Monthly Archives June 2009

If House Prices Drop Another 40% – Who’s at risk of Negative Equity?

Negative equity is already playing it’s part in stifling the property market and it is set to make matters worse.

If prices do drop by another 40% (according to MoneyWeek) or more, over the next few years the number of people finding themselves in negative equity is likely to increase substantially.

The actual number of homeowners facing the prospect of negative equity is difficult to quantify because there is limited and conflicting data available.

According to the Bank of England between 7% and 11% of UK homeowners are now in negative equity a recent report suggests this equates to between 700,000 and 1,100,000 people.

If 700,000 is 7% that report suggests there are 10,000,000 homeowners in the UK.

But according to the Telegraph in 2008 the figure was closer to 14,500,000 and I’m pretty sure 4.5million people haven’t lost or sold their houses in the last year. Unless nearly 30% of all UK homeowners own their property outright?

7% to 11% of 14,500,000 is 1,015,000 and 1,595,000 respectively which is between 315,000 and 495,000 more people in negative equity than the Bank of England suggests.

The ‘NMG Research Survey’ commissioned by the Bank of England and carried out in October 2008 on a sample of just 1000 people forms the basis of the recent report and the report also suggests many of the people surveyed probably overstated the value of their homes.

This means the real number of people either in or facing negative equity, is probably much higher.

According to FSA data used in the report, approximately 75% of all homeowners have 25% equity.

That means 25% of homeowners have less than 25% equity.

That means if house prices drop by another 25% then 25% of all homeowners will be in negative equity.

If there are 14.5 Million homeowners in the UK then the number of people in negative equity will reach a staggering 3,500,000.

But house prices could drop another 40%.

The MoneyWeek article refers to affordability as the main contributor to the potential decline and compares the events of past crashes to predict a 40% drop.

The Bank of England report has another interesting graph showing Nominal House Prices and Real House Prices with the peak of 2007 as the 100% mark. A simple extrapolation of the Real House Prices suggests a correction being approximately 20% lower than the current point (from peak, or 25% from the current level) but as all past crashes have shown, the actual bottoming out occurs well below the target.

So a drop of 30% – 40% more is not unrealistic.

If 3,500,000 homeowners will be in negative equity if house prices drop 25%, how many will be if they drop by 40% or more?

Data from suggests the average mortgage size in 06 – 07 was approximately £138,000 which by now on a repayment basis could put the average around £135,000 (roughly) and the house price average is now down to approx £150,000.

That actually puts the average Loan to Value at 90%!!

I think a recent survey of more than 1000 people might help to shed some light on that!

Take the survey: What’s your Loan to Value?


What’s your Loan to Value? – Take the survey.

A recent report from the Bank of England has made it into the press suggesting figures for the number of UK homeowners in a negative equity situation.

The report used information from a 2008 survey of just 1000 people and may therefore be misleading.

To take part in this totally anonymous survey simply select the answer that reflects your personal Loan to Value and I will compile more recent data to try and evidence the real situation.

Feel free to email this to as many people as possible.

If you don’t know your Loan to Value use this calculator first: Loan to Value Calculator

Then enter your answer below (it’s just one answer, one click and your done!):


What is your Loan to Value (LTV)?
View Results

This survey was actually started 0n the 27th of June 2009 using a template that was made in June 2008. This IS a recent survey!



Payday Loans – Friend or Foe?

I run a personal finance website and on this site I have affiliate programs and also direct access enquiry forms.

An affiliate program allows me to display links to other websites and earn commission when someone clicks or applies.

Like this: Virgin Credit Card – 0% for 16 months 2.98% fee (typical 16.6% APR)

The direct access enquiry forms send enquiries direct to qualified and waiting advisers.

In the past there were virtually unlimited marketing budgets in the finance sector and there were an abundant supply of affiliate programs for loan products.

Now there are very few.

An emerging loan market in the UK does however seem to be advertising everywhere and marketing their offerings through affiliate links.

