Interest Rates: 74% decrease in tracker mortgage interest following August rate rise

There was a sharp fall in the number of consumers shopping for tracker mortgages in August following the rise in interest rates, new analysis from Experian has revealed. On August 2, the Bank of England (BoE) made the cost of borrowing more expensive when it raised the Base rate to 0.75%, its highest level since March 2009.

Data from Experian shows that just 10% of those shopping for mortgages throughout August were looking at tracker deals, down from more than a third (38%) in July. Interest in fixed-term deals remains high, with 38% looking at those products, up from 36% in July.The figures suggest that the rise in Base Rate put-off potential home buyers from viewing a tracker deal as an attractive option for their home loan.

Research from Experian revealed that the latest rise will add around £400 a year in mortgage payments to those with on tracker and standard variable rate (SVR) deals, based on a 20-year, £250,000 loan.
In August, the company announced it would be offering mortgage eligibility to customers, giving potential home owners the opportunity to find out which mortgages they are likely to be accepted for and how much they could borrow, based on lenders’ criteria.

Meanwhile, further analysis of data from Experian found that consumers looking to get away for the summer have been looking to borrow more than £4,000 to fund their holiday.

Consumers shopping in May, June and July have been looking to borrow £4,305 on average in order to pay for their summer break.

Amir Goshtai, managing director of Experian Marketplace & Affinity, said: “The fall in searches for tracker mortgages suggests people are nervous about further rate rises, so are instead looking at fixed deals to given themselves more certainty. “We hope that our mortgage eligibility feature will help people more quickly decide more quickly what the right mortgage is for them, particularly when so many people are still on standard variable rate mortgages and could be paying significantly less.”

Money Advice Trust appoints Vineeta Manchanda and Rebecca Wilkie as new trustees

The Money Advice Trust, the charity that runs National Debtline and Business Debtline, has appointed Vineeta Manchanda and Rebecca Wilkie as members of its board of trustees as of 1st September 2018.

Vineeta and Rebecca replace Claire Whyley, Merrick Willis and Sian Williams on the board whose terms of service have come to an end.

Vineeta has served as a non-executive director at organisations including the Royal Free Foundation Trust, Sandwell Children’s Trust and Relate. She spent twenty-five years in fund management and investment banking, including at blue chip global firms such as Merrill Lynch and Credit Lyonnais. She has recently operated at managing director and board level, growing start-up emerging market investment banks.

Rebecca is currently programme director at the Litigant in Person Support Strategy which helps people without means through the court and tribunal process. Prior to this role she was chief executive of the Bar Pro Bono Unit, a charity matching members of the public who cannot pay for advice with a pro bono barrister. She has also previously held a number of non-executive director roles including at the National Pro Bono Centre and the Advice Services Alliance.

Adam Sharples, Chair of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “I am delighted to welcome Rebecca and Vineeta on to the Board of Trustees. They bring with them a wealth of knowledge and expertise which will be of great benefit to the Money Advice Trust. With demand for the Trust’s services continuing to remain high, our work in helping people to tackle their debts and manage money with confidence is more important than ever.

“I would also like to thank Claire, Merrick and Sian, whose terms on the Board have come to an end, for their hard work and service over the last few years.”

Vineeta Manchanda said: “The work of the Trust in helping people to tackle their debts and improve the debt and credit landscape is a vital one. I am Iooking forward to working with Adam and the rest of the Board to help shape the important work the Trust delivers, and to bringing an additional outside perspective from my experience in the corporate world.”

Rebecca Wilkie said: “I am excited to be joining the Board of an organisation with such a strong reputation and I look forward to helping build on their outstanding work for people in financial difficulty. The need for free, independent, expert advice for people in debt is every bit as important as it is in the legal sphere, and I look forward to exploring what learning can be applied across these two sectors.”

StepChange comment on Help to Save

Following a successful pilot, StepChange Debt Charity is pleased that the Government has today announced that the new Help to Save scheme is now available across the whole of UK to eligible lower income working households.

