Monthly Archives: January 2019

Weekly Round-Up: 25th January 2019

Paying more

ShoppingIn its latest review of the spending habits of the UK population, the Office for National Statistics found that the average weekly household expenditure was £572.60 in the financial year ending 2018; the highest weekly spend since the financial year ending 2005, after adjusting for inflation.

Transport was the category with the highest average weekly spend of £80.80, equivalent to 14% of households’ average total weekly expenditure and those households whose occupants were aged between 50 and 74 years appeared to have spent almost a quarter of their housing expenditure costs on alterations and improvements. £76.10 on average was spent on housing, fuel and power and £74.60 on recreation and culture. When Transport is added in, this accounts for 40% of total average weekly household expenditure (14%, 13% and 13% respectively).

Average weekly household spending was the highest in London and the South East (over £650), whilst spending in the North East was the lowest, approximately £200 less. Households with heads aged under 30 years and those in Northern Ireland spent the most on takeaway meals eaten at home, £7.80 and £8.60 respectively. Households’ average weekly spend on alcoholic drinks away from the home was less in the financial year ending 2018 (£8.00) compared with 10 years ago (£10.90), after adjusting for inflation.

Households in London spent the most on alcoholic drinks away from home, spending an average of £9.30 a week.

Drive down

Motor InsuranceDespite reports suggesting premiums are going up, figures published this week by the Association of British Insurers (ABI) suggest that actually there was an overall fall in the average motor premium paid in 2018, with the seasonal rise in quarter four premiums lower than normal. This is the first calendar year fall since 2014, according to the latest ABI Motor Premium Tracker. The fall came despite a rise in the average premium paid in quarter 4 last year over the previous quarter, in line with the seasonal trend.

The ABI’s Premium Tracker is the only survey which measures the price that consumers pay for their motor cover, rather than prices quoted. The average price paid for motor insurance in 2018 was £477, down 1% on the previous year, and in line with the seasonal trend, the average price paid for cover in quarter 4 of 2018 rose slightly on the previous quarter, up by 2% to £479.

However, this was the lowest quarter 3 to quarter 4 rise since 2013 with the rise in average premiums reflecting lower car sales, with insurers’ fixed costs needing to be spread across fewer motor polices.

Life costs

MarriedAnyone planning how to meet their big life dreams in 2019 take note: the best things in life are very much not free. That’s if your aspirations are on the conventional side, anyway.

Royal London, the mutual insurer has calculated that the major life goals of going to university, buying a house, getting married, having two children then retiring comfortably add up, on average, to an eye-watering £566,659 over the course of a lifetime. On a median UK annual graduate net salary of £22,421, if you were spending your salary only on the fulfilment of your dreams, the insurer calculates these goals would take 25 years to pay for.

That figure includes typical mortgage interest but is without any interest from loans, credit cards or overdrafts added – and assuming you stay in the first home you buy. Adding a second property purchase and associated stamp duty into the mix – as well as saving for your children’s futures on top – could push up the total bill for a dream life to more than £1 million. The insurer suggests a mixture of long-term planning, regular saving and cost-cutting where possible to manage the cost of your dreams.

Royal London took the typical cost of the big six traditional life goals, as follows, before dividing the total by £22,421. Going to university will cost you approximately £23,000, buying a house with a 10% deposit and paying the average cost of a first-time buyer property is £250,148, the average cost of a wedding, is £30,111 and having two children could cost £150,000.

Then, to retire comfortably: the pension pot most people would need to be £300,000, which would require a total personal contribution of £113,400 between the ages of 25 and 67, according to Royal London.

Check the small print

Co-habitingAccording to analysis by NatCen Social Research nowadays, cohabiting couples (both opposite and same-sex couples) are the fastest growing type of family, more than doubling from 1.5 million families in 1996 to 3.3 million families in 2017, with 15% of dependent children living in cohabiting couple families.

In England and Wales, cohabitants have no legal status and, therefore, no automatic rights in most circumstances – especially if the relationship comes to an end. For example, if one partner dies there’s no right for the other to inherit part of their estate – regardless of how long they have lived together and even if they had children together. Equally, there is no exemption for tax purposes and no legal duty to support the partner financially.

Yet almost half of people (46%) living in England and Wales are unaware that this is the case and think that an unmarried cohabiting couple have a “common law marriage” with the same legal rights as a married couple, according to the latest British Social Attitudes Survey. This figure is largely unchanged since 2005. The data also shows that people living in households with children are significantly more likely to think that common law marriage exists than those in households with no children (55% vs 41%) and singles (39%). Worryingly, cohabitants (48%) are no more clued up than married people (49%).


