I suppose it is with an air of some inevitability that news arose last week that IVAs and bankruptcies are on the increase.
Rising interest rates, soaring fuel bills and the murmurings of increasing unemployment coupled with the backlash of cheap borrowing are slowly chipping away at the feel good factor of the past few years. We are witnessing the fallout of those who stretched their borrowings.
Two new adverts have also appeared. One was for Abbey’s mortgages offering income multiples of five times salary, and the other for a certain credit card.
I don’t have an issue with Abbey. It has always been a flexible lender, prepared to stretch incomes if required, and five times salary was not that far removed from what it, and some other lenders, offered in any case. Any competent mortgage adviser will triple check client affordability before recommending any appropriate mortgage, whether it is for a multiple of two, three or five times income, because advice is involved.
The second advert for the credit card annoyed me. The card is fine – it’s the advert that I object to because it endorses overspending. It does this by effectively saying: “don’t be prudent – you can buy both item A and item B and just rack up the debt on your card.”
A Scottish chief executive of a company I used to work for used to have a saying regarding sales – it was “the excellence of the ‘and’ over the tyranny of the ‘or'”. In the case of the credit card, its more like the tyranny of the ‘and’ over the excellence of the ‘or’.
In light of rising debt levels, this type of advertising is irresponsible, particularly in the run up to Christmas when those who are more likely to overspend in their normal daily lives become more vulnerable. Decorations are in supermarkets and the toy adverts are on TV. Bah Humbug, I hear you say, however, the pressure to spend on the over commercialised UK Christmas becomes more relentless every year. Call me Scrooge but I hate it so much I am leaving the country mid December.
It is ironic that those who chose to save properly towards a family Christmas by using Farepack will now have to perhaps, unfairly, resort to credit card borrowing to fund festivities, although a rescue scheme has just been launched.
Unlike a mortgage, borrowing on a credit card does not require advice. What does require advice is how the heck to pay it off if you’ve gone too far.
Martin Lewis’s website, www.moneysavingexpert. com, offers great saving tips and he has always been an enthusiastic and exuberant champion of the canny and the not so solvent. He also offers excellent explanations on all areas and is impartial.
His popularity seems to stem from the fact that he is not an IFA – he is an uber specialised journalist – and rather obtusely, people seem to trust him. He gets his facts right and is pro fee-based IFAs. It is one of the best financial websites in the UK and everyone should sign up for it. The occasional downside is its forums. These are full of subscribers each offering the other advice and support in many areas, including getting out of debt. While this is encouraging and innovative, I have learned a lot about how to make money on the side, the trouble is that sometimes the information passed around the forums is misinformation and a girl could spend all day correcting views from Joe Public on most IFA topics.
Another event worth signing up for is the PFS conference next year. I attended my first one last week. Two days of influential speakers, Dan Sullivan, Sir Geoff Hurst and Greg Dyke to name a few, along with high-profile industry people such as Kathryn Langridge, head of international equities at Invesco Perpetual.
As I mentioned, I am escaping the UK Christmas this year and I am off to the sun. Shiraz? Chardonnay? It’s the excellence of the “and” over the tyranny of the “or”.
Fiona Sharp is a senior adviser at Finance4Women