When people turn to StepChange for debt advice, 98% of them have no savings whatsoever. The charity has long called for realistic mechanisms to enable more households to save – and in previous research has estimated that if every household in Britain had £1,000 in accessible savings, this would reduce the number of people in problem debt by half a million.

Under the Help to Save scheme, delivered through NS&I, eligible lower income households can save up to £50 a month, and after two years get a bonus of 50% of the highest balance they achieve during that period, with a subsequent additional bonus at the end of four years. From the perspective of the charity’s clients, this type of saving may be particularly helpful and realistic for those who are becoming debt-free, to help build their financial resilience for the future.

Phil Andrew, CEO of StepChange Debt Charity, commented: “98% of our clients have no savings at all at the point they turn to us, and only 1% have £1,000 or more. Yet we know that having £1,000 in rainy day savings virtually halves the risk of falling into problem debt, so helping lower income working households to build savings should be an important policy goal.

“We campaigned for Help to Save and it is a good scheme. Yet it will only bring benefits if people actually use it. The Government’s impact assessment suggested only one in seven of those eligible are likely to use Help to Save in its first two to three years of operation. It’s vital for the Government to make a real effort to promote the scheme if it is to have the desired result, and for all of us who work with eligible households to support that effort.”

Together delivers strong full year results with continued record lending levels

Together, one of the UK’s leading specialist secured lenders, has announced strong growth and record levels of lending in its results for the year ended 30 June 2018, as the group’s loan book reached a new high of £3.0bn.

Building on over four decades of experience, Together continued to grow strongly, with annual loan originations up 40.0% to £1.7bn. Highlights included our highest ever month of lending in June of £169.2m, while we maintained a conservative loan-to-value on originations of 58.0%. The Group remained highly profitable and cash generative, delivering record profit before tax of £121.7m and cash receipts to £1.2bn.

Group Chairman, Mike McTighe commented: “We maintained our strong growth momentum in the year while continuing to invest in our people, products, distribution channels, systems and governance. We also continued enhancing our senior management team with several senior appointments across the group, including the arrival of John Lowe from Coventry Building Society.

“We also added further depth and diversity to our funding structures, issuing our first public residential mortgage backed securitisation for £275m, upsizing our 2024 bonds with a successful £150m issuance, extending our £255m Lakeside securitisation on improved terms and launching our inaugural £525m Highfield warehouse facility for small balance commercial real estate. The Group’s continued progress was reflected in rating upgrades from both S&P and Fitch.”

“With an established track record, a unique and successful model, and the investment we are making in our platform, we believe Together has a great opportunity and remains well placed to deliver on our ambitious growth plans.”

Marc Goldberg, Commercial CEO, said: “We are proud to report another great set of results for Together as we delivered record lending during the year. Our continued strong growth would not be possible without the hard work and dedication of our now 700 colleagues, who remain focused on delivering positive outcomes for our customers and intermediaries throughout their journey with Together. We’re delighted to have been recognised by our entry into the Sunday Times Best 100 Companies to Work For, at number 34, and I want to thank all of our colleagues for their commitment to helping our customers to achieve their financial ambitions.”

Pete Ball, Personal Finance CEO, added: “We are excited to have achieved another period of record lending during the year as we grew our loan book to £3billion. Particular highlights over the year have included building out our distribution partnerships with the UK mortgage clubs and networks, as well as continuing to invest in our people, product range and service offering.

“Over the last 12 months we have focussed improving communications with customers through every stage of a loan, and we are proud to report that 93% of customers say they are happy with our service. Looking ahead, we are focussed on further enhancing our platform and extending our distribution reach to provide more customers with the products and finance solutions they need.”

NAO report on problem debt ‘hits the nail on the head’

The Money Advice Trust, the charity that runs National Debtline, has today welcomed the National Audit Office’s (NAO) report into tackling problem debt. The report found that while personal debt problems have a significant impact on individuals, the government has a limited understanding of how this affects the public purse and there are “weaknesses in its strategy” for dealing with the issue.

