Credit Action News Round-up (22 November 2011)

ONS figures for October show Government deficit lower than expected: According to official figures released this morning by the Office for National Statistics (ONS), the UK Government borrowed £6.5 billion in October 2011, compared with £7.7 billion for the same month last year. In the first seven months of this year, the total public sector net borrowing requirement (PSNBR), excluding financial interventions, reached £68.3 billion – this number is down from £78.7 billion for the same period of 2010. The provisional estimate for public sector borrowing in October was lower than expected as tax revenue outstripped new spending commitments.

Howard Archer, Chief UK & European Economist at IHS Global Insight said: “If the overall performance of the first seven months was replicated through the rest of the fiscal year, the PSNBR would come in at £119 billion in 2011/12, which is actually modestly below the targeted £122 billion.”

Downturn in household finances widens gap between highest and lowest income groups: The headline Markit Household Finance Index (HFI) for November revealed the sharpest deterioration in household incomes for three months. HFI stood at 34.6 in November, down from 35.0 in October: any figure below 50.0 indicates worsening household finances. The decline was unevenly distributed between households, with the gap between the highest and lowest income groups increasing. The steepest falls in income were reported by those from low income groups and by public sector workers, whilst those on higher incomes experienced only a limited income fall.

Tim Moore, senior economist at Markit, said families were unwilling to make major purchases or investments while the situation remained unstable. He said: "While all eyes are on whether the UK economy will double-dip, the latest survey is a timely reminder that the household recession hasn't even paused for breath.”

Upfront discounts on store cards to be banned: A voluntary deal set up between card companies and the Government will prevent high street shops offering introductory discounts to entice customers to sign up for store cards. These offers and instant credit often persuade consumers to sign up for such cards, but recent research from Which? Money has shown that they have interest rates of up to 60 times the Bank of England’s base rate of 0.5%, which often leave shoppers in debt. Consumer minister Ed Davey announced the move to ban the up-front offers on store-cards following a Government review on consumer credit. 

The new rules will come into force in 2013 and mean that stores can only give discounts to consumers seven days after they have applied for a card. There will also be a ban on staff receiving commission for sales. The Government has, however, decided against capping interest rates on credit and store cards. On this subject, Mr Davey commented: “Following the review, the evidence showed that a cap would not be in the best interest of consumers as pricing some consumers out of the market could force individuals to seek unregulated or high cost credit.”

Asking prices of homes for sale fall by 3.1% in the last month: According to the property website Rightmove, house sellers’ asking prices have fallen by 3.1% in the past month. During November, the average asking price of newly marketed properties dropped by £7,528 to £232,144. Rightmove put the falling prices down to economic uncertainty, and said that the November figures represented the biggest fall in cash terms that it had recorded since December 2007 and the third largest percentage fall on record. November saw a 13% fall in the number of new sellers coming to market compared with the previous month, and an 11% fall compared with the previous year. Miles Shipside of Rightmove said that these figures “illustrate a growing reluctance to make big financial decisions.”

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