Author: Catriona Singfield

As winter draws near, around 10,000 of the UK’s motorcyclists begin to make plans for storing their bikes away for the cold season. Snow, ice and biting winds make riding a motorbike a less attractive prospect, so many savvy bikers pack their machines up and save on the tax and insurance until biking season comes around again. Unfortunately, thieves know this too and every month around 600 motorcycles are stolen from their garages.

This could be a problem if you are the unlucky victim of such a theft when you are temporarily uninsured. A useful compromise is to reduce the cover to the minimum needed, usually just fire and theft.

Compared to car insurance, motorcycle insurance has some unusual features. That old favourite, the no claims bonus, is almost unheard of for bikes and it’s only a select few insurers who offer any comparable discount.

So how does a typical motorbike policy work? As with cars, there are a variety to choose from, such as third party, specified rider policy and specified bike policy. Specified bike policies cover the machine, not the rider, which means that several riders can be insured for the same bike.

Specified rider policies apply the other way around, to a specified rider on any bike of a size agreed by the policy.

Comprehensive insurance is the most expensive type, but like the familiar car version it covers you for the repair costs for accidental damage, and may or may not include breakdown cover. If you need to make a claim, you pay a specified excess and the rest will be paid for by your insurance company.

Third party insurance covers you for the legal minimum, and is thus the least expensive. It includes any damage you may cause to property, or injury to people. It doesn’t cover you for damage to your bike or repair costs, and still includes an excess payment.

Unfortunately, the exhilaration of getting a new bike is tempered for many young riders by much higher premiums on all types of insurance. This is because the chances of a new rider being involved in an accident are so much higher, due in part to lack of experience on the road. Motorbikes are also notorious for offering little protection in the event of a crash, and such accidents can have tragic consequences.

Premiums are also calculated on how long the rider spends travelling, for example a daily journey to work, or touring. This is because the longer a biker spends on the road, the greater the likelihood of an accident occurring. If you have had the misfortune to make a claim for a driving-related accident recently, this will also affect the rate you will be offered.

So what else goes in to the complex mix of tailored bike insurance? Well, the size of the engine and the make of the machine will be factors, so owning a vintage Harley is likely to be a costly affair! Any previous convictions for speeding, dangerous driving or even a disqualification will affect it adversely too.

It seems sensible to do what you can to reduce these fees. A security device, especially an immobiliser, steering lock or alarm should also secure a discount, as may completion of a specialised motorbike training course.

With so many things to take into account, it may seem tempting to be economical with the truth to save costs. This will certainly invalidate your insurance, leaving you with an expensive payout and no claim. It’s also illegal to drive without insurance, so honesty is definitely best for your policy!

Naturally, you’ll want to find the best deal, so try an online insurance broker. They can find you a policy to suit your specific requirements, and shop around for the best quotes to match your budget. Not only do they have the experience to help out, but they often have access to special discounts only available online.

So shop around, make sure you get the right insurance for your needs and have a safe drive!

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Author: Dot Piper

Life is taxing enough without parting with more of your hard-earned cash than you need to. There are lots of ways in which you can trim down your tax bill.

The current tax allowance for people under 65 is £5,035 per annum. This is a tax free amount and when your income rises above this, income tax will become due. It may be that your spouse is either not earning or is a low earner. You could think about transferring investments to him or her to make use of their allowance.

Is your tax code correct? If not, you could be paying more tax and national insurance than you should. It’s very easy to check your tax code and the government website offers a full explanation of how to do this. www.direct.gov.uk

If you’ve left your job and not applied for unemployment benefit you should be able to get a tax repayment. You will need to apply to your tax office for a repayment form P50. You will also need the P45 which your employer gave you with your final wage payment.

Her Majesty’s Revenue and Customs and the Department of Work and Pensions have £2.9bn of tax credits on offer. You may be entitled to one of three credits. There’s child tax credit, working family credit or pension credit. www.taxcredits.inlandrevenue.gov.uk is the place to check.

An ISA offers a way of earning tax-free interest. You can have £7000-worth of stocks and shares, or alternatively invest £4000 in stocks and shares and £3000 in cash. As long as the ISA is in place, the interest will be tax-free.

Building society and bank interest is normally paid after deduction of tax. If you’re a non tax-payer you can request that you receive your interest gross. Should you have already had tax deducted, you can claim a tax refund. The Taxback Helpline phone number is 0845 077 6543.

The taxman will help you with your pension contributions too. This varies according to your tax rate. If you’re a basic rate taxpayer, for every £100 invested in a scheme, the tax man will contribute £22, so you only part with £78. Higher rate taxpayers would only need to contribute £60 for £100-worth of investment.