Weekly Round-Up: 18th January 2019

First Steps

First Time BuyersA mixture of competitive deals and schemes including Help to Buy saw even more first-time buyers get a foot on the housing ladder during November according to the latest analysis of the Mortgage Market by UK Finance.

Meanwhile, the research suggests homeowner remortgaging activity has steadied, after reaching its highest level in a decade the previous month as a large number of fixed-rate deals came to an end. Buy-to-let market new home purchases remain subdued, while remortgaging continues to grow as landlords lock into attractive rates.

In more detail 36,200 new first-time buyer mortgages completed in the month, some 5.8 per cent more than in the same month a year earlier. The £6.0bn of new lending in the month was 9.1 per cent more year-on-year. The average first-time buyer is 30 and has a gross household income of £42,000. This is in contrast to the 1.1% growth in new homemover mortgages completed in the month, and homeowner remortgages completed at 1.3 per cent higher than in the same month a year earlier. The £6.8bn of remortgaging in the month was the same year-on-year.

For Buy to Let, 6,100 new buy-to-let home purchase mortgages completed in the month, and 15,000 new buy-to-let remortgages completed in the month. Remortgaging was 9.5 per cent more than in the same month a year earlier.

On the rise

Retired Home OwnersRetired homeowners released £3.6 billion in new property wealth last year as the market doubled in size in just three years, new data from Key Retirement Solutions revealed. When further advances and additional drawdown are taken into account, figures suggest the market is now approaching to £4 billion, up from the £1.4bn in 2014.

Equity from people’s homes paid out nearly £10 million a day in 2018 with customers releasing an average £76,500 to improve their standard of living in retirement. The statistics indicate that the number of customers using money to help families rose to 27% from 24% the previous year highlighting how property wealth is increasingly supporting a wider range of financial needs for retired people. Money gifted to family and friends is typically being used to clear debts, pay for significant life events such as weddings or to fund house deposits. The figures show other major uses of gifts are to pay for large family holidays, fund university fees or buy cars.

The most popular use remains funding home and garden improvements with 64% re-investing some or all the money in their houses – often to “age-proof” the property. Around one in three (33%) paid for holidays and 31% used some or all the cash to clear credit cards or loans while 22% paid off existing mortgages.

Care takes its toll

Family CarerSandwich carers – those who care for both sick, disabled or older relatives and dependent children – are more likely to report symptoms of mental ill-health, feel less satisfied with life, and struggle financially compared with the general population. That’s the conclusion of the Office for National Statistics in its latest study into the Health & Wellbeing of the UK.

Almost 27% of sandwich carers show symptoms of mental ill-health while caring for both sick, disabled or older relatives and children. Around 1.3 million people, now have this responsibility and as a result are more likely to experience symptoms of mental ill-health – which can include anxiety and depression – than the general population (22%), according to the ONS analysis for 2016 to 2017.

The prevalence of mental ill-health increases with the amount of care given. More than 33% of sandwich carers providing at least 20 hours of adult care per week report symptoms of mental ill-health, compared with 23% of those providing fewer than five hours each week. More than 72% of the sandwich generation are aged between 35 and 54 years, while 62% are women. Whereas among the general population, 38% are aged 35 to 54 years and 51% are women. Many sandwich carers are not satisfied with the amount of leisure time they have. Those looking after their relative in their own home – half of whom provide at least 20 hours of adult care per week – are least satisfied. Women sandwich carers are also much more likely to be economically inactive than men – 28% are not part of the labour market, compared with just 10% of men in the same situation. It should be said, though, that the majority of sandwich carers are able to balance their job with caring responsibilities. More than 59% of those providing care at home say this does not prevent paid employment.

Clearly, caring for two generations could have an impact on carers’ finances. One in three sandwich carers say they are “just about getting by” financially, while one in ten are “finding it difficult” or “very difficult” to cope. Meanwhile, only 17% say they are “living comfortably”, compared with 32% of the general population.

Going Green

Driving NorwayThe Association of British Insurers this week has set out advice for consumers and businesses who may be affected by a no-deal Brexit. In new guidance drivers are being advised of the need to contact their insurer, arrange what is known as a Green Card and take it with them if they wish to drive their vehicle in the EU in the event of no-deal.

Green Cards would be required under EU regulations as proof of insurance if there was no-deal. The documents are supplied by an insurer and customers are advised to contact their insurer about a month before they travel to get one. Those who travel without one may be breaking the law. The same requirements will apply to EU motorists travelling to the UK. Among those affected include people who drive across the Northern Ireland/Republic of Ireland border, anyone planning to take their vehicle to Europe e.g. a family planning a holiday to France in the Easter holidays and any freight company planning to transport goods into the EU after 29 March.

