"Why are there so few options for those on benefits or low incomes to borrow money safely? It has simply not been a priority for the Government to come up with one.
Ministers made much of the Universal Banking Service they introduced in 2003 to allow benefits to be paid electronically. That may have increased access to no-frills bank accounts, but it has not provided any solution to the menace of the loan sharks. Loans to the poor are too risky, too time-consuming and too small-scale for the banks to bother with, and no one in authority has told them to mend their ways.
Despite warm words from politicians, community-based credit unions have failed to flourish. There are 690 of them in all, but they struggle to attract deposits, meaning that their ability to lend is limited. They also have a worryingly low profile. Only those already well plugged into community services would have even heard of their local credit union.
Legislation to make these organisations easier to join and more attractive to a wider range of customers is trundling its way through Parliament, but the reforms will not come into effect until the autumn at the earliest, and the crisis is now.
Contrast that with the US, where community development credit unions have developed quickly in the past decade to become the main community banking service for low and moderate-income Americans. They mobilise assets of $2.7 billion (£1.6 billion) a year and provide affordable credit to almost a million households. New low-cost loans are estimated to save members more than $300 million annually in interest charges from loan sharks.
The Government needs to do far more to promote credit unions here. The Post Office is looking for a new role and could easily offer credit unions the outlet that they desperately need. It is almost a perfect fit. The Post Office has a nationwide branch network but no products for low-income borrowers. Credit unions have an affordable product range but no branch network.
Local authorities could offer facilities and help with start-up costs for new credit unions in areas troubled by loan sharks"
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( 3 / 235 )For those that have been on a tracker mortgage their repayments are set to begin rising. Anyone who has been on this type of mortgage will have been fortunate enough to be paying possibly the lowest rates in history to date.
"Before the credit crisis, many borrowers took out tracker mortgages – loans whose interest rates rise and fall in line with the Bank of England's official rate – charging very small margins above Bank Rate. Some lucky ones were even charged a margin below Bank Rate. But all good things end. Many tracker deals last for just two years before the rate reverts to the lender's normal rate, usually called the standard variable rate (SVR), and a more realistic reflection of the lender's costs.
Many people who took advantage of the best short-term tracker deals just before the financial crisis began two years ago are about to see their interest rates revert to much higher SVRs.
Bank of Scotland, for example, offered a two-year tracker at Bank Rate minus 0.26 of a percentage point. Two years ago, Bank Rate stood at 5.75pc, so the rate that borrowers paid at the outset was 5.49pc. But now that the Bank of England has cut its rate to 0.5pc, the interest rate on the loan is 0.24pc, so a borrower with £150,000 outstanding on his mortgage is paying just £30 a month in interest.
The two-year introductory deal will expire on October 31, however, and the rate will revert to Bank of Scotland's SVR – currently 4.84pc. Borrowers' interest rates will rise by 4.6 percentage points – a colossal increase that means the interest bill on a £150,000 mortgage will be £605 a month.
On a typical repayment mortgage, the monthly payments will rise from £559 to £902, according to John Charcol, the mortgage broker.
Meanwhile Halifax, one of Britain's biggest mortgage companies, offered a two-year tracker at Bank Rate minus 0.51 of a percentage point, meaning the payable rate started at 5.24pc. Now that the official rate is 0.5pc, borrowers with this mortgage are paying no interest. But when this deal expires on November 30, the rate will revert to Halifax's SVR of 3.5pc – meaning monthly repayments of £438 for interest-only borrowers or £751 on a repayment mortgage, up from £501 now.
The lowest tracker rate available two years ago was Cheltenham & Gloucester's at 1.01 percentage points below Bank Rate. When this rate expires on September 30, the rate will revert to the bank's SVR of 2.5pc – the lowest on the market. Out of a total of 399 two-year tracker mortgages available in August 2007, 86 (or 22pc) were priced at Bank Rate or below, according to Moneyfacts, the data provider"
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( 3 / 236 )The famous tv actor Neil Morrissey has entered into an Individual Voluntary Arrangement (also commonly recognised as an IVA) after the loss of millions of pounds as a result of a collapsed property investment scheme.
