Increase in credit card spending could indicate upcoming rent and mortgage affordability issues

Today’s UK Finance figures show credit card spending has risen considerably in May. This could be an indicator of affordability issues, which could have a knock on effect on people’s ability to keep up with rent and mortgage payments.

Mark Pilling, managing director at Spicerhaart Corporate Sales said: “UK Finance figures out today show that credit card spending was 2.3 per cent higher than a year earlier, with outstanding levels of card borrowing having grown by 5.7 per cent over the year. Credit card purchases in May were 193 million – this is well above the previous 12 month average of 181 million.

“While this could just be a good sign that retail sales are starting to pick up, perhaps as a result of the summer weather and the Royal Wedding, we all know the retail sector is currently struggling, so it could be an indicator of wider issues, that perhaps people are being forced to put more of their day to day purchases on credit cards.

“You can’t read an awful lot from one month’s data, but this is quite a significant rise and it will be interesting to see if this trend continues. If credit card debt does continue to rise, we need to be prepared for the knock on affect this may have on other areas, such as people’s ability to keep up with rent and mortgage repayments.”

Oblix Capital joins the ASTL

Oblix Capital, a specialist short term lender, has joined The Association of Short Term Lenders (ASTL) as a new associate member. Membership of the ASTL now stands at 35 full members and 29 associate members respectively.

Oblix Capital is a London based firm, specialising in bridging and development finance. Led by a team of experienced real estate professionals, Oblix Capital provides financial support for both commercial and residential properties throughout England and Wales. Oblix Capital offers a diverse funding base, providing financial flexibility and transparency to borrowers.

Andy Reid, Sales Director, Oblix Capital comments: “Oblix has experienced rapid growth since being founded in 2014 and we see our membership to the Association of Short Term Lenders as our commitment to provide the industry with the high-quality service it deserves.”

Benson Hersch, Chief Executive of the ASTL added: “The wealth of knowledge and insight Oblix Capital offers provides a strong addition to our growing membership here at ASTL. Their transparency and direct approach will certainly prove to be a real asset to our members.”

Experian secures FCA accreditation to supply Open Banking and PSD2 services

The UK’s largest credit reference agency, Experian, can now offer Open Banking and PSD2 (Payment Services Directive 2) services to enable the exchange of bank account information between people and organisations. The FCA has given it permission to operate as an Account Information Services Provider (AISP).

The accreditation allows Experian to help people and organisations benefit from the Open Banking initiative. A new suite of products will allow customers to share data in a secure and compliant way. This will complement Experian’s existing credit bureau services.

Tom Blacksell, B2B Managing Director at Experian, said: “This accreditation from the FCA underlines our commitment to support Open Banking. One bank has already signed up to use Experian’s Open Banking platform, and we’re running several proof of concepts with other clients so they can explore a range of innovative new services.”

Open Banking will help people to prove they can afford products, even if they have a limited credit history. When people choose to share bank account information with financial service providers they can receive the more appropriate products, improved services and better deals.

It will be a useful tool for organisations to ensure they only lend people and small businesses what they can afford to repay, while it will be useful to price comparison websites, brokers and background checking providers.

Open Banking will also help lenders to meet FCA regulatory obligations on affordability and reduce costs when processing applications. Adopting new data assets will be easier from both a technical and consumer support perspective.

In 2017, Experian acquired Runpath, a UK-based fintech company, which improves its ability to aggregate Experian data with external sources. Many of the UK’s leading price comparison websites use Runpath’s technology, and it has also been used to test the government’s Pensions Dashboard concept. New services will be brought to market using Runpath as Open Banking APIs continue to be implemented in the coming months.

Creditfix Ranks Among Top 20 Companies To Work For In Scotland

The UK’s biggest personal insolvency practice Creditfix has taken 15th spot in a major employee poll to uncover the best companies to work for.

Headquartered in Glasgow, the firm is the only debt advice specialist to appear in the 2018 “50 Best Companies to Work For in Scotland”, scoring high marks in three key areas – wellbeing, community initiatives and employee engagement.

Workplace engagement expert Best Companies, whose results are published in the Sunday Times, carried out the survey and used anonymous employee responses to generate the Regional Best Companies Index (RBCI) score.

Creditfix was praised for its positive office atmosphere, relaxing breakout areas, and its community outreach, which includes supporting mental health programmes at Motherwell Football Club.

