The Financial Conduct Authority (FCA) has proposed new rules which are aimed at tackling the worrying rise in long-term credit card debts, by compelling firms to encourage faster repayments, and in some cases, reducing or waiving interest charges.
What are persistent debts?
According to the FCA, persistent credit card debt affects anyone who has paid more in interest and charges than they have repaid of their borrowing over the course of 18 months. With an estimated 3.3 million people in persistent debt, their new proposals could provide a much needed source of relief.
Andrew Bailey, chief executive of the FCA, highlighted the extreme costs of persistent debt, noting that this was largely deliberate on the part of lenders ‘because these customers remain profitable, firms have few incentives to intervene.’
The new rules
The new guidelines suggest that firms should contact customers who have been in persistent debt for more than a year and a half, prompting them to make faster repayments.
Following a further period of 18 months, firms would be required to propose repayment plans to customers. Those who cannot afford to pay the balance in a reasonable period could then have interest charges reduced or cancelled. The FCA also recommends that firms use the vast amount of customer data available to them to identify those experiencing difficulties and intervene.
The proposals are now in consultation until July 3rd 2017, with the watchdog estimating that it could save customers between £3 billion and £13 billion by 2030.
In the meantime, it’s always worth weighing up every option before you take the plunge with a particular credit card or loan. If you aren’t confident that you’ll be able to pay off the amount you borrow each month, other forms of credit may be more suitable for you.
Given the disparity between surging house prices and annual salary increases, it should come as no surprise that millennials are facing huge difficulties when trying to buy their first home.
First-time buying has never presented such a tough task, which you’d think would deter the millennial generation from seeking home ownership. However, a recent report from HSBC has revealed that an overwhelming number of millennials still dream of owning a home. Almost three-quarters of those surveyed hoping to get a foothold on the property ladder within the next five years.
Alive and kicking
Tracie Pierce, Head of Mortgages at HSBC UK, said: ‘This study challenges the myth that the home ownership dream is dead for millennials in the UK. With three in ten already owning their own home, the dream of home ownership for millennials is definitely alive and kicking.’
While thrifty saving and effective budgeting has helped many to fulfil their dream of owning bricks and mortar, a large proportion of millennial homeowners have inevitably dipped into the bank of Mum and Dad. Thirty-five percent of millennials relied on parental help with their purchase, and over a quarter moved back in with their parents to save for a deposit.
Skipping brunch
The report also revealed that millennials are willing to make considerable sacrifices to own a home. Despite the popular image of millennials as brunch-obsessed spendaholics, almost half of those surveyed (47%) indicated that they would be willing to cut down on their leisure spending.
Thirty-three percent would be prepared to settle for a smaller property, and sixteen percent would even consider delaying having children.
It pays to save
Housing market woes don’t just affect the millennial generation. Four in ten of all non-owners intending to buy revealed that they hadn’t set a budget at all, while forty-eight percent only had a rough budget in place.
Stagnant incomes and a buoyant housing market represent a major obstacle to buying a house, but there are steps which can be taken. Planning early, finding a competitive mortgage and budgeting beyond the purchase price can all help to make your dream of home ownership a reality.
The Darwin group – which offers secured and unsecured loans to customers through Evolution and Progressive Money – is delighted to announce a new funding facility of in excess of £75m which supports the Groups objective of becoming a leading consumer finance brand in the UK.
The award-winning Evolution, ranked as one of the fastest growing finance companies in the UK as recognised in “The Sunday Times Virgin Fast Track 100”, and its sister company Progressive Money, have built up a substantial loan portfolio, having lent more than £120m in just over 5 years.
Joining the original funding partners, NatWest and Shawbrook Bank, are Insight Asset Management and another UK-based private credit manager, all four of whom have significant experience in financing consumer finance lenders and a shared desire to see Evolution and Progressive Money increase market share through both organic growth and the development of new and innovative products.
Steve Brilus, Chief Executive of Darwin said “We are entering an exciting new phase of growth and I am delighted to have such forward-looking and supportive funding partners investing in our business. This funding provides the springboard to enable us to achieve our ambitious plans and to take Evolution and Progressive Money to the next level”.
Evolution and Progressive Money were advised by the Financial Services Corporate Finance team at EY.
Mat Beaver, Managing Director of Darwin said “We are grateful to Nick Parkhouse and the team at EY for facilitating this transaction. They have worked closely with us in understanding our business and our plans, and have supported us throughout the process.”
For a typical loan of £30,000.00 over 120 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £598.34.
Including a Product Fee of £2,400.00 (8% of the loan amount) and a Lending Fee of £807.00, the total amount repayable is £71,800.20.
Annual Interest Rates ranging from 11.88% to 29.38% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
