Two Come Along At Once

Blimey, two posts in one day....

I saw this come in on an email; today and felt it was worth publicising:

Research commissioned by Scottish Provident and carried out by Opinium Research revealed that:

• Almost four million Britons have less than six months worth of emergency financial provisions should they be unable to work after a critical illness or experience the death of a loved one.
• For those relying on credit cards their emergency financial provisions would last only five months
• About a third would have to drastically cut back on living costs

Almost a third (31%) do not have any form of emergency financial provision ("safety net") in place at all. 23 % of those questioned stated they didn't know what they would do if they suddenly had to maintain their current standard of living without the main source of income.

The poll carried out was on online one and 2044 people responded. I feel this gives a pretty good cross section of the population and the stats revealed pretty much go along with what I have heard in the past.  What I don't understand is why nobody wants to do anything about it.  Every time I see or talk to a client I check to see what their provisions are in these circumstances and make recommendations to meet any shortfalls.  Potential unemployment is a cloud on the horizon for everyone but if you take the time to look at the stats you'll find that around the same number of people are claiming long term disability benefit as are unemployed at the moment (go on try it www.statistics.gov.uk).

There is underwriting involved and sometimes it can be time consuming if your case is less than straightforward but with the help of a good adviser you can get a product right for you.  Not looked at the stats but I bet more people subscribe to Sky Sports than have an income protection policy in place.

Revolting Students

Yesterday saw some major disruption in London with Students protesting against the coalition government's plans for student tuition fees.  The majority of people protested peacefully with a small number of irate people going on the rampage at the Conservative Party's headquarters.  I'm not going to give my personal views on the protesters or their cause, except that I think we all have a right to protest in our democracy and feel that this is right and proper.

I'm thinking a bit more long term from a personal perspective as a mortgage broker.  My business has survived (and a couple of years ago thrived) on the back of two areas, remortgage business and first time buyers.  Not all my clients fall into these categories of course but they have provided the mainstay of the business.  Without the first time buyers I won't get those who want to move up the property ladder to their second and third homes and so on.

In September loans to first time buyers were 6% lower in volume than in September 2009 (according to the Council of Mortgage Lenders -CML) and it has been in the news constantly that first time buyers are finding it harder and harder to get onto the property ladder.  I don't have the stats for previous years but do recall that the number of first time buyers as a percentage of the whole market has been falling over the last two or three years.

So agree or disagree with the proposed legislation in coming years we are going to see graduates coming out of university and finding themselves with an extra 9% tax to pay at a time when it is already very difficult to raise that all important deposit on your first home.  Presumably they will still have student loans on top of this extra tax burden so I can't see the first time buyer market thriving in years to come.

Another issue is how will the mortgage lenders deal with this new tax bracket in their affordability calculations?  Traditional methods of calculating how much to lend have been three times salary or four times salary with deductions for loans etc taken into account.  More recently the high street lenders have built affordability calculators which we brokers use to determine how much our clients can borrow.  The affordability calculators are also available directly on the lenders' websites. 

I feel that in the already tight lending environment in which we find ourselves the graduates of the future are really going to struggle to get that foot on the ladder.