New research by Friends Provident has found that nearly half of people in the UK have no insurance in place to cover loss of income through illness or death of a breadwinner and even those that have considered taking some action would be underinsured by an average of £14,500 per year.

Not being able to pay the bills means you could default on your secured loan repayments and your mortgage repayments. This could eventually lead to the lenders taking your home – all because you were not covered in the case of a loss of earnings.

Alarmingly, a third of people told Friends Provident they could live on less than 35% of their take home pay if they were unable to work through illness or injury. Based on an average weekly income of £489, that means they would have a maximum income of £171 per week – not enough to pay the bills and to be sure you and your family are safe.

Ed Stuart-Brown, head of protection sales at Friends Provident says: "Imagine being told that you had just been given a 66% cut in your income – the impact of that for most people would be catastrophic. It’s time people took control of their future and looked at this in a responsible way, instead of burying their heads in the sand, especially in today’s environment. Ignorance is not bliss, it’s irresponsible.

"It’s a sad fact of life that the unthinkable can and does happen and the last thing you would want is to leave yourself or your family in dire financial straits. And it’s too late to do anything about it once illness, accident or death occurs. If you are fit and well now is the time to act – the cost for most people is a fraction of the potential benefits they could receive and it’s a simple matter to review your needs with your adviser."

SOURCE: Friends Provident, 02/03/10

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Not enough it seems. Since last year, there also hasn't been a decrease in the proportion of British adults who are concerned about being forced to leave their home during the next 12 months due to falling behind on their mortgage debts, according to St. Mungo's.

Getting into debt, especially mortgage or rent arrears, is a recognised 'trigger' that can lead to homelessness. Around two thirds of St Mungo's residents in the charity's own poll said losing their job had contributed either directly or indirectly to their becoming homeless.

People who do not cover their debts with redundancy, critical illness, income protection or life insurance face their home being taken from them if they lose their job – and as we all know, no one's job is entirely safe in a recession.

Charles Fraser, chief executive of St. Mungo's says: "Losing your job, and falling behind on home payments, remains the spectre at the feast for many this Christmas and into 2010."

There is a simple way of avoiding losing your home, whatever happens to your job, and that's by taking out some cheap, simple insurance products. Talk to your mortgage adviser about keeping your debts safe and ultimately keeping a roof over your head if you lose your job.

SOURCE: St. Mungo's, 23/11/09

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The Association of Finance Brokers says stretching regulation so as to cover second charge mortgages as well as first charge loans is a good thing for borrowers.

Robert Sinclair, director of AFB, says: "We fully support this announcement as we have long been calling for an alternative regulatory regime under FSA. In our view this will benefit brokers, lenders and consumers. We welcome the fact the Government and the regulators have listened to brokers in seeking to deliver a better environment for business and consumers."

Brokers know secured loans – they understand how they work, who needs them and what you need to do to make the most of them. So when brokers say regulation of secured loans by the FSA is a good thing, you know it will benefit their clients – which means you.

But what will it do? Well it will make sure, first and foremost, that you are protected. Regulation by the FSA will mean that secured loan lenders and brokers must, by law, treat all their customers fairly and must also make sure that any loans are the right choice. But it will also make sure all the loans are created with the borrower in mind, it will make sure that brokers and lenders are not making too much money from you and it will make sure that you have recourse if something goes wrong.

Ask your broker about the new regulatory regime. Most good brokers, like The Mortgage Broker Limited, are already regulated by the FSA. They know how it works, they know what their job is and they know that their main remit is to make sure that you are getting hold of the best financial products possible.

SOURCE: AFB, FSA, 25/11/09

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An undercover store card investigation by the publication has seen an indebted graduate handed £2,750 of credit on the high street, despite him having earned less than £1,000 this year.

The consumer rights body sent 21-year-old graduate James Smith to pose as a shopper in 20 of the biggest high-street stores. He bought a variety of items costing between £50 and £100 and asked whether he could get discounts by taking out a store card – in total, James was able to get £2,750 worth of credit on cards from six stores with interest rates ranging from 18.9% to 28.9%.

Although he had twelve credit checks over two days, James was still able to get credit at the end of day two. Also, in eight of the twelve shops where James applied for credit filled in the forms containing terms and conditions for him, only asked him to sign at the bottom – arguably not giving him a proper chance to read the important small print.

