StepChange Debt Charity comments on latest Bank of England consumer credit data and FCA creditworthiness rules

StepChange Debt Charity comments on latest Bank of England consumer credit data and FCA creditworthiness rules. Peter Tutton, Head of Policy at StepChange Debt Charity said: “Whilst the growth in consumer credit recently stabilised, households are still at risk of being tipped into severe problem debt. We estimated 9 million people are already using credit just to make ends meet, as the recent ONS report showed the poorest 10% of households spent two-and-a-half times their disposable income. Therefore helping the households living on a financial knife must be a priority for public policy.

“With credit card borrowing growing fastest and the FCA’s proposals for toughening affordability assessments released today1, we are looking for a clear statement from the regulator that credit markets, and credit cards in particular, must grow in a sustainable way and lending practices focus on preventing people from falling into persistent debt.”

The Right Mortgage & Protection Network bolsters compliance team with two new appointments

Due to its continued growth, The Right Mortgage and Protection Network are delighted to welcome two new members to its expanding compliance team.

The appointment of Sue Read and Dave Allan adds to the networks compliance management team which currently includes Angela Martin, Nick Crombie, Greig Portingale, Robin Pearson and Aidan McCarthy.
Allan (left) joins the network from Personal Touch Financial Services, having previously worked in financial services for 37 years in a variety of roles, the last 14 years of which within the network environment.

Allan said; “I’m excited about joining a network that really cares about its members. My objective is to work with the members to maintain competence and to provide quality advice to their clients, with the common goal being the right outcomes for their customers”.

Read (right) joins the network’s growing team of equity release specialists following the launch of its Later Life Lending Network earlier this year. Read has worked in a wide diversity of roles through her 36 year career in financial services including as a mortgage adviser, compliance officer, underwriter, operations manager and seminar equity release adviser. Read, who joins the network from The Mortgage Alliance said; “I really want to help the network grow its equity release arm by supporting members to fulfil their business potential in this niche product area”.

Ben Allen, Compliance Director of The Right Mortgage & Protection Network said: “We’re delighted with the appointment of Sue and Dave. Their personal approach to compliance and their combined 74 years’ experience within financial service is a perfect fit for the network and our ethos of Trust, Respect and Partnership. I know our members will start to benefit from this experience over the coming weeks as Sue and Dave settle into their roles”.

Rise in insolvencies reflects challenges facing household budgets

The Insolvency Service has today published insolvency statistics showing that total individual insolvencies were 4.4 percent higher in the second quarter of 2018 than in the previous quarter, and 27.3 percent higher than in the same quarter the previous year.

The increase in individual insolvencies was the highest quarterly total since quarter one 2012.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “The continued rise in individual insolvencies, with numbers now at their highest level in six years reflects the wider issues facing many households. As the Treasury Select Committee report out yesterday highlighted, many people across the UK are faced with a range of challenges putting pressure on already stretched budgets.

“At National Debtline, we hear on a daily basis the impact of issues such as slow wage growth and rising living costs where the slightest change in circumstances can push someone into financial difficulty.

“I would encourage anyone struggling to cope, or who thinks they might in the future to seek free debt advice as soon as possible.”

More debt advice capacity needed as IVAs reach record levels– TDX Group comments

Following the release of the Q2 2018 Insolvency Service insolvency statistics today, Richard Haymes, Head of Financial Difficulties at TDX Group, an Equifax company, calls for improved debt advice services: “The figures released by the Insolvency Service today, showing increasing personal insolvencies, support our expectation that the number of Individual Voluntary Arrangements (IVAs) and Trust Deeds is set to grow by 17% or more in 2018.

“Our own research shows the financial profile of people using personal insolvency to actively manage their debts has worsened in the last six months, with average monthly income decreasing to £1,899, average monthly contributions towards unsecured debt falling to £145 and average total of unsecured debt remaining between £24,000 – £26,000.

“The main drivers of the rise in individual insolvencies continue to be consumer need (fuelled by the current record levels of consumer borrowing), marketing by insolvency providers, and limited capacity in the debt advice sector.

