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An Inheritance should not come burdened with the choice, “Do I sell, or take out a loan to pay the Inheritance Tax?”  The IHT is a major burden for the middle class. As the law stands now, a person can inherit money, investments, property, and other assets to a total value of f £285,000 left by a single person, or £570,000 (2 x £285,000) left by a married couple.

A recent study revealed that the Treasury’s income from IHTs have doubled in the past eight years. In 1997-98 approximately 18,000 estates paid a total of £1.7 billion in IHT tax. In 2005-06 an estimated 37,000 estates will pay the Treasury will collect £3.2 billion. Most people will apply for a homeowner’s loan, or seek a secured loan to prevent being forced to sell their property.

After this threshold, the government adds a tax at 40 per cent. This means that if the personal assets are £385,000, IHT would charged 40 per cent on the excess £100,000, which totals £40,000.  The spouse exemption is of little comfort to smaller families who will eventually leave the total assets to one or two children, who will be burdened with the tax.

People who inherit enough money to cover the tax can consider themselves lucky. Those who do not are in a bind.  The government allows exactly six months, from the end of the month the person died in, to pay the tax.  That is not much time to find £40,000, or to figure out how to pay the debt back when it is secured.  For many people, the only option is to put the property up for sale, and hold off on paying the tax, even though it means incurring interest.

The Lord Mayor of London, Alderman Sir David Brewer has launched the Islamic Finance Qualification (IFQ). The IFQ will be the first global benchmark examination covering Islamic Finance to be available to candidates via Computer Based Testing (CBT). It will also be the world’s first ever global benchmark qualification to cover Islamic Finance from both a technical product knowledge and a Sharia’a aspect.

In the last year, the IFQ has been jointly developed by the Securities and Investment Institute (SII) and the Ecole Supérieure des Affaires (ESA), to respond to rapid expansion in the Islamic finance and banking sector. The Advisory Council for Islamic Finance responsible for the IFQ’s development is chaired by the First Vice-Governor of the Banque du Liban, Dr Ahmad Jachi and comprises leading Sharia’a scholars and practitioners from around the Gulf and the UK. Mr Riad Salamé will launch the IFQ at the Mansion House with Mr Roger Ourset, Director General of ESA.

The syllabus has been published and the workbook, which will support preparation for the IFQ exam, is available. This will be the world’s first ever handbook on practical Islamic finance and banking, and the text may be of interest to organisations already engaged in this area, or thinking of moving into Islamic Finance and Banking, as a practical guide for their staff.

Training has been organised for the first public sitting of the IFQ to be held in November 2006 in London and Beirut with the IFQ becoming available worldwide via CBT from March 2007.

Ruth Martin, Managing Director of SII said: ‘Setting standards for practitioners is a vital part of any professional body’s remit. SII has been delighted to combine its expertise in both examinations development and professional standards to partner with ESA in the Middle East in this innovative new qualification aimed at helping practitioners grasp the fundamentals of Islamic Finance and Banking.’

The Financial Services Authority (FSA) has published the final rules for the regulation of home reversion plans and Islamic law compliant home purchase plans, which it is to regulate from next year. The rules have been formulated after consultation and are designed to ensure that anyone taking out either of these sale and lease plans enjoys consumer protection similar to that enjoyed by consumers taking out lifetime or conventional mortgages.

The plans will be regulated by the FSA from 6 April 2007, following recent parliamentary approval of the legislation. The FSA will be able to accept authorisation applications for these home finance products from 6 November.

The FSA’s director of retail policy Dan Waters said: ‘Regulation of these sale and lease arrangements introduces important new protections for consumers in the housing market.  It will help older consumers looking to release equity from their homes by extending protection over both sectors of the equity release market.  It will also ensure fairer treatment for consumers wanting to buy their homes in way that is compliant with Islamic law, building on the work that we have already done in the field of Islamic financial services to improve consumer access to these products.’

He added that firms needed to be sure that they were fully prepared as regulation was only five months away. Consumers will be able to be sure that firms which offer these products are adequately resourced with competent staff. They will also get clear information about services so they can make informed choices.

New research from Halifax shows that house prices have risen by an average of 187 per cent across the UK since the housing market recovered in February 1996. The average UK house price has risen by 10.6 per cent a year from £62,453 in the second quarter of 1996 to £179,425 in the third quarter of 2006. Stock prices have risen much less, by 61 per cent or 4.6 per cent per year, as have nominal earnings, by 54 per cent or 4.2 per cent a year. Retail prices have risen by 31 per cent during the period. That equates to 2.6 per cent per year.

