First-Stop-Credit.com News

A report on the UK mortgage market has shown stronger mortgage lending in December than expected. The research from the Council of Mortgage Lenders (CML) reports that mortgage lending came to an approximate total of £26.3 billion, which is 25% up on December 2004.

A report from the British Bankers’ Association (BBA) has also shown stronger mortgage lending growth than expected, with mortgage lending rising by £5.4 billion in December 2005. However, the BBA also report that lending via unsecured loans such as credit cards and other forms of unsecured loans was “subdued” in December. This would fit with a general trend where credit card use is being replaced by debit card use.

The main attraction with credit cards are that the repayments can’t be spread over a fixed period of time, unlike the traditional bank loan. A credit card has a minimum monthly repayment usually in around 2% of the outstanding balance, but can change depending on the issuer and terms and conditions. Late fees are applied if the minimum repayment does not arrive in time with the issuing bank.

Given the way credit cards operate and the flexibility of their repayment terms, many people develop a debt that accrues over time. While many credit card companies try to attract new customers with incentives like airmiles, free gas, cashback and interest free periods, if you are thinking about applying you must ask yourself how disciplined you will be. All the offers may sound attractive but you may actually be lining yourself up for a debt problem.

Ask yourself:

• How often will you use the credit card?
• Do you have the ability to repay on time?
• Do you have a history of bad debt?

Recent figures suggest that 1 in 5 UK consumers are suffering from late payment fees and charges on unauthorized overdrafts. Are you sure you will not become another statistic who does not repay on time?

A survey by defaqto and MoneyExpert has found that in 2005, 1 in 5 consumers got hit with late payment fees. The main reason for the late payment fees was late payment of credit cards and store cards. The survey also found that 1 in 20 consumers had built up over £100 in late penalty fees and associated charges. It is estimated that in 2005 alone, some 7.8 million people paid £553 million in late payment fees.

Other common causes for being charged a late payment fee included exceeding overdraft limits as well we early repayments on mortgages and loans. However, early reports suggest that consumers in the UK are actively working to take control over their outstanding debts during 2006 in order to avoid further penalization from their creditors. The survey found that 1 in 4 questioned plan on paying back their loans with 6% planning on moving their mortgage to another provider so they can avail of lower rates and more flexible repayment plans.

The UK interest rate, set by the Bank of England, has been left unchanged at 4.5% after the bank’s meeting on the 12th of January. The move to keep interest rate the same is seen by analysts as the Bank waiting on more reports from retailers and their Christmas figures.

The UK economy has been stuttering recently with slower than expected growth and a small slowing down of the housing market. However, reports from the Office for Nation Statistics show strong growth through November in manufacturing output, up 0.4% in November after a 0.8% drop in October.

With interest rates still relatively low, it is hoped that the housing market will stabilize and more consumer confidence, which has shown signs of weakening recently as credit card debt mounts.

Recent reports based on data released by the federal US government indicates that the average American adult is running $3,560 in revolving debt. Extrapolating the figures, the average American household has $7,271 in revolving debt. Revolving debt includes debt accrued from credit cards and loans that have yet to be paid back.

These figures are based on a report issued by the Federal Reserve Board, which outlines that US consumer debt is now at $799.1 billion.

The BBC and Experian have developed a joint debt tester where you answer a series of questions in order to build up your profile. The debt test asks a series of questions about your current financial stats such as how much you earn, what you pay back per month etc. This helps them to build a profile of your financial situation.

Upon answering all the questions you are given feedback on where you actually stand, with various suggestions on what you can do to help you address your outstanding debt. It’s well worth taking the test if you are unsure about what you should do next.

Visit the BBC / Experian Debt Test or consult First-Stop-Credit.com’s library on debt assistance.

Even those great interest free credit cards eventually start charging interest, once the interest free period has passed. So why do credit cards charge so much interest?

Basically it all comes down to risk. The interest rate for any loan or credit card is directly tied to the risk of loss to the lending company. The high rate of interest is because when a person stops to pay back the balance on their credit card, the credit card company is basically taking the loss on the money that has been already leant out.

It’s different when you take out what is called a ’secured loan’. These types of loans are ’secured’ against your home or some other collateral, which allows them to charge lower interest rates. You can see how secure a loan is by what collateral is actually securing the loan. Loans for older cars are typically higher because the value of the car drops quickly over time. On the other hand, a home loan will most often have a lower interest rate because the property will go up in value over time.

Visa USA have publically aknowledged that a merchant credit card provider based in the United States may have had a security breach where the details of accounts were revealed. Visa have announced that they have alerted the financial institutions so that they can protect their business and customers.

the US Federal Reserve has announced that interest rates in the United States are to rise by 0.25% to 4.25%, representing the 13th increase in interest rates. However, experts are split down the middle on the issue of future interest rate rises, with some wanting to dispell any talk of future rises because it could damage consumer confidence.

Alan Greenspan, the Federal Reserve’s chairman of 18 years, is due to leave his job in January 2006. Greenspan will be replaced by Ben Bernanke who is currently head of President Bush’s Council of economic Advisers. Mr. Bernanke is a former governor of the Federal Reserve. Analysts will be watching closely as the changeover approaches.

Debt counsellors in the UK are warning that consumer debts will mount to record levels in 2006 because of Christmas overspending. Personal debt in the UK is already valued at over £1 trillion, with more than 3 million people owing more than £10,000 on loans, bank overdrafts and credit cards.

However, a statement from debt counsellors clearly states that unless consumers closely monitor their spending on Christmas gifts the UK’s debt problems will spiral in 2006. But as more and more consumers are spending beyond their means on credit cards and store cards, the problem looks likely to grow.

“People feel under increasing pressure to spend more than they can afford at this time of year,” says Porter. “Unfortunately, that means using their plastic or taking out a loan or upping their overdraft. The credit companies are only too happy to oblige,”said John Porter, a counsellor at a UK debt counselling company.