“With a likely Bank of England (BoE) interest rate rise on the horizon on 2 August, as well as the prospect of rising inflation and limited wage growth, additional support and advice for people living on low incomes or in financial distress is urgently required. Companies need to be aware of the extra pressures their customers may face, and treat them appropriately when they are struggling to meet payments. We encourage individuals who are in, or feel they’re approaching financial difficulty to speak to their creditors as early as possible, as they can provide support to help manage repayments more effectively.”

Gatehouse announced as Sutherland Mortgage Services’ first UK client

Sutherland Mortgage Services has announced Gatehouse Bank as its first UK client. The pioneering Sharia-compliant bank offers savings products and finance for UK residential and commercial real estate.

The five-year contract will be delivered by Sutherland Mortgage Services’ UK team and will handle all of Gatehouse Bank’s buy to let finances on completion, managing the growing book for all the bank’s buy to let finance.

The third party servicer, which has around $250 billion in mortgage assets under management worldwide, will take a digital focused approach with the mortgage servicing.

Sutherland was chosen because of its vast worldwide experience and servicing methodology, its customer-led approach and its detailed knowledge of the Sharia-compliant mortgage market having previously worked with one of the biggest lenders in Dubai.

Sutherland has the capability to offer user experience insight through Sutherland Labs, its in-house experience design agency, providing deeper insight and understanding of customer behaviours in the UK mortgage market and customer base.

Gatehouse Bank’s CEO, Charles Haresnape commented: “We chose Sutherland because undoubtedly it has the expertise and everything in place to deliver, and like us is on a growth journey in the UK. We may be the first UK client, but Sutherland’s global experience and capability speaks for itself. I was very impressed with Sutherland’s dedication to getting under the skin of Gatehouse, as an example Sutherland staff are undertaking the same training as our staff to really understand our values.”

Sarah Green, Director of Business Development at Sutherland Mortgage Services said: “We are thrilled that Gatehouse is our first UK mortgage client; they have an exciting prospect for growth in the UK, to service the Islamic market and really make a difference in this area. I believe working with Sutherland gives Gatehouse a step up with better customer experiences, quicker processing time and access to the latest technology, and Sutherland’s global expertise.”

Sutherland has so far originated around $45 billion of mortgages for its clients in the US, and has over $250 billion of mortgage assets currently under management. It is aiming to replicate that success in the UK by providing highly efficient mortgage services driven by the customer, with the newest technology at the forefront.

ONS report reveals stark divide between richer and poorer households when it comes to making ends meet

​A new report from the Office of National Statistics out today shows that, on average, each UK household last year spent or invested £900 more than they received in income.

But, as the ONS points out, according to its recent expenditure poverty analysis based on Living Costs and Food Survey data, the poorest 10% of households spent two-and-a-half times their disposable income, on average, in the financial year ending 2017. In contrast, the richest 10% spent less than half of their available income during the same period.

StepChange Debt Charity chief executive Phil Andrew commented: “It’s really unfortunate that this very useful data is so heavily sprinkled with the phrase that households are ‘living beyond their means’. The reality is that too many households, here in Britain, in 2018, simply cannot make ends meet, however hard they try. Not having enough money to make ends meet is not the same thing as living beyond your means – which implies you have a choice, when too many people do not.

“Our own recent analysis showed that the typical StepChange client spends, on average, 60% of their net monthly household income on essential household bills plus food – while among those on the lowest net household incomes (under £10,000), an average 93% of their monthly income is swallowed up by the basics, leaving basically nothing for other important items, let alone luxuries. So it is lack of choice, rather than poor choice, that explains why an estimated 9 million people last year turned to credit to meet household needs.

“As yesterday’s report from the Treasury Select Committee noted, many households are facing challenges that are putting pressure on the health and sustainability of their finances, and as the Committee said, the Government cannot pass the buck on this.”

Paradigm add Masthaven Bank to lender panel

Paradigm Mortgage Services, the mortgage services proposition, has today (26th July 2018) added Masthaven Bank to its lender panel.

From today, Paradigm member firms will be able to access Masthaven’s range of first and second-charge mortgage products with an array of unique criteria for both mainstream and specialist borrowers.

Masthaven’s first-charge mortgage products are offered up to 80% LTV with rates from 2.94% on a repayment basis, with both interest-only and part and part mortgages available up to 60% LTV.