Although an agreement between the relevant European insurance authorities was made in May 2018 to waive the need for Green Cards in the event of a no-deal Brexit, this has not been confirmed by the European Commission, hence the industry is planning on the basis of Green Cards being required.

Weekly Round-Up: 11th January 2019

Paying their way

London Financial DistrictThis year’s Total Tax Contribution Study for the UK banking sector, commissioned by UK Finance and based on analysis by PwC, found that banks now pay £1 in every £8 of corporation tax in the UK. Total revenue raised by corporation tax for the sector, including the banking surcharge, has increased by 13.6 per cent since last year and is now over four times higher than the levels seen in 2014, despite the UK’s main corporation tax rate falling in that time.

The banking sector’s total contribution to the public finances has risen by £5.4 billion since 2014, while overall banks are now paying the equivalent of over half (50.4 per cent) their total profits in taxes. This is partly a result of sector-specific taxes such as the bank surcharge, which generated £1.8 billion in the 2017/18 tax year, and the bank levy, which raised £2.8 billion over the same period.

This year’s report also includes separate analysis by PwC on the comparative total tax rates faced by a typical corporate and investment bank in five leading global financial centres including London. This research finds that such a bank would face the highest total tax rate in London, reflecting sector-specific taxes in the UK.

As they expected

English. HousesAccording to the Halifax, In December the average cost of a home was £229,729 and annual house price growth stood at 1.3%, a stronger monthly growth figure for December which was an improvement from a weak November. Overall, house price growth in 2018 was within the range of 0-3% as the Halifax forecasted at the start of the year.

In 2019, the Bank is expecting continued stability in house prices with between 2% and 4% price inflation. This is slightly stronger than 2018, but still fairly subdued by modern comparison. However, the Bank has tempered its overcast suggesting that this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of their forecast.

Of course, there are a number of other factors that will impact the market in 2019. The need to raise a significant deposit still acts as a restraint for those looking to buy a new home, limiting the number of potential purchasers. This year, the Bank has highlighted mortgage payment affordability as more difficult to predict. There are competing pressures with signs of positive annual pay growth supporting affordability, but risks associated with the potential for higher interest rates are pulling in the other direction. On balance the Halifax do not see affordability pushing house price growth significantly in either direction.

The shortage of homes for sale and continuing low levels of housebuilding both constrain the supply of houses, and in turn support current high prices, which the Bank suggests will continue to inhibit demand in 2019.

Funeral costs

funeralsNew data obtained by Royal London reveals nearly a third of public health funerals carried out were as a result of bereaved families being unable to afford the cost of a funeral. A public health funeral is held by a local authority if the deceased has no family or the family are unable or unwilling to cover the cost of the funeral. The data is based on Freedom of Information (FoI) requests submitted by Royal London to 390 local authorities in the UK.

The data shows nearly a third (31%) of families who turned to their local council for a public health funeral did so because they were unable to pay for the funeral. A basic funeral costs on average £3,757 according to Royal London’s National Funeral Cost Index, which also found one in 10 (12%) went into debt to pay for a loved one’s funeral. Other reasons for public health funerals included the deceased having no family (31%) and families unwilling to pay for the funeral (10%).

Local authorities spent almost £5.4 million on public health funerals in the financial year 2017/18 which is a 3.5% increase on the previous year (2016/17). More than 3,800 public health funerals were carried out across the UK last year, costing councils an average of £1,403. Local councils in the West Midlands spent a staggering £1.3 million on public health funerals, followed by London councils, who spent more than £800,000 and carried out the highest number of funerals (654).

Birmingham City Council in West Midlands spent the most, with public health funerals costing them £990,437. Armagh Banbridge and Craigavon Borough Council in Northern Ireland had the lowest spend on funerals at £275.

Take no Prisoners

mortgage lenderIn a letter to the Treasury Committee the Financial Conduct Authority’s chief executive Andrew Bailey has indicated that they are planning a change in their rules that could lower the housing costs of thousands of “mortgage prisoners”.

Research indicates that over 140,000 homeowners are trapped on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal. The Financial Conduct Authority (FCA) has now said it is considering a change to its affordability checks for those who are looking to switch.

Current rules mean that these homeowners are unable to move due to the strict affordability criteria when they apply for a new fixed deal, introduced in 2014. The change would apply only to those in this situation who are not seeking to borrow more on their mortgage, but just want to reduce their costs. Banks and building societies still need to agree to take on these customers.

The FCA said it had identified about 150,000 such customers, about 30,000 were with authorised mortgage lenders, while about 120,000 had mortgages held by non-regulated firms, which include for example Northern Rock and Bradford & Bingley customers. 10,000 mortgage prisoners are with lenders who are still actively operating in the mortgage market. These customers will have received letters during the latter half of last year outlining some of the alternative mortgage deals available from their existing lender.

