University Debt Prompts Chancellor to Step Down

May 12th, 2010

Student debt is difficult situation to manage. On one hand, in order to get the better jobs, we’re raised to believe a university education will stand us in the best stead. In terms of personal finance though, it is strange that students are actively encouraged to take on this debt without any proper education in managing their personal finance. After all, the current employment environment in the UK does not instil much confidence. Your financial circumstances can change without warning and any speculative financial planning can quickly fall by the wayside. That’s why you have to be as prepared as possible and be quick to react when debt problems arise.

Summing this relationship up quite nicely is a story that has recently emerged from The University of Cumbria. We talk quite often about the level of student debt in the UK but every once in a while, we must actually look at the debt of the institutions themselves. For The University of Cumbria, which is facing debts amounting to £30million, the recession and restrictions on student intake have been blamed for its ongoing debt problems.

In fact, the extent of the problem is such that the University has been prompted to appoint an interim vice chancellor in order to replace Peter McCaffery, whose tenure was ended prematurely. Mr McCaffery had held the position of Vice Chancellor since the University opened in 2009 but Professor Graham Upton will now officially take up the post this week.

The chairman of the University’s board of directors, the Venerable Peter Ballard, was buoyed by the number of applications that the University of Cumbria still receives on a regular basis and was confident that the staff and students would continue to uphold the same high academic standards that they have displayed up to this point.

However, as a fitting reminder that no institution can guarantee employment, the University of Cumbria has been forced to meet several challenges in a difficult economic environment and as a result, Mr McCaffery’s position as vice chancellor was brought to a premature conclusion. A major part of his role while at the university was to establish a financial recovery plan. However, up to 200 jobs look set to be cut at all levels of the university’s staff. The university have set a further target of an additional 1,000 students to be recruited by 2012.

Sadly though, the University’s Ambleside campus project is being placed on hold indefinitely and the intended development of the campus in Carlisle has been cancelled. These cuts are an effort to stem the loss of an estimated £800,000 a month. It just goes to show that regardless of the sector in which you operate, the recession is indiscriminate in its effect. Universities have always operated in a speculative manner, with implied levels of student debt and no guarantee of return on investment. You would imagine that the Vice Chancellor would be relatively safe in his position but it just goes to show that anyone’s financial situation can change at any time.

That’s why it’s good, when struggling with personal debt problems of your own, to be able to depend on specialist debt advisors like those at Harrington Brooks.

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Debt Plan for Health Trust

May 10th, 2010

In the last year, a health trust in Cambridgeshire overspent by almost £13million. In response to the colossal financial miss-management in this financial year, a debt management plan has been approved in an effort to solve this ever worsening debt problem. Ultimately, this debt management plan hopes to save NHS Peterborough £20million over the next financial year by striving to ensure that their services are running in as co-ordinated and efficient a way as possible. Obviously the fear is that they will have to limit services in order to meet such a target.

However, Sheila Bremner, the interim chief executive, has attempted to reassure local service users that their level of healthcare will not be affected. Such reassurances are expected to do little to allay public concerns that despite the best of intentions, cut will be felt by those in need. In the best tradition of better debt management though, NHS Peterborough are intending to achieve these targets through improved efficiency, by tightening up on their control methods and striving for more effective processes.

The health trust is aware that this debt from overspending will have to be repaid to the NHS in the east of England. Essentially, this is just one creditor looking for repayment, which is a far easier to manage scenario than that which is faced by many people in the UK. Being chased by numerous creditors, each looking for a different repayment amount at a different date each month is an extremely awkward and high stress situation. That’s why so many take advantage of Financial Management Plans and other debt solutions from Harrington Brooks.

As it does for individuals facing debt, inaction simply leads to a more serious debt problem and limits your debt solution options. For NHS Peterborough, taking no action would result in an increase in arrears to an estimated £33million. That figure takes into account the impact of inflation, a growing population, developments in medication and the rising number of people seeking to make use of their healthcare services.

