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Research from credit reference agency Callcredit has found that students heading for university this year are likely to graduate with debts of more than £15,000. That is more than double the average student debt seven years ago. Some 83 per cent of that debt will be from student loans.

Callcredit’s Mel Mitchley commented: ‘Student loans offer the best value for money and automatic repayments only begin once gross earnings go above £15,000. Also, repayments are capped at nine per cent of the amount earned above £15,000, which will minimise the impact on a graduate’s ability to afford other credit commitments, like a mortgage, once they leave higher education.’

Many students are choosing to wipe out their debts by declaring bankruptcy. In 2005, 899 students took this option, compared with eight in 1992. However, students who take this route will still have to repay their student loans. Mitchley warns: ‘Bankruptcy has serious consequences in terms of current and future assets.  Any hopes of future home ownership may be ruined and even something as simple as opening a bank account may become difficult.’

Research by the Royal Institution of Chartered Surveyors suggests that the UK government’s proposed planning gain supplement will drive small developers out of the housing market. The government could then miss its target of 200,000 new homes a year. The proposed land tax could cut small developers’ profit margins to uneconomic levels, leaving them no choice but to exit the residential building market.

This situation could leave first time buyers and homeowners in a tight property market in which demand far exceeds supply. RICS Head of Policy, Brian Berry, commented: ‘ This is a prime example of the government shooting itself in the foot.  The research clearly demonstrates that PGS fails to achieve the Government’s stated objective to raise additional money for infrastructure. The mechanics are flawed and need to be reworked.’

RICS estimates that 55 per cent of the 30,000 homes built in England since 2001 have been constructed by small developers.

Kensington Group has launched Kensington Personal Loans (KPL) to address the second charge loans market. KPL will offer secured loans to a range of borrowers, including those with highly adverse credit. Clients with arrears will benefit from 90 per cent loan to value (subject to maximum income limits) and loan amounts up to £100,000. Employed borrowers will be able to self-certify up to 20 per cent of earnings.

KPL’s managing director, Alison Hutchinson, said: ‘Our products have been designed to meet the needs of our customers, resulting in unique features on both our secured loan and related insurance products, including no minimum trading for self certification, self-employed applicants and self certification for employed applicants.’

The new products are going out to a small number of packagers initially, with full roll-out likely soon. Gerry Lafferty of Access Broker Services, one of KPL’s first packaging partners, said: ‘ Kensington have brought some unique selling points to the market which I am sure will be very interesting for intermediaries who are looking to move into the fast growing secured loan market. With a company like Kensington moving into the sector, secured loans have got to be viewed as a serious market now.’

UK savings are now at their highest level this century, according to IFA Promotion, the organisation that promotes the benefits of independent financial advice. Between April and June, UK consumers saved some £38.6 million. However, they are still taking on new debt, to the tune of 48 pence for every pound saved.

IFA Promotion’s chief executive David Elms commented: ‘This new-fangled allegiance to saving is all well and good, but only if we show equal commitment to controlling our debts.’ He said that people were not taking spending and borrowing behaviour into account when saving. ‘The simple fact is that if we don’t stop borrowing money, the positive effects of saving will be negated,’ he added.

Elms said the new findings were ‘disappointing’. He concluded: ‘When we last reported – on the period January to March 2006 – we saw what we hoped to be signs of a new financial pragmatism. UK consumers were borrowing only 16 pence for every pound saved, and there was evidence of a net repayment of debt. This quarter’s results therefore only go to show that the economy is in a state of flux and that a sensible budgeting mantra is yet to be embedded in the British psyche.’

Brits may not be able to blame lending companies or credit card spending for their financial difficulties. According to Cahoot, Brits lent approximately £65 billion to each other without a written contract. The loans are commonly made between family and friends, with loan totals averaging £3,704 per person. The problems can be compounded when the lender is faced with a lien on their home, or the prospect of insolvency. Their first reaction is to demand repayment.

John Goodard, Cahoot’s managing director, suggests that lending to friends and family is a common practice, and that waiving the debt has become a part of lift. The problem is that people are borrowing large amounts of money in addition to personal loans, overdrafts, and credit cards. This puts a strain on the expendable income and relationship of both the lender and the borrower. Cahoot estimates that one in twelve un-official loans result in a falling out between the borrower and lender.

Brits are lending money they do not have according to the national debt figures and the insolvency rates. Parents are in the worst position with national pension rates offering less than half the income level than they would have received if they retired ten years ago. This leaves pensioners with few options.

Financial councilours suggest that people should solicit a financial lawyer to write out loan papers for private loans. This will protect all parties involved. It also gives the lender a clear indication to the borrower’s intent. Borrowers who are not comfortable with signing a legal contract may not feel they are under any moral obligation to repay the loan.