The NAO’s findings comes in the same week as new Money Advice Trust research showed that people are increasingly struggling with “smaller but trickier” debts, often in the form of household arrears and debts to local and central government – with demand for debt advice expected to hit its highest level for five years.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “The National Audit Office has hit the nail on the head. We need to see a new cross-government strategy to tackle problem debt – which brings together the work of government departments, agencies and regulators into a single, coherent approach.

“The government needs to put its own house in order when it comes to how it collects the growing debts owed to government departments and local authorities, in particular.

“With demand for debt advice at a five-year high, there is also a need to significantly increase funding for frontline debt advice services, to close the growing gap between supply and demand.

“The good news is the government has already taken some positive steps, with the creation of a new Single Financial Guidance Body and plans for a statutory ‘Breathing Space’ scheme. This provides a strong platform to build on and we look forward to working with the government as it responds to the NAO’s recommendations.”

The Money Advice Trust’s new research, published this week, examined how debt problems have changed over the last decade and found:

· Smaller but trickier debts – half of callers to National Debtline (50 percent) are now struggling to repay debt of £5,000 or less – up from just 22 percent in 2008
· More household arrears and public sector debts – 30 percent of National Debtline callers in 2018 have council tax arrears, up from just 15 percent in 2008, with callers also increasingly facing energy arrears (rising from nine to 17 percent), rent arrears (rising from six to 17 percent) and benefit and tax credit overpayments (rising from three to 16 percent) over the same period.
· Increasing demand – National Debtline is expecting more than 189,000 calls by the end of this year, the highest level of demand since 2013, with demand for webchat and online advice also rising.

In its report, the Money Advice Trust recommended a “new formal cross-government strategy to reduce problem debt, with HM Treasury bringing together the work of the Single Financial Guidance Body, regulators, Department for Work and Pensions and all relevant departments and agencies into a single coherent approach.”

Changing Credit Conditions Can Favour Dealer Finance

Consumer confidence is vital to car buying and the recent rise in the UK Base Rate to 0.75% could dent this confidence, given an estimated 80% of car buyers need credit to finalise their purchase. A further challenge could be the emergence of more stringent underwriting in the lending market with arrears levels reportedly rising also.

Changing credit conditions may be unwelcome, but on a more positive note, global wholesale stocking software provider Sword Apak’s analysis suggests that even with tighter credit conditions, dealers can succeed by adopting a more targeted approach to used car financing opportunities as Executive Vice President James Powell notes:

“The recent increase in the UK Base Rate will impact motor retailing with its inevitable knock-on effect on loan rates, underwriting and the cost of wholesale stocking. A potential ‘silver lining’ to this is that tighter underwriting is more likely to impact personal loans than secured loans, which could make dealer finance a more attractive option for consumers. We saw something similar immediately following the credit crunch in 2009, when access to personal loans became more difficult and often more expensive for many consumers.”

As Powell notes, changes in the lending market are not just related to interest rates. At the end of July, the Office for National Statistics (ONS) reported that UK households saw their outgoings surpass their income for the first time in nearly 30 years. Alongside this, theBank of England recently reported upon increasing arrears issues, most notably in unsecured lending.

The impact of all these factors had already led to loan rates rising ahead of the Base Rate increase, and wholesale finance was no exception, as there were clear signs that lenders were becoming more prudent in their underwriting.

Looking ahead, we may yet see further uplifts in interest rates, both as a result of rising money costs and the use of ‘rate for risk’ underwriting. Whilst dealer finance is not invulnerable from the broader trends, as Powell mentions, historically it is unsecured lending, which includes personal loans, that is hit harder than secured lending.

