Money talk
WALES ON SUNDAY - 23RD DECEMBER 2007
Though he wanted to be helpful, David Cameron’s letter asking lenders to be lenient on those who hit trouble when their fixed rate mortgages expire has added to fears about 2008.
Simon Burgess of British Insurance says: “People have been using their capital asset to sustain their lifestyles, and this has to be paid for. Many people fear they won’t have a job a year from now, and the outlook is bleak.
Financial data agency Moneyfacts.co.uk says residential sub-prime mortgage deals – for borrowers with poor credit histories – is down 64% since July.
Says Julia Harris at Moneyfacts: “If borrowers have overstretched with an unaffordable sub prime deal, worse troubles could lie in store.”
With Britain’s consumers holding debts of £1.3 trillion, the experts suggest these survival tips to help stay afloat:
• Making a budget: those struggling to make ends meet should make a budget. Write down income and expenditure, review luxury bills and cut back on day to day expenditure.
• Mortgages: Richard Brown at Moneynet.co.uk says the squeeze will be toughest on those who fixed around 4.5% in 2006. seeking new loans in 2008, they could find many products carrying hefty upfront fees and possibly a tie-in for a set period.
Ray Boulger at mortgage broker John Charcol thinks tracker mortgages are probably best in current circumstances.
But borrowers should get trackers with a drop lock option – the option to lock into a fix – and with no early repayments – could also become attractive in 2008.
• Maximise income on savings – possibly by locking money in a fixed rate bonds paying nearly 7% gross.
• Buy insurance to cover to protect income against redundancy and illness, well before either these troubles strike, and at a realistic price. Try cut price payment protection insurance like British Insurance, where to insure £1,000 of monthly income against unemployment costs £13 per month, or £21 per month including illness. A lender will charge £60 a month.
• Try to get off the treadmill of plastic. Mike Naylor at price service uSwitch.com says 13.4 million store card accounts carry a balance of £2.17bn, with an APR of 26.3%. he says those holding store cards should switch to a credit card with a combination of 0% on balance transfers and new purchases.
