ABI – CONSUMER CONFIDENCE FALLING IN ECONOMY

Consumer confidence in the economy took a knock in the last quarter of 2009, with one-in-three consumers expecting the economy to worsen in 2010 according to research published by the ABI.

Optimism over the economic prospects for 2010 fell significantly, as worries over job security increased.

The ABI’s Savings and Protection survey for the fourth quarter of 2009 questioned 2,500 adults on their views on the economy, and how it affected their attitudes to saving and protection. Key findings show that:

• Optimism over the outlook for 2010 has fallen. Nearly a third (31%) expect the economy to worsen in 2010, up from 22% in the third quarter. Only 39% were optimistic about the economy in 2010, down from 52% who felt the same in the previous quarter.

• Worries over job security have increased. 31% said that they were more concerned about their job security than they were three months ago, up from 27% in the previous quarter.

• Paying off debts is taking precedence over saving. 42% have started paying off their non-mortgage debt faster than before, up from 34% a year ago. Of those saving regularly, only 17% expect to be saving more in 2010, down from 24% who felt the same way in the previous quarter.

• Despite a reluctance to put money away, more people regard themselves as savers than spenders. 37% see themselves as savers; 31% as spenders. Less than 20% say that they would rather get into debt than go without.

Dr Rebecca Driver, the ABI’s Director of Research and Chief Economist, said:

“Despite continued fiscal and monetary policy intervention, consumer perceptions of the economic prospects and their own job security in 2010 have deteriorated.

Seven-in-ten people feel that they would cope badly financially if they lost their job, with four-in-ten admitting that they had not made adequate financial provisions to enable them to cope with a large, unexpected expense.

This is not because people are spendthrift – the majority would prefer to go without than get into debt, and there has been an increase in the number of people expecting to pay off their non-mortgage debt at a faster rate than compared to a year ago.

These findings highlight how important it is for any government to deliver policies that appeal to consumers’ increasing sense of financial responsibility, helping more people become financially independent by increasing saving as well as reducing debt.”


Source: Association of British Insurers

ABI Website

CML – PROPORTION OF INCOME NEEDED FOR MORTGAGES

Home buyers in November needed to use less of their income to cover their mortgage interest than at any time for more than five years, according to new data released by the Council of Mortgage Lenders.

In particular, home movers are experiencing a low debt burden by historical standards. They typically needed only 10.6% of gross income in November 2009 to cover mortgage interest payments, down from 11.1% in October.

Other than a brief low of 10.2% in the middle of 1996, this is the lowest debt burden on home movers since the CML started recording this data in 1974.

The debt burden on first time buyers also reduced, with 14.4% of gross income needed in November, down from 15.1% in October - the lowest it has been since May 2004.

Source: Council of Mortgage Lenders

CML Website

LLOYD’S – FRAUD TO THRIVE BEYOND THE ECONOMIC TURNDOWN

Fraud broke the £2 billion barrier in 2009 and is set to treble over next three years, according to experts. New research found that the amount lost by businesses and the public sector to frauds increased last year by 76%, with both the number and size of frauds increasing dramatically during the recession.

One of the UK’s biggest specialist fraud investigators predicts that this tidal wave of fraudulent activity is only a precursor of things to come.

It warns that annual reported corporate fraud could get even bigger with businesses losing as much as £5 billion in a couple of years’ time.


Source: Lloyds of London

Lloyds Website

FOS – CORPORATE PLAN AND BUDGET

The Financial Ombudsman Service has published for public consultation its proposed budget for next financial year (2010/11) – together with an update on the numbers and workload for the current financial year (2009/10).

The budget sets out how the ombudsman service plans to gear up to resolve a forecast 27% increase in the number of disputes in the 2010/11 financial year.

This will involve the ombudsman settling a record 210,000 complaints from consumers unhappy with their treatment by financial firms. This compares with the 165,000 consumer complaints that the ombudsman expects to resolve in the current financial year – itself a 44% increase on the previous year.

The further substantial increase in the volume of new cases expected to be referred to the ombudsman in 2010/11 – rising to 190,000 – takes account of initial forecasts from the financial services industry and largely reflects the continued impact of the recession.

Meanwhile, the total number of new cases brought by consumers to the ombudsman in the current financial year (2009/10) looks likely to exceed by 11% the figure of 150,000 in the budget.

This reflects continued higher levels of complaints about payment-protection insurance (PPI) than originally anticipated (42,700 PPI complaints now forecast for 2009/10, compared with a figure of 25,000 in the budget).

The number of PPI complaints referred to the ombudsman service is expected to continue to rise to 46,000 cases in 2010/11. Other areas where growth in complaint numbers is expected in 2010/11 are banking (forecast to increase by 16% to 85,000 cases) and consumer credit (forecast to increase by 55% to 10,200 cases).

This continued growth in the ombudsman's workload will involve an increase in operating costs from £96.6m (forecast for 2009/10) to £113.5m (in 2010/11). This includes the cost of 300 additional casework staff needed to help resolve the expected 210,000 complaints.

The ombudsman service's unit cost – its average cost of handling a case, taking all overheads into account – is forecast at £587 for the current year (2009/10) and is expected to fall by 8% to £540 in 2010/11.

This means that the total levy to be paid by the financial services industry in 2010/11 – raising 20% of the ombudsman service's funding – can be frozen at the amount levied in 2009/10.

And the case fee – paid by those financial firms that have four or more disputes referred to the ombudsman service during the year, and meeting the other 80% of the ombudsman service's funding requirement – will also be held down at the previous year's rate of £500.


Source: Financial Ombudsman Service

FOS Website