The growing concern is the reported rise in arrears, especially while interest rates are at historically low levels. Base Rates may be at their highest level since 2009, but in January 2008 they were at 5.5% and had previously been far higher. With a generation of borrowers, and some motor retailers, who have known nothing except sub 1% Base Rates, any increase in funding costs could be very damaging for consumers. In these circumstances, the Bank of England would call for lending restraint which represents a controlled way of slowing the supply of credit, rather than relying upon interest rates alone.

There is however no immediate sign of a further Base Rate rise. The latest rate rise accompanied the quarterly Inflation Report, which showed that despite the rise, the market outlook was for Base Rates to increase at a slower rate than expected over the next three years. The critical issue, therefore, may be tighter underwriting. Powell concludes;

“Our analysis suggests that for many, credit will be harder to come by and more expensive; with unsecured borrowing facing a bigger impact. Acceptance levels for dealer finance on an ‘across-the-board’ basis have always been higher than for personal loans, and whilst not immune from higher costs and tighter underwriting, this could become of increasing value to dealers, especially in used car sales where dealer finance penetration is lower than for new car finance. It could benefit dealers and finance companies to make the availability of dealer finance more apparent to consumers.”

StepChange responds to NAO report on how much debt costs the state

StepChange Debt Charity today responds to a new official report showing that problem debt costs the state almost a quarter of a billion pounds every year, for reasons that include the behaviour of government itself. Tackling Problem Debt, published today [Thursday 6 September] by the National Audit Office, estimates that problem debt directly costs the public purse at least £248 million a year – with wider economic costs of £897 million.

The NAO points out that although around 40% of personal debts are to government, “government lags behind the retail lending sector in following good debt management practice”. This is further backed up by findings from StepChange clients cited in the report, which found that more people felt they were treated unfairly by local authorities (35% of clients) than by payday lenders (32%).

StepChange Debt Charity strongly backs recommendations to the Treasury that urgently calls for action to address the discrepancy in how the government approaches debt collection.

The NAO estimates that:

· People are 7.76% more likely to report being depressed or anxious if they are in problem debt, which the NAO says equates to some 81,000 people at an estimated annual cost to the NHS of £24 million a year.

· People are 2.85% more likely to be in state-subsidised housing if they have previously reported being in problem debt, equating to 23,000 people at an estimated annual cost of £224 million a year.

In evaluating whether the Government is getting value for value, the NAO says “there is further to go before value for money is secured”. The report particularly identifies the poor quality of information available about the nature of personal debts owed to government, and to utilities, compared to the high quality data available on consumer credit and mortgages. The report states that this makes it difficult to assess risks and outcomes effectively, and also points to “perverse incentives” to recover government debt quickly, which can result in bad collection practices.

StepChange supports both the analysis and the report’s key recommendations. In particular, the charity welcomes the NAO’s focus on the impact of problem debt on individuals and its enlightened approach to assessing how this impacts in aggregate on wider costs.

The NAO has quantified how intimidating actions to collect debt, and additional charges being applied, substantially increase the likelihood of debt burdens becoming harder to manage. The knock-on increases in anxiety or depression caused by these practices have a direct and avoidable cost to the state. As well as pinpointing why good debt collection practices matter, the report starkly demonstrates why the shortfall in free debt advice provision, leaving 600,000 people a year without access to advice that would help them, is so important to redress.

Commenting on the report, StepChange Debt Charity CEO Phil Andrew said: “The National Audit Office hits the nail on the head. Poor debt collection practices that fixate only on getting as much money back as quickly as possible are counter-productive and ultimately harmful. The government is simply robbing Peter to pay Paul, as the wider implications of government debt collection practices are costing taxpayers almost a quarter of a billion pounds every year.

“If the Treasury follows the NAO’s recommendations on how to continue its efforts towards improving the personal debt landscape, progress can undoubtedly be made to alleviate current problems. We will do everything we can to support improvements.”

