Tuesday, 30 October 2007

Mortgage Repossessions Set to Soar - Guardian

From Guardian Unlimited 29th October 2007

The number of repossessed homes looks set to soar next year to levels not seen since the 1990s house price crash, it was claimed today.

At the same time, house prices will edge ahead by just 1% in 2008 and property sales will fall by 15%, according to the Council of Mortgage Lenders (CML).

The group expects the number of repossessions to rise by 50% during the year, rising from 30,000 this year to 45,000 in 2008.It said this would be the highest level of repossessions seen since the 1990s, although it added the number of mortgages had increased by 1.5m since then, and the level of repossessions still represented just 0.38% of all home loans.

The number of people who are in arrears of at least three months is also set to increase, with 170,000 people expected to have problems keeping up with their mortgage repayments next year, compared with an estimated 145,000 this year.

The CML said this was because the five interest rate rises since summer 2006 were beginning to take their toll. This would be especially true for the 1.4 million people whose fixed rate deals, taken out when interest rates were much lower, run out next year.

But it added that additional pressure would be put on households as a result of a tightening in lending criteria sparked by the global credit crunch. It said remortgaging options available to some borrowers, such as those borrowing high income multiples, people with high loan-to-value ratios and those with adverse credit histories, would also reduce.

Crunch to intensify

The group said the credit crunch would exacerbate trends already emerging in the market. It predicts house price growth will fall from 7% this year to just 1% next year, while property sales will drop from 1.17m to just over 1m. At the same time, total mortgage advances will edge lower to £340bn, compared with £360bn this year, although the amount lent will remain above 2005 levels.

Net lending, which strips out redemptions and repayments, will also decrease, seeing a drop to £90bn from £105bn. But the CML added that it did expect interest rates to fall, and has pencilled in a 0.25% cut before the end of this year, with rates reducing by a further 0.5% to 5% by the end of next year.

CML director general, Michael Coogan, said: "The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago.

"Luckily, the credit crunch occurred at a time when the UK economy was robust, but even so the effects on the financial sector are significant, and the mortgage market is not immune from them.

"We now expect a slower mortgage market next year, although by no means a stagnant one," he added.

The group said the impact of the credit crunch made forecasting an even more uncertain process than usual, and as a result it was only issuing forecasts until the end of 2008, and would not issue its predictions for 2009 until the first quarter of next year.

Wednesday, 24 October 2007

Responsible Lending: Proposals for Action

Debt Campaigners Declare October 23rd ‘Responsible Lending Day’ and call on Government to raise its game to tackle UK Debt Crisis.

Debt on our Doorstep, the campaign for fair and responsible financial services, has declared October 23rd to be the UK’s ‘Responsible Lending Day’ and called on Government to raise its game to tackle irresponsible lending and Britain’s growing debt problem.

The day will see the Westminster launch of Debt on our Doorstep’s 17 page report into debt in the UK which sets out proposals for action in 8 areas including calls for:

Banks to disclose how they serve low income communities and meet the need for affordable credit

Regulation of the credit card industry to be tightened to ensure they take proper account of a borrower’s ability to repay and for a ban on unsolicited increases in credit limits and credit card cheques

Longer term funding for projects to tackle illegal money lending and for the introduction of a criminal offence of usury.

Lenders to also advertise APRs of agreements with payment protection insurance included so that borrowers can see the true cost involved

Calling on Government to draw up a properly resourced national strategy for debt advice provision

Launching the report, Damon Gibbons, Chair of Debt on our Doorstep, commented:

“The Government has so far underplayed the role of irresponsible lending in causing debt, and continues to allow the industry to target high cost credit at people on low incomes as a means of increasing profit.

We are now seeking some fundamental changes to the UK’s credit society – asking banks and mainstream lenders to prove that they are engaging with low income communities and can offer them the products they need. If the Government is willing to pump money into the financial services sector to offset the impact of the ‘credit crunch’ then it must start to seek better services for people in return.”

The launch takes place at 5pm in Committee Room 5 of the main building of the Houses of Parliament with the following speakers:

Prof Iain Ramsay, University of Kent Law School (Chair)
Damon Gibbons, Debt on our Doorstep
Mark Lazarowicz MP (Lab) & Chair, All Party Parliamentary Group on Debt
Ed Vaizey MP (Conservative)
Adam Price MP (Plaid Cymru)
Danny Alexander MP (Lib Dem)
Anne Pettifor, Advocacy International and author of 'The Coming First World Debt Crisis'

The first Responsible Lending Day also features a British Bankers Association conference in London on these issues, but which is taking place at a cost of £400 per head and has minimal involvement from consumer groups.