In order to stretch their budget and make the appropriate savings, the health trust is going to place tighter controls on its management of medicinal waste and try to limit the gratuitous use of the more expensive hospital services. This is naturally worrying to those service users who feel that any hospital service that might help their situation is not gratuitous. The improvement and introduction of further specialist teams who are capable of caring for more people at home has been welcomed though.

There is also a scheme to reduce costs by moving from older buildings to more efficient, modern ones. This is something that will be familiar to anyone who has sought to better manage their debt through downsizing their home. Any equity in your present property can then be released in service of your debt. Talking to a debt specialist will help to illustrate the best solution to your personal debt problem but better money management is at the core of the issue regardless of whether you’re an individual or a local health authority.

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Mortgage Lending On the Up

May 7th, 2010

According to the Council of Mortgage Lenders (CML), the month of March 2010 saw an increase in mortgage lending of almost a quarter on the previous month. The total value of mortgage lending jumped to £11.5billion in March, which was also up 3% on the same time last year.

The CML was quick to point out that the total value of mortgage lending for the first quarter of 2010 was lower than the last quarter of 2009 though. This shows that the housing market’s recovery has not been a smooth growth and it will continue to fluctuate. The increase in mortgage lending and activity on the housing market late last year could have been curtailed by the end of the stamp duty break. Hopefully though, the improving economic conditions in the UK and the continuing low rates of interest rates will stimulate slow but sure improvement in the housing market.

The government has recently proposed an additional measure to help maintain activity in the market. For the next two years, the usual 1% stamp duty band will be waived for first-time buyers. So, they’ll be able to buy a home up to the value of£250,000 without the additional 1% property tax. It’s not all good news though, as first-time buyers will continue to be required to make large down payments. These can typically run at 25% of the value. Naturally, the best rates are reserved for those looking for a mortgage of less than 75% loan-to-value. Those approaching a 90% loan-to-value will be significantly more expensive. So, in order to get on the housing ladder, any potential buyers will have to raise much more initial capital for the deposit in order to achieve a favourable rate.

Ominously, the Council of Mortgage Lenders has reiterated the warning that the UK’s property market is heading for a big problem in the not too distant future. In fact, from 2011, mortgage lenders will have to find something in the region of £300billion in order to repay the government for funds borrowed through the emergency support schemes. Therefore, as a result of the special liquidity scheme and credit guarantee scheme, the moves that kept them afloat at the height of the banking crisis, mortgage lenders will continue to ration their lending.

This is a somewhat mixed message for those people who are facing debt problems that might be solved by a secured debt consolidation loan. If their ranges of unsecured debts are becoming unmanageable, debt consolidation can be a great way of bringing your finances back under control. The best rates of interest on these consolidation loans tend to be saved for those who secure the loan against an asset, which is normally their home. As such, the housing market has a huge bearing on this debt solution. For some, remortgaging can be an excellent way to settle some debt, letting you release equity from your home to pay off outstanding loans.

To find out more about how you can consolidate debt without the need for a debt consolidation loan, talk to the specialist advisors at www.harringtonbrooks.co.uk.

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Could you inherit your tenant’s debt?

May 5th, 2010

For those people who decide to rent out properties, it’s taken as part and parcel of the experience that there may be some tidying up to do once your tenants move out. So, it’s fair to say that landlords are probably quite accustomed to their tenants leaving a bit of a mess behind at the end of their lease. It can be a nuisance, it can be a stress and it can cost you something to get it tidied up. It can go a lot further than getting the carpets shampooed though.

When the mess that your ex-tenants leave behind is financial, it’s seldom a quick thing to tidy up. For one lady, an 80 year old landlady from London, the financial mess left by her young tenant nearly turned into serious debt problem. It all started four years ago, when a young French tenant left her rented room in London and returned to France. There was nothing unusual about the circumstances under which the tenant left and shortly after her departure, her mail continued to arrive and was duly forwarded on to her French address. Interspersed with her mail were letters from NatWest. The landlady continued to forward these as normal but as the frequency of the letters increased, she began to return these to sender, using the address on the back of the envelope.