Conveyancing Association member firms make shortlist for second annual ESTAS Conveyancing Awards

The ESTAS Group – which highlights the best firms for customer service involved in the home-moving process – has today (5th September 2018) revealed its shortlist for the 2nd annual Conveyancer Awards, which is supported by the Conveyancing Association (CA), the leading trade body for the conveyancing industry.

The results for the Awards are based purely on feedback data received from customers who were asked a series of questions about the service they received during the home-moving process. Over 7,000 customers completed a survey providing 175,000 pieces of data relating to customer service delivered by the conveyancing firms taking part.

Conveyancing firms across the UK have been shortlisted regionally and nationally and CA firms have figured strongly again this year with 25% of the shortlist being members of the Association.

The winners will be announced at the 2nd annual ESTAS Conveyancer Awards on 19th October. This black-tie event will be held at the Grosvenor House Hotel in Mayfair London and will be hosted by TV property expert and ESTAS brand Ambassador, Phil Spencer.

One CA firm will receive a special award for being the highest ranked member in the competition.

Simon Brown, Founder of The ESTAS Group, said: “I think these figures prove customers are not only happy to give feedback but many now expect to be given the opportunity to do so. We live in a world where customer reviews are becoming increasingly important in the consumer decision-making process, not just for hotels and restaurants but property-related decisions as well.”

Paul Smee, the new Non-Executive Chair of the CA, commented: “Our industry is changing and customer service is at the forefront of those changes. We are delighted to support a set of awards which highlight firms who deliver great service and help to drive higher standards across the sector. Congratulations to all CA member firms who have made the shortlists and we hope they all have a successful night at the awards.”

Phil Spencer, Brand Ambassador of The ESTAS, said: “Our job is to highlight firms who are providing exceptional levels of customer care throughout the home-moving process. At The ESTAS we believe the only way to judge the performance of a conveyancer is to ask the clients who have experienced the whole service through to completion. Firms that enter The ESTAS have already sent a clear message they are passionate about customer service so to make it onto the shortlist is a huge achievement in itself.”

The ESTAS Awards are supported by the CA and The Society of Licensed Conveyancers. The headline sponsor is SearchFlow supported by Landmark Information, Ochresoft, Safemove, Legal Eye, Howden, Bold Legal Group, Lawyer Checker, Solve Legal, ULS, and Decision First.

Experian to launch “real rates” in the credit card market to boost transparency

Experian is introducing a “real rates” service to the credit card market so consumers will now know exactly what deal they’ll be getting.

In a transformative change to the way consumers shop for credit cards, those using Experian’s comparison services will see the actual rate they’ll get when shopping for cards with certain providers.

Credit card and loan providers only need to offer their headline representative Annual Percentage Rate (APR) to a minimum 51% of customers that apply.

The remaining 49% can be offered a different deal at a more expensive rate – and customers often won’t know what that is until they’ve completed an application, which will also leave a mark on their credit report.

The move will be a major boost to transparency in the credit card market and help consumers make more informed decisions about their finances.

Currently, two major credit card providers are signed-up to real rates with Experian, Virgin Money and Capital One, while customers which are pre-approved for cards from Aqua, Marbles, Mbna and Barclaycard, will also see the rate they will get before applying.

The introduction of the service comes after Experian launched real rates for loans in May. Providers signed-up to offer real rates include Likely Loans, Zopa, Lendable, and Shawbrook.

The move to boost transparency in the credit market comes after recent research from Shawbrook found that more than one in five (21%) consumers who successfully applied for a loan received a higher APR than the rate that was advertised, with the average difference of 2.4%.

Amir Goshtai, Managing Director of Propositions & Partnerships, Experian said: “We see offering real rates as a true game-changer in a highly competitive market

“We are already in discussions with other lenders to sign-up for real rates. It’s not right that nearly half of those looking for a credit card may not get the rate they see advertised – and often won’t know what deal they’ll get until after they’ve applied.

“Improving transparency for consumers so they know what they’ll get is something the industry should be striving for. Experian is determined to help consumers make better decisions for their personal finances.

