With the effects of the credit crunch, either directly or indirectly, beginning to affect all of us living in the UK today, many individuals are finding it particularly difficult to make ends meet, with regard to the monthly repayments of their home loans. Defaults on home loans have increased by 17% so far this year, and the Council of Mortgage Lenders (CML) are predicting a record number of repossessions throughout the course of the year.

With this in mind, an independent think tank, New Local Government Network (NLGN) have issued a report which claims that local councils should offer support to those home owners who are struggling to maintain their mortgage payments. The NLGN are proposing a scheme similar to one which is operated in the US, whereby councils are able to obtain funds under prudential borrowing rules in order to offer financial support to selected individuals. Those benefiting from the scheme would include first time buyers and people having difficulty paying their home loan or mortgage and would be used mainly in areas where a large number of repossessions could have an impact on the local community.

The rules of the scheme would allow local authorities to provide personal loans to those in most need at a subsidised rate, significantly lower than that available from the usual banks and building societies. The loans could be for the whole mortgage balance, or just for part of it, depending on the personal situation of the individual borrower.

A spokesman for the NLGN said that the Government should use £2bn from its £50bn liquidity package announced earlier this year to fund the project. Whether or not the Government adopts the scheme, or even some variation of it, remains to be seen, but if it happens we will let you know!

There have been plenty of mis-selling scandals within the financial services industry over the years, for example personal pension plans and low cost endowment policies. It now seems that another product is going to be added to this list, to tarnish the industry’s reputation yet further, that is payment protection insurance, or PPI.

PPI is often sold alongside a personal loan, mortgage or credit card application and is designed to protect the applicant‘s monthly loan repayments in the event of accident, sickness or unemployment.

This month, the Competition Commission has issued a report which condemns the methods used to sell PPI to unsuspecting clients and has called for a ban on the sale of such products at the same time as a loan or credit card application is made.

The report comes after the Citizens Advice Bureau made a complaint to the Office of Fair Trading (OFT) in 2005 regarding the mis-selling of PPI plans, following a large number of complaints from consumers. The OFT determined that there were severe problems within the selling practices of PPI and referred the matter to the Competition Commission.

It is estimated that out of the 20 million policies sold over the past five years, one third of these have been mis-sold to consumers and although many individuals have paid large premiums to protect their payments, they would not be able to make a claim on the policy as they are not eligible for the cover they have been sold.

The most common example of this is where unemployment cover has been sold to self employed people, or those on a fixed term contract, when the insurance only provides cover for those in permanent employment.

Another area for complaint was where the charge for cover was paid as a single premium, which was then added to the loan. This boosts the cost of cover as interest is charged on the premium alongside the loan repayments. If the loan is repaid early, in many cases it is not possible to cancel the cover as the premium has been paid up front.

Many loan and mortgage companies have sold PPI alongside their products over the years as these are high commission paying policies, even though many are unsuitable for the customer. Often customers are told that cover is compulsory and that they will not be accepted for a loan unless PPI is taken.

If you currently hold one of these policies, (and it’s quite possible that you have one without realising!) check the policy wording to ensure that you are covered for what you think you are. You may get a surprise!

Recent figures show that consumer confidence for those of us living in the UK today is at an all time low. The figures come from a joint research project by the British Retail Consortium (BRC) and Nielsen, a leading market research company.

The survey, which has been conducted on the British public on a regular basis since 2003, has recorded its most pessimistic results since the poll started. According to the report, the Nielsen/BRC UK consumer confidence index is currently at 79. The lowest previous score on the survey was at the same time last year, when the index stood at 91. A spokesman for Nielsen said “the fact that the score has plummeted a further twelve points is telling of how much consumers are being stretched”.

The impact of the general slow down in the UK economy has undoubtedly been the cause of these poll results. Individuals do not feel as confident as they head into the next twelve months, for a variety of reasons. 60% of us are not confident about job prospects in the present climate, a worry bourn out by the fact that unemployment has actually risen over the past few months, as employers are feeling the effects of the slow down and being forced to make cut backs on staff.

Many individuals are also concerned about their personal financial situation, with particular reference to applying for a new loan or mortgage. 57% of those polled feel that they will be in a worse financial position over the next twelve months than they are currently and a staggering 75% of individuals feel they do not have the confidence to spend money on the items they require and many feel that, due to the restrictions imposed by lenders on their criteria, they may not be accepted for a new loan.

The survey highlights that 20% of us say we have no spare cash and our major concerns are the future of the economy and our own personal levels of debt on loans and credit cards.

As house prices continue to fall through the course of the year, many individuals are seeing this as an opportunity to move house and upsize. It seems that 2 million home owners in the UK are planning to move this year, with more than half of them planning to take advantage of reducing property values and buy a larger house, which may well have been beyond their financial reach twelve months ago.

Although many of the individuals planning this sort of move will be forced to accept a lower offer on their current home, the anticipated price reduction on the new, larger property is likely to more than compensate them for the loss on their current home. Also, with mortgages and homeowner loans becoming harder to obtain due to the credit crunch, those with a good track record on their existing finances are more likely to be accepted for a new loan, giving themselves extra bargaining power when it comes to making a lower offer on a property.

Potential home buyers are not in the same rush to commit to a property as they have been in the past, with many individuals waiting an average of 7.5 months before they make an offer. At the same time, a further 12 per cent of those considering a move have said that they are prepared to wait until they know what is happening with regard to property prices.

Other home owners are selling up now in order to maintain the best price they can for their property and entering into rented accommodation, to hopefully allow house prices to fall further before they re-enter the market.

This could also have positive implications for the first time buyer market, as more, lower priced property comes onto the market due to existing home owners up sizing. A larger availability of cheaper housing could be enough to enable them to afford and be accepted for a loan to purchase a home.

If you are in the position where you can accurately state your current financial situation, with regards to loans and credit cards etc, it would appear that you are in the minority of people living in the UK today, according to research recently released by CreditExpert.co.uk

The survey questioned individuals about their own personal financial situation and although 96% of those interviewed said they were up to date with their circumstances, once they were asked for further details, only 26% could provide accurate figures with regard to outstanding balances on loans and credit cards. More worrying still is the fact that 10% of those taking part in the survey had absolutely no idea about the level of debt they currently held on their personal accounts.

When it comes to knowing how much our debts are actually costing us, we appear to be even more clueless. The individuals questioned were asked about the level of APR (Annual Percentage Rate) they were paying on their loans, credit cards and overdrafts and although most knew how much their overdraft limit was, almost half of those interviewed did not know what the APR was on their credit cards and 36% were not even sure what APR is.

If the previous comments are starting to ring a few bells and maybe even causing a slightly guilty feeling, then the chances are that you are in exactly the same situation as a large proportion of the rest of the country! But please don’t take any comfort from this information. Once you’ve finished reading this article, go and check your bank and credit card statements and contact your loan providers, to confirm what balances are outstanding and what you are being charged for the credit. With a little shopping around it may be possible to find a much cheaper alternative to your current credit commitments. There is still a good range of cheap loans and 0% balance transfer credit cards available in the market place, without having to look too hard. Go ahead, try it……..you never know, you might be surprised at just how much you can save each month!