Talk Money

Britons looking for a loan or mortgage should do so before Christmas, or potentially miss out. The impact of the credit crunch is being felt, with personal loans and mortgages becoming increasingly difficult to secure.
One in ten lenders has left the unsecured loans market including GE Money and Leeds Building Society. This week Hanley Economic Building Society and Eskimo Loans withdrew their personal loan offerings. Esther James of Moneyfacts.co.uk said:
“Such a large reduction in just the last month is worrying. With no signs of rate rises slowing, it’s a rather unsettled market. The credit crunch is showing its strength in the personal loan market. With less choice, a more cautious lending strategy and the impending decision on payment protection insurance sure to shake up the market, the 2008 loan market could look very different.”
The mortgage market is also feeling the credit crunch and potential customers are advised to act early. Borrowing parameters are getting tougher and lenders are making applicants wait. The Woolwich, for example, has a one-week wait, just to look at new applicants.  Katie Tucker, technical manager at mortgage broker John Charcol said:
“The credit crunch means that even in balance sheet lenders who have funds available are in no hurry to price themselves into popularity because it could bury them in business and ruin their service levels. It is vital borrowers allow extra time for applications, the temptation to delay applying until after Christmas may cost remortage customers an unexpected month on a nasty high rate if they revert to their lenders SVR while they are waiting.”

According to a report from accountants PricewaterhouseCoopers (PWC) UK consumers are facing a cut in the credit available to them.
PWC’s Precious Plastic 2008 report states that credit card companies are suffering from falling profits due to customers defaulting on payments as well as an increasingly competitive environment.  Credit companies have lost around £4 billion due to customers not being able to me repayments, according to PWC his has led to “thousands” of credit card applications being rejected over the Christmas period.
Richard Thompson of PWC said:
“Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies. Many consumers will find it increasingly difficult to obtain credit this Christmas.”
PWC also show that UK consumer debt is increasing, with the average British adult having £33,000 of unsecured debt, double the 2000 figure.

Borrowing limits on credit cards are being cut following the global financial crisis. Even customers with good repayment records are finding that card companies are lowering their credit limits. Credit card provider Goldfish said that it had cut limits for a “small amount” of customers.
The global financial crisis began with the collapse of the US sub-prime mortgage as many sub-prime customers defaulted on their mortgage payments.  In turn, it materialised that many financial institutions had purchased these sub-prime debts on the money markets and were facing huge losses with the sector’s collapse.
This led to an increase in the Interbank rate, the rate at which banks lend to one another. The situation has been called a “credit crunch” and has now trickled down to High Street level. More credit problems are anticipated as big losses are predicted for global financial institutions exposed to the US sub-prime market.

The ongoing credit crunch may lead to UK consumer s avoiding credit card expenditure over Christmas. The credit crunch has been caused by the slump in global financial markets following the collapse of the US sub-prime loans market, which led to the run on Northern Bank earlier this year.
Research conducted by debt consultancy Thomas Charles in conjunction with pollsters YouGov reported that a quarter of Britons intend to “avoid” using their credit cards this festive period.
Director of Thomas Charles, James Falls said:
“People are thinking about how much they are spending and they are thinking about spending within their budget. I think that around this time of year it’s easy to almost make a resolution to do something, but it’s a very difficult time of year to do it – particularly when the natural instinct is to go and spend more.”
According to Thomas Charles, 15% of Britons are in serious of over £10,000, with men in more debt than women.

A report has indicated that there will be a fall in credit card use this Christmas.  Debt consultancy Thomas Charles polled 2000 adults and discovered that one in four planned to avoid using their credit cards this festive season.  On top of this 10% will try to avoid any large credit card transactions in the coming six months-.
These results can be explained by another part of the survey that showed 15% of those polled held unsecured debts of more than £10,000.  Total consumer debt in the UK is estimated to be £1.5 trillion.
Thomas Charles Managing Director, James Falla said:
“Interest rate rises and subsequent mortgage hikes means that people have been relying on credit for their everyday expenditure – credit they can often ill afford.  These results show that Britons are finally making positive steps towards confronting the amount of debt in the street – this is good new for the man on the street, but may signify bad news for retailers who have come to rely upon the vast amounts of credit spent at Christmas time.

The House of Lords has ruled that consumers who use their cards abroad will be covered under Section 75 of the Consumer Credit Act. The ruling was made following appeals against the Act by Lloyds TSB and Tesco Personal finance were dismissed.
This means that credit card purchases between £100 and £30,000 made abroad will be insured by credit card companies.
Mike Naylor, Personal Finance expert at uSwitch said:
“This landmark decision has finally laid to rest the issue for overseas transactions which has been rumbling on with credit card suppliers for several years. The decision to uphold it means that wherever in the world consumers use their credit card; they can enjoy the same protection as they do in the UK. This is especially important with the growth if Internet shopping where goods are often shipped to the UK from sites based overseas.”
In 2006 UK consumers spent £16.4billion overseas using credit and debit cards.