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Consumers who are wondering whether they should fix up their current residence and make a profit have another year to solidify their plans. Hometrack predicts that the UK housing market expects a four per cent growth through 2007,

The current range of factors influencing the market is unprecedented leaving no real way to measure a realistic outcome. However, Hometrack sees a solid sellers- market supporting solid house price growth.

“The housing market is moving into uncharted territory as we enter a period of low growth and lower turnover, a trend not seen since the 1950s,” said Hometrack research director Richard Donnell.

“The problem is that low levels of liquidity in what is an already illiquid market are likely to increase the short term volatility in house prices.

“This is likely to impact on asking prices more than underlying values.”

The Bank of England’s secrecy about whether they plan to increase interest rates again, and unpredictable unemployment will increase the short term uncertainty.

Some reports state that the housing prices will continue to rise 4 per cent. The location of the property is the defining factor. Consumers in high demand areas can sell at a huge profit.

Some consumers are already borrowing secured loans with low early repayment fees, and fixing their homes up. Then, they are prepared to move into a rental until the housing market drops, which is predicted to happen in two years.  However, like all speculation, there is no guarantee that the market will fall.  Some sources claim the housing markets will continue to increase for five years.

Most of us have credit cards. In fact, according to official Visa statistics, there are more credit cards than people in developed countries and over a billion credit cards in circulation at the moment. They can be a useful tool and there are many instances in which not having a credit card can be seriously inconvenient. For example, when you travel or wish to rent a car, if you do not have a credit card you may find it very difficult to find payment methods that are acceptable to merchants. As more and more of us get hooked on internet shopping, it also becomes more and more useful and convenient to have credit cards.

However, credit cards also come with a certain amount of risk. It is very easy to spend freely on a credit card and then realise that you cannot pay back the amount you owe as quickly as you would like. For example, one fact that many people are aware of when they first take out credit cards is that if they pay off the full amount on their statement as soon as they get their bill each month, there will be no interest to pay back at all.

However, all it takes is one month of overspending and you will realise just how easy it is to make the minimum payment and put off paying the amount that you owe. If you let this continue unchecked, you will quickly allow credit card debt to build up on a number of credit cards and will have no way of paying it off easily. To avoid this, you should keep close tabs on your credit card balances and aim to repay them in full each month if at all possible.

A recent BBC feature by Ian Pollock has looked behind some of the reasons why house prices in the UK are so high. First of all, the British, unlike many other nations, seem to be obsessed with house prices. There are now ten major house price surveys measuring price movements on a month by month basis.

There is also a lot of public interest in DIY, interior decorating, foreign property investment and property speculation. There are literally dozens of exhibitions and companies specialising in showcasing the properties available for purchase in foreign markets and the British account for a huge proportion of property purchases in the EU by non residents. It seems as if the British value home ownership in a way that few other countries do.

This trend is also set to continue. The population is set to rise by about two million people over the next five years and a further three million in the decade after that. This will mean there is a continuing demand for housing that housebuilders will find it difficult to keep up with. However, even more drastic is the increase in households which is increasing at a phenomenal rate with an extra 2.3 million households in the nation by 2016, an increase of almost 10 percent.

The big driver in this increase in household numbers is that more and more people are choosing to live alone. While in the past, most households consisted of over three people, this figure is now closer to two and it is getting to the stage where almost every adult in the country will require their own home.

However, it appears as if we are not alone in this obsession. Many report that there is nothing unusual or peculiar about the British obsession with homeownership and residents in other countries are just as eager to climb the property ladder.

Many professionals starting out at the beginning of their career will be all too aware of the time it takes for their career to start paying them dividends. Many of those in the country’s highest paid professions start out their careers on comparatively low salaries, as well as being straddled with the debts of years of study.

This fact has not been lost on HBOS, Britain’s largest mortgage lender which announced on the thirteenth of November that it will be launching a new mortgage lending up to 125% of the price of a new home to such cash strapped professionals.

It is expected that the loans will be used to help get young professionals onto the property ladder while also leaving them with enough cash to pay their stamp duty, legal fees and pay for furniture and improvements for their new homes.

Some however, fear that such large loans will make it ever more difficult to keep up with repayments and say that repossessions will increase as a result of such lending policies. A spokesperson for the Citizens Advice Bureau said that such mortgages could mean as much as half of a borrower’s monthly income will go towards mortgage payments and that such borrowers will be extremely vulnerable to increases in interest rates.

The new loans will only be offered through independent mortgage advisors and will not be offered in the banks branches. The bank has also said that it will operate extremely stringent criteria to ensure that only those borrowers who will be able to afford the products will be able to take them out. According to the bank this mortgage is a “niche product” and will only be targeted at appropriate customers.