If your estate is worth £278,000 or more, it would come into the inheritance tax bracket of 40%. It may well be that your home alone is approaching that figure. To lessen the tax burden on your heirs, it may be worth considering gifting money; you can give up to £3000 per year tax free.

You are allowed to earn up to £4,250 by renting out a room in your home. This is free of tax, but apparently you should declare the fact that you are taking advantage of this scheme. You can find details and help on www.hmrc.gov.uk

There is a Capital Gains allowance, which is currently £8,800. This is a yearly tax-free allowance. This is transferable between spouses to maximise assets.

Charity Begins at Home? Lastly, if you donate to charity, the use of a tax-efficient deed of covenant, payroll giving or Giftaid means that the taxman will give his support too!

By Richard Norfolk

In our present consumer driven society, problem debts give many people sleepless nights. Worrying day after day about whether you will be able to meet your commitments is no way to ensure a peaceful life. Lenders abound of course, offering loans at varying rates and in some cases making the problem more acute by charging interest at very high levels. Is there any way out of continually paying more but getting less because interest costs pile up and have to be repaid?

The answer is yes, in the form of credit unions. You have probably never heard of them but they are well worth investigating if you are in need of financial help. You are likely to be very pleasantly surprised.

Credit Unions, under the umbrella of ABCUL (Association of British Credit Unions), are best described as financial co-operatives, working on a non-profit basis on behalf of groups of members who have a common ‘bond’. This bond may be where they live or work, or membership of a church or trade union – something which ties them together as a recognisable group.

The members own and control the credit union, working within laws laid down to protect them all. They are responsible for the election of a board of volunteer directors who run the union for their benefit.

They will offer savings facilities which are very flexible, allowing members to save as much as they wish whenever they want to. This can be paid in via designated local places such as shops or even direct from wages. An annual dividend will be paid on the amount saved; this is usually around 2-3% but can be anything up to 8%. Child Trust Fund vouchers can also be used, through an arrangement with the Scottish Friendly Society.

Loans are made available to members at very reasonable rates, usually for up to 5 years unsecured or 10 years secured. The charge can be expected to be around 1% per month on the reducing balance of the loan, rather than on the total loan taken out. This gives an APR of 12.7%, which in much simpler terms means that for £1000 borrowed over 1 year, the total repayment would be £1067. You are unlikely to get a rate anywhere near this from the usual ‘high street’ lenders. Life insurance is provided free of charge to cover the outstanding loan if you reach your ‘best before date’ with payments still to be made!

The loan charges are such that you may well find that it would pay to borrow from the credit union to pay off an existing debt, and then repay the loan at the union’s much lower rate. Note also that there are no additional charges if you are able to pay off the loan early.

Another not so obvious advantage of the credit union is that the operation is totally local, so that the money is kept within the local community. This is better than if the funds are whisked away to a relatively anonymous ‘head office’ which is probably located in a city at the other end of the country.

Details of credit union operations and on how to start a credit union in your area, can be obtained on www.abcul.org, email at info@abcul.org or telephone 0161 832 3694.To reassure you about the status of this organisation, many facts are provided at this website which serve to show its international coverage.

A listing of existing credit unions is given and you may be disappointed to find that there is not one in your area, but don’t despair – there are answers. In the first place you should check if the union nearest to you is not fully subscribed and that you do qualify under the ‘common bond’ requirement. Also, you may well find that the ‘boundaries’ of
common bonds are being extended to cover larger numbers: an expansion could be in line for your area, or you may be able to convince an existing union to do so.

Failing this, why not consider starting your own credit union. You can make a start by going to the ABCUL website and that of the Financial Services Authority at www.fsa.gov.uk and noting the requirements for starting a new Credit Union. These are quite detailed and cover a broad area but don’t panic. Plenty of people have been here before you, to start up their own.

Very briefly, to start your own credit union you need to know that to establish your union is likely to take 1 to 3 years and within the common bond you have decided upon, you initially need a minimum of 21 members. Then you will have to arrange and follow up your publicity drive to establish the demand in your area.

You would be wise to join ABCUL once you have enough backing to ensure that the project is going ahead. This will give you access to a large amount of very relevant information from ABCUL information services as well as a full manual providing guidance on how to progress. Also see the FSA website mentioned above to find out what you need for FSA approval before you can proceed further.

Members will have to choose the directors, who will require training to enable them to run the union. They will need to investigate sponsorship and obtain promises from local organisations to provide funds to cover the early years of the operation. These costs can be as high as £70,000 in the first 3 years. This could be a daunting sum, but ABCUL make the point that one of their objectives is the education of their members in the wise use of money – surely a very worthy aim. Membership in the UK (where the association started in 1979) is given as 600,000; worldwide there are said to be 40,258 credit unions in 79 countries with 118 million members in total. In Ireland (founded 1958) the coverage is given as 50% of the population and in the USA and Australia as 25%.