The second-charge range is available up to 75% LTV with rates from 3.84%; Masthaven’s second-charge buy-to-let products are available up to 75% LTV.

The lender is particularly active in the specialist market offering loans to both the self-employed – for those who have 18 months’ trading although it will consider projections if the individual is nine months into their current trading period and have two years’ finalised – and contractors who have three months in a role.

It also lends to those with some adverse credit allowing CCJs and defaults under £300 or over 36 months, while recent CCJs/defaults and missed mortgage payments may also be considered.

Masthaven prides itself on its credit flexibility and does not credit score providing advisers with an avenue to explore for all those borrowers who may not fit the mainstream criteria.

John Coffield, Head of Paradigm Mortgage Services, commented: “The number of quality challenger banks and mortgage lenders operating in the marketplace has grown significantly in recent years and the latest UK Finance lending figures shows the strides that many are making. Masthaven Bank is certainly one of those institutions and its commitment to all parts of the mortgage market, not just the mainstream, is evident in its product range and criteria. We feel certain that many Paradigm firms will have clients who will benefit from the lack of credit scoring and the significant flexibility that it offers. We look forward to working with the Masthaven team and introducing them and their range to our members.”

Matt Andrews, Managing Director of Mortgages, Masthaven, said: “Masthaven is working with Paradigm and its mortgage intermediaries as part of our mission to make the specialist market more accessible for brokers and customers alike. Distribution partnerships such as this one are vital to this effort. Masthaven products are designed for customers that don’t fit the traditional high-street ‘cookie cutter’ approach. Paradigm is a leading mortgage distributor with strong expertise in the specialist market, and we’re confident that Paradigm’s DA firms will be able to find the answers to their customer needs.”

StepChange comment on Treasury Select Committee report on household finances

StepChange Debt Charity is pleased to see the Treasury Select Committee, in its report published today following the inquiry into household finances, show a clear understanding of the debt landscape and robust calls for action from the Government.

Phil Andrew, chief executive of StepChange Debt Charity, who gave oral evidence to the Committee as part of its enquiry, said: “The Committee’s report shows a clear understanding of the debt landscape, a keen awareness of where problems lie, and a robust identification of who has the power to solve them. In many cases, it is the Government who needs to take action. We agree wholeheartedly with the conclusion that the breathing space scheme should include non-credit arrears and with the Committee’s incisive comments on how the over-zealous approach to enforcing government debt, including the routine recourse to bailiffs, should be addressed. We look forward to working constructively with policymakers to help them address the problems set out so cogently in the report.”

The Committee is urging the Government to tackle the “over-zealous” pursuit of local authority debt as a priority. As the Committee observes, “the public sector should be leading by example in their treatment of the most financially vulnerable; but the current approach risks driving them into further difficulty.”

StepChange also agrees with the Committee’s conclusions of what the final debt “breathing space” scheme should look like. The Committee argues that Government should consider the case for extending the period to be covered beyond six weeks. It also states that “Given the role of non-credit arrears in problem debt, and the aggressive collection practices used by many public sector creditors, the case to include non-credit arrears in the breathing space scheme is overwhelming. The Committee can only offer its support for the scheme if its scope is expanded accordingly.”

StepChange also supports a number of the other recommendations, including that the Government should take a more strategic approach in co-ordinating the expansion of mid-cost credit to reduce reliance on high-cost credit, that the FCA should intervene on overdraft fees “as quickly as it can” and should reconsider whether a wider cap on high-cost credit – including compulsory restrictions on unsolicited credit limit increases – should be imposed.

Just one hour of financial education works

The Money Charity’s Money Workshops have a significant positive effect on the financial capability of young people, in terms of confidence and perception of knowledge, even when the majority of students experience only one one-hour workshop.

This is one of the findings of a new school-level randomised controlled trial (RCT) exploring the impact of The Money Charity’s ‘Money Workshops’ on students’ financial capability that has been published today.

The RCT study found that the Money Workshops were effective at improving students’ self-reported confidence in managing money, how much students feel they know about savings and credit, and how much students feel they know about planning and budgeting. It was also found that teacher capability to deliver financial education themselves was improved by attending the workshops, an unintended but welcomed consequence.

