Unsurprisingly, new evidence shows that it is those on low incomes who have been hit hardest by the financial downturn – so it is those on low incomes who need to seek out debt advice the most urgently.

According to a report by the Resolution Foundation, low earners have been more likely to have experienced a drop in income than other groups – this was most pronounced amongst the 25-34 age group where 66% reported a fall in income compared to 50% in the benefit dependent group and 33% amongst the higher earning group.

As all adverse borrowers know, any drop in income can be disastrous. With high rates and innumerable debts, every penny counts every month to just get by. So by losing income, mortgages and debts become more at risk of default.

There are 9.4 million low earners of working age in the UK, living on an average household wage of £15,800. Low earners are not the poorest in society and are not in crisis but many of them live close to the cliff edge, spending all their monthly income, leaving no room for savings or safety nets – over half of low earners have less than a month’s salary in savings.

So the need for financial advice now is more crucial than ever, helping those with less make their money go further. Low earners need wealth management too, however small that wealth might be. By talking to a mortgage adviser they may find someone who can help them manage with what they have for longer.

SOURCE: Resolution Foundation, 05/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Mortgage rates have been historically low for a year now thanks to lender forbearance and a low base rate – but should people with adverse loans be concerned that mortgage rates are on their way up?

It's a tricky task to predict the exact point, or even a close estimate, of when rates may rise. However, with the current base rate at 0.50%, it is fair to assume the future for rates can only be up. 

HSBC is reminding borrowers that 20 years ago the Bank of England base rate was at 15.4%, proving that rates can rise significantly higher than 0.5%. It says that while no one is arguing that interest rates are likely to hit double figures anytime soon, some economists are estimating that Bank of England base rates could reach 6.5% over the next five years. 

Martijn van der Heijden, head of mortgages at HSBC says: "The message for borrowers is that if you couldn't afford an increase of up to 3% on your mortgage, you should seriously look to fix your payments now. Mortgage holders unsure of how they might be effected by rising interest rates over the next few years should first take expert financial advice."

A mortgage expert will not try to predict the future, but they will use their years of experience to help you come up with a solution that is likely to mean you pay out as little as possible over the coming years. No one can know what the future holds but you can prepare yourself with the help of someone who has seen it all before.

SOURCE: HSBC, 03/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Most young people need some help from their parents to have any hope of getting onto the property ladder – and both need help from a mortgage adviser if they are to be successful.

According to the Council of Mortgage Lenders, 80% of all under 30s now need financial help from a parent or relative to get on to the housing ladder. It says before the financial crisis it was just 45% of all young people.

As a result, those under the age of 34 are half as likely to be able to get a mortgage than those ten years ago.

The CML says: “What is most striking is that to get into the market, today’s first-time buyer is putting in a deposit of around £34,000, equivalent to more than their total gross annual household income. Only three years ago the deposit required to enter the market was a much more manageable – but still hefty – 37% of annual household income, at £12,700."

For the first-time buyer, a mortgage adviser is always crucial. The first time someone signs up for a mortgage it can be a challenging, daunting task so having a professional there to make sure everything goes smoothly is a big help.

And for those parents who are helping the first-timers, financial advice is equally as crucial. It might mean remortgaging, it might mean unlocking equity in their home or it might mean the cashing in of assets like stocks, bonds or pensions. However they find the money, they need a professional by their side as much as their kids do.

SOURCE: CML, 02/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

You may have been given a sub-prime mortgage in the past but do you know whether you are still a sub-prime mortgage borrower? It may be that you now have the ability to get hold of a regular, cheaper prime mortgage.

During the last decade many people took out sub-prime mortgages. They were plentiful and no one could see the downside to the loans. But in the wake of the credit crunch many people suffered with the mortgage debt and it was sub-prime mortgages that were rightly or wrongly blamed for the failure of banks round the world. As a result, they have now become almost extinct.

But most of the people who were sold sub-prime mortgages were able to safely navigate the recession and are now comfortably paying their mortgage each month. If you are one of these people then you may find that you are no longer a sub-prime borrower.

After years of a high rate of interest you have significantly improved your credit score – you have proved that you can handle any loan offered to you. As a result your credit score may have improved enough so as to take you out of sub-prime and into prime. That means you could get hold of a new loan at a cheaper rate.

