Wednesday, 21 May 2014

How Lloyds will limit big mortgages

Lloyds, including Halifax, Bank of Scotland and Scottish Widows Bank, has said that it will restrict mortgage lending to people wanting to borrow more than £500,000.

The move is targeted directly at the spiralling London housing market and the risk that buyers might get themselves into trouble with over-risky purchases.

But why is Lloyds saying that it will limit this sort of lending to 4 times income?

After all, we were told that simple income multiples were a thing of the past, across the whole mortgage business.

From last month, they were giving way to much more detailed affordability assessments, based on detailed questions about childcare spending, haircuts, food bills and so on.

The answer is that Lloyds is bringing in a twin track approach for these soar-away London purchases.

Anyone asking for half a million pounds or more will still be subjected to the new barrage of questions about lifestyle and family budgets.

The spending power revealed by this process is then compared to the overall cost of a mortgage, factoring in future interest rate increases, according to a secret Lloyds formula.

The fact is that even after going through this mill, some people with large salaries and few commitments will find that they can borrow more than 4 times their annual income.

Some will qualify for 5 times, or even more, just like the bad old days before the credit crunch.

What Lloyds is saying is that even if its affordability checking machine spits out approvals for people asking for loans of more than 4 times income, they won't be given the money.

Thursday, 15 May 2014

Lamborghini effect dismissed

Worries that the beneficiaries of the Chancellor's pension reforms would blow their savings on Lamborghinis and fall back on the state have been dismissed by the Institute for Fiscal Studies.

An IFS report explains that most of those who gain from the changes will be well off anyway.

George Osborne announced in his Budget that many savers would be able to do what they liked with their pension pots on reaching the age of 55 and avoid having to buy an annuity, a guaranteed income for life.

The Pensions Minister Steve Webb then said "If people do get a Lamborghini and end up on the state pension...that is their choice."

The IFS research shows that significant numbers will be entirely unaffected by the reforms because they have no relevant pension savings.

Of those currently aged between 55 and 59 just under four-in-ten men and just over two-in-ten women will enjoy greater flexibility.

The vast majority of those are home owners and have significant other assets. They are unlikely to qualify for key benefits such as housing benefit.

The middle range of this group has wealth adding up to £730,000 apiece, including their homes.

Don't be a mule

Thousands of bank account holders are being used by criminals as "money mules" to launder the proceeds of crime, according to fraud figures released today.

CIFAS, a fraud prevention service working on behalf of banks, retailers and hundreds of other organisations, says there has been a 54 per cent jump in the misuse of bank accounts so far this year.

The fraudsters target students, the unemployed and others who are stuggling financially - asking permission to use their accounts to handle money and transfer it to banks overseas, in exchange for a fee.

Fraud experts say the funds can come from internet scams, drug sales or people-trafficking.

CIFAS says there were 11,920 examples of account misuse in the four months to April. That's 19% up on the previous 4 months and 54% higher than the same period last year.

Over half of the frauds arose from individuals allowing their accounts to be used to receive money linked to organised crime.

Some people who become involved are unaware that they may be committing an offence and could have their bank account closed.

Crimestoppers has been campaigning on university campuses, telling students, "Don't be a mule!"

Tuesday, 13 May 2014

Payday lender stopped

A leading payday lender, whose customers paid an Annual Percentage Rate of 3,000%, has fallen victim to the financial watchdog's get-tough policy on high cost loans.

The FCA has forced Cheque Centre, which has 451 branches across the UK, to stop making the short-term loans -- under what is termed a voluntary agreement.

The business was the second biggest payday lender on the High Street, making it the FCA's most high profile target since it took over the regulation of payday lenders last month.

The watchdog was unhappy about the extent of checks on what borrowers could afford and on the treatment of customers in financial trouble.

Cheque Centre has been criticised in newspapers for targeting desperate families who couldn't repay, a charge which it denies.

It will carry on with its parallel businesses of pawn broking and selling foreign currency.

A spokesman from Cheque Centre said: "The FCA made clear their expectations, under the new rules, and we offered to make immediate changes. One of the decisions we made was to accelerate our exit from payday lending."

Free wi-fi at the bank

Free public wi-fi is spreading like wildfire across UK banks, as bankers try to harness the power of mobile internet to keep customers happy.

RBS and NatWest have just revealed that all their 2,000 branches will offer free wi-fi by the end of the summer, for customers and anyone else who happens to be in a branch or in range.

Yesterday HSBC launched wi-fi hotspots in 650 of its branches. Barclays already has them in 1,600 outlets.

The RBS group has been trying out wi-fi in 800 locations, to give customers the option of downloading banking apps and managing their accounts on the move.

Some technology experts have warned that users need to be on their guard against cyber thieves who use open connections to steal personal information.

RBS said its service was safe and protected. However, customers needed to be alert to the danger of thieves setting up wi-fi hotspots purporting to be from the bank.

Thursday, 1 May 2014

House prices up, mortgages down

House prices rose by more than ten per cent in the year to April according to Nationwide Building Society, the first time for 4 years that the annual increase has hit double figures.

Nationwide warns that unless more homes come on the market, buyers will be stretched to afford to move.

But while prices continue to race ahead, the Bank of England reports that there was a fall, for the second month in a row, in the number of house-hunters approved for a mortgage.

Approvals had been revitalised over the winter, partly because of the government's Help to Buy scheme.

More recently, though, there may have been an early impact from stricter rules on mortgage applications -- which were launched officially last weekend, but imposed gradually by lenders over several months.

March saw just over 67,000 mortgages approved for house buyers, a reduction of more than 2,000 compared with February, and still around half the peak levels which were reached before the financial crisis.

Now I discover that while the Bank's seasonally adjusted figures show falls in mortgage approvals in February and March, their actual figures show increases both times!

In fact, there has been a year-on-year rise in approvals every month for the last 12 months...

So there may well be an impact from tougher mortgage application rules, but it probably isn't in the stats yet.