The news this week – a rise in both house repossessions and personal bankruptcies. Both indicate that consumers are finding it increasingly difficult to repay their debts in a climate of high interest rates, and highlights the undesirable consequences of failing to do so. So the top tip for this week is: don’t let this happen to you! Work out a monthly budget to help you plan and meet your financial commitments. And help is at hand – check out the section on Budgeting on the Moneybasics website. You can make budgeting even easier by using the handy MoneyBasics budget calculator.
Tuesday 30th Jan
House Price Slowdown
House prices in the UK are still rising, but, for the first time in 8 months, they are rising more slowly. Data released by Natwest on Tuesday showed that house prices in the UK only rose by 0.3% during January.
House prices are very volatile, so this slowdown could just be a one off. However it’s also possible that potential buyers were discouraged by high interest rates (meaning it’s more expensive to pay off a mortgage), weakening demand, which could explain why house prices have risen more slowly.
A persistent slowdown in UK house prices would make it easier to get on the property ladder – good news for would be buyers. However, this would be less good news for those who have assumed that house prices will continue to rise and have borrowed against their home on this basis. The way forward?Think carefully if you are considering taking out a second mortgage on your home to its full market value – as this might rise more slowly than you anticipate, or even may start to fall.
For more information about how to budget for buying a property, check out the Setting up a Home section on the Moneybasics website.
Super casinos come to town
The government announced on Tuesday that Britain’s first super casino is to be built in Manchester. On one level this is good news for Mancunians, who will benefit from around 2,700 new jobs created, but America’s experience of supercasinos indicates that having a casino in your town is likely to lead to a rise in gambling related debt, crime and bankruptcy.
This Manchester casino is set to be the first of many, although several groups (the BMA, Churches) have warned of the dangers of building large new forums for gambling. The British Medical Association currently estimates that there are around 300,000 Britons with a gambling addiction problem.
If you don’t gamble, then think twice before you start – remember your luck against a slot machine, for example, is estimated at between 1 in 4096 to 1 in 33,540,000.
So Manchester’s lucky number may be up, but we’ll have to wait until the ball stops rolling to see if there are any real winners.
Wednesday 31st Jan
Repossessions rise to 17,000
The Council of Mortgage Lenders announced on Wednesday that 17,000 families lost their homes through repossession in 2006, up from 6,030 in 2004. Moreover, the Council of Mortgage Lenders expect this number to rise even further this year, as higher interest rates (currently 5.25%) mean higher monthly mortgage repayments.
Thus repossession is a very real danger for many families in Britain this year. To avoid this becoming your fate, be sure to budget properly and set aside enough money to make your mortgage payment every month. Bear in mind that interest rates might rise again to 5.5% - work out how much this would make your monthly repayments and make sure (worst case scenario) that you could meet them. If you’re worried about how to do this, or about meeting your monthly mortgage repayment, then call Credit Action for free and independent advice on 0800 138 1111.
Friday 2nd Feb
Personal Bankruptcy Hits Record Levels The number of individual insolvencies hit 29,804 in the last quarter of 2006, according to government data published on Friday. This record level of personal bankruptcy represents an increase of 44% from the same period a year ago, bringing the total number of personal insolvencies for 2006 to 107,288 – crossing the 100,000 mark for the first time. Even at the height of the 1991 recession there were only 25,000 personal insolvencies.
Moreover, there has been a marked rise in consumers choosing to enter individual voluntary agreements (IVAs). The number of IVAS entered into has more than doubled over the past 12 months to 44,000.
If you’re worried about your financial situation, then chances are that you are not alone. The key is to act now before the situation gets any worse. Seek independent advice on how to resolve your financial problems – the recent rise in IVAs is potentially worrying as these may not be the best solution for the individual concerned so getting free and independent advice is vital. The Consumer Credit Counselling Service ( www.cccs.co.uk) is a great place to go for this advice.
The weekly update is written for MoneyBasics by Adela Read.