You can certainly proceed with confidence in the organisation!

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By Bridget Carter

So you’re serious about buying a home and you think you have enough money together to take the plunge into the property market?
One of the things you are undoubtedly going to need is a mortgage. It might be that you go straight to your bank and make an inquiry about how to obtain one.

But what you need to remember when it comes to borrowing money is that there are many different money lenders to choose from and many different types of mortgages you can obtain.

This is why you really need to shop around to make sure that you are getting yourself the best deal. On offer is such a wide variety of loans, including special mortgages for graduates and mortgages for professionals. There are guarantor mortgages, joint mortgages with your parents and the list goes on.

It is even more important than ever to make sure you are paying out the least amount of interest as possible on your loan. That is because the costs connected to making your first home purchase have rocketed by 94% in six years. They are increases have had a large impact on those trying to get their foot on the property ladder.

Consider these numbers. In the year 2000 people only needed an average of £4,698 to pay for things like stamp duty, mortgage fees and solicitors’ bills. But in 2006, the costs almost doubled to become £9113. So when it comes to raising a deposit on your home you can see how much more difficult it has become.

And for this reason, some wanting to purchase their first property might not even have enough money to pay for the deposit on their house.
There are some money leaders out there willing to loan money for people to pay for their deposit.

Your money lender may offer you a mortgage package that includes the deposit as part of the overall package, but be careful of this.
A major disadvantage is that if there’s a crash in the property market you could wind up owing more than you borrowed, often known as negative equity.

Also be wary about over committing to a mortgage. If you cannot keep up your mortgage repayments you may wind up in court trying to fight to keep your house so that the banks or the money lenders do not take it from under your feet.
This may happen if you have a credit history is not that positive in the first place because money lenders will make you pay more on your interest rates than others if, in fact, they loan you money at all.

If you are in the fortunate position where you have the money to put down a large deposit, it might be worth baring in mind that the more money you put down on a house as a deposit, the less interest you may pay on your mortgage.
Usually people pay up to 10% of the total cost of the property as a deposit. For example, if you were to purchase a £100,000 house, you would pay £10,000 up front.

When you go to your bank or money lender, they will consider things like your disposable income and existing loans before deciding whether or not to give you a mortgage.

Whatever your decision, make sure you shop around and take the right advice. Factor in fees for your mortgage interest rates because while a company may quote ‘typical rates’ for a mortgage, the exact rate that you pay will depend on your personal circumstances.

There may be many routes available for you. More and more lenders are launching mortgages specifically designed to help out first-time buyers. The possibilities are almost unlimited.

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Author: Bridget Carter

So you think it is impossible to get enough money together to convince the banks to offer you a mortgage on your first home? You are still renting and have given up getting your first foot on the property ladder?

It can be soul destroying for those trying to acquire their own piece of property, especially for those trying to go it alone with respect to buying a house. You can see how easy it can be for people to just give up.

Well, it actually does not need to be as difficult to buy a house as the headlines and statistics suggest. Ask yourself this question. Have I really, I mean really tried hard to save the money for the deposit on my first home?

Building up money reserves does not have to mean skipping a holiday or trying to go without any rewards. What it does require is making small daily changes to your everyday life then routinely putting an amount of money aside week after week.

You need to change your lifestyle – buying coffee for example can cost £15 a week and £720 a year. So do you really need it? And what about lunch? Do you buy your sandwiches each day or do you make your lunch? Health benefits aside, bringing your own lunch to work each day stops you spending more money or something that turns out to be of a higher cost than you thought. If you do the calculations in your head, by the time you have spent £2 on a coffee, perhaps up to £3 on a sandwich and a further £2 on snacks, you can see how easy it could be easy to spend £70 a week on daily food and more than £3000 a year.

Why don’t you get a credit card with zero interest? If you are in debt, you would end up spending the money on reducing the balance rather than paying the interest. Likewise, shop around for the best deal on a savings account. There are high interest saving accounts or you could try a tax-free Investment Savings Account. Cancel extra memberships and subscriptions that you just do not need.

Of course people become despondent with the house market with headlines like ‘House Prices Continue to Rise’ and ‘First Time Buyers Continue To Struggle’.

After all, ten years ago people only need to get together £4000 for a deposit on a house. These days you pay closer to £12,000, so naturally, the age of your average house buyer is now early to mid thirties.

But if you can work out how much you can commit to with respect to your mortgage you are half way there. You can then establish the amount of the deposit and the monthly payments. This can be done by simply having a look on the internet. Once you have a goal to work towards, the saving part is easy. It’s all about making small changes and getting into a saving routine – and sticking to it!

