Anybody who is in the process of trying to sell a house, or apply for a mortgage or secured loan at the moment is likely to be well aware of the problems in the housing market.

The fact that there are fewer mortgage loan deals available in the marketplace and lenders are more reluctant to grant loans to individuals through tighter lending criteria, coupled with fears that house prices are likely to continue to fall further over the coming months, is putting many individuals off the idea of moving or buying a house at the present time.

This seems to be particularly true for first time buyers, the number of which has dropped significantly over the course of recent months. Recent figures have shown that in 1999 approximately 600,000 individuals entered into the housing market for the first time, last year however, this figure had dropped to 358,000.

One reason for this drop in numbers is due to the high increases in property prices over the past few years, which have gone up well above the rate of inflation or wage increases. This is great news for someone who already owns property, as their equity has increased significantly, allowing them to use this to move up the property ladder, but high house values have priced many potential first time buyers out of the market.

The other factor which is acting against the first time buyer is the lack of availability of funding through a mortgage or secured loan. As banks and building societies restrict their lending criteria on mortgage loans through lower income multiples and higher priced products, it is becoming increasingly difficult to obtain the necessary level of funding required to make a purchase. Whereas the average age of a first time buyer used to be in their early twenties, many individuals are now putting this off until they are in their thirties, when they are earning more money and have had a chance to save a larger deposit.

Due to the reasons stated above, coupled with the fact that many individuals are waiting for house prices to fall further, there are fewer and fewer first time buyers entering the market. The problem with this is that, without them nobody else is able to move house and therefore the problem is likely to continue to cause the housing market to stagnate for some time yet.

The latest figures from the Office of National Statistics, which were released yesterday, revealed that the consumer price index rate of inflation had reached a level of 3.8% for the month of June. This is almost double the target figure of 2% set by the Government for the rate of inflation and is the highest level recorded in the past sixteen years.

The news came as an unwelcome surprise for many experts who, although they had expected the rate of inflation to rise, had only predicted it to reach a level of 3.6%, an increase of 0.3% over the figure for May rather than a jump of half a percent.

A large driving factor in the rise in inflation has been caused by the high increases in food and oil prices. Food has gone up in price by more than 10% from this time last year and the price of a litre of petrol has gone up by 5.3p in the last month alone.

The extra increases in inflation means that it is now extremely unlikely that we will see any cuts in the rate of interest for loans and mortgages in the near future. The Bank of England’s Monetary Policy Committee voted to keep interest rates at 5% in the month of July and is likely to maintain this rate in the forthcoming months, which means bad news for those individuals who may be already struggling to keep up with their loan repayments.

This sudden jump in inflation has fuelled fears that many workers will call for inflationary pay rises to cover the rising cost of living. The Chancellor, Alistair Darling warned against this course of action as he claimed it would only help to drive inflation higher.

So the outlook seems fairly bleak for the average British consumer at present. With inflation rising, effectively reducing the real value of take home pay and little chance of a pay rise to compensate for this, along with the prospect of continuing high interest rates keeping the cost of loans and mortgages high, it looks like we may be in for a tough ride financially over the next few months.

It’s that time of year again, the kids are about to break up from school for six weeks and the great British summer is upon us once more!

With all the doom and gloom that we’ve all been subjected to throughout the course of the year so far with regard to the credit crunch and the effects it has had on us all either directly or indirectly, it seems understandable that most of us living in the UK will be wanting to get away from it all for a couple of weeks and enjoy a holiday in the sun, temporarily leaving our cares and worries behind us.

But with the current problems in the UK economy at present, such as relatively high interest rates on loan and mortgage repayments and a high rate of inflation causing many individuals to be worse off in real terms than they were at this time last year, can people really afford the luxury of a holiday, given their current circumstances?

The results of a recent survey showed that only 2% of the UK population would be prepared to give up their two weeks holiday in order to make ends meet financially. As a result of this, many individuals will be looking to take out either a new personal loan or a credit card to help fund their annual holiday, in many cases, without giving any thought to the consequences of having to make the repayments when they return.

Anyone who is considering taking a loan or a credit card to pay for a holiday should consider the long term costs of such action. The debt taken should be fully repaid within twelve months, because most people will want another holiday next year (probably with another loan) and although it may seem attractive to take a personal loan over a longer term in order to reduce the monthly repayments, this can lead to a spiralling debt problem over a period of time as new borrowing for this years holiday gets stacked on top of last years loan.

I know we all enjoy our holidays and I would hate to be though of as a kill joy, but you should think very seriously before taking out a personal loan or credit card to pay for it. Remember, a loan is for life not just the holiday!

Thousands of British parents are said to have become less willing to provide financial handouts to their children, as general household budgets become tighter due to the continuing onslaught of both the credit crunch and a rise in the rate of inflation.
 
According to recent study by AXA Insurance, British parents are rapidly clamping down on their children’s tendencies to fritter away money, whilst also becoming more active in discouraging their offspring from turning to personal loans and credit as a means to fill their financial voids.

Large numbers of British teens and adolescent youths are now coming up against something of a brick wall when requesting funds from their parents on the fly, where as many others are finding that the weekly pocket money that they have been used to receiving, has either reduced substantially or stopped altogether.

A spokesperson for AXA commented that their had been little research into what effects the credit crunch would have onto the back pockets of Britain’s younger generations with respect to funds being handed down through their parents. Obviously, as the adult population starts to feel the pinch of the credit squeeze, those people who are dependant on them for financial liquidity (their children) will start to feel the pinch also. 

However, it has also become very apparent that British adults are both conscious and concerned that their children may consider or have already entered into a personal loan or similar credit agreement the resulting effect of which has spurred (and maybe for the first time) a very real need for “at home” financial education.

Following the ensue of the credit crunch, many businesses in the UK have suffered throughout the course of this year, particularly those involved in financial services such as loan and mortgage companies and advisers, with many firms making redundancies and some others closing down altogether.

One exception to this trend is that of the protection market, which appears to be defying the pattern and is actually doing quite well at the moment.

The chairman of the protection review Andy Couchman, announced the news at a dinner for the protection insurance industry, where he said that the possibility of a recession in the UK had encouraged individuals to seek advice about protection products for themselves and also to review their existing arrangements.

Many people are seeing the slowdown in the economy firsthand, which tends to make them look to their own circumstances with a “what if?” attitude, particularly when it comes to protecting the things that are important to them such as providing money and an income for themselves and their families, should the worst happen and also ensuring that they have adequate protection to provide cover for their loan and mortgage repayments, in order to keep the roof above their heads in the event of them losing their regular income.

Income protection appears to be one of the most important areas of cover that individuals are applying for, whether this is through a payment protection insurance policy for their loans and mortgages, or a permanent health insurance plan, which is designed to replace a regular income in the event of long term sickness.

It is certainly easier to get back to work following a sickness or redundancy if a person hasn’t had to worry about their money troubles in the meantime. One expert in Psychological medicine said that being out of work could have serious health implications for a person and that six months unemployment had the equivalent health detriment as smoking 200 cigarettes a day!

Other protection products that are currently enjoying an increase in interest from individuals include life cover and, to a lesser degree, critical illness cover, both on a family cover basis and also as protection for a loan or mortgage.

If you are considering taking out any type of protection plan, or reviewing your existing arrangements, you should talk to an independent financial adviser who will be able to give you suitable and appropriate advice regarding your needs.