No longer safe as houses?

More pain ahead for the property market

Latest figures released by the Bank of England have shown that mortgage approvals in April dropped to their lowest level since records began in 1993. The reduction in lending is likely to cause more problems in the housing market, with Morgan Stanley predicting that house prices will fall 10% by the end of 2012.

Not only is this bad news for homeowners, but it may also start to cause further problems in the beleagured banking sector. Many banks are still massively exposed to moves in house prices, due to mortgage deals arranged during the last decade. In particular, The Telegraph reported that Lloyds TSB may be hard hit, with up to one quarter of its mortgage customers in negative equity by 2012. Analysts suggested that this could mean that mortgages totalling up to £90 billion were potentially affected, at this one bank alone.

However, as always, statistics can tell a thousand different stories and the Council of Mortgage Lenders issued a prediction that 'net' mortgage lending (stripping out redemptions and repayments) would actually rise during 2011 to £9 billion, up from £8 billion last year. This may sound like a lot of money, certainly enough to keep the current Mrs Moorhead in the manner to which she would like to become accustomed. But in 2006, the last year that mortgage lending rose, the total lending was £110 billion. That's right, £110 billion. So we are currently running at about 8.2% of 2006 mortgage lending levels. No wonder the housing market is in the doldrums, but also no wonder that so many homeowners, and banks, found themselves in seriously deep water.

As ever, when money matters go wrong, we can help. My number is 01709 331300.

Interesting times ahead?

Rising inflation raises concerns over interest rates

The UK Consumer Price Index annual rate of inflation rose to 4.5% in April 2011, its highest level since October 2008, according to figures released today. This has led to speculation that the Bank of England may raise interest rates in the coming months, causing more problems for struggling businesses.

A survey carried out by R3 found that many business owners are predicting that any rise in interest rates will have a serious impact on their business, with 7% of small business owners believing that they are likely to become insolvent if interest rates rise to between 2% and 3.5%. If rates climb to between 4% and 5%, the number of businesses at risk increases to 18%. The base rate was 5% in 2007.

The Office for National Statistics reported that inflation rose to 4.4% in February 2011, followed by a slight fall to 4% in March before increasing to 4.5% in April, way above the Bank of England’s target of 2%, which is likely to put pressure on the Monetary Policy Committee to increase rates.

Many commentators have suggested that historically low interest rates have helped to keep the number of business failures artificially low in recent months as debt interest payments are tied to the base rate for many businesses. However any increase in the cost of borrowing is likely to have an adverse effect on cash flow and may be the last straw for many ailing businesses.

Consumers will also feel the impact of any rise in interest rates as the cost of mortgages increases. An increase of two percentage points, whilst still low in historic terms, would add £166 per month to the cost of a £100,000 mortgage.

Rising prices put additional pressure on businesses and individuals, and increasing costs are likely to damage any fragile signs of recovery, adding to the finacial problems of many.

Moorhead Savage has the expertise and experience to help sort out financial problems - even when things seem bleak. For a free, no obligation consultation and an unbiased summary of which solutions are right for you, call Paul Moorhead today on 01709 331300. It's always good to talk.

Missed the tax deadline? It isn't the end of the world but act quickly

£90m penalties windfall for HMRC for late tax payments and tax returns

If you have missed the 31 January deadline for filing your Self Assessment Tax return, you are in good company. You are one of 9 million people who has yet to file their tax return for 2010-11. HM Revenue and Customs are looking forward to collecting around £90m in penalty fees from people who have filed their self assessment tax returns and/or paid the tax due after the 31 January deadline.

But don't be disheartened  - act quickly and you can avoid the situation getting any worse. The penalties charged by HMRC for late filed returns and late payments of tax rise as the delay increases, so if it's simply a question of an oversight, get it in ASAP and you'll save yourself some hard-earned cash.

And the good news is that if you have a 'reasonable excuse' for missing the deadline then you won't have to pay any penalty. But the bad news is that HMRC is unlikely to consider excuses relating to forgetfulness, the consumption of documents by pets, or delays due to overseas excursions, to be 'reasonable.' The rather short list of examples on their website includes documents lost through theft, fire or flood that can't be replaced in time, life-threatening illness, for example a heart attack that prevents you dealing with your tax affairs and the death of a partner shortly before the deadline.

