £53 billion or 4% in total festive retail spending over last year’s figures, which it claimed would be driven by increased card spending, accompanied by a 5% fall in cash spending - dropping from £19.8 billion in 2006 to £18.9 billion in 2007.   

The drop in credit card spending appears to be confirmed by overall retail spending figures released yesterday. Credit card giant MasterCard says shops recorded weak sales for November, causing a decline in the annual retail sales growth rate from 4.5% to 4%.

Christmas credit card debt continues to be a problem for heavy spenders. 

According to new research, one in five Britons will still be paying for their Christmas spending in June. 

One in ten will be paying off their debts in September, and a further 3.9 percent will be celebrating Christmas next year with a hole still in their pocketbooks from 12 months ago. 

Figures released last week by MoneyExpert.com supported the stats, showing 4.4 million people are still paying off credit card bills from last Christmas.

“It never ceases to amaze me how Christmas continues to sneak up on people and how ill-prepared financially they are to deal with it,” said Cesarina Holm-Kander, presenter of Channel 4’s Your Money or Your Wife and speaker at this year’s Your Money Matters Show.

“To those who are spending without thinking about the bigger picture this Christmas, I would like to offer a little reminder - a credit card binge is not just for Christmas, it’s a legacy that could be with you for most of next year, too.”

Despite the increasingly high cost of gifts expected over the holidays, only 50% of Brits put aside any savings in preparation for Christmas. 

The biggest savers are in the north-east, but perversely these are the same people who are most likely to get into debt this holiday period.

Unsurprisingly, London is home to the most aggressive festive spenders in the country, with one in five shoppers dishing out more than £1000 in holiday bills.  Contrast with East Anglia, where frugal spenders average half that - spending £500.

Overall, £53 billion is expected to hit retail counters over the Christmas period - £11.7 billion of that on plastic.

Travelling abroad this Christmas could cost you more than you think. Many credit card companies charge an extra 2.75% in commission for purchases made overseas – a fact most shoppers are unaware of, according the Post Office.

The Post Office is warning consumers to be aware of “hidden” fees. With holiday travel a favourite pastime for thousands of Britons, many people could be hit hard over the Christmas period. The first they will learn of it is when they see their credit card bills in the near year – too late to do anything about it.

Consumers can avoid unnecessary stress by doing all their holiday shopping at home. This advice is strongly voiced by Post Office Lending Director Gary Fitton: “For many people, going abroad for Christmas is a great way to relax and not have to worry about cooking Christmas dinner. However, many people could be returning from their Christmas break with a lot more than just ‘memories and mementos’ due to hidden card charges.

“Regardless of where people are travelling this Christmas, we are urging holidaymakers to ensure the only baggage they return with is the luggage they are carrying and not unnecessary card charges.”

The top three destinations this year are Spain, the US and France, making up 17%, 8% and 6% respectively of the total travelling trend. According to the Post Office, 49% of these festive voyagers will be pulling out their credit cards while on vacation.

Research firm Abbey has released poll data revealing that 46% of women and 41% of men are ‘financially overweight’. Their spending habits are irresponsible and lazier than necessary, which can lead to excessive debt and unwanted fees if left unattended. 

Just 1% of consumers scored ‘financially fit’ on Abbey’s survey when it came to banking habits, credit card usage and shopping around for the best deals. 

The survey tracked financial fitness on a percentage scale, with zero indicating an athletic level of financial discipline, and 100 showing ‘financial obesity’. 

These worrying trends are borne out most clearly during the Christmas holiday shopping rush.

Sue Hayes, Director at Abbey, offers this advice: “We encourage people to review the financial products they hold and to shop around to ensure that they are getting the most competitive deals available. Like exercise, a financial workout can take a bit of effort but for most people the rewards are well worth the exertion.”

Overall, the study found Wales to have the fittest average population, recording 42% of people overweight, while northern England showed the most dramatic statistics, with 46% suffering some degree of financial weight crisis.