Money Advice Update - March 2018

Money Advice UpdateMarch 2018

FCA publishes rules on current account service provision

FCA has published rules, which come into force 15 August 2018, requiring providers of personal current accounts and business current accounts to provide better information about the quality of current account services they offer. Under the new rules, customers, comparison websites and the media will be able to find:
  • how and when services and helplines are available 
  • contact details for 24 hour help
  • how long it takes to open a current account 
  • how long it takes to have a debit card replaced
  • how often the firm has had to report major operational and security incidents 
  • the level of complaints made against the firm 
To read the rules click here.

FCA publish a policy statement on the credit card market study: persistent debt and earlier intervention remedies

FCA published a response explaining the changes they made to the proposals, including the final rules and guidance on persistent credit card debt and earlier intervention. They outline a package of remedies to address the issues identified and aim to put consumers in greater control of their borrowing while keeping the flexibility of credit cards.

To read the full statement click here.

FCA urges action on interest-only mortgages

Nearly one in five mortgage customers (17.6%) have an interest-only mortgage and the FCA is concerned that shortfalls in repayment plans could lead to people losing their homes. Their thematic review into the fair treatment of existing interest-only mortgage customers found that, although mortgage lenders are writing to customers prior to their mortgage maturing, engagement rates with firms are low. There are currently 1.67m full interest-only and part capital repayment mortgage accounts outstanding in the UK. In 2013, the FCA identified three residential interest-only mortgage maturity peaks. The first peak, happening now, is likely to have more modest shortfalls due to the profile of customers typically being those who are approaching retirement with higher incomes, assets and levels of forecast equity in their property at the end of term. The next two peaks in 2027/2028 and 2032 include less affluent individuals who had higher income multiples at the point of application, greater rates of mortgages converted from repayment to interest-only and lower forecast equity levels; the FCA is concerned that they are more at risk of shortfalls. 

To find out more on click here.

Open Banking

Open Banking launched in 13 January 2018, are online services that you allow to access your account data or make payments on your behalf will be regulated by the FCA. An Account Information Service Provider (AISP) lets you see all of your account information from different bank accounts in one place online or in a mobile app. AISPs can include budgeting apps and price comparison websites offering budgeting help and product recommendations. An AISP needs your explicit consent to provide you with these services. A Payment Initiation Service Provider (PISP) lets you pay companies directly from your bank account rather than using your debit or credit card through a third-party such as Visa or MasterCard. A PISP needs your explicit consent before providing you with this kind of service. A company providing these services should never assume your consent. 

Your banking terms and conditions should not prevent you from sharing your credentials with regulated AIS or PIS providers. Your bank cannot hold you responsible for unauthorised transactions just because you have shared your credentials with regulated AIS and PIS providers. You have the right to complain to an AIS or PIS provider. If you are not happy with the firm’s response, they reject your complaint or you do not hear from them, you have the right to take your complaint to the Financial Ombudsman Service. 

To check if an AISP or PISP is registered with the FCA click here.

FCA outlines trends on regulated mortgage lending over the last ten years

The FCA has produced a short video on the trends on mortgage lending over the past ten years. This is a particularly interesting period to look at because it encompasses the financial crisis and its aftermath. It looks at how mortgage activity reduced in the wake of the crisis and the extent to which it has changed since. They have collected data from mortgage lenders covering lending to home purchasers including first time buyers and data by UK region. 

To view the short video and read the full bulletin click here.

UK Finance announce NI first-time buyers and re-mortgages at 10 year high

In 2017, NI seen a ten year high in the number of first time buyers and re-mortgages. Year on year, first time buyers were 9,700 which was an increase of 20% and re-mortgages were 8,600 which was an increase of 15%.
  • There were 2,700 new first-time buyer mortgages completed in NI in the Q4 of 2017, some 17.4% more than in the same quarter of 2016 and was 22.7% more year-on-year. The average NI first-time buyer is 30 and has an income of £33,000.
  • There were 1,900 new home mover mortgages completed in NI in Q4 of 2017, an 18.8% increase compared to the same quarter of 2016 and 21.1% more year-on-year.  The average Northern Ireland home mover is 39 and has an income of £45,000.
  • There were 2,300 re-mortgages in NI completed in Q4, some 21.1 per cent more than in the same quarter a year earlier and 20% more year-on-year. 

Halifax reported a sharp slowdown in house price growth in 2017

According to Halifax statistics house prices rose by 2.7% in 2017 - compared with a 6.5% increase in 2016. On a calendar year basis, that is the lowest rise since 2012. The Halifax research echoes last week's figures from the Nationwide, which suggested prices rose by 2.6 per cent in 2017, and which the former attributes to a squeeze on real wage growth and continuing uncertainty over the economy. However, the Halifax still expects prices to continue rising in 2018. Nationally house prices in 2018 are likely to be supported by the ongoing shortage of properties for sale, low levels of housebuilding, high employment and a continuation of low interest rates making mortgage servicing affordable in relative terms.

To read the full article click here.

