Loan Origin

Intelligent Finance, a division of Bank of Scotland initiated in 2000, recently released research showing that if offset loans were as popular in the U.K. as they were in England, U.K. residents could collectively save £345 billion or nearly £70,000 for each average borrower.
Offset loans are situations, typically in mortgage loans, in which the borrower maintains a savings account with the lender. The interest payment due on the loan each month is calculated only on the net balance of the loan minus the savings account. Although offset mortgages have become more popular in the U.K. in the past ten years, Intelligent Finance would like them to become as prevalent as they are in Australia. According to Cammy Amaira, Intelligent Finance sales director, the “latest number crunching roves it’s definitely worth it.”
Why exactly are offset loans so prevalent in Australia? Mr. Amaira explains, “In Australia, the popularity of offset has a lot to do with mind-set. Australians value home ownership as much as we do, but they don’t want their mortgage to take over their lives, making offset their ideal choice.”

With the majority of fixed rate mortgages offered only lasting for five years, Chancellor Alistair Darling recently made a call for 25 year fixed rate mortgages to increase in opportunity-and even become normal-in the future. Currently, Nationwide is the only major mortgage lending company in the U.K. that offers a 25 year fixed rate mortgage.
Chancellor Darling’s reasoning behind his desire for wider availability of affordable long-term fixed rate mortgages is to bestow homeowners with added security in the current unstable financial conditions. Chancellor Darling explains, “For many households, particularly those on low incomes, fixing the level of mortgage repayments for several years makes real sense. It can also contribute to wider macroeconomic stability.
The popularity of the fixed rate mortgage is apparent. After Nationwide initiated the offer of their 25 year fixed rate mortgage in March 2007, they announced that it sold out within only five weeks.

The Monetary Policy Committee (MPC), whose panel of nine members meet every month to discuss and set the interest rate for the U.K., recently decided to cut the interest rate by .25 per cent-down to 5.5 per cent. The Bank of England made the decision for a low cut to address slow economic growth while keeping an eye on inflation.
John Charcol’s Ray Boulger reflected that most experts expected the cut. He explained, “With the MPC receiving significant criticism for not cutting the rate for a second consecutive month in January, after a unanimous vote for the December cut, together with discussion on whether a .5 per cent cut might be necessary to achieve economic stability, there was never any real doubt on the outcome of today’s meeting.”

Financial experts, Global Insight, stated recently that they forecast interest rates to fall for 2008 and early 2009. Specifically, Global Insight predicts that by the end of 2008, the interest rate will have fallen to 4.5 per cent, and will continue to fall to 4.0 per cent in the beginning of 2009. Currently, the interest rate is at 5.5 per cent, with an expected cut by the Bank of England of at least a quarter per cent coming on Thursday.
Chief European and U.K. economist at Global Insight, Howard Archer, explains that, “This [prediction] is based on out assumption that the U.K. will avoid recession, but will see extended below-trend growth.”
In addition to the interest rate forecast, Global Insight set the gloomy prediction that the Gross Domestic Product growth will be “the equal weakest performance since 1992,” of approximately 1.8 per cent in 2008 and 2009.

According to Council of Mortgage Lenders (CML), the trade association for the mortgage lending industry, U.K. mortgage lenders want increasingly tighter rules so that mortgage fraud is reduced. Specifically, the mortgage lenders are upset about sales of newly built city centre flats.
Mortgage lenders are concerned that in the current unstable property market conditions, developers are offering deals of buyers that inflate the new home’s cost. Many of these deals include cash-back offers, free holidays, paid legal fees, and buying white goods.
The CML publication states, “In recent years, discounts and incentives have had the effect of making the real value of new homes less than transparent. This is bad news for genuine buyers and for lenders. Buyers may find themselves with a mortgage worth more than the property’s value, while lenders may find themselves exposed to fraud and the risk of loss.”

Manchester has a lot to offer its residents: affordable housing in a city centre with everything one would expect from city living. Exactly how affordable? Real estate provider Savills states that first-time home buyers can find plenty of options for around £100,000, while living in the city centre.
Savills residential investment consultant, Tom Rogers, explains that in Manchester, “There is a lot on offer. The market is going through a little blip at the moment but as far as property prices go, I think they are quite fairly priced in Manchester. A one-bedroom apartment is still quite affordable and that’s city centre living .You wouldn’t get that in London.”
Further extolling Manchester’s pluses, Mr. Rogers continues that Manchester has grown “significantly” in the past few years and is “still growing.” This observation is corroborated by Manchester’s website, manchesterfacts.com, which states that Manchester will commit £4.9 billion to construction projects over the next ten years.

According to new research from Halifax, younger consumers, in the 20-29 year old age group, are the most likely consumers to opt for a debt consolidation loan. Debt consolidation loans are the second most frequent option for the 30-39 year old age group. Halifax’s research further shows that men are more likely than women to take out a debt consolidation loan.
Whether due to New Year’s resolutions or not, more loans are taken out in January than in any other month of the year. In fact, January loan totals nearly double the average loan amount taken out in some other months.
Neil Chandler, head of Halifax Unsecured Personal Loans, explains that, “For many people, the start of the year is a time to get personal finances in order - transferring debt from more expensive products such as store cards or other loans.”
For consumers who have loans, the Consumer Credit Counselling Service advises they share loan information with family members and friends.

First-time homebuyers should not be dismayed by the plethora of news reports and discussions expounding on the crisis in the mortgage industry. Although it is true that there are fewer loans available for 100 per cent of property value and that eleven mortgage companies have reduced their maximum loan amounts since December, 2007, Moneyfacts.co.uk wants first-time buyers to understand loans are still possibilities for them.
Darren Cook, head of mortgages at Moneyfacts.co.uk, explains that though mortgage companies are tightening their lending practices, first time buyers can still receive appropriate loans. He explains, “It’s not all doom and gloom for first-time buyers, it’s just that in the current mortgage market, [mortgage lenders] are not sure what is going to happen so they are being a bit prudent.”

Does it seem like more of your friends are moving in together? If you think so, you may be correct. According to research from company John Charcol, in 2007 the amount of first-time home purchases made by couples increased to 50 per cent, up five per cent from 45 per cent in 2006. The Bank of England predicts that more British homeowners will require more secured loans in 2008 than in 2007.
John Charcol’s research also shows that for 2007, the amount of women who purchased homes by themselves stayed about the same from 2006, and the number of men purchasing homes independently fell by about five per cent.
Regarding her company’s research, Katie Tucker, technical manager at Charcol.co.uk, John Charcol’s website, reflects that, “”Buying together is a very sensible choice in terms of affordability. Not only for splitting the mortgage and the bills, but more cuddling up should save you on the heating!” She adds, however, that renting for moving in together for the first time might be a smart move, to ensure the living situation will work out.

Security expert with protection firm CPP, Danny Harrison, states that credit card fraud is viewed largely as a “victimless crime.” Meaning that those who commit the fraud do not believe they are harming individuals, as banks are typically held accountable for the lost money. He believes this is one contributing factor to the high incidence of credit card fraud.
Mr. Harrison explains, “What’s happened is credit card fraud is moving more and more in to becoming what’s viewed as a victimless crime because the fraudster sees that it is the bank that pays and not the individual and in the majority of cases that’s true.”
Mr. Harrison warns consumers to monitor where they keep their cards and to call the bank immediately if the card is stolen or lost. In addition, it is wise to write down the list of emergency contact numbers for the credit institutions and keep it outside of your wallet in case it is stolen.