If, however, the reason for the delay is that you know that you cannot afford to pay the tax due on last year's trading, then there is good news. By filing the tax return, even if the tax is unaffordable, you are then in a position to negotiate with HMRC for a 'time to pay' agreement. As long as your returns are filed up to date and you have a reasonable record of compliance with the tax authorities, you can put forward a repayment proposal. HMRC are generally willing to discuss sensible repayment plans, particularly if you approach them at the earliest opportunity.

If tax debts are part of a wider debt problem, it may be that a Voluntary Arrangement is the answer. These come in two flavours - Individual Voluntary Arrangments (IVAs) and Company Voluntary Arrangements (CVAs) depending on whether you trade through a limited company or are a sole trader. VAs of either variety can be a good way to solve cashflow problems and HMRC have a specialist department which deals with IVAs and CVAs, so they know what to look for in a well thought through proposal.

We have lots of experience in dealing with debt problems involving HMRC, so for expert, impartial and confidential advice, call us today on 01709 331300.

Plans to widen debt relief scheme

DRO eligibility to be amended

The Government today announced plans to make more people eligible for a debt relief scheme that allows individuals to write off unaffordable debt. The Debt Relief Order (DRO) was introduced in April 2009 and has been dubbed 'bankruptcy lite' - debts are written off in the same way as in bankruptcy, but the DRO is designed for people with very low value assets and little spare income after living expenses, where the full rigour of bankruptcy is unnecessarily cumbersome. Effectively, it is a way for over-indebted consumers to remove the burden of crippling debt that can never realistically be repaid. The idea is to draw a distinction between cases where debt is disputed or where the debtor may be able to repay but chooses not to, and cases where the debt is not in any doubt and nor is the fact that the debtor will never be able to repay it.

The main criteria for a DRO is debts of less than £15,000, surplus income after reasonable living expenses of less than £50 per month and total assets worth less than £300 (not including a car which may be worth up to £1,000). This makes a DRO available to a slender but statistically significant group of over-indebted individuals.

The plans unveiled today are to exempt pension plans from the asset cap. Previously, having a pension would mean that a debtor would fail the low asset requirement (assuming that the pension fund is worth more than £300.) As almost all pension policies are 'locked away' for use in retirement and aren't available for paying debts, it seems fair to exempt pensions from the equation. In addition, the Government is firmly entrenched in a policy of encouraging everyone to save for their retirement. It therefore makes sense to amend the criteria in a way which will have little effect on the likelihood of creditors recovering their debts.

Good news for homeowners - but will it last?

Repossessions fall - but is this the calm before the storm?

The Council of Mortgage Lenders (CML) today announced a decline in the number of housed repossessed by mortgage lenders in the second quarter of 2010. In the three months to the end of June, there were 9.400 repossessions, down from 9,800 in the previous quarter and considerably below the same quarter last year, when 11,800 properties were taken back by first charge mortgage lenders.

As a result, the CML have revised down their forecasts for repossessions in 2010 as a whole from 53,000 to 39,000, a reduction of around 25%.

The number of mortgages in arrears has also reduced, with 178,200 mortgages in arrears equivalent to 2.5% or more of the mortgage balance. This is 5% lower than at the end of March and a whopping 17% lower than the same period last year.

These figures have surprised many in the industry, with mortgage difficulties being contained below the levels that the CML expected at the start of the year, and in comparison to the recession at the start of the 1990s.

I don’t want to be accused of talking down this good news. But I’m afraid that this is just a lull, an aberration, before things get worse. There are some important factors that make this downturn different to the 1990s recession. Firstly, the headline interest rate is at an historic low: at some stage, rates will start to increase and many homeowners who are currently struggling to keep their heads above water will sink beneath the waves. Secondly, the Government is struggling to cope with crippling levels of debt and has indicated that wide-ranging cuts in public spending will be used to help balance the books. Nobody knows for certain what the effects of those cuts will be, but rising unemployment and increased job insecurity will surely become a reality for many more homeowners in the months and years to come.

If you have financial problems and are worried about how this will affect your home, call me today on 01709 331300 for a free, no-obligation and confidential chat.

More people than ever are becoming insolvent

Insolvency statistics give cause for concern

Official figures released by the Government’s Insolvency Service today show a 5% increase in the number of people getting into serious financial difficulties in the last three months. Although the number of bankruptcies has dropped by nearly 20% in the past year, the overall number of people becoming insolvent has increased as greater use is made of alternative ways of tackling high debt levels.