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Author: Dot Piper

The buy-to-let market is buoyant, with buy-to-let mortgages up by over 475% in five years. As falls in share prices dent the confidence in the stock market, many buyers have moved to this more “hands on” type of investment, and most are very happy to have done so. Typically you may get a couple who already have a property each deciding to move in together, and they may decide to rent out one or both of their properties to fund their new start.

Failure to “cross the t’s and dot the I’s” at this stage can lead to problems later and as a new television series, entitled, rather worryingly, “Tenants from Hell” shows us, it may not all be plain sailing in your new life as a landlord.

Tales of cannabis farms being set up in a London property, expensive homes being wrecked by a revenge-seeking unhappy tenant or finding you’ve let a home, lovingly refurbished maybe, to a convicted criminal are featured in the programme.

There are steps that you can take to lessen the risk of nightmare tenants. Two of the most important things are to ensure the tenant signs a contract and pays at least a month’s deposit before being given the key. Also, always obtain and follow up, references, including that of their employer. It’s also a good idea to check with the employer just how long the tenant has been employed. References from previous landlords are invaluable, try to speak to them personally if possible. It is also possible to use a credit referencing service, at a cost of around £25.

It may be possible to secure a guarantor for the tenant, which would be an excellent move. No matter how pleasant and easy to get on with the prospective tenant appears to be, it’s easier at this stage to ask for a copy of their passport and make a note of their national insurance number. If it comes to tracing them later, you’ll be glad you took this step.

If you do, unfortunately, find yourself lumbered with a bad tenant, despite all the precautions, the courts are busy and understaffed and you may find yourself waiting five months to obtain a repossession order, which is frustrating and costly.

We heard of a case recently where someone rented out a terraced house with a value of just under £120.000 to a single woman on housing benefit. The first month’s rent and a further month’s deposit were paid, but no more money was received. By the time the tenant was evicted, the house was in a total mess and in addition to the almost £5,000 rent owed, there was £2,000 needed to redecorate and rubbish removal costs.

To avoid getting into this situation it might be as well to consider employing an agent. They will thoroughly vet any prospective tenants and are experienced in spotting potential problems and acting quickly to minimise the consequences. They are there to protect your interests.

An agent who is registered with the Association of Residential Lettings Agents, otherwise known as ARLA, or the National Association of Estate Agents (NAEA) is a good choice. Both stick to good codes of practice.

So, take care when choosing your tenants. Buy-to-let continues to be a sound investment if you can avoid the, fortunately rare, tenants-from-hell.

For details and quotes on buy-to-let mortgages, search the internet for a broker. You’ll then be offered details of what’s on offer, but remember to follow all the rules for a good relationship with your tenant.

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Author: Dot Piper

There’s a new critical illness policy on the market which attempts to go some way with regard to sorting out the perplexity regarding exactly what is, and is not, covered when it comes to claiming on the policy.

Traditional critical illness policies tend to cover up to 35 listed medical conditions. Policyholders could become seriously ill with a condition that doesn’t fall into the scope of the policy and find that their illness is not covered, whilst others may be diagnosed with a listed illness with a lower “grading” which is relatively easily treated, for which they get a full payout.
Because of this inequality, the Financial Services Authority is uneasy with regard to insurers failing to fully understand that cover is restricted to certain specific illnesses.

This new product is marketed by the Prudential, under the name of the Flexible Protection Plan, and is unusual in that it claims to cover an amazing 140 medical conditions. However, cover is based on the severity of the condition which could possibly cause some uncertainty regarding the grading of these illnesses.

This is how the plan works:

Listed in the policy are practically all serious illnesses and the payout when one these is diagnosed will be graded according to the severity of the condition. The Prudential says that by tying payments to the degree of seriousness of the illness means that more payments can be offered to people with debilitating illnesses, who may otherwise get nothing at all. An example of this is that should you lose the sight of one eye; the Prudential policy will pay 25% of the sum assured. Normally, critical illness policies would only pay out when total blindness occurs. In all, 140 severe conditions are covered.

A spokesman for one of the specialist financial advisers welcomed the range of the policy, but voiced some concern regarding the implementation of these severity-based payments, saying that it would be open to argument as to what level of severity some illnesses would be graded as. It was felt that it would not be advisable to enter into this type of policy unless you had a very clear understanding of exactly how it would work. We quote “It will be up to the consumer to decide whether a guarantee of getting a smaller payment is better than possibly getting nothing.”

The cost of this new policy is approximately twice as much as conventional critical illness cover.