If you want to know if you are clear of sub-prime, talk to a mortgage broker. They can assess your credit score and look to see whether you could now get hold of a prime loan. It might mean a cheaper rate of repayment each month and it might mean a new age of financial stability in your life.

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

More people sought help for their sub-prime mortgage problems than ever in 2009 as many woke up to the fact that only proactive behaviour will solve debt problems.

It doesn't matter who you talk to if you have sub-prime problems – it might be a mortgage adviser, your lender, a debt manager or even a debt charity – all that matters that you take action and begin working on a plan to solve your financial woes.

The Citizens Advice Bureau has reported record numbers for people seeking help with debt problems at the end of 2009. It says it is currently dealing with 9,500 new debt problems every working day and debt and benefit issues combined now account for 60% of the CAB workload. CAB advisors handled 2.27 million debt problems in 2009.

The latest research from Equifax certainly backs up these figures – it found that 20% of people it surveyed have lost income either through cutbacks in overtime, an enforced pay cut or reduction in working hours, or because they didn’t get a bonus last year.

Neil Munroe, external affairs director of Equifax says: “At the start of 2010, nearly a quarter of respondents said they had not had a pay rise so far this year and 64% are either not expecting one, or are unsure if they will get a pay increase, and that appears to be putting increasing pressure on family budgets.

“Nearly a third of consumers surveyed said that they felt they were in debt because their living expenses had increased in the last year. This is a big challenge for many families. Whilst interest rates have dropped, the cost of many essential items hasn’t followed suit and this is adding to the burden on those already juggling various monthly financial commitments."

SOURCE: Equifax, CAB, 24/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Research from moneysupermarket.com has found that 10% of British adults – five million people – are permanently in their overdraft as they continue to struggle with their adverse finances.

If you are in your overdraft more often than not it is time to take stock. An overdraft is not a right, it should be just warning sign to tell you that your finances are stretched too far and you are living beyond your means. An overdraft is an alarm bell to get some professional advice.

Kevin Mountford, head of banking at moneysupermarket.com, says: "We should be concerned that there are still such a large number of people permanently overdrawn. With rising inflation, it is going to be difficult for many to break the habit of living in the red, and it may be that more people will fall back into this position as living costs increase."

It doesn't make financial sense to live in the red – the website says that someone with an overdraft of £500 could be paying more than £240 a year more that they should for the privilege. Mountford adds: " The dangers of being overly, or entirely, reliant on your overdraft are clear; firstly this can be an extremely expensive debt to carry if it hasn't been agreed with your bank in advance, and secondly your bank can reduce the size of your overdraft with little warning."

The only way to drag yourself out of debt is to take charge of your finances – look at where your money is going and look where you can plug the gaps. Some changes may be easy, like spending less on luxuries, but others like mortgage repayments may not be so easy to reduce. Talk to a professional adviser about making meaningful changes to your finances so as to be able to live in the black, not the red.

SOURCE: Moneysupermarket.com, 24/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

The Consumer Credit Counselling Service, a UK debt charity, is warning people not to be complacent about their debts or risk serious problems in the future.

It says that people should not ignore signs that they have unmanageable debts and to seek help as soon as they realise they have a debt problem. Many people simply bury their heads in the sand and hope that the lottery or a magic genie will come along and solve all their problems. Unfortunately this is real life and debt problems can only be solved if people proactively try and make amends.

According to new research by Unbiased.co.uk, Brits have spent the first 50 days of 2010 just earning enough money to pay off the interest on their personal loan and credit card debts. CCCS points out that those who have now earned enough to repay the interest are not free from debt and may have a debt problem as they still have to repay the actual debt itself. Simply, it is not enough to manage the debt, you need to work towards reducing it or risk being in the red forever.

Laura Carver, CCCS helpline manager, says: "Being unable to repay your debts is the most obvious sign of a debt problem. However, there are other warning signs that your debts are putting a strain on your finances and that they are likely to become unmanageable, particularly if you have an unexpected large expense or change in circumstances.