New consumer education programs are bringing to light some startling ‘play on words’ that financial institutions have used to sell mortgages. In fact, many financial institutions offer incentive plans for employees who sell a mortgage. Moira Haynes of Citizens Advice states, “We have concerns that this is not an isolated case. There are potentially problems across the industry.”

Other sales tactics that would entice a homeowner to select a mortgage over a loan are the ‘No Closing Fee’ mortgages. This is in fact a misrepresentation. The consumer does pay the closing fee with their regular payments through the life of the mortgage. Most institutions charge this in the form of an increased interest rate. In fact, when many consumers sit down and do the math, their monthly installment far exceeds what their closing cost would have.
There are other subtle misconceptions most loan officers do not explain to consumers. One is the mortgage insurance. This provides a £66 million windfall for banks. The mortgage insurance is often attached to the monthly mortgage payments, incurring interest along with the money borrowed. In the end, the homeowner paid far more for the house insurance than the insurance was worth.

This is leading to new venues and trends of debt consolidation and debt relief for UK consumers. Many of them are opting for personal and secured loans instead of a mortgage. This may cause a short-term financial hardship, but offers many long-term benefits.

This information is being exposed at a vital time. As many UK homeowners are faced with a short-fall in their endowments, they are searching for ways to cover the short-fall without ruining their credit rating. Many of them are taking a second look at mortgages, and opting for loans, or an increase to their savings.

Not only are UK credit card holders racking up more than 10 000 of debt, GM, a private credit card provider states that consumers are loosing out on millions each year by failing to claim rewards they earned through store loyalty initiatives.

Helen Parker of GM Card said, “It’s incredible that, as a nation, we are losing out on rewards and bonuses that we have earned through our loyalty, especially when it is so simple to cash in.

“Loyalty and reward schemes are a fantastic way to earn bonuses - but only if users bother to recoup them.”

In 2006, approximately 600,000 credit card accounts had had their limits reduced, by the banking group, HBOS. This was in reaction to the current statistics that reveal a 15 percent increase in bad debts to £864 million in the first half.

This combined with consumer’s frequent changes from one credit card to another, in the misguided belief that the short 0 per cent interest period will save them money, is driving many UK consumers into a high-risk credit category.

This in turn is driving the number of homeowners looking for a mortgage to record heights. However, the numbers also indicate the UK consumers are educating themselves in financial matters.

UK consumers who sought financial relief in the form of loans, personal and secured, saw a 2% decline in the number of accounts in arrears. This could indicate that consumers are looking for solid financial solutions to their debt, and not following the traditional routes of soliciting mortgages, or adding necessities like utilities to their credit cards.

The Chartered Insurance Institute’s (CII) Society of Mortgage Professionals has seen its membership rise to more than 3,000. The CII sees this as related to the expanding mortgage market, which enhances the need for qualified advisers. Chief executive Richard Fox commented: ‘I expect membership to continue to rise as more advisers realise that the Society is able to deliver a wide range of initiatives to help them build their technical knowledge, skills and professional commitment.’

The CII has launched a number of initiatives to help members with mortgage sales and advice. These include a job role and competence framework and a series of e-bulletins, fact files, seminars and workshops under the ‘Professional Pointer’ badge. The latest of these deals with higher-risk mortgages, which is expected to be a growth area for consumers and advisers.

Some people may damage their credit ratings by choosing inappropriate financial products, says research commissioned by financial comparison website MoneyExpert.com. The report, by Professor Merlin Stone, finds that 8.7 million people have bought financial products through comparison websites in the last year. That is equivalent to 1.1 million sales a month.

However, the research warns that people with poor credit ratings, who apply for loans, mortgages and credit cards can damage their credit rating further if they are refused for these products.  Recent MoneyExpert research shows that 2.8 million people have had applications refused in the last year. Some six per cent of people applying for loans, credit cards and mortgages have been rejected. MoneyExpert expects this figure to rise as banks clamp down on easy credit. This follows increases in the level of bad debts.

Professor Stone wishes to see financial comparison websites offer a more rounded service that focuses on factors other than price. He says: ‘Currently they are overly focused on price which means they can provide banks and building societies with poor quality business as there is no attempt to detail the wider attributes of the product or understand the credit position of the consumer before making a recommendation.’

The Times Online reports that banks are fighting back in the face of a likely cap on unauthorized overdraft charges. According to the report, the Office of Fair Trading could introduce a cap similar to the £12 cap on credit card default charges it imposed earlier this year.

The report suggests that banks collect some £4.7 billion a year from unauthorised borrowing. To make up the expected shortfall in income, many banks have increased service charges and interest rates for authorised overdrafts. Some, like HSBC, will keep a stricter eye on customers with overdrafts and will review these more regularly.

Finally, the Times Online refers to recent research which suggests that UK banks could follow the lead of banks abroad and introduce charges for banking services which are currently free, such as holding a cheque account.