The loan will require a 5% deposit on the cost of the home. Borrowers will then be able to borrow 95% of the house price on a secured basis, with a further 25% being offered as an unsecured loan. Both loans will be repaid in a single monthly payment.

Many have also criticised the high rates of the new loans,  which vary depending on the type of loan offered. Customers opting for a two year fixed rate will pay 5.89% for the first two years, which will revert to 7.09% thereafter. Many customers would be better served opting for a traditional loan and then seeking unsecured finance from more traditional sources at a lower rate.

Shadow Chancellor George Osborne unveiled a plan to tackle soaring debt and financial exclusion at a recent Conservative Debt Summit meeting in London. Many of the proposals in this plan have been proposed by debt management organizations for some time. This plan will be researched by the Conservatives in collaboration with the Citizens Advice Bureau and other organisations.

He went on to say that this isn’t just  problematic for people who find themselves caught up in rising debts, but rather it could be a problem for everyone. He also said “An economy built on borrowed money is an economy built on borrowed time.”

Consumers sign up for these ‘impulse buy’ items without understanding the ramifications of the store’s program.

The summit examined a series of proposals. The plan may include a seven-day cooling off period for store cards. This would give them the opportunity to really think about their spending habits.

There is also a request for credit card providers to inform the public, in layman terms, about charges involved and a proposed introduction of a debt action plan to encourage greater corporate and social responsibility.

This last proposal was directed at the summit audience which included leading figures from the charity, consumer protection, and financial services sectors.

Mr. Osborne addressed them directly when he spoke of the “social responsibility” of debt and financial exclusion, urging the government, organisations and individuals to work together.

The summit also looked at a proposal that mimicked the government’s plan to encourage financial education at the grade school level.

We will all be aware of recent interest rate increases from the Bank of England. However, what many people will not have noticed is the fact that the average annual cost of mortgage repayments has increased over the last three years by as much as a third.

This is the combined effect of both increasing interest rates as well as larger and larger mortgages. The average annual cost of a mortgage in the UK in 2003 was £4,711. According the one survey, this figure has not increased to £6,284. The survey also shows that over a million homeowners now pay more than £1,000 a month on their mortgage, with the majority of them living in London.

Mortgage rates are on the rise with rates raising from an average of 4.29 percent in 2003, to 5.41 percent today. These figures come from a YouGov poll of over two thousand mortgage payers. However, as interest rates have risen, house prices have been rising even faster and this has meant that borrowers are being forced to take on larger and larger loans as they seek to secure the homes they want.

Some debt charities have also drawn a lot of attention to the increases that banks and mortgage providers are charging for arranging mortgages and exiting them. These fees have been increasing steadily as mortgages get larger and are simply adding to the overall cost of borrowing. Many borrowers are now also having to depart from traditional mortgages of 90% and four times earnings, and are borrowing 100% or more, and ever higher income multiples. Without even taking account of the difficulties that some borrowers will face in repaying these larger mortgages, banks are adding even more charges such as higher lending fees which simply put borrowers in even more debt.

A new article published by the Council of Mortgage Lenders (CML) reveals that over 5% of total mortgage lending in 2005 was probably “adverse credit” lending to people with previous credit problems, making it the largest specialist sector after buy-to-let.

The CML’s other findings on this growing sector of the market include the following:

•    Nearly 50% of adverse credit lending is to people in the less serious “low adverse” category, and less than a quarter is “high adverse”.
•    80% of adverse credit mortgages are sold through intermediaries, compared to less than 60% of non-adverse.

•    Approximately 66% of adverse credit mortgages are remortgages - compared to about half of non-adverse loans.

The CML’s research also revealed that for many borrowers adverse credit lending represents a way of rehabilitating their finances after a period of financial difficulty.

Independent research supports the CML findings: 30% of non-conforming borrowers thought their credit standing had improved since taking out their mortgage, compared with 8% who felt it had got worse, suggesting that a material degree of credit rehabilitation does occur.

CML head of research Bob Pannell, comments:

“We believe that the adverse credit mortgage market, although higher risk, plays a valuable part in helping many individuals who encounter short-term financial difficulties to rehabilitate their finances and migrate back to prime products.

“There are many flavours of adverse credit mortgages to deal with the broad range of circumstances that people face.  It is a real testament to the dynamic and innovative nature of our market that UK lenders are able to offer an attractive range of mortgages to suit these different circumstances.”