If your main concern regarding insurance cover should you become critically ill would be the financial outcome, it might be better to consider life insurance. Particularly, if you have a family to support, you may need something that is going to guarantee their lifestyle in the worst case scenario and with the addition of some income protection cover, which would meet outgoings in the event of you becoming unable to work due to illness. This type of cover, unlike the critical illness policy, protects you against common conditions, which result in you being unable to carry out your work.

The best course of action would be to contact a broker and check out the alternatives. The internet’s a good place to start and there are some good internet discount’s available, along with plenty of advice. A good broker will be able to compare the products available and come up with the right insurance product for you.

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Author: Dot Piper

There’s a new critical illness policy on the market which attempts to go some way with regard to sorting out the perplexity regarding exactly what is, and is not, covered when it comes to claiming on the policy.

Traditional critical illness policies tend to cover up to 35 listed medical conditions. Policyholders could become seriously ill with a condition that doesn’t fall into the scope of the policy and find that their illness is not covered, whilst others may be diagnosed with a listed illness with a lower “grading” which is relatively easily treated, for which they get a full payout.
Because of this inequality, the Financial Services Authority is uneasy with regard to insurers failing to fully understand that cover is restricted to certain specific illnesses.

This new product is marketed by the Prudential, under the name of the Flexible Protection Plan, and is unusual in that it claims to cover an amazing 140 medical conditions. However, cover is based on the severity of the condition which could possibly cause some uncertainty regarding the grading of these illnesses.

This is how the plan works:

Listed in the policy are practically all serious illnesses and the payout when one these is diagnosed will be graded according to the severity of the condition. The Prudential says that by tying payments to the degree of seriousness of the illness means that more payments can be offered to people with debilitating illnesses, who may otherwise get nothing at all. An example of this is that should you lose the sight of one eye; the Prudential policy will pay 25% of the sum assured. Normally, critical illness policies would only pay out when total blindness occurs. In all, 140 severe conditions are covered.

A spokesman for one of the specialist financial advisers welcomed the range of the policy, but voiced some concern regarding the implementation of these severity-based payments, saying that it would be open to argument as to what level of severity some illnesses would be graded as. It was felt that it would not be advisable to enter into this type of policy unless you had a very clear understanding of exactly how it would work. We quote “It will be up to the consumer to decide whether a guarantee of getting a smaller payment is better than possibly getting nothing.”

The cost of this new policy is approximately twice as much as conventional critical illness cover.

If your main concern regarding insurance cover should you become critically ill would be the financial outcome, it might be better to consider life insurance. Particularly, if you have a family to support, you may need something that is going to guarantee their lifestyle in the worst case scenario and with the addition of some income protection cover, which would meet outgoings in the event of you becoming unable to work due to illness. This type of cover, unlike the critical illness policy, protects you against common conditions, which result in you being unable to carry out your work.

The best course of action would be to contact a broker and check out the alternatives. The internet’s a good place to start and there are some good internet discount’s available, along with plenty of advice. A good broker will be able to compare the products available and come up with the right insurance product for you.

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Blogg entry for Wed 9th Aug

By Melinda Varley

Over 200,000 homebuyers in London during 2005 took out an interest-only loan according to the Council of Mortgage Lenders (CML). None of whom had a repayment vehicle in place and of these, 60,900 were first-time buyers.

There are no figures available for the total number of homebuyers with interest-only loans. However, figures for new interest-only house purchase loans have been running at between 10 and 20 per cent for all new first-time buyers over the past 10 years, and roughly the same for other homebuyers.

With more than half of all mortgages now arranged through an intermediary, mortgage brokers could be in the firing line for claims of mis-selling if the homebuyer’s loan reaches maturity and there is not enough cash to pay off the loan.

The CML is keeping close tabs on the situation and has set up a shortfalls working group to look into ways of encouraging consumers to act now to address any shortfall on interest-only mortgages.

“We are suggesting that when a mortgage comes up for review, for example, when it reaches the end of a concessionary rate, then it would be prudent to check on how the borrower intends to repay the loan,” said a spokesperson for the CML.

Using an interest-only mortgage will keep your monthly payments down until you can afford the higher monthly payments of a repayment mortgage.

But because you’re not paying anything off the amount you owe, you will probably end up paying more interest in the long run.

Interest only mortgages are a high-risk strategy that could come back to haunt advisers that set up the arrangement. An increase in interest rates could also hit these clients hard as they would have no fall-back option of reverting to an interest-only mortgage.

Simply enough, to combat the issue clients must be told that if they can not afford to pay for a mortgage, don’t take one out.

Here’s what you need to know. With an interest-only mortgage your monthly payments only cover the interest on the loan and do not actually pay off the loan itself.

If you take this option you will need to make separate arrangements to pay off the loan when the mortgage ends. You can make your arrangements through your lender – but it isn’t compulsory.

