For many of us, this year has been one of significant financial change. The international ‘CRedit CRunch’ and the ongoing global recession has brought the banking industry to its knees leading to pay cuts, job losses and rising unemployment. So is there light at the end of the tunnel?

According to the Office for National Statistics (ONS, Jul 09), not all forms of wealth have been damaged in the past two years. About 70% of British adults have some form of savings or investments. 54% of us have deposit accounts and 34% have money saved in Individual Savings Account (ISAs).

In our opinion, this revelation that some people in the UK have now started to perhaps pay off their personal debt rather than increasing it, means that some wealth is being accumulated again. This is partly because some homeowners who are paying a low interest rate mortgage are choosing to use their spare cash to repay their mortgage faster or repay other debts such as credit card bills.

Tough Scrutiny for Home Loans

Borrowers may face a mortgage affordability test from lenders if plans go ahead from the Financial Services Authority (FSA) to step up the regulation of home loans. Self-certification mortgages may be banned under the new proposals with lenders required to verify borrower’s incomes. The plans include:

• Making lenders ultimately responsible for whether the consumer has the ability to pay the mortgage payments.
• Banning high loan-to-value for a consumer with a bad credit history.
• Stopping charges for borrowers who are behind on mortgage payments but are keeping to an arrangement to repay the arrears.

There is also a call to ban so-called ‘self-certification’ mortgages where the consumer doesn’t need to prove their income.

London House Prices Set to Jump

London homeowners may escape falling house prices next year while the rest of the UK continues with a setback in the values of most properties. According to estate agent Knight Frank (London Metro Oct 09), house prices may end 2% higher this year than they were at the beginning of 2009 with London continuing to grow with prices possibly rising 3% next year and 9% by 2011.

Insurance Trap Warning

Millions of people could be paying for worthless home insurance due to a loophole over past convictions. If you have a minor offence or a police caution against your name you could invalidate your cover if you do not tell your insurers about them. The condition may also apply to any family members or friends staying in the property, or landlords who may find their policies are worthless if their tenants have undisclosed convictions. Insurers don’t always explain the risks of not declaring convictions. Please make sure you disclose any relevant details to your insurance companies or financial advisor.

Anything to Declare?

Critical illness policies are often taken out with a mortgage and are designed to pay out a tax-free lump sum if the policyholder develops certain life-threatening illnesses like cancer, a heart attack or stroke.

Around 20% of claims are rejected. Of this 20%, around half are rejected for "non-disclosure", which is where an insurer finds out that a pre-existing condition has not been brought to their attention. The other half are rejected because the claimant's condition does not match the ones laid out in the policy - or the condition is not severe enough to qualify. (Source: BBC on line, Oct 09)

The Association of British Insurers has drawn up two new codes of conduct for its members:

• One is designed to make the completion of application forms more straightforward. The other aims to standardise the list of qualifying illnesses.
• Do make sure you disclose everything you need to when talking to your financial adviser or completing forms.

The information contained within this article is for guidance purposes only and does not constitute financial advice.

For advice to suit your own personal circumstances, please seek advice from a suitably qualified Independent Financial Adviser.