These are Payday loans. Loans designed to give you emergency cash until you are paid.

They are not designed for long term borrowing. The interest rates are very high (see Silly Apr).

The reason the interest rates are high is so the lender can cover their costs and make the charges even for everyone.

They could charge a fixed fee but that wouldn’t be fair on people only borrowing a little bit.

If the rate was low and the loan was paid off in under a month they wouldn’t make any money.

But, if the loan is not repaid in a month or two months or six…. The costs are high.

I can see a place for this type of lending because there probably are some people who would have no other option.

However, people who have no other option because they are already stretched could find themselves adding to the problem.

Because I am of the mind that a lot of people already in difficulty will be looking at these products I have so far chosen not to advertise them very prominently.

I know an elderly couple who are struggling to clear an emergency loan and a single mother of two who got into some difficulty with one.

I would be interested in peoples opinions?

Are they a necessary evil or are they just going to add to the already mounting public debt?

The Recession is Over!

‘The recession is over, according to one of the nation’s most respected economic think-tanks.’

Phew! Thank goodness for that!

And there was everyone thinking it was going to be deep, nasty and a long slow recovery!

The first paragraph of the Independent story reads:

‘The UK’s surprising resilience is confirmed by the National Institute of Economic and Social Research (NIESR), an independent body with an enviable record for accuracy. It says that the economy hit rock bottom in as early as March and returned to growth, albeit modestly, in April and May’

Here is a link to the NIESR data: (requires Adobe)

The headline reads:


So I’m off to buy a new car and drive to the estate agent!

But then again, according to Theo Paphitis: “I don’t think we are anywhere near the end of the recession. We have probably had a bit of growth but this will definitely be a W-shaped recession. We have got a lame duck Government.”


The NIESR UK Economy Forecast is decidely grim! (although it was written earlier than the most recent release)

‘The recession is on track to become the most serious since the 1930s as GDP declines by 4.3 per cent in 2009. There is a real possibility that GDP will fall more this year than in 1931. The pace of decline to date shows a remarkable resemblance to that of the depression of the early 1930s, though that similarity should be broken as a feeble recovery gets under way in the final quarter of this year. ‘

House Prices Could Drop by 50% – But I’m not Convinced.

There are varying predictions about the direction house prices will go in the coming months and years.

Predictions range from up by 25% over the next 5 years (according to the National Housing Federation) to down 50% by 2011 (according to

It’s possible to approximate the anticipated extent of the house price crash by analysing graphs of previous housing crashes.

Provided the crash is comparable to previous crashes in terms of market conditions and contributing factors it may be a reasonable way to predict one possible outcome.

Let’s look at a graph!

The most recent crash in 1989 took 7 years to reach its trough and 13 years to return to its former highs.

But the crash in 1980 only took 2 years to reach the trough and 5 years to bounce back to former levels.

So what are we facing? A long sustained drop in house prices or a quick ‘correction’?

It’s not possible to predict from looking at one graph when there are so many contributing factors but one which I think plays a bigger part than others is the ratio of house prices to earnings.

The ratio is calculated using average house prices and average income figures.

According to Halifax: ‘The house price to earnings ratio – a key affordability measure – is at its lowest for six years. The house price to average earnings ratio has declined from a peak of 5.84 in July 2007 to an estimated 4.42 in February 2009; a fall of 24%. The ratio is at its lowest level for six years (February 2003: 4.41). The long-term average is 4.0.’

So for the ratio to equal the long term average of 4 it needs to drop another 9.5%

House prices are already down 21% since the peak in 2007 so another 9.5% makes 30.5%.

The National Housing Federation justifies its claims of a 25% increase on the basis that there is a huge demand for housing in this country and the natural laws of supply and demand will bring about a reversion to the current decline.

But one more very important factor is driving the current decline and that is the availability of credit.