If you don’t arrange the funds at the end of the mortgage you may very well lose your home. Essentially, the money you pay to the interest only mortgage goes no where – you may as well rent.

You will have a substantial amount of time (depending on the actual agreement) to save regularly in order to make payments into a savings or investment scheme in order to build up a lump sum to pay off the mortgage when the time comes.

However, the returns offered by banking or building society accounts are usually too low to be used to pay off the amount borrowed.

Instead, it is common to accept some risk in the hope of a higher return by choosing schemes where returns are linked to the stock market. Although the risk is with these stock market linked schemes, there is no guarantee that your money will grow enough to pay off the mortgage in full by the end of the mortgage term.

Another option is to change to a repayment mortgage later. This might be a suitable option if your earnings are low now but are expected to be much higher in future.

Using a lump sum from somewhere else such as an inheritance or selling something such as another property or a business is another option and is also a risky one. You need to be sure that the inheritance will materialize and think about what would happen if your business was to fail.

Selling the property to pay off the loan is probably your last option. This is suitable only if you won’t need to live in the property such as if it is a buy-to-let property or a second home, or you are buying something cheaper.

Whatever plans you make to repay your mortgage, remember to review them from time to time to make sure that they are still on track. In the first place, interest only loans should be a last resort and should always only borrow what you are guaranteed to be able to pay back.

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Author: Bridget Carter

This year the Financial Services Authority revealed the extreme lengths some mortgage brokers will go to in an effort to secure a loan in the sub prime mortgage market. Sub prime customers range from those who have been declared bankrupt right down to those who might have missed just one credit card payment. But because the customers are considered risky, money lending companies use this to justify charging them higher-than-normal interest rates. As part of a probe into the sub prime money lending business this year, the FSA found three cases where brokers lied about an applicant’s income to secure the deal on the loan. As an outcome of this discovery, the firms involved have been referred to enforcement agencies for further investigation. And the FSA is not leaving it alone there. It plans to do more digging to see what else it can find going on in the highly lucrative business.

The three cases involving the mortgage brokers is a classic example of the desire within this part of the money lending industry to sign up sub prime customers into an agreement for more debt. These days, the sub prime market is worth £30bn a year. The money is too big to resist for both large finance institutions and smaller companies, which is why a growing number of big players in the finance industry want a slice of it.

The new players area banks like Deutsche, West LB and Investec. Lehman, GMAC and Merill Lynch have been lending to sub prime customers for some time.

It is estimated that the amount of UK sub prime residential mortgage backed securities issued rocketed from £5.9bn in 2003 to £12.1bn in 2005. It is expected that the number will continue to rise.

So what exactly is the FSA doing about it?

A spokesperson says it is taking a closer look at the advisers working on the scene to make sure they are collecting the right information to decide whether someone is adequately capable of taking on the burden of a mortgage.

“We want to assess whether mortgage advisers are taking reasonable steps to ensure that personal recommendations to enter into sub prime mortgage products are appropriate to the needs and circumstances of consumers. We also want to ensure that mortgage advisers are gathering all information likely to be relevant for the purpose of establishing the suitability of these products.”

In a recent investigation, the FSA examined 31 small mortgage firms and 210 customers who had borrowed with these firms.

It found that six in ten companies had not collected the information they should have to determine whether the applicant could pay back the loan and a further six in ten signed up customers who already had existing debts. Almost seven in ten were unable to prove they had considered an applicant’s previous situation when it came to their debts. Most companies could not justify how the mortgage met the applicant’s needs.

So don’t think that the authority is done with the matter. Another investigation is underway this summer. And there are bound to be more.

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Author: Michael Challiner

Thinking of giving up smoking? Maybe the thought of England’s 2007 smoking ban in enclosed public places is niggling away. Could this be the spur you need to finally kick the habit? Think of what you could buy with the money saved – that holiday the family have been talking about, your son’s new bike, simply more money to spend maybe?

Here are some more thoughts:
· Several thousand people have given up smoking since the ban came into force in Ireland and Scotland.
· It has been found that the average smoker spends over £90,000 in a lifetime.
· The Health Development Agency tells us that smoking is “the biggest single cause of illness and premature death, killing some 83,200 people a year in England alone.”
· Become a non smoker and you’ll save around 50% on your health and life insurance premiums, not to mention living longer!
· Your health will undoubtedly benefit. Also the health of your family. Passive smoking creates risks too!

Life and critical illness insurance premiums are rising. The popularity and ease of access to the internet over the past few years has encouraged people to search for lower and lower insurance rates. Insurers have cut the cost of cover as much as they can in order to be competitive, but the underwriters have now decided the time has come to redress the balance. The insurance company will publish their standard rate, which will be based on fit and healthy individuals. There will then be an increased premium for those that the insurers feel are at risk of health problems. That means you!