The survey also revealed that 94 per cent of employees believe they can make ‘a valuable contribution to the success of the company’, and feel up-to-date with what is happening.

Commenting on the results, Andy Taylor, director at Creditfix, said: “We work with more than 75,000 clients across the UK, who are experiencing severe financial difficulties and all the emotional stress that brings. It’s therefore crucial that we look after our employees and ensure their own health and wellbeing is not negatively impacted.

“As well as providing health insurance and tickets for music and sport events, we have created a working environment that enables staff to take time out when needed, and also get out of the office to volunteer.”

Last month, Creditfix announced plans to expand with a second office in Salford, Greater Manchester with the creation of up to 50 new jobs in the region.

“This is a really exciting time for us, and we’re looking forward to establishing ourselves as an attractive place to work in Salford,” added Andy.

Why should being vulnerable have to mean being worse off?

In 2017, one in five clients of StepChange Debt Charity had an additional vulnerability (such as illness), on top of their problem debt. New analysis from the charity now shows that they tend to be in a notably worse financial position than other clients. This underpins the importance of the financial sector’s current focus on vulnerability, and cements the charity’s view that better safety nets are needed to prevent vulnerable people from suffering disproportionate difficulty.

There are many reasons for vulnerability, according to the new analysis in Breaking the Link: a closer look at vulnerable people in debt. Among the charity’s vulnerable clients, the overwhelmingly most common reason was mental health difficulty (43%), followed by physical disability (4.7%), cancer (4.6%), and poor health (4.1%).

Debt problems are closely associated with certain forms of vulnerability, especially illness. 77% of clients with a terminal illness, and 68% of clients with cancer, cited illness as the main cause of their debt problems. Among those with mental health issues, 40% said illness was the main reason for their debt. Two in five vulnerable clients overall said that the main reason for them falling into debt was illness.

However, vulnerability can derive from situations, as well as personal characteristics – bereavement, relationship breakdown, poor treatment by firms and many other features could all make someone vulnerable at certain times, even if the vulnerability is temporary.

Vulnerable clients were significantly more likely than other clients to have a net household income of under £10,000, and significantly less likely to have a net household income over £20,000. 45% of vulnerable clients had a deficit budget (with less money coming in than going out), even after budgeting advice, compared with 30% of clients as a whole.

Over two thirds of vulnerable clients were receiving benefits, compared with half of those clients without a vulnerability. Yet their benefits were less likely to prevent them facing a budget shortfall, with 40% facing a deficit budget compared with 37% of those clients without a vulnerability in receipt of benefits.

Vulnerable clients were more likely than other clients to be in arrears on household bills such as rent, utilities, or council tax. And they spent an average of 70% of their income on essential household bills and food, compared with 65% among other clients.

Commenting on the findings, StepChange Debt Charity chief executive Phil Andrew said: “Among our clients, those who are vulnerable typically show higher levels of financial distress – but that shouldn’t be inevitable. While there has been progress, it’s clear that the finance sector, regulators and the debt advice sector could all still do more to help break the link between being vulnerable and being significantly worse off. There are questions, too, for Government. With mounting evidence that vulnerable people are not always being adequately supported in their times of need – including the DWP’s own recent survey on the impact on claimants of Universal Credit – it is only reasonable to ask whether changes to the welfare system are creating too many negative and stressful impacts on people who are least in a position to deal with them.”

Bank of England’s warning on 0% credit card deals signals growing concern

Following the Bank of England’s recent letter warning about the growing risks attached to the provision of 0% credit card balance transfer offers,

Daoud Fakhri, Principal Analyst at GlobalData, a leading data and analytics company, offers his view on what this means for credit card providers: ‘‘For the second time this year, the Bank of England has warned lenders about making unrealistic assumptions about their 0% credit card balance transfer portfolios. The Prudential Regulation Authority sent out a letter on 6 June warning that some credit card providers with high exposure to the 0% balance transfer market may be guilty of overly optimistic assumptions about customer retention rates, thus impacting on calculations of Effective Interest Rate (EIR) income.

‘‘Virgin Money, currently the subject of a takeover bid by CYGB, has made an aggressive play in the balance transfer market – it currently offers a 36 month 0% deal, one of the longest on the market – and consequently has an above-average reliance on EIR as an income source. This will leave it more vulnerable than most, should customers reduce their debt exposure more quickly than expected.