9 US banks already claim to be able to repay their bailout money to the government and Northern Rock repaid half it’s loan early so is this a good sign?

Lloyds Banking Group are closing all the C&G branches and threatening another 1500 UK jobs which doesn’t look good but that’s because they made a bit of a poor judgement call when they bought HBOS and not just due to continued economic decline.

House prices needed to drop. They were getting silly and what we are seeing is a very swift correction.

It looks like banks are picking themselves back up and dusting themselves off already and there are some very attractive introductory savings rates being offered. (Abbey 6% for the first 12 months on balances up to £2500)


Sky Box Warranty & Digital Services UK

I had a call from a company recently because my Sky TV 12 month warranty was due for renewal.

The call wasn’t from Sky but a 3rd party company offering ‘repair or replace’ cover for the Sky equipment.

I listened to the call and absorbed the information and by the end of the call I was happy to proceed with a policy on the basis that:

1/ I knew the company wasn’t Sky but a 3rd party warranty provider.

Take a look at most buildings & contents policies or car insurance policies with legal cover. The legal cover is generally provided by a 3rd party so this kind of thing is not uncommon.

I keep getting offers to extend my fridge warranty but it’s not Zanussi offering the cover it’s Domestic & General.

2/ The price seemed reasonable (£5.99 per month) based on the information provided about Sky call out charges and replacement equipment.

Call out over £60 and new box as much as £150 so if the box dies in the first 3 years the cover has paid for itself.

3/ The cover doesn’t start until August and I have a 28 day cooling of period when it does so I have plenty of time to find out about it!

I have since researched the web and I called the company directly for a bit of info.

Digital Services (UK) Ltd is the company and they have actually been in business for many years. The customer services representative I spoke to was very helpful and provided me with background on the company and was able to answer questions about the service knowledgeably and without having to ‘ask a supervisor’ or ‘put me on hold while they looked into it’

I searched the internet and on ‘’ there is quite a detrimental page about Digital Services UK Ltd.

It claims they are a scam and only one company is authorised to maintain Sky equipment and using any other company to service the equipment would void the warranty.

So, what about when the warranty ends after 12 months?

It’s a free for all.

Any company can offer warranties for anything.

It’s only a scam when they don’t deliver on their promises or agreements.

I called Sky and they told me they only ‘endorse and recommend’ one company to cover their equipment and that cover was available directly through Sky. So from a business point of view of course that’s the only one they’re going to endorse and recommend! They probably make some money in the process! Business is business.

Sky offer ‘SkyProtect’ which is provided by Domestic & General who are a 3rd party warranty provider. In fact, they are the company who keep writing to me about my fridge cover.

I don’t feel as though I’ve been duped or misled and perhaps it could have been more clearly stated that they weren’t Sky when they called, because that seems to confuse people, but beyond that I’m quite happy to give them a go.

The Sky equipment warranty market is a growing one and a competitive one and I’m quite happy to talk to a provider who can protect the equipment after the Sky warranty expires. As far as I know there’s a hard drive in the box and those things don’t last forever!

If you are faced with the dilemma of whether or not you need to have this kind of cover or if you are unsure about the company selling it to you, give them a call on their customer services number. If the service is good and you are happy you will receive a good service then you might think it’s worthwhile.

If you speak to a company and you don’t like the way you are treated or you are unhappy with anything then you have to decide if you want to buy or keep what you have bought.

There should be a ‘cooling off period’ with any insurance contract in which you can cancel without paying for the cover (but the FSA does allow companies to charge an ‘admin’ fee for cancelling so check first).

I thought I’d write this article just to clear up any concerns people might have about 3rd party companies calling them to offer an extended warranty.

I’m not endorsing any company because I have yet to experience the benefits of the cover I have agreed to but one thing I do know is it costs £2.09 less per month than Skyprotect.

BT Call Plan Offers with 0845 Numbers

The heading of this post may lead you to think it will be about the various offers and deals available from BT.