The Money Charity commissioned The National Foundation for Educational Research (NFER), an independent evaluator, to provide an independent evaluation of their Money Workshops in Schools and Colleges for Key Stage 4 and post-16 students, as part of the Money Advice Service financial capability ‘What Works Fund’. The Money Workshops make money and finance engaging and relevant and aim to increase students’ confidence, knowledge and skills relating to money matters. They are delivered in hour-long interactive sessions to classroom-sized groups by trained consultants.

Michelle Highman, Chief Executive at The Money Charity said: “We are delighted that the results show that our Money Workshops work. Our Money Workshops have a significant positive impact on students’ confidence and perceptions of knowledge around money months later. In addition, teachers felt that their ability to deliver financial education themselves had been enhanced”.

Dr Ben Styles, Head of NFER’s Education Trials Unit said: “Young people have limited opportunities to learn about managing money and finances and our findings from this evaluation emphasise the importance and relevance of financial education to equip young people with the confidence they need to manage their money. Studies of this type use self-reported proxies for behaviour change so are always limited but given that most students received just one workshop, the effects seen are impressive. The Money Charity and financial capability stakeholders will be using these findings to inform financial capability policy and practice more widely.”

Sarah Porretta, UK Financial Capability Director at the Money Advice Service said: “We’re pleased to be able to support projects like this through our What Works Fund. These encouraging results highlight exactly what we set out to do with the fund: helping organisations understand which interventions work so that every penny spent makes a real difference to people’s lives. Going forward, the findings from this study will prove invaluable in the practice and delivery of young people’s financial education.”

Beverley BS rewards businesses – and does its bit for much-loved local charity

Beverley Building Society has today increased the rate on its Business Postal and Business Online Accounts.

And as well as rewarding businesses with the new, improved rate, it is also pledging to donate a proportion of new deposits to the Beverley Community Lift (BCL) transport charity.

The Society is upping its Business Postal and Business Online Account rates to 0.55% gross/AER variable from 0.25% gross/AER variable), on balances over £1,000, with effect from Tuesday 17 July.

And it will donate 0.1 per cent of all new balances received by 31 December 2018 to BCL, up to a maximum of £3,000, helping the Beverley-based good cause to fund maintenance work on their fleet of minibuses. The charity helps elderly and disabled people get out and about. For many, it is their only link to the outside world and provides them with friendship and a social outlet too.

The accounts represent part of Beverley’s commitment to supporting – particularly local – businesses, in an environment where many struggle to make any return on excess business funds.

And the Society has added the BCL donation because it cares deeply about supporting its local community.

Chief Executive Karl Elliott said: “We’re acutely aware that the current environment is a challenging one, particularly for smaller, independent businesses, not least in the fact that many company bank accounts pay little or nothing in interest, and often also charge a monthly fee.

“We wanted to help a little by increasing the return businesses can achieve on any excess funds they have in their account.

“We also know that the kinds of businesses we serve care as deeply about community good causes as we do, which is why we are offering to donate a percentage of the new balances we receive on the account over the next six months, to BCL.”

In May, BCL appealed for urgent help from the East Yorkshire community as it works on a strategy to overcome the impact of EU transport rules that are threatening its financial stability. The charity is battling to maintain its local services, which provide a lifeline for many local people. EU legislation means it can no longer maintain the commercial contracts like school transport that, for years, have contributed vital income to sustain its community transport services.

In order to continue with those contracts, it would need to apply for an operator’s licence or ‘O licence’, which is not feasible for such a small organisation. As a result, as well as appealing for community help, BCL is restructuring and considering adding other services to its repertoire of help.

Charity Chief Executive Jan Stainforth said they are deeply grateful for the support of organisations and individuals, who have really rallied round since their May appeal.

“We’ve been overwhelmed by the kindness people have shown since we called out for assistance,” said Jan.

“Everyone from East Riding Council, to individual users, has come forward to offer help in kind or donate, and this generosity – coupled with determined efforts by our own employees and volunteers, is giving us a real chance of a sustainable future.

“In this vein, we can’t thank Beverley Building Society enough for donating a proportion of deposits into its Business Saver account, and we’d say to any companies thinking of opening one: ‘come on and help us reach the maximum of £3,000, and reap rewards yourself at the same time!’”