‘‘However, this is an issue for the whole industry, and credit card providers would be well advised to act on the PRAs advice to review their EIR assumptions and consider applying interest income-at-risk limits. Should the economy continue to underperform, consumers are likely to become increasingly risk-averse and reduce their indebtedness. Consequently, providers that have been banking on a given level of interest income will have to contend with a significant shortfall.’’

Stonebridge Group records record month for mortgage apps

Stonebridge Group, the mortgage and insurance network, has today (14th June 2018) announced its best ever month for mortgage applications with its advisers last month seeking £800 million of loans for clients.

May’s figures showed a considerable 16% month-on-month increase from April, with the previous best month for Stonebridge being back in February this year.

Stonebridge’s year-to-date figures for mortgage applications also show an overall 16% increase on the same period in 2017.

The network puts the increase in application business down to an increase in productivity from its advisers and AR firms, plus a 4% increase in the average mortgage applied for.

Mortgage application business was split between 55% purchases and 45% remortgages/product transfers.

The record month shows Stonebridge Group bucking the wider market trend with the Bank of England recently announcing that the number of new mortgage ‘commitments’ agreed by lenders had fallen to £61.1 billion in Q1 2018, a 5.9% drop on the previous quarter. This was the lowest amount since Q1 2016.

The network has close to 550 active advisers, spread across 250 AR partner firms; a further 16 advisers are currently in the network’s pipeline and will be brought under its umbrella shortly.

Jo Carrasco, Business Partnerships Director at Stonebridge Group, commented: “Despite some of the general market figures coming out of the Bank of England for recent months, and the year to date, we have had a very strong start to the year in terms of mortgage activity. Our applications continue to move upwards and to post a record month in May, following similar activity levels throughout 2018 is very pleasing.

“Productivity from advisers within the Stonebridge Group is predominantly the reason for this, coupled with an increase in the average loan size, and it’s clear there is a growing demand for mortgage advice from the general public, particularly given the increased complexity and the fact that clients want access to the whole of market.

“It’s for this reason that we are worried by some of the measures proposed in the FCA’s recent Mortgages Market Study Interim Report. The benefits of advice should be clear to all, and the fact the regulator appears to think lenders have over-egged the pudding in terms of following MMR is not helpful. Our advisers provide a quality service with the added protection that advice offers; for the regulator to be supportive of a process which pushes more consumers via direct channels and makes it easier to conduct execution-only business is a retrograde step, and should be resisted by all within our industry.”

Nationwide Building Society: The Most Compelling UK Banking Brand

Nationwide Building Society’s reputation rating of 7.3 out of 10 is dovetailed by extremely high recommendation among customers (8.1), making it the UK’s most compelling banking brand. According to research by Brand Finance, the world’s leading independent brand valuation and strategy consultancy, only 2% of Nationwide customers would consider a switch to another bank. Nationwide, which has revitalised its building society heritage, is also the brand that customers of other banks are more likely to switch to.

Banking brands like RBS, Barclays, and Natwest continue making efforts in repairing their reputations and balance sheets– but still have much more work to do. UK customers, in the post-crisis environment, have greater expectations of the banking sector and there is a high degree of dissatisfaction in the performance of the banks, undoubtedly connected to the taxpayer bail-out that followed the crisis, along with constant negative publicity around the banks themselves.

In a move towards online banking, most of the major banking brands have announced UK-wide branch closure programmes, which also plays a role in affecting the brand reputation. Brand Finance research proved that UK customers are eager to embrace alternative providers. Retail-connected bank brands such as M&S Bank, Sainsbury and Tesco all perform relatively well in terms of reputation, suggesting customers are looking to embrace brands seen more as consumer champions. But being ‘new’ may not always be sufficient – brands such as Metro and Virgin Money have only a moderate reputation and are not quite the game-changers they may have aspired to be.

As a result, customer discontent is not entirely reflected in the appetite to switch providers. Big factors are general inertia and the belief that switching banks is not easy in the UK and entails multiple hurdles. Efforts from brands to deliver a seamless seven-day-switching service when changing providers has not always been a success and the lack of a truly exciting alternative may also be a factor.

David Haigh, CEO of Brand Finance, commented: “The UK banking sector as a whole has perception problems to confront and is clearly in a delicate state of transition. UK banking brands are also confronted with ongoing digitalisation and challenger banks providing new, and often dynamic, competition. Some banking brands are adapting well to market evolution, but the future depends on combining new technologies with enhanced customer service, in order to build reputations, strengthen brands and generate greater levels of customer loyalty.”