It doesn’t take long for the insurance companies to consider you’re a safer bet for them. Most companies accept you are a non-smoker after 12 smoke-free months, although a few require a little longer and it can be as long as 5 years. Once you’re successfully over this (normally 12 month) period you can start to think about your future insurance needs. The first thing to do is to contact your insurer and ask for you policy to be re-assessed.

Be completely truthful – any claims will be thoroughly checked and your Doctor will be asked to confirm that you are a non-smoker. If anything is out of order, the claim will be rejected under the insurer’s non-disclosure rules.

The new quote will show a big reduction in the premium. You may well be able to save even more money by searching the internet to find out what other companies have to offer. If you decide to change insurers, don’t cancel your original until you’re certain that you’ve been accepted by the new company, after they’ve checked your application form including details of health records. Cancellation charges won’t apply to the old policy, so it’s simple to change insurers. You don’t even have to let the old company know, simply cancel your direct debit and when it’s queried just say that you no longer need the policy.

No one said it would be easy, but it has to worthwhile. For the sake of your health. Good Luck.

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Author: Dot Piper

In the forty years since Barclaycard introduced the first credit card to Britain, there have been many changes. From being something to be regarded with suspicion they’ve changed into something we don’t appear to be able to live without.

The British seem to have taken to these cards like ducks to water and now 3.7 million people are claimed be in possession of 6.7million cards. Some people use their cards to switch balances between accounts and therefore save money and some simply sign on to new credit cards which have opening offers attached to them and, in reality, make little use of them. If you travel abroad regularly, it’s a good idea to cover both Visa and MasterCard in case of difficulties.

For the first five years, until 1971, Barclaycard retained its exclusivity but now there are 1300 different sorts of credit cards available across Britain. On average, card holders spend £60 per transaction and the amount spent in a year comes out at around £4,600.

Probably the most famous credit card in the world, American Express, was established in 1995. American Express was around before then, but as a charge card, the balance of which had to cleared monthly.

From the introduction of the Barclaycard in 1966 with its £100 credit limit, the average credit limit has now risen to £1,500 per card. Not everyone is successful with their credit card application though, as last year there were 1.7 million credit card rejections. There is around £1.4 million a year lost in fraudulent transactions. The recent introduction of the chip and pin should, hopefully, reduce these figures and new methods of card protection are being developed all the time.

The “flexible friend” has changed the face of shopping in the UK. Practically all retailers welcome credit card transactions. They can be used for shopping on the internet, booking holidays and an added bonus is the insurance which is included when paying with your card. It’s easier to use your card for everyday transactions, such as re-fuelling you car and it’s easy to keep track of payments with your monthly statement. If you pay your bills on time and avoid stretching yourself too far financially, your card really is your friend.

On the minus side, for someone who struggles to organise their finances, credit cards offer a temporary escape route and can create debt problems. Care is needed to avoid this, but if problems develop, our advice is to seek help before a molehill becomes a mountain!

A few more facts for you –

There is an Arab oil magnate who has a higher than normal credit limit on his Barclaycard – supposedly £1million

You may have heard of an American man nicknamed Mr Plastic Fantastic. His real name is Walter Cavanagh. He is reported to hold 1397 credit cards, with a maximum spend of $1.65million. We won’t even think what the repayment would be!

There’s a UK credit card which charges 46.19%. This tops the most expensive list! Interest rates average a more affordable 15.5% at present.

Competition in the credit card market has resulted in some excellent introductory deals at present. Applying for them is simple and the best way to discover them is on the internet.

Used wisely, they really do make life easier. Happy Birthday, Credit Cards.

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Author: Richard Norfolk

Student life is usually gregarious, with plenty of like-minded company to relieve the possible tedium of study. However, when it comes to dealing with debt, each student has to sort out his own salvation. The theory says that after graduation, the students of today will be the high earners of tomorrow. Doubtless in some cases this is correct but……..

The unavoidable expenditure on student loans to cope with day to day living costs, plus the credit card bills and overdrafts which occur when those costs become too great, have a way of accumulating. This results in students leaving university with, on average, debts reaching £10,000 or more. This is the current debt level. Expectations are that this will increase threefold within a very few years.

Unfortunately no-one can bank on a highly paid job to clear their debts immediately on leaving university. Even if such a job is ‘in the offing’ there is likely to be a significant delay before the actual earning power comes to fruition. In the meantime, i.e. when first starting at university, it is necessary to evaluate the costs you will be facing and plan how best to cope with them.