The letters didn’t stop. Anxious about the nature and frequency of these letters from a bank, the landlady decided, mainly out of a mixture of frustration and desperation, to open one of the letters.
As she had suspected, the young French lady had defaulted on a loan and was being chased for the debt. In an attempt to explain the situation and assist NatWest in their efforts, the landlady phoned the bank. She was concerned that, by association, her tenant’s debt might begin to affect her. Could bailiffs turn up, looking for payment?

Rather than having her debt fears put to rest by one of the bank’s advisors, the landlady was instead threatened with the prospect of legal action for opening private mail to their client. Her own financial situation was quite healthy but she was still in a precarious position; retired and supplementing her pension by letting out a room. How would this affect her credit rating? Could she really be held responsible for the financial mess left behind by her tenant?

First of all, your credit report just contains financial information that concerns you. It will show the names of your Financial Associates, anyone that you are financially connected to, but this doesn’t include tenants. Your score will not be affected by anyone who either has lived, or still does live, at your current address unless they are listed as a financial associate on your credit report. Receiving bills, or even a notice of impending debt collection, that are addressed to a previous occupant or tenant have no impact on your credit rating as long as they’re not a Financial Associate.

A dedicated debt advisor at Harrington Brooks will be able to take you through any debt concerns that you might have. So, if the stress of mounting debt is getting to you, visit www.harringtonbrooks.co.uk.

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Budget £600,000 for your Retirement

May 3rd, 2010

A recent article in the Telegraph outlined figures suggesting that the average pensioner will need a retirement fund in excess of twice the current state pension if they are to afford the basic, everyday expense of food, clothes and fuel. Compared to five years ago, the average pensioner’s annual expenditure is a third more than it was and those who are approaching retirement age are set to be caught between these mounting living costs and a diminishing value of the state pension.

It is now generally accepted that, without a substantial subsidiary saving to go along with your state pension, your retirement years are going to be almost unaffordable. The concept of funding your retirement with credit is also a rather daunting prospect, as is the amount of debt we carry into retirement, as our means to pay it off are severely limited. As such, we’ll be much less attractive a proposition for any prospective lenders and will therefore have to pay greater rates of interest. There’s also the rather morbid truth that lower rates but longer repayment periods won’t really work for pensioners, as time begins to become a factor. Ultimately though, you could be looking at 30 years of surviving on a pension.

Figures outlined in the article suggested that for 20 years of retirement, the average retired couple will need somewhere in the region of £600,000. This staggering amount is based on an annual household expenditure in excess of £23,000 for those aged 65 to 74 and about £15,000 for those aged 75 and over. As little as five years ago, these figures were substantially lower than they are today, at around £18,000 and £12,000. At the more expensive end of the market, a couple living in London will need to find nearer £700,000 for the same 20 year period. There are big changes in cost of living depending on the region in which you live. As a result, it’s expected that a large number of people will relocate to cheaper areas for their retirement.

A basic state pension, at a current value of £97.65 per week, amounts to £10,155 a year for a retired couple. This is a stark warning that, for the vast majority of people, the state pension is just not going to be enough to live on when you reach retirement age. On top of this, further studies suggest that people are entering retirement with an average debt of £36,000. This includes their credit card debt, secured and unsecured loans, mortgages and overdrafts.

The moral of the story seems to be to save up, supplement your state pension and pay off your debts before you reach retirement. All three are far easier said than done, particularly in the current financial climate. It’s important to get help and advice from a debt specialist who’ll be able to help assist you in settling your outstanding debt in an affordable and timely manner. Get in touch with one of the dedicated debt specialists at Harrington Brooks for more information on how you can achieve this goal of a debt free retirement.

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