Chill winds are blowing. More than a million homeowners are at risk of defaulting on their mortgages this year, according to the Financial Services Authority (FSA).
Unveiling its Financial Risk Outlook this week, the chief City watchdog identified three risk factors that make a homeowner likely to default on a mortgage – a long term and high loan-to-value and loan-to-income ratios. Almost one in five of the 5.7 million people who took out a mortgage between April 2005 and September last year has two of these risk factors, making them a “cause for concern”, the FSA says.
Of course, a long mortgage term and a high loan-to-value ratio by themselves are not necessarily an indication of financial difficulty. As long as a borrower can comfortably afford the mortgage and remain in work, the two factors are essentially irrelevant. Nonetheless, it is clear that many thousands of borrowers are struggling, or will struggle, to meet their mortgage repayments this year.
Sadly, this means boom time for the sale-and-leaseback industry, one that is beset by rogue operators. Sale-and-leaseback companies offer struggling homeowners the chance to clear their debts and stay in their properties as tenants. In theory, this can be a practical solution to large debt problems. In reality, however, it often end ups with people selling their homes for a massive discount and being forced out when the rent jumps after the original lease expires.
Thankfully, some of the better operators have recognised that there is a problem and joined forces to set up an industry body in an attempt at self-regulation. If this body is to be taken seriously, it must insist – as a bare minimum – that an independent solicitor is appointed to the homeowner so that the terms of the contract are properly understood. It must also ensure that rents are set at the correct market level in the beginning so that clients understand what they will have to pay to remain in their homes.
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Energy companies must not be allowed to have it both ways
First it was npower, then it was EDF. Not to be outdone, Brisith Gas quickly got in on the act. Now E.ON – formerly Powergen – is to become the latest energy supplier to announce a double-digit increase in the cost of gas and electricity.
All too inevitably, the remaining two suppliers will soon join this very profitable club by whacking up their prices, too. Why wouldn’t they? With most customers more likely to move house than move energy supplier, the market simply does not punish effectively companies that increase costs for consumers. (Those who wish to help foster competition should read our guide to getting the best deal on pages 4-5. They can also help by encouraging elderly relatives to switch, because two thirds of pensioners are wasting hundreds of pounds a year by languishing on the worst deals.)
With the energy companies set to swell their coffers this year, perhaps they will now oblige their long-suffering customers with a level of service commensurate with their prices. It is appalling that it takes an average of seven months to resolve complaints. My own six-month battle with Powergen and npower to establish which company was actually supplying my gas left me staggered at the indifference to customers’ problems.
The imminent demise of Energywatch, the industry watchdog, makes this an even more pressing concern. Last year 280 thousand frustrated customers turned to the watchdog after their suppliers failed to deal with their complaints. Sadly, the energy companies will not improve voluntarily, so Ofgem, the energy regulator, must step in. Having failed on price, the least it can do is get tough on service.
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High-tech taxpayers thwarted by low-tech taxman
“For a list of all the ways technology has failed to improve the quality of life, please press three.” Alice Kahn, the American writer and author of this caustic analysis of the so-called benefits of technology, had obviously spent far too much time trying to navigate customer service helplines.
This week the limitations of another technology were exposed, and not for the first time. Yet again, the Revenue & Customs website came crashing down on the deadline day for filing self-assessment tax returns. Thousands of taxpayers were left beating their breasts with rage on Thursday as they struggled to use the service, which was available only intermittently.
After exactly the same thing happened last year, you might have thought that the Revenue would have had the good sense to enlarge server capacity in expectation of such high demand at this time. Alas no.
Perhaps the Revenue should allow taxpayers to file their self-assessment returns on data-CDs through the post. Then again, perhaps not.