James Daley, editor of Which? Money, says: “No one is James’ position should be given access to £2,750 on store and credit cards in just two days, or be able to continue getting credit after so many applications have been made in such a short space of time. The question remains whether stores should be handing out credit at all."

This case highlights that it is so easy to get credit and it is so tempting. But it also highlights the fact that too much credit without proper advice and guidance can destroy your credit score and make you a financial pariah for years.

Simply, you have to fight temptation. Unsecured debt, whether it is from a shop or a bank, is bad news. If you need credit, talk to a professional who can help you with a secured loan or a remortgage – secured debt is the only thing any borrower should be considering during the recession, regardless of temptation.

SOURCE: Which?, 18/11/09

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If you have unsecured debt, you have to consider consolidation or at the very least plan a means to pay off the risky debt as soon as possible – the longer you are saddled with unsecured debts, the more you will suffer in the future.

The website says those carrying a £2,000 balance on a card with an industry average rate of 18.21% APR, who split the repayments equally over six months, will incur £144.19 in interest payments. Longer term, those who borrow over 12 months would pay £188.79 in interest.

If those borrowers were to consolidate their debt, their interest rate would be just a fraction of what it is now. That means they could save more and work towards paying off all their debts instead of keeping their head above water.

Peter Harrison, credit cards expert at moneysupermarket.com, says: "People must be extremely careful about carrying debt on credit cards for long periods of time – you don't want to be paying for this year's presents when the Christmas decorations are rolled out again next year, particularly as rates could be at dizzying heights.

He says that with interest rates rising on many cards, minimum repayments often only barely cover the interest accrued on the debt – by paying just the minimum borrowers could spend most of their life paying a credit card company a monthly sum on a debt as small as £500.

Harrison adds: "Those with credit card debt should look at ways to reduce the outstanding balance on their card, especially as providers have been known to increase APRs for longer standing customers."

SOURCE: Moneysupermarket.com, 09/11/09

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IVA.com says it is now taking calls from worried debtors who are approaching year four of their Individual Voluntary Arrangements when the terms of their contract state that they are obliged to release equity from their property – but the property slump has drained those resources dry.

For many, the only option on the table is to extend the IVA for another year to a total of six – a grim prospect after four years of living on a very tight budget.

Terry Balfour, director of IVA.com says: “When property prices were buoyant the strategy of using equity to fulfil the terms of the contract was a viable option for many people signing up to an IVA. But since then the unforeseen drop in house prices has removed this vital safety net for many and they face renewed misery just at the time when they thought the end of their arduous journey was in sight."

If you are in a tricky situation, you need to talk to your mortgage adviser. A good adviser will know the best way to protect their client’s mortgage whilst fulfilling the demands of the creditors.

Balfour says: “They may suggest switching to an interest only deal to free up funds for a higher monthly repayment. This will make them a more reliable proposal to creditors and increases their chances of seeing the deal through to completion.”

Debt management is a booming business and there are a great many companies offering their services, but it cannot be stressed how important it is for people to choose carefully. The pressure of unmanageable debt makes people very vulnerable and it can cloud their ability to judge. It’s just not worth signing up for something that isn’t the most suitable vehicle just because it sounds like the easiest, quickest way out. You need to talk to a professional, with credentials.

Balfour adds: “The effects of the property slump on debt solution strategies should be a lesson to all concerned that nothing can be taken for granted and the best insolvency practitioners will know this. Choosing the best adviser, based on recommendation and research, is absolutely vital if people are to deal with their debts effectively. The wrong choice could see them suffer for longer and ultimately, lose everything.”

SOURCE: IVA.com, 06/11/09

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The building society says that average house prices are now £161,816, a year-on-year increase of 2%, the first time the annual figures have risen since March 2008.

So house prices are back in the black. After all the scare stories and 'experts' predicting that house prices would freefall, normality has prevailed. And while it is true that this is just an average and some house prices might be still be in the doldrums, there will be houses out there that have increased considerably in value.

This will all depend on geography, local economy and the houses themselves of course, but your home might be one of those that has bucked the trend and has risen in value over the last few weeks, months and years. So you may have more equity in your home than you think – equity that can be reinvested in your home or put to good use tackling debt.

If you think your home might have increased in value over the last few months, talk to a mortgage adviser. They will be able to help you find an independent valuer to tell you exactly how much your house is worth. Then, if it has risen enough, they might be able to help you unlock that acquired equity. This could be in the form of a secured loan or a remortgage depending on what fits you best.