He told the News of the World newspaper that he saw bankruptcy as an "easy" solution that was did not complement his beliefs and was not fair to his creditors.
He commented: "I feel morally obliged. After [the IVA is completed] I'll feel better about myself. Now I'm working very, very hard every second out there to earn another penny."
The Men Behaving Badly and Waterloo Road star originally invested £2.5million in a collection of pubs and hotels. The company collapsed following overstretching itself, seeing Morrissey’s business partner declared bankrupt.
While others were hasty to suggest bankruptcy as a solution, Morrissey said he ultimately settled on the decision to enter into an IVA because he wishes to honour his debts to the people he owed.
He said “I decided no, I'd step up to the plate, try to do the right thing and get everyone their money back."
"I just thought there are too many good people who've lost their money on these deals, and I wanted to repay them as much as I possibly could.”
Individuals facing financial difficulties as a result of debt should understand and consider all options available to them. Honouring your obligations can still be achieved, as Morrissey has demonstrated.
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( 3 / 260 )If you currently have credit then it is important that you keep up your repayments otherwise you could find that your credit record is badly affected. This is especially important if at some time in the future you may need to take out credit or a mortgage as even the smallest of errors could come back to haunt you.
"Some of the country’s high street banks may have returned to the days of bumper profits, but evidence suggests that lenders are taking a tougher line than ever with their customers. Growing numbers of Times Money readers report problems taking out mortgages, credit cards and loans as minor borrowing slips are seized on by lenders to refuse applications.
Indiscretions that would have previously been ignored — a single late payment, for example — can now jeopardise a new loan or card request. This hardline approach suggests that the credit crisis is still far from over for ordinary borrowers, even though the Government has urged lenders to adopt a more welcoming stance.
Even if a payment is missed for a good reason, such as illness, moving house or a holiday, the knock-on effects can be severe. It could even play havoc with existing borrowing commitments, as spending limits are cut.
Banks and credit card companies are cagey about revealing how many applications they turn down. But a telling signal comes from the credit reference agencies, which have reported a jump in requests for credit reports as more people have applications rejected. Equifax, for example, has experienced a 10 per cent increase in requests for credit reports in the past year"
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( 3 / 239 )According to a recent article in the Guardian Bradford and Bingley have reported a rise in the number of repossesions.
"State-owned Bradford & Bingley today bucked an improving national trend in home repossessions by admitting it had seized more properties from its defaulting mortgage customers in the first half of this year.
The near 50% rise in the number of repossessed homes on B&B's books came as new figures showed government pressure on lenders to go easy on struggling homeowners had contributed to a drop in foreclosures.
The Council for Mortgage Lenders said 11,400 properties were repossessed in the three months to June, a drop of 10% on the previous quarter but up from 10,000 in the second quarter of 2008. Falling interest rates eased the pressure on home-loan payments, with the CML reporting only a small increase in customers missing one or two monthly repayments.
At B&B Richard Banks, managing director, warned that repossessions would continue to rise until the end of this year, reflecting the sharp rise in the number of customers who began falling into difficulty in 2008. Banks joined B&B in May on a salary of £250,000 a year.
B&B, taken into public ownership last September, today announced an increase in its losses to £160m in the first half of 2009. But, the number of troubled customers is not as high as B&B had budgeted for and its arrears level has probably peaked. The lender has now set aside £270m to cover fraud and professional negligence from applicants for its buy-to-let and self-certification mortgages. Some 21,102 B&B customers – almost 6% of its customers – are more than three months in arrears or have been repossessed. At the end of June the bank had 961 homes under repossession, some 300 more than at the end of December"
For further help and advice regarding repossession then why not have a look at our guide and see how we could help.
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