The Telegraph reported that UBS warns digital banking overtakes branch use and may fuel more closures

Swiss investment bank UBS conducted a survey which showed online banking has overtaken visiting branches for the first time, leading three quarters of global banks to plan closures. More than half (52%) of all transactions are now done digitally compared with 33% two years earlier. Four in five consumers using mobile phones to bank at least once last year, and transactions done in branches has fallen from 48% to 34% over the same period. A separate survey by the bank of 86 global lenders found 73% were likely to shut branches, while 83% are planning to reduce in-branch staff numbers. Britain has already seen record closures. The UK’s five largest lenders currently have fewer than 6,000 branches, down from 11,240 two decades ago.

To read the full article click here.

The Telegraph highlight divorced couples forced to stay under the same roof following a split

Living under the same roof as an ex is most people's worst nightmare. But Aviva, an insurance firm, reports that it's a reality for an increasing number of estranged couples who are forced to stay in the marital home even after a divorce. Rising house prices are behind the trend, with one in six former couples forced to live together following their split, which has increase from one in 10 since the last report. Almost 90% of those who stay living together do so for more than a month, with 39% for more than three months. Some couples stay living together for a year or more because they cannot afford to separate. Many couples who had owned a home were also forced to rent for an average of 4.7 years, with one in five divorced people still renting a decade after their split.  In more than one in five cases, parents said their children had been forced to move home following a split.

To read the full article click here.

The Guardian reports Home Office gets banks to check immigration status of account holders

Banks and building societies will be required by the Home Office to ‘check’ the immigration status of all current account holders, in a bid to identify illegal immigrants living in the UK. If an illegal immigrant is found to be operating an account, banks and building societies are legally required to alert the Home Office who will advise on the best course of action – which may involve closing the account.  The scheme was introduced by ministers as part of attempts to create a “hostile environment” for those staying in the UK unlawfully. It requires banks and building societies to check the immigration status of all current account holders against details of known illegal migrants held by authorities.

To read the full article click here.

The Independent reports that landlords planning to sell property hits 10-year high because of tax changes

The National Landlords Association (NLA) works with around 81,000 landlords and reports that the number of landlords planning to reduce the volume of properties across their portfolios has hit a 10-year high – a trend which the NLA attributes to tax changes. 
The Government has unveiled a series of policies to curb buy-to-let activity in the private rented sector. These include the withdrawal of mortgage interest relief for higher and additional rate tax payers, a 3% surcharge on purchases of an additional property, and the introduction of a ban on upfront letting fees for tenants. Before April 2017, landlords could deduct their mortgage interest costs from their income when calculating their tax bill. And up until now, tenants have tended to foot the bill for tenancy agreements, referencing and credit checks. But under the announced changes, these costs would be passed on to landlords.

To read the full article click here.

The Independent reports that UK lenders expect 'significant' squeeze on unsecured debt to households in 2018

The Bank of England's latest Credit Conditions Survey also shows lenders have been reducing unsecured credit availability for four consecutive quarters. Lenders expect to impose a “significant” squeeze on the availability of unsecured debt to UK households this year. The results will please policymakers at the Bank, who raised concerns last year about the rapid accumulation of additional credit card and personal loan debt by families and flagged it as a potential risk to financial stability. There was also a sharp reported drop in demand for unsecured loans, with the exception of credit cards, in the final quarter of 2017. This was the slowest annual expansion since December 2015. The saving ratio of the UK household sector – the difference between aggregate income and spending – fell to 5.2 per cent in the third quarter of 2017, the second lowest level in 20 years, stoking fears over the extent to which personal borrowing has been supporting overall GDP growth.

To read the full article click here.

Credit – Connect report on Provident Financial confirms £120m losses

Provident Financial is to report a pre-exceptional loss of around £120m in its consumer credit division. The report highlights, Vanquis Bank and Moneybarn have both traded satisfactorily through the final quarter of the year. However, the Consumer Credit Division (CCD) is expected to report a pre-exceptional loss of approximately £120m. This reflects a lower than expected rate of reconnection through the fourth quarter with those home credit customers whose relationship had been adversely impacted following the poorly executed migration to the new operating model in July 2017. 

To read the full article click here.

MAS publish report on The Economic Impact of Debt Advice

The Economic Impact of Debt Advice report demonstrates a financial return of up to £960m per year to the UK economy as a result of people receiving debt advice. This is in the context of an estimated £150m to £200m total annual investment in debt advice. The research, undertaken by Europe Economics, builds on work previously carried out by others in the sector and shows that debt advice generates significant direct and indirect economic benefits for the society at large. It identifies twelve impact areas comparing the experience of those who have received debt advice with individuals who are indebted but have not accessed advice. The report highlights that the economic benefits of debt advice go far beyond creditors and financial services and deliver benefit across the UK economy.

To read the report click here.

MAS’ CEO Charles Counsell responds to Peter Wyman Review of Debt Advice Funding

He said: We welcome this timely and comprehensive review delivered today by Peter Wyman. Debt advice is a lifeline for millions of people throughout the UK so we are pleased that the report recognises its importance and offers a number of recommendations for how lasting improvements can be made across the sector. We believe the availability of high quality debt advice services is crucial. We will now be working through the results of the review and developing our response to the recommendations it contains. We know that there is a significant shortfall between demand for debt advice and its supply, and look forward to working collaboratively with the sector to make sure these valuable services are available to those who need them most.

To read the report click here.