Spending on international travel increases but accommodation hits a slump, new research finds

UK consumers look set to spend more on international travel this year than in 2017, the latest findings from Ferratum’s Summer Barometer have found.

According to the international study, 35% of UK consumers are planning to spend on international travel this summer, which is a 5% increase from last year’s Barometer. This latest figure marks a significant jump compared to the 2016 Summer Barometer following the EU referendum, when just 10% were planning to spend on overseas travel.

However, while spending for international travel is set to rise, the outlook for accommodation providers is not as positive. Consumers’ desire to spend over €100 per night for a hotel dropped dramatically in this year’s survey, from 44% in 2017 to just 19% this year. The number of consumers who would opt for an Airbnb was very similar (18.7%) – an increase of just 0.7% from last year. As such, it is clear that UK consumers are still eager to limit spending where possible, even if their desire to travel abroad has increased.

Ferratum’s Summer Barometer also revealed that the UK leads the way in terms of online purchases, with 41% of UK consumers planning on spending on this activity. Clothing and fashion products are set to be the UK’s main area of spending this summer (12.9%), with social activities (11.7%) and travel (11%) following closely behind. Paying for family and children’s activities also made their way to the top of the list, with these areas accounting for 9.8% and 9.1% of consumers’ spending, respectively.

Tony Gundersen, Ferratum Money UK Country Manager, says: “The renewed interest in international travel is a result of numerous factors – with many consumers feeling more positive about their finances following an increase in the National Living Wage, along with changing perceptions towards the UK’s future relationship with the EU. However, this has not stopped the British public from seeking out a good deal online. UK spenders are keen to shop around for a range of services, ranging from flights and accommodation to summer clothes for the family.”

Almost 22,000 households were surveyed for Ferratum’s 2018 Summer Barometer. Respondents were aged from 18 to over 61 years old. In addition to demographic factors, respondents were asked about their disposable monthly net income, how much they spend on their summer holidays, what other activities they spend their money on, and if they are going to use Airbnb services or online banking while travelling abroad. The survey used each country’s respective currency. Responses were adjusted to reflect the respective purchasing power of each country. All survey respondents were anonymous.

Do children know the value of money?

In support of the tenth annual My Money Week (11-17 June 2018) Equifax has partnered with Young Enterprise in order to equip young people to grow-up with the life skills, knowledge and confidence they need to successfully earn and manage money. This year, Equifax will be the sole sponsor of its national competition, the theme of which is young peoples’ ‘needs and wants’. The aim is to explain the financial decision making process in a fun and interactive way to engage pupils.

Underlining the need for broader awareness amongst young people of the cost of the things they want – and how they might be financed – the credit information provider has released research which reveals that a third of parents admitted feeling pressured by their child to buy them the latest technology, and 35% felt pressured to buy fashionable clothing for their children.

My Money Week is a national activity week for primary and secondary schools that provides a fantastic opportunity for young people to gain the skills, knowledge and confidence in money matters to thrive in society.

“Our findings suggest that some parents are feeling under pressure to spend on their children when they may already be financially stretched,” explains David Stiffler, Vice President of Global Corporate Social Responsibility at Equifax. “As well as spending money on technology, nearly a quarter of parents said they have been put under pressure to keep up with the latest gaming devices and online apps, and a further 29% said their child pressured them to buy the latest toy craze.

“More than ever before, Equifax is committed to making a difference to the communities in which we live and work and My Money Week is a fantastic opportunity to encourage both parents and schools to help the younger generation appreciate financial values. The right attitude about money management starts at home so it is very encouraging to see a campaign that will teach children more about managing money in a way that is practical and relevant to them.”

The Equifax research also highlights how 11% of parents will spend between £51-£100 just on technology such as tablets, laptops and smart phones, for their child every school year. A further 10% admit to spending between £151- £200.

Russell Winnard, Head of Educator Facing Programme and Services at Young Enterprise, said, “It is important to have the right foundations from an early age to ensure that young people continue to manage their money well throughout their life. The aim of My Money Week is to improve financial capability for young people in primary and secondary schools. It’s all about teachers and parents inspiring young people to be financially literate, and the statistics from Equifax demonstrate just how important it is to learn about finances from an early age.”