As expected the largest increase has been in London, where prices have risen by 240 per cent (12.4 per cent a year) during the period under review. That said, during the downturn from 1989 to 1996, house prices fell most in the capital, by 23 per cent. Scotland has seen the smallest increase, up 110 per cent (7.3 per year). However, prices remained virtually unchanged during the downturn elsewhere.

Average house prices have also increased, from less than £80,000 in 1996 to above £100,000 today. In eight regions, the average house price is now above £150,000. Cornwall has performed best among the counties since the recovery with a 274 per cent rise (13.3 per year) in the average house price there. Meanwhile, Surrey has held its position as the most expensive county, both in February 1996 (£96,983) and now (£314,037). The highest priced town in 2006 is Gerrards Cross in Buckinghamshire with an average house price of £712,828. In 1996 prices were highest in Kensington & Chelsea (£206,119), followed by Gerrards Cross (£205,968).

Liverpool Victoria has launched an intelligent online processing system for their flexible protection plan, mimi, which will allow financial advisers to apply online for their clients’ protection needs in a hassle-free way.

Called straight through processing (STP) the new system lets advisers choose cover for mortgage payment protection, income protection, critical illness and life. Advisers can complete applications online and can also get instant acceptance and policy tracking. The system also allows advisers to review previous cases and to produce illustrations.

STP allows advisers to receive quicker decisions and clients will be contacted directly, reducing the need for reports from GPs and avoiding processing delays. There are two application routes. The short form option allows advisers to enter basic client information. Within 10 minutes the application goes to a telephone interviewer who completes the rest of the questions with the client. The normal route allows advisers to complete risk and medical details on clients’ behalf and the system uses rules based decisions to give immediate decisions.

Stuart Tragheim, Director, Intermediary Business at Liverpool Victoria, said: ‘Our new STP system demonstrates our commitment to making the life of the adviser easier.  Any technology that can be put in place to speed up policy applications is a positive step, and the ease and breadth of choice of cover available through the mimi Flexible Protection Plan means advisers can find quick and individual solutions to their clients’ needs.’

STP can be accessed directly through Liverpool Victoria’s IFA website or through portals such as The Exchange, Webline and Assureweb.

The wealthiest are warned by companies like Experian to keep a close eye on their consumer credit information.  Experian, a global information solutions provider, revealed last week the results of their research into the victims of identity fraud.

Their findings include a few startling facts.  The people who are victimized the most are the wealthiest, and the successful homeowners. The next group is those who rent their accommodations.  London is the identity fraud capital of the UK.  The risk of becoming a victim of fraud is four times greater than the UK average. Residents of Kensington are the most at risk, being five times more likely to become a victim of identity fraud. Of the 54 UK areas classified as being ‘very high risk’, 34 are within the M25 and 20 of those are in London itself.

The two most common forms of identity fraud are the misuses of a person’s previous address and credit card or store card fraud.

More than half of all victims are 30 – 50 years old, are an equal balance of male and female, and are in the wealthiest category or are living in rental accommodations.

There are some trends that seem to indicate whether a person is in a high target group.  Renters and young singles in a shared accommodation, high-flying graduates, thriving people including young families, and people living in premium city residences.

Consumers need to be aware that identity fraud goes farther than misuse of credit cards. Criminals may take a second mortgage out on a home, or apply for a secured loan against a home. After obtaining the money, they disappear leaving the homeowner with the legal responsibility for the loan. 

Many buy-to-let investors are experiencing a growing increase in the difference between their mortgage payments and the rent they can collect on their properties.  Rental incomes are falling evenly across the UK.  Nationwide they dropped an average of 5.70 per cent to 5.50 per cent.  London is experiencing a 2 per cent greater decline.

Buy-to-let lenders are optimistic. They claim that the situation is stablising. One company, Landlord Mortgages surveyed the profits across Scotland, England, and London.  The survey suggests that the markets are becoming linked. Brokers are predicting that this might lead to above average rental profits in smaller areas.  Landlord Mortgages suggests that smaller areas  like Bath and South East Avon will offer more of an investment on return than larger regions like Scotland or the South West.

