Credit Action News Round-up (3 February 2012)

House prices decline in January: The beginning of the year saw a slight decline in house prices, according to Nationwide’s House Price Index. Prices fell by 0.2% in January compared with the previous month. Nationwide estimate that the value of the average home was £162,228 in January, and predicted that in the coming months, prices would either remain static or decline modestly. Robert Gardener, Nationwide’s chief economist, said: “Given the challenging conditions prevailing in late 2011, with the UK economy contracting in the final three months of the year, it is not surprising that house price growth softened at the start of 2012."

Meanwhile, the latest figures from financial information service Moneyfacts show an increase in mortgage availability for those unable to raise a large deposit. According to Moneyfacts, there were 343 mortgage products available at a 90% loan-to-value at the start of February, up from 280 a month earlier.

December fall in consumer borrowing is largest on record: Consumer borrowing (which excludes mortgages) fell by £377 million in December, which represents the largest monthly decline on record. The Bank of England, who provide the data, attributed the drop to a fall in borrowing on overdrafts, bank loans and hire-purchase agreements.

Credit Action has calculated that average household debt in the UK (excluding mortgages) was £7,948 in December, down from £7,972 in November. Credit Action’s recently released February Debt Statistics also reveal that the daily amount of interest paid on personal debt decreased in December 2011 from £173 million to £171 million.

Michelle Highman, CEO of Credit Action says:  “Put in context these are striking figures with the decrease in average household debt not necessarily a cause for celebration.  I suspect that these figures in fact represent an increased level of caution and concern in your average household, which impacted confidence in putting Christmas on credit last year. Whilst it is heartening that people did not overspend, the underlying reasons for not doing so may prove to be a real cause for concern in the coming year.”

Commons overturns Lords’ votes on Welfare Reform Bill: The Coalition Government won several key votes in the Commons this week, which overturned a number of defeats it suffered in the House of Lords over its controversial Welfare Reform Bill. Amendments to the legislation which had been made by peers were rejected by MPS, and the original proposals were reinstated. These include plans for a £26,000 annual limit on total household benefit, including child benefit.

 The Commons voted 334 to 251 in favour of overturning the Lords amendment to exclude child benefit from the cap. Ministers say they will use a “financial privilege” rule to ensure Parliament approves the cap. This rule means that when the Lords consider the Bill for a final time, they will be unable to send the same amendments back to the Commons.

British households have low levels of savings and investments compared with other countries: New research from Lloyds TSB has shown that Britons currently save around 7% of their disposable income, and have around £5,000 in savings and investments. Lloyds TSB compared these figures to China, where on average 47% of disposable income is saved and average household savings are over £19,000. German household savings are also slightly higher than in Britain, with average household savings standing at almost £9,000 in Germany.

According to the Lloyds TSB, these findings reflect the lack of “social safety net” in China, such as state pensions and benefits. The bank also reported that the savings ratio in the UK (a person’s savings as a proportion of their disposable income) has been decreasing over the last ten years. 

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