First Direct’s decision to introduce charges on its current account has not shaken up the industry—it has only shaken up the bank itself. So says Stuart Glendinning, managing director at moneysupermarket.com:

“First Direct is clearing up a mess of its own making. This is not a precursor to more widespread charges in the industry.

“When First Direct launched its telephone banking operation it set a new benchmark for customer service. It is well known throughout the industry that First Direct has a reputation for maintaining a very high standard of service that is valued by existing customers. However, over recent years First Direct has found itself in a difficult position.

“While the terms on its current accounts are okay they are no way near as attractive as some of the more compelling propositions offered by competitors such as Alliance and Leicester, Nationwide Building Society, Halifax, Smile, and Lloyds TSB. Furthermore, many other banks have now caught up with First Direct in terms of offering high standards of service.”

Glendinning believes that this stiff competition is the reason for First Direct’s difficulty in attracting new customers:

“Accordingly it has been difficult for First Direct to attract lots of new customers. It has relied on cash incentives as an inducement to attract new customers. And hey presto, it shouldn’t be surprised that many savvy individuals opened the accounts merely to benefit from a £50 cash payment.”

Industry experts believe that First Direct’s new approach to clearing up the latent accounts comes across as heavy handed and does not fit in with First Direct’s reputation for customer care. The bank might be on a better footing with its clients if it combined this move with attractive incentives.

Mr. Glendinning suggests: “There is an easy way to avoid these charges if an individual doesn’t fit the new criteria. To avoid the charge they merely have to open a savings account with an investment of £1. Hence this campaign runs the risk of being counter productive as First Direct may end up with tens of thousands of people with two latent accounts instead of one.”

UCB Home Loans, the specialist lender of Nationwide, today dismissed fears that a thriving equity market and a drop-off in immigration from other European Union countries could bring about a downturn in the buy-to-let sector.

The lender’s most recent report on buy-to-let indicates that immigration from other EU countries is unlikely, as some have predicted, to decline over the next few years. This segment of the population has given significant support to the buy-to-let sector in some parts of the country by providing a ready supply of new tenants.

The government’s Accession Monitoring Report, published this August, states that 427,000 workers from Eastern Europe registered to work in the UK between May 2004 and June 2006. When the number of self-employed is added, the true figure is believed to be closer to 600,000.

Keith Astill, managing director at UCB Home Loans, comments: “Most of these people are renting and, in some parts of the country, they form an important part of the rental community for buy-to-let properties. This has been particularly beneficial for landlords in these areas, as it has helped to keep void periods to a minimum whilst maintaining rents at a reasonable level.”

The recent drop-off in the number of workers coming from Poland, combined with government restrictions on immigration from Bulgaria and Romania, could lead to a downturn in the buy-to-let sector in areas where large numbers of foreign workers are concentrated. However, UCB Home Loans says that this scenario is extremely unlikely.

“Young foreign workers have provided substantial support to the UK economy over the past couple of years and, as net tax contributors, they take little back in the way of support or benefits,” said Keith Astill

“If the number of people coming to the UK does ever begin to fall off, it is likely the government will alter regulations to enable workers from other European Union countries to take their place,” he said.

Financial consultant and analysts are warning people that the country could reach a breaking point where those in financial trouble form the majority. This can have devastating impact on everything from pensions to the price of a loaf of bread.

A recent survey indicates that the number of adults reporting problems repaying their debts rose 9 per cent from 1.8m to 2.5m in the last six months.  One in five adults now have unsecured debts of more than £10,000 according to the Thomas Charles report.

More than 1.4m adults with debts higher than £10,000 say they are ‘quite likely’, ‘likely’ or ‘certain’ to declare themselves bankrupt or apply for an IVA.

Reports also show a relationship between the number of people borrowing to support a lifestyle and the increase in consumers who are not concerned with repayment of their debts.

This problem is seeping into all segments of society.  The M4 corridor is a hotbed of secret debt. The cost of homes and material possessions has these middle-class families turning to Individual Voluntary Arrangements to deal with their debt.
These people have overstepped more practical debt consolidation venues and went straight to IVAs because they do not have the stigma of bankruptcy and do not involve the same public humiliation of court appearances and announcements in local newspapers. However, the loosing total control over 100 per cent of your revenue for five years is proving that IVAs do not work.

According to the credit experts Experian Wiltshire, Berkshire and Buckinghamshire carry the highest proportion of households with IVAs.  Experian claims the rise in IVAs is being felt particularly among a group it labelled ‘happy families’.

This area has seen ten years of flourishing house prices, the construction of vast housing estates and an influx of hi-tech firms and office complexes. It is thriving on a mountain of debt.