The problem is blamed on the drastic rises in house prices combined with the increases in interest rates.  However, there are several factors. One difficulty was brought on by the Government’s new regulations regarding rental units, which force landlords to invest thousands of pounds into upgrades in each unit.

Mortgage lenders added to the problem by changing their criteria for borrowers, and putting a greater financial stress on their customers.  One change that hit the market in recent months is an increase in the minimum rental coverage from 125 per cent of the mortgage’s repayment to 115 per cent.  Despite optimism on the part of lenders, recent statistics have shown that rental profits have dropped every quarter this year.

This has left buy-to-let owners with few options.  Borrowing enough to meet the government regulations and upgrade the units to attract a higher class of renter, or selling outright, appear to be the only options for many landlords.

Following the recent introduction of automated valuation models (AVMs) and electronic identity verification (eIDs), Kensington Mortgages has prepared a guide to these innovations which could cut the time it takes to receive a full mortgage offer.

An AVM is a computer generated valuation, which can be carried out in minutes. In contrast, a physical valuation may take weeks. The automated valuations are based on factors including comparable property sale prices from the Land Registry, data from valuers’ databases, historical price appreciation and property characteristics.

An automated valuation can’t be influenced by external factors such as loan amount, recommended purchase prices and customer estimates. However, it may not be suitable when there are few similar properties in an area. The accuracy of an automated valuation depends on the data on which it is based, and this will be indicated when the valuation is produced. The data on which AVMs are based is updated at least monthly.

In-depth surveys such as homebuyer’s reports or structural surveys are still available to those wanting more information. This can replace or accompany an automated valuation. However, this could delay the time it takes to receive a mortgage offer and any significant difference in valuation between a survey and an automated valuation may be queried by the lender.

E-IDs rely on information from credit reference agencies and the electoral roll to verify people’s identity and location. This information is only available to lenders with your permission and it can only be used for the stated purpose.

The Financial Services Authority has fined Loans.co.uk £455,000 for failing to treat its customers fairly when selling payment protection insurance (PPI). The FSA found that the company did not have the appropriate systems and controls in place to lessen the risk of making unsuitable sales. Loans.co.uk sold PPI over the telephone, but did not gather and record information to show that the recommendations it made were suitable. Customers did not receive enough information to make an informed decision about the PPI policy being offered and therefore could not be sure they were recommended the right option for them. This was estimated to affect approximately 14,400 customers.

Margaret Cole, FSA Director of Enforcement said: ‘We have highlighted Payment Protection Insurance as an FSA priority due to the potential level of risk to consumers. Loans.co.uk Limited failed to make sure adequate processes were in place to ensure the suitability of its PPI recommendations and treat its customers fairly. The principle of Treating Customers Fairly should be embedded in firms’ business models to help prevent such failings and it is important that all firms review their systems and controls to reach this standard.’

The FSA also found that the company did not have appropriate compliance monitoring procedures in place to identify failings in the sales process and there was no guidance to staff on how to identify and handle a complaint.

Stephen Hayes, CEO of Loans.co.uk commented:  ‘Loans.co.uk is committed to providing its customers with a high level of service. We co-operated fully with the FSA and undertook an internal audit review to ensure effective and timely resolution of the issues identified.  New practices have been in place for the past six months’.

An article on the Motley Fool gives credit card holders advice on what to look out for with credit cards. This could help card holders to save or make some money. Although many credit card issuers are now charging balance transfer fees of between 2 and 3 per cent, there are still some free balance transfer cards from Britannia Building Society and Sainsbury’s Bank. The trade off is a shorter 0 per cent period.

When shopping around for a credit card consumers also need to be aware of uncapped balance transfer fees, which could add hundreds to the cost of transferring a balance. The way payments are allocated can also affect how financially effective a particular credit card is. Card issuers often assign payments made to pay off the cheaper debt first, meaning that any 0 per cent balances are cleared before any higher rate spending. This means that people could find themselves making unexpected interest payments.

Finally, the article advises cardholders to check the terms and conditions. Some credit cards which appear to have a long term 0 per cent rate require cardholders to qualify for the discount by spending some money first. This ensures that the lenders make some interest, but makes the deal less appealing. The article suggests that cardholders look for cards with capped balance transfer fees, if fee-free ones are not available. They should also check the terms and conditions to see what they will really have to pay. And they should check to see how payments are applied on the card.