"These signs include only making the minimum payment on your credit cards each month, not knowing the total debt you have, lying to your friends or family about your spending and debt and using credit to repay debt."

Take control if you are struggling. Talk to your mortgage broker, your lenders, a debt charity or a debt manager to help you work out a way of getting on top of your money problems. It takes time and it is not easy but it is only those who do not ignore the signs who eventually become debt free.

SOURCE: CCCS, Unbiased.co.uk, 19/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Repossessions might be falling and we might be officially out of a recession but there could still be as many as one million people struggling to pay their mortgage each month.

Peter Sargent  president of R3, an insolvency practitioner, says, “The insolvencies and repossessions reported are the tip of a very worrying personal debt iceberg. What lies below the waterline is a much larger group who are sadly not facing up to their debt problems.”

R3’s research shows that around one million people are struggling without seeking help, and a further half a million have contacted their creditors informally for help after struggling with their debts. All in all, the number of people experiencing financial difficulty is estimated to be around seven times the number of people in formal insolvency.

A lot of people just assumed that as soon as the recession ended it would be the end of the economic misery and all of a sudden the good times would return. Some of those who are struggling to pay their adverse mortgage debts each month thought they would be able to simply ask their mortgage adviser for more credit and hey presto! the debt would disappear.

Unfortunately real life isn't quite so simple. Yes, we are out of a recession, but those million people will not suddenly find their mortgages are manageable. They still need to talk to their mortgage adviser, their mortgage lender, debt managers or charities and find ways to make their debts more manageable through hard work, consolidation, saving and budgeting.

It isn't easy but seeking out advice is all adverse mortgage borrowers can really do while the UK economy struggles out of the recession.

SOURCE: R3, 05/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Rates for mortgages of 90% loan to value have dropped by a third over the last three months meaning those borrowers who have been locked out of the mortgage market may now have a much better chance of getting an affordable home loan.

According to Evaluate Technologies, rates for borrowers with deposits of 10% have fallen by nearly a third in the past three months as competition in the mortgage market increases. It says average initial rates for borrowers at 90% LTV have dropped to 5.3%, down from 7% in November. This cuts monthly payments by £160 on a £150,000 loan.

But the best-buy rates at 90% LTV are still more than double the average 2.58% charged for borrowers at 60% LTV. As is always the case, if you have more money you can afford more equity and that means you are a better bet to lenders and they can afford to offer a cheaper rate of interest on a home loan.

Jim Barrowman, national accounts director at Evaluate Technologies says: “It is a genuine sign of confidence that lenders are now willing to lend at 90% LTVs and also that they are cutting rates for borrowers. The revival is to be welcomed and shows that gradually lenders are getting the message that if people with smaller deposits are creditworthy enough to qualify for a loan they should not have to pay too much of a premium.”

If you want to be sure of the best 90% LTV deal you need to speak to a mortgage adviser. These deals are still rare and they still need a specialist to help manage them from application to signing on the dotted line, and beyond.

SOURCE: Evaluate Technologies, 16/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Mortgage lenders' data has found that the Government's temporary stamp duty break last year helped more first-time buyers get on the ladder than at any point in two years.

It seems there was a rush to buy properties in the £125,000 to £175,000 bracket before the year-end stamp duty concession expired, according to figures from the Council of Mortgage Lenders.

December saw 24,900 loans to first-time buyers, the highest number since November 2007. At £2.9bn, first-time buyer loans rose 26% from November both by volume and value.

Of those, 55% of house purchase loans were on properties costing under £175,000 and therefore exempt from stamp duty, up from 51% in November. The CML says this clearly indicates a rush to complete purchases before January, when stamp duty would have added an additional 1% of the purchase price onto the cost at that level.

This proves that for first-time buyers, just 1% or a few thousand pounds, makes all the difference when it comes to being able to afford a home. And while the stamp duty break has now ended and all properties worth more than £125,000 have a 1% tax, there are still ways to save more for your first home.

Talk to a mortgage expert about what you can do to save that bit extra for your first home. It might involve some smart investing, and it might take some extra time, but a good mortgage adviser will help a first-time buyer maximise their income, their savings and their potential so as to be able to make that all-important first step onto the UK property ladder.

SOURCE: CML, 12/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.