A full copy of the proposals for action are available from: http://www.debt-on-our-doorstep.com/files/responsible%20credit%20proposals%20for%20action.pdf

Wednesday, 17 October 2007

One million householders use credit cards to pay mortgages or rent

More than a million householders have used credit cards to pay their mortgage or rent in the past 12 months, according to a new survey published today by Shelter in its magazine ROOF.

In a desperate attempt to stay on the housing ladder a growing number of young people, including first-time buyers, are turning to credit cards, with almost seven and a half per cent of people aged 18 and 24 saying they had done so in the last 12 months.

The survey, conducted by YouGov for ROOF magazine, polled two thousand households following the Northern Rock crisis. Six percent of respondents who pay mortgages or rent said they had relied on a credit card to make payments, equating to a national figure of more than a million householders.

Shelter chief executive Adam Sampson described the results as shocking, and added: “The number of people hit by the credit crunch, interest rate hikes and unaffordable housing costs are rapidly rising.

“For many people trying to keep a roof over their head desperation is driving them to short-term, high-cost borrowing. Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction and repossession.”

Most credit card companies charge interest at between 15 and 18 per cent – nearly 50 per cent above even the highest mortgage interest rates of 11 or 12 per cent in the sub prime sector.

But for people with poor credit ratings the card companies can charge interest rates of up to 40 per cent, a staggering five times above the average mortgage rate.

Stuart Freeman, director of services at Community Housing Advice Service, which offers advice on housing and debt, said: “There is such pressure on people’s budgets that paying your mortgage or rent by credit card, then paying that card with another card is becoming the norm for many people.

“It leads to an ever spiralling maze of debt, and eventually the credit simply runs out.”

The poll also found the practice more prevalent in men than women with seven per cent of men admitting to using credit cards compared to six per cent of women.

The situation is worst in the Midlands and Wales with nine per cent – almost one in ten – households in the region using credit cards to keep a roof over their head. Northern England and London were closer to the national average at six per cent whilst Scotland polled at just three per cent.

Part of the problem stems from irresponsible mortgage lending allowing people to overstretch themselves financially, forcing them to use credit cards to stay afloat. However Heather Keates, Director of Community Money Advice, said lenders shouldn’t shoulder all the blame.

“If someone is making minimum payments on their credit card and they have four or five cards, when they are credit checked they don’t look like a bad risk because companies don’t have the whole picture.

She added: “It’s fine if you pay off the balance every month, but I would suggest that the majority of people don’t – they just pay off the minimum, so the debt starts to spiral.”

Shelter’s Adam Sampson continued: “Clearly this is a huge problem which will only become more widespread as housing costs continue to rise.

“We would urge anyone struggling with the cost of their mortgage or rent to seek independent financial advice or log onto www.shelter.org.uk urgently before resorting to such desperate, and ultimately more expensive, measures.”

In the ROOF magazine article, Damon Gibbons, Chair of Debt on our Doorstep comments:

"One in ten is a phenomenal figure and shows that people are significantly overcommitted. It shows they are concerned that they could face repossession action for not paying their housing costs and are keen to try and maintain those payments if at all possible."

He called for a national strategy for debt advice services to ensure access to assistance for those in financial difficulties:

"What is clear is that better advice is needed to help people rearrange their finances and pay less on unsecured credit before this problem escalates. We don’t have a national strategy for debt advice provision and somebody has got to address this issue fast."

Monday, 1 October 2007

Westminster Launch of Responsible Credit Proposals

Invitation to the Westminster Launch of Our 'Responsible Lending' Proposals & AGM, Tuesday 23 October, London

Irresponsible lending in the US sub-prime mortgage market has now fed through into a 'credit crunch' for UK banks, causing upward pressure on mortgage and lending rates for all consumers. With increasing evidence of irresponsible lending practices in the UK, there has never been a better time to lobby for improved regulation of the financial services industry.

Following the success of our own responsible credit conference in Edinburgh in May, we will be launching a new set of proposals for action to MP's to address irresponsible lending practices at the Houses of Parliament on Tuesday 23 October (time tbc). A number of MP's from across the political spectrum, as well as agencies involved in our campaign will be speaking at the event.

The launch will be immediately preceded by a Campaign Forum and Annual General Meeting, 3 - 4:30pm at the Abbey Centre (behind Westminster Abbey at 34 Great Smith Street, London SW1P 3BU )

Please let us know if you are able to participate by emailing, faxing or posting back the form below.

[ ] I plan to attend the Campaign Forum and AGM on 23 October. Please send me a map and agenda.
[ ] I want to attend the "Responsible Lending" Parliamentary launch. Please send me more details.
[ ] I am unable to attend. Please note my apologies.

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Please return to: Debt on our Doorstep, c/o CAP, Central Buildings, Oldham Street, Manchester M1 1JT, OR fax 0161 2375359 OR e-mail to info@debt-on-our-doorstep.com