But it’s not. It’s about one particular offer seemingly available on BT’s own online Terms and Conditions but peculiarly unobtainable.

BT have a great call plan offer, don’t get me wrong I think it’s great for people who may do some work form home and need to call 0845 numbers now and again.

Sky have ‘Sky Talk’ which you can pay £5 per month for and pay nothing for the first hour for calls to 01, 02 & 03 numbers. If you want to talk for more than an hour you simply hang up and start again.

BT have recently launched ‘BT Unlimited Anytime Plan’ which is a similar offer but also includes 0845 numbers and their introductory offer is £4.95 per month if you subscribe for 12 months.

I can easily add £10 – £15 to my monthly phone bill if I work form home so this is a great offer.


Please allow me to draw your attention one particular cherry of a deal that appears to offer an extra £1 discount on line rental and is clear to see on the BT terms and Conditions (at time of writing this post anyway!) but for some reason, nobody in BT seems to know about it!

These T’s & C’s can be found via a link at the bottom of the BT Calling Plans page. I’ve found a direct link to the page but who knows how long it will work for

If you open this in a new window and do the following:

Click on ‘Unlimited Anytime Plan offers/deals’

You should see a read bold heading that says ‘Unlimited Anytime Plan’

Under this there are 5 bold black sub-headings each describing different variations of the Unlimited Anytime Plan.

Scroll down to the third sub heading which reads:

“Unlimited Anytime Plan for £4.95 per month and Line Rental with £1 off – 12 month Renewable Special Offer

This special offer is available to eligible new and existing residential customers agreeing to a 12 month renewable contract on the Unlimited Anytime Plan between 16th March 2009 and 15th August 2009 (inclusive).

You will pay £4.95 per month (£1 discount compared to the same plan without a renewable contract, discount via bill credit), plus line rental at £10.25 per month (£1 discount compared to standard line rental), if paying by Direct Debit or monthly payment plan and the customer elects for paper-free billing. Otherwise add £1.50 per month for payment processing fee levied by BT Payment Services Limited, a BT Group company, plus £1.25 without paper-free billing discount. Exclusions and conditions apply. Discount is via bill credit.”

Interpret this how you will but to me it seems to suggest the call plan will cost £4.95 and you’ll also get £1 off your line rental.

But can anyone in BT actually sell you this offer? Is it available via their website? No!

I tried and I tried. I spoke to 5 or 6 people (I forget) and each person I had to direct to their own T’s & C’s to show them the offer.

I was told I’d have to go through and complete the order and select the option online.

I did this and ended up with the wrong deal. There was no option!

I called them and after several more explanations and re-reading of the terms a nice woman actually told me she’d found the offer and changed my incorrect online purchase to suit. I was delighted.

Then I received a letter about my purchase showing the wrong offer without the extra £1 discount.

Another call and even more discussions and this time I was met with flat denial about the offers existence! Even though it was in black and white on their T’s and C’s.

I know it’s only £12 for the year but it’s the principle!

After an interesting conversation it was agreed that my account would be credited £12 so that I received the same benefit as the offer I wanted.

Something of a hollow victory because I was still met with denial of the offers existence despite being given £12!

I then logged onto my BT account and discovered there were 2 calling plans showing on my account and Friends and Family which I hadn’t ordered!

Another phone call to BT.

Apparently the online system doesn’t reflect their actual billing system!

How is anyone supposed to resolve a dispute if you’re both looking at completely different sets of information?

It turned out that I did have a variation of the original offer set up with the correct monthly discount but worked out slightly differently. (Someone had to perform a manual override to give me the discount because the offer wasn’t on their system!)

I have also been credited £12 and learned not to trust my online customer account!

I might give the £12 back once I’m satisfied I’m being billed the correct amount….

So, anyone who works from home and can be bothered to go through this rigmorale could save themselves an additional £12 per year.

Or if you just want to play with BT for half an hour why not try to find out more from them!