I am quite prepared to admit that I am the personification of the stereotypical “grumpy old man” (and my wife would certainly agree!), but I don’t think that I’m alone in my attitude toward things, in fact I would suspect that a high percentage of men in the UK of a certain age would share my opinions on life, the universe and everything!
Perhaps it’s because they haven’t been fully subjected to the cynicism of the world in general as yet, but a recent survey has shown that young people in the UK at the moment are more optimistic about their futures, despite the recent recession and economic slowdown.
The survey, which was conducted by Alliance and Leicester bank amongst a group of people aged between 16 and 21, has shown that young people today have a more positive outlook on their financial future than they did in a similar survey two years ago. The survey found that the average 16 to 21 year old expects to earn an average of £44,600 for men and £34,800 for women, in ten years time (the current average is just £25,123). Almost three quarter of those interviewed would expect to have obtained a homeowner loan or mortgage by the age of thirty and own their own home.
Despite the fact that the level of personal debt in the UK, on personal loans and credit cards, is increasing dramatically, with a higher percentage of people retiring who still have outstanding loan debts, 30 per cent of young people expected to be completely free of personal loans and card debt by the age of 34.
Andy Bayes of Alliance and Leicester commented on the survey, he said “With so many young people looking to maintain their financial and lifestyle aspirations during these tough economic conditions, it is essential that those looking to start their career have access to good sources of advice, information and inspiration.”
Banks and building societies in the UK have come under an awful lot of pressure in recent months for their handling of customers with arrears on their homeowner loans and secured loans and have had a high proportion of the blame for the recent credit crunch placed before them by the vast majority of the public.
It now looks as though things could become even worse for four homeowner loan and mortgage lenders, as the Financial Services Authority (FSA) have recently announced that they are investigating these lenders with regards to over charging customers in an arrears situation on their loan.
Under FSA guidelines, loan companies must be seen to be treating their customers fairly in all aspects of their business and this includes the way that they deal with arrears on a loan as well as the level of charges they add to the customer’s existing debt for not managing their loan in accordance with the original credit agreement.
The FSA acknowledge that a bank or building society will have to charge additional fees for a customer with arrears on their loan, as there is additional work and costs involved for the lender, but these charges should not be a profit making scheme and should literally only cover the costs to the lender for dealing with the arrears on the loan.
The FSA have not announced which four lenders are currently being investigated and have said that this will be announced at the end of the investigation, if the loan companies in question are proved guilty of over charging customers, but this attitude has brought criticism from a number of consumer groups who believe that loan companies should be named and shamed from the outset.
In the meantime the FSA are remaining tight lipped about the situation and it looks as though we will just have to wait and see what the outcome will be.
Although there have been definite signs in the housing market and the economy in general of the starts of some recovery, one of the main problems which seems to be holding back a quick recovery is that of a lack of availability of homeowner loans and mortgages for those individuals looking to move, or buy a house.
This has largely been due to much tighter lending criteria on loans from banks and building societies, who have been hit hard by the credit crunch and are now reluctant to offer new loans to anyone, even if they have a good credit history.
But according to the latest figures from the Council of Mortgage Lenders (CML), lending criteria should ease over the next couple of months and it should (hopefully!) become easier for a potential borrower to obtain the loan they require. The news is based on a survey of changes to homeowner loan products over the past few months and the CML claim that criteria for new loans stopped tightening in May this year and lenders are now slowly starting to relax their policies, with increased availability of higher loan to value products and higher income multiples to calculate the maximum loan.
A spokesman for the CML commented on the changes, he said “We might expect to see a modest easing in these measures over the summer, as some higher loan to value (LTV) products came on to the market in recent months and lenders reported that they intend to increase lending at higher loan to value ratios in the Bank of England’s recent credit conditions survey.
Lending remains at very low levels, with modest increase in house purchase activity offset by a fall in remortgaging. The trend of tightening lending criteria seems to have subsided and we may see a modest easing in these measures over summer, which will help some borrowers.”
The effects of the credit crunch and generally negative media coverage regarding the unavailability of personal loans and mortgages for individuals from banks and building societies, has left many potential borrowers with the belief that they will be unable to obtain the amount of loan they require in order to purchase the house they want and as a result, many people have simply not even bothered to apply for a loan which they may well have been accepted for, if only they had applied.
The news comes following a survey which was conducted by Unbiased.co.uk, the independent advice website, who say that there is a big difference between the public’s perception of what they think they can borrow and what they are likely to actually be able to get on a personal loan or mortgage.
Although the criteria for mortgages has got a lot tougher since the start of the credit crunch, the situation is not as bad as many would be borrowers think it is. The survey has revealed that around a third of the UK population now believe that they would be able to obtain a homeowner loan of between 0.5 and 2.5 times their annual income and the number who believe they would be able to get up to 4 times their salary, has dropped from 28 per cent at the beginning of the year, to just 24 per cent currently.
In actual fact, the majority of banks and building societies are likely to offer a loan of somewhere in the region of 4 times a person’s salary, although many now use an affordability calculator which takes into account other commitments such as personal loans and credit card commitments. So the advice is clear, if you would like a loan (within reason of course!), but think you will not qualify for it, apply anyway…….you never know, you might get a pleasant surprise!
Last Thursday saw the usual monthly meeting of the Bank of England’s Monetary Policy Committee (MPC), during which the base rate of interest for loans and savings is decided for the coming month, taking into account all the other factors which have an impact on the UK economy as a whole.
It was no great surprise to anyone at all that the MPC voted to keep the base rate at 0.5 per cent, the same level it has stood at for the past three months now and it looks as though it is likely to remain at this level for a few more months yet.
This means that those borrowers who have a tracker, or standard variable rate of interest on their mortgage or homeowner loan, will not see any change in the level of their monthly repayments, but should make the most of the currently low interest rates to reduce their outstanding loan balance through overpayments, before the rate increases again.
In the meantime, the Bank of England is continuing with its strategy of quantitative easing and purchasing bad credit loan debts from banks and building societies. This programme is expected to take another month to complete, at which time the bank should have a clearer picture of the level of success of the scheme, although it seems to be working well at the moment.
It is likely that interest rates and therefore the cost of loans will increase once the economy starts to recover, but at the moment things still look uncertain and although we have seen the first signs of recovery in the housing and homeowner loan markets, other areas of the economy still appear to be quite depressed, which will slow a full recovery and therefore hold rates at a lower level for some time yet.