Weekly Round-Up: 4th January 2019

Stable and Steady

HLP-housing-smlOverall mortgage borrowing across the residential property market remains stable and the trend in households’ cash savings remains steady, that’s the message from UK Finance, the trade body for High Street Banks.

According to UKF, total credit card spending increased in November while borrowing growth remains constant compared with November last year. The increase in spending, which is largely offset by cardholder repayments, reflects the growing use of credit cards as a preferred form of payment, particularly in travel, as consumers take advantage of stronger customer protection and value-added benefits.

The trade body’s analysis revealed that the number of mortgages approved by the main high street banks in November was 10.6 per cent lower than November 2017 led by a reduction in re-mortgages. Approvals for house purchase were 1.2 per cent lower but remortgage approvals were 20.3 per cent lower. Approvals for other secured borrowing were 12.2 per cent lower.

£11.3bn of credit card spending in November was 7.5 per cent higher than November 2017. Over the past twelve months, the outstanding level of credit card borrowing grew by 5.3 per cent. Personal borrowing through loans and overdrafts grew by 2.5 per cent in the year to November.

Cracks appearing

subsidenceMore than 10,000 households made claims worth a total of £64 million to deal with the impact of subsidence in just three months of this year, the Association of British Insurers (ABI) has revealed. The figures for July, August and September are the highest level of subsidence claims since the record-breaking heatwaves of 2006 and 2003. The hot weather of 2018 saw some UK regions experience the driest months on record, particularly in the South East which is also well-known for building on subsidence-prone clay soil.

From the previous quarter, the number of claims jumped from 2,500 to 10,000 – rising in value from £14 million to £64 million. This increase of 350% is the highest quarter-on-quarter jump since records began more than 25 years ago. Subsidence usually occurs when the ground beneath a building loses moisture and shrinks. This can be caused by a number of things including prolonged dry spells which cause soil to lose water and trees and shrubs which can absorb significant volumes of water from the soil.

Subsidence is routinely covered by buildings insurance. Each claim is unique depending on the building, circumstance and severity involved so there is no typical approach to repairs. In some extreme cases a home may need to be monitored for a period of time and, if the home is uninhabitable during this process – the insurer may cover the cost of alternative accommodation for the homeowners until they are able to move back in.

Cyber aware

shutterstock_500191807smlParents are potentially putting their family finances at risk by giving children access to smartphones and tablets without taking simple steps to protect against cyber security risks, new research from Nationwide Building Society shows.

The research highlights that more than one in ten parents (13%) will have purchased a smart device for their children at Christmas – adding to the 70 per cent of children who already have their own devices. The research, which surveyed over 2,000 parents with children aged two to 16, found that one in four (24%) parents admit that they do not know what malware is – with almost three in ten (28%) mums admitting to this lack of understanding, compared to one in eight (12%) dads (please see notes to editors for regional breakdown). Parents also admitted to taking a variety of risks, including not using strong passwords or changing them regularly.

The research also found that despite eight in ten (86%) parents sharing their smart devices with their children, less than half (46%) of parents have talked with their children about the dangers of cybersecurity. In contrast, over three in five (61%) have talked with their kids about their personal safety online. Nationwide’s research found four in ten (44%) parents admitted to not monitoring their child’s use of the internet when using a smart device, which could lead to unexpected consequences. Eight in ten (84%) parents were not confident their children know how to distinguish a fake email from a genuine one or recognise a fake download link (85%).

Despite this, less than half (46%) of parents have talked with their children about the risks of cybercrime – of these, around a third (35%) assume their smart devices are safe, one in ten (10%) don’t think the risks are that high, while eight per cent don’t have the time and a further eight per cent don’t understand the dangers.

Lack of understanding

illnessOfficial figures show a million workers are off sick for more than a month every year, with new Royal London research showing half (52%) of workers would worry about their income if they were to become too ill to work for longer than a month. 42% do not think £92 a week would be enough to live on if they were to go off sick for a long period of time.

Nearly two-thirds (60%) found their employer’s sick pay policies difficult to understand, with one in six workers not knowing what their employer’s policy is. Employees are entitled to £92.05 a week Statutory Sick Pay (SSP) for up to 28 weeks, yet two in five (42%) didn’t think this was enough to live on if they were off sick for more than a year.

Employers may enhance SSP, but different companies have different policies – a quarter of those surveyed thought the opposite, and mistakenly believed sick pay policies were the same across all companies and industries. Some employers offer contractual sick pay, which is more generous than SSP and you could be entitled to it from the first day of sick leave.

The average UK worker stands to lose almost £450 in pay if they were off sick for a week without contractual sick pay. Employees are therefore being urged to think about how they would manage their finances if they were faced with this situation.