First – the cost of the course itself, that is the tuition fees. Below a certain level of family income there will be nothing to pay; above this level there is a sliding scale. In earlier years the total cost was paid by the government but this had to be altered when increasing numbers attending university pushed the total costs upwards. It was also claimed that increased earnings as a result of gaining a degree would leave ex-students better able to pay their costs during their working years.

Currently there is however a ceiling on payments, which restricts the value of same to 25% of the cost of the course. This is still a significant sum at around £4,000 but thankfully any balance will be paid by the government.

Don’t forget that this cost is purely to pay for your proportion of the course work – day to day living costs have still to be covered. This and any other needs should be discussed with your Local Education Authority as soon as you know what your tuition fees will be.

The LEA will then calculate the value of loans available to you. You then contact the student loans company and arrange for the necessary funds to be paid into your account ready for the start of the new student year. These are unsecured and will be provided at an interest rate which ties in with inflation, and will not be repayable until the end of the tax year after you graduate.

At this point the repayment threshold comes into operation, so that no repayment will be required until your earnings reach the specified level. Even then your repayments will not (under present legislation) exceed the actual amount borrowed, and will be set at a value that is suitable for your earnings level. If you should decide that despite your educational achievements, the life of an impoverished artist (or other poorly paid artisan) would best suit you and your earnings never reach the threshold figure, then, if you reach the age of 65 without starving to death, your debt will be written off!

So much for student loans – what else is available to you? Credit cards are an obvious source of credit (otherwise they would be called by a different name) but they really should be avoided if possible. With no special terms for students in most cases, the interest rates are high and the amount of credit available to students is low. A lot of money can easily be spent paying interest charges whilst having a maximum debit balance, which makes you pay out regularly but allows you to spend nothing.

A bank loan is another possibility but this too is dangerous ground. The possibility of an interest free student overdraft of £2000 is very attractive, but go just over the limit and the rules will be applied rigorously. This means you are likely to be hit by a very high interest rate PLUS charges for an unauthorised overdraft. The whole of any overdraft will have to be paid off as soon as you leave university, otherwise the entire sum will attract interest charges.

You are going to have to exist without real income for quite some time. Arrange your finances to the best of your ability for the avoidance of interest charges and your lifestyle for the avoidance of unnecessary expenditure. It will seem like a long drag but well worth the effort in the long run.

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Author: Dot Piper

If you’re planning a pregnancy or are newly pregnant, may we congratulate you? Naturally, your mind may be filled with all manner of things, from your first scan-date to how to choose a suitable, up-to date name without upsetting the excited grandparents-to-be. Dare we ask, have you thought about insurance?

If you choose to take out life insurance, then without a doubt, the right time is before you become pregnant. Once into the pregnancy it may become very much more difficult to be accepted by insurers. Particularly with a first pregnancy, you never know what complications might arise. Whilst the vast majority of pregnancies proceed without any complications whatsoever, some conditions can crop up, such as gestational diabetes or high blood pressure, which insurers would consider as a greater risk. If cover is offered once one of these problems is diagnosed, the premium could be raised by up to 50%. If this happens it may be a good idea to accept the increased cost and change to a more economical policy when the baby is a few months old.

There are some cases where women have applied for cover after experiencing problems, only to be told that the will only be accepted after the child is born and everything is fine. One insurer told us that as lifestyles change and women are starting their families after they have reached their mid-thirties it is increasingly likely that they will delay cover until after the birth.

In the case of a single parent, you are going to have a tiny individual totally dependant on you. In the event of your death, it is doubly important that provision has been made for the care of that child, both personally and financially.

For two-parent families, whilst the pressure is less, it still makes sound sense to cover for the financial implications of bringing up a family single-handed. There is a case for arranging separate life cover and the cost of two single policies would be only minimally more expensive. As an example:

· Level term assurance, over 25 years, for a couple aged around 30, would cost around £16 per month for £150,000 worth of cover. The policy would pay out on the death of the first partner.
· The male partner taking out the policy over the same term would pay £10 per month and the female partner would pay £8.
· These figures assuming that both are non-smokers.

That’s a cost of £2 per month more, but both partners are covered. There’s also a lot more flexibility in arranging single life policies in that if one of the couple earns considerably more than the other they are able to arrange insurance for a higher sum, in order to maintain the standard of living of the family, should the worst happen.

It’s a sensible step to arrange your insurance prior to your first pregnancy for another reason too. Should you be diagnosed with a condition which would upset your insurers, you’d be covered for subsequent pregnancies as your insurance is for life.

So, log on to the internet and see what the brokers can offer you. You’ll only have one lot of form-filling to do and they’ll come up with a range of deals to suit your circumstances. The internet discount may come in useful too. Now, having got that out of the way, which website offers advice on naming the baby?

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