So talk to a mortgage adviser today. The frost that has kept the UK housing and mortgage market in deep freeze over the last year may be beginning to thaw – and you may now be able to get on with making your house and your money work better.

SOURCE: Nationwide, 30/10/09

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In its mortgage discussion paper, the FSA said that it was time to add secured loans into the same remit as first charge residential mortgages.

The report said: "Second charge lending potentially provides a cost-effective borrowing option as an alternative to either remortgaging or taking out a further advance. This is particularly the case where there might be significant early repayment charges on the first mortgage. It is also a market associated with consumers looking to borrow in circumstances when a first charge lender may be unwilling to lend. Not all second charge consumers will be credit-impaired, but a substantial number will be.

"We firmly believe that effective delivery of a stable and sustainable mortgage market calls for [regulatory] standards to apply across all secured lending to consumers."

Jon Pain, managing director of the FSA said: "The reforms that we have announced will ensure that the mortgage market works better for consumers and that it is sustainable for firms."

Sue Edwards, head of consumer policy at Citizens Advice says: "Citizens Advice welcomes the proposals outlined in this review. In 2009 bureaux dealt with over 95,000 enquiries about mortgage and secured loans arrears – up 49% on the previous year. We would like to see uniform consumer protection for all secured lending and for the FSA's scope to cover this, as well as lending secured on a home."

So what does this mean to secured loan borrowers, past, present and future? It means that you can be sure that your loan has been sourced, applied for and approved through official sanctioned methods and you can be sure that it is the best deal for you, for the long-term.

SOURCE: FSA CAB, 19/10/09

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It found that just over half of homeowners say they would take on a second job to help meet their mortgage payments, and four in ten would withdraw some or all of their life savings to make ends meet. Almost a third would even be prepared to sell off the family silver.

One in five homeowners would be prepared to take in a lodger to help pay the mortgage and almost as many would rather go cap in hand to friends than face repossession. One in ten say they would move out and rent their property to someone else, if that was necessary to be able to cling on to ownership.

Chris McFarlane, LV= head of protection, says: "The financial turmoil of the last year has done nothing to dampen our national obsession with home ownership. It's fascinating to note just how far people would go to avoid having to give up the keys to their castle."

Yet fewer than one in ten homeowners have insurance that would pay their mortgage repayments and other regular outgoings over the long term, in the event of a sudden loss of income. By having insurance to cover your debts and your home you could be sure that whatever happens, your home is safe.

While just over a third of homeowners have some kind of mortgage protection in place, most of them have simple mortgage payment protection insurance, which often only covers mortgage payments over the short term says LV=. Less than one in ten homeowners have more comprehensive income protection insurance that could cover their mortgage and other living expenses over the long term not just for a limited period.

McFarlane says: "We need a sea change in the way we view threats to our homes. We install locks and alarms because we fear burglary and we have buildings insurance to protect the property structure. But typically we don't protect the regular income that we need to be able to maintain over the long term to pay for our homes and other living costs. Proper income protection can cost as little as 50p a day, which in the current climate should be food for thought for everyone."

SOURCE: LV=, 19/08/09

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The council found that the mix of a low rate environment coupled with forbearance towards borrowers means many have a better chance of getting back on track.

But the UK borrower is not out of the woods yet – the CML figures show show that there were 11,400 cases of possession, equivalent to one UK mortgage in 1,000, in the second three months of 2009, which is down 10% on the first three months, but 14% more than the same time last year. There was a modest deterioration in arrears during the last three months – 205,600 have arrears of around six months, compared with a total of 203,900 at the end of the first three months of 2009.

Jackie Bennett, head of policy for the CML says with the economy still in the doldrums, the outlook will remain challenging for the rest of this year and into 2010.

And Sue Edwards, head of consumer policy for the Citizens Advice Bureau says: "The really vital thing is that people should actively engage their problems early on because what might have been a hopeless situation a year ago could now be effectively addressed by showing more forbearance.

"Many lenders are offering more repayment solutions and through added protection such as the pre-action protocol for mortgage arrears which is designed to make sure that possession action really is a last resort."

If you have debt problems, don't hide behind them. Talk to a financial professional about getting some help and getting back on track. These figures show that there is some hope out there and people are turning their debts around.

SOURCE: CML, CAB, 14/08/09

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