Personal finance commentator, Andrew Hagger, said: “It’s always been a bit of a lottery for customers when they apply for a credit card as they never know what interest rate they will be offered until the application process is complete and a mark left on their credit record.

“The representative APR quoted is only a rough guide and often bears little resemblance to the rate a customer is granted.

“It’s a positive step if customers can see the actual rate they will be getting before fully completing an application form and hopefully this much needed transparency will soon become the norm within the credit card industry.”

Experian is planning to launch real rates for credit cards in the third quarter of 2018. Customers should look out for the “star” next to the results on the Experian comparison tables to know that the rate they see is the rate they’ll get.

‘Smaller but trickier’ debts causing problems for households as demand for debt advice rises

People are increasingly struggling with ‘smaller but trickier’ debts on everyday household bills, according to new figures from National Debtline, run by the Money Advice Trust. The charity expects the number of calls to National Debtline to hit 189,000 by the end of the year – the highest level in five years – with webchat and online demand also increasing.

Its new report, A decade in debt, reveals how the realities of debt problems have changed in the 10 years since the financial crisis – with fewer people seeking advice with credit cards, loans and overdrafts, and more calls about debts on everyday household bills such as council tax, rent and energy arrears.

Smaller but trickier debts
Half of callers to National Debtline (50 percent) are now struggling to repay debt of £5,000 or less – up from just 22 percent in 2008. These smaller levels of debt are proving difficult to repay due to an increase in ‘broken budgets’ – where the money coming in is simply not enough to cover essential spending. Nearly half of National Debtline callers (48 percent) now have a budget deficit – up from 27 percent in 2009.

A shift towards household arrears
National Debtline advisers are helping more and more people with arrears on everyday household bills, with proportionally fewer calls relating to credit-related debts such as credit cards and personal loans. Three in 10 callers (30 percent) now have council tax arrears – up from just 15 percent in 2008, with the proportion of callers with rent arrears rising from six percent to 17 percent and energy arrears from 9 percent to 14 percent in the same period.

Increasing demand
Calls to National Debtline rose in the aftermath of the financial crisis to a peak of 305,000 calls in 2010 – and while demand fell in the first part of the current decade as the economy recovered, the number of calls to National Debtline has since risen every year since 2015. The charity is expecting a total of more than 189,000 calls by the end of 2018 – its highest level of demand in the last five years, with webchat and online demand also increasing.

In response to these trends, the Money Advice Trust – the charity that runs National Debtline – has set out recommendations for government, regulators, creditors and the advice sector, including:

· The introduction of a formal cross-government strategy to reduce problem debt, bringing together the relevant government departments, agencies and regulators into a single, coherent approach
· Ensuring that the government’s planned ‘Breathing Space’ scheme provides protections for people seeking advice from all types of creditors – including utility companies, local authorities, DWP and HMRC
· Further action from the Financial Conduct Authority on persistent credit card debt, unauthorised overdrafts and extending its payday loan cost cap to other forms of high-cost credit.

The report presents trends and recommendations relating to different types of debt – including consumer credit, rent and mortgage arrears, council tax debts, energy, water and telecoms arrears and benefit and tax credit overpayments.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “We need to change how we think about problem debt in the UK.

“Ten years ago a typical caller to National Debtline was struggling to pay credit cards and personal loans. Today, callers are struggling with smaller but trickier debts, usually on everyday household bills – and often caused by ‘broken budgets’, where the money coming in is simply not enough to cover their essential spending.

“The government, regulators, creditors and the advice sector need to work together to tackle these new realities. There is some good news with the creation of the new Single Financial Guidance Body, plans for a statutory Breathing Space scheme and a renewed focus from creditors on supporting people in vulnerable circumstances.

“However, with debt problems still changing and growing, there is much more to do – including a new formal cross-government strategy to reduce problem debt, which brings together different strands of work into a single, coherent approach.”