It seems clear that many people are struggling to cope with the effects of the downturn and record numbers are becoming insolvent. Job losses and cuts in overtime payments are making life difficult for households. This means that debt that was previously affordable can become a real problem. And as public sector spending cuts start to kick in, the situation is likely to get even worse.

In the first six months of 2010, over 70,000 people have become insolvent – the equivalent of a town the size of Barnsley or Chesterfield.

The cost of becoming bankrupt has increased in recent months and this may have encouraged people to look at alternatives. In particular, the new Debt Relief Order has become more popular since it was introduced last year. The good news is that there is help available – but I would recommend that anyone in difficulties should take advice from a reputable organisation. Beware of unsolicited calls offering advice that sounds too good to be true.

To find out what all your options are, call me today on 01709 331300.

Getting away from it all can lead to problems back home

Millions get into debt for a holiday

The insolvency trade body R3 released figures today showing that over 2 million holidaymakers have got into debt to pay for holidays this year and will spend an average of seven months paying it back.

The research, carried out in the middle of July by pollsters GfK NOP reveals that 2,329,500 people had to borrow on average £1,130 to pay for a summer getaway.

Now I like a holiday as much as the next insolvency practitioner and to many, a spend of just over £1,000 on a big holiday may not be too shocking. In fact, I wonder if the ‘real’ figure for holiday spending is much more, but the individuals surveyed didn’t have an accurate idea of exactly how much they would spend: the flights and hotel may be around £1,000 but how much more unplanned spending goes on food and booze, sightseeing trips and souvenirs?

In my experience, the problem often tends to be that the holiday spending comes on top of other unsecured debts that have mounted up through the year. This kind of spending can be the final straw for many people, who return home to credit card bills and loan repayments that they simply can’t afford.

The good news is, no matter how debts have been incurred, there is help available. If you’ve returned from your summer holidays and found that you’ve got more than a few photos and a bottle of the local firewater to remind you of your trip, give me or one of my colleagues a call on 01709 331300. We can help.

Ostrich mentality to debt is still a big problem

Sticking your head in the sand will not help deal with debt problems

Research published today shows that many people are too ashamed to ask for help with their debt problems, preferring to ignore them in the hope that they will go away. A poll carried out for 'R3', the insolvency profession's leading association (of which I am a member) shows that 21% of people with debt problems haven't contacted anyone for help because "It's easier not thinking about it" whilst 14% are worried what people will think if they seek help about their debts. In addition, 30% of people with money problems haven't even told their partner or family about their situation.

Unfortunately I see this situation all the time. People come to me when the situation is really desperate, where someone has put off taking advice sooner because they were worried about what people would think or what their partner or family might say. (Sometimes people are even worried about what I would think - trust me, I've seen it all, nothing shocks me any more!)

The old saying 'better late than never' is true and there are things that can be done to ease the situation even when things seem bleak. But the sooner that someone takes advice about debt problems, there will be more options and the options themselves will be more palatable and more attractive to creditors.

So if you are worried about your debts, whether they are business or personal, why not give me a call on 01709 331300. You can meet with me free of charge and I'll help you to find out what all your options are. It's confidential and I promise that I won't judge or be shocked: I'll just try to help.

Budget offers help for struggling businesses

Chancellor pledges more help for firms with unaffordable tax bills

In his Budget speech, the Chancellor of the Exchequer Alistair Darling announced that the Business Payment Support Scheme will be extended for the life of the next Parliament.

Under the scheme, HM Revenue and Customs will agree to requests from businesses to defer unaffordable tax payments in an attempt to safeguard jobs and prevent the damaging effects of high numbers of insolvencies. Since the scheme was introduced in November 2008, over £5bn in unpaid taxes has been re-negotiated by 160,000 businesses employing more than 1.4 million people.

There had been speculation that the scheme would be abolished during 2010 as the Treasury tried to maximise tax revenue as part of the Government’s efforts to cope with the record levels of public borrowing. However, the scheme has been popular and is considered to have been instrumental in saving many businesses and jobs.

However, in a separate announcement the Government has announced that from 1 April 2010 any requests for time to pay agreements for tax debts in excess of £1m will need to be accompanied by an independent business review to demonstrate the long term viability of the business. HMRC estimates that this will affect approximately 1 in every thousand requests.

This announcement will affect few firms but I’ve seen that even small firms are being increasingly asked to provide accounts when requesting time to pay agreements.

If your business is facing unaffordable tax bills, call Paul Moorhead today on 01709 331300 for help and advice. We can help arrange a time to pay agreement with HMRC.