Thursday, August 20, 2009

“Personal debt falls €563m in Q2 (Irish Examiner)” plus 4 more

“Personal debt falls €563m in Q2 (Irish Examiner)” plus 4 more

Personal debt falls €563m in Q2 (Irish Examiner)

Posted: 20 Aug 2009 05:43 PM PDT

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Personal debt falls €563m in Q2

By Niamh Hennessy

Friday, August 21, 2009


LATEST figures from the Central Bank show personal debt fell by €563 million in the second quarter of this year while mortgage debt was down €194m.


The bank's figures show that overall the outstanding debt owed by private individuals and businesses was down 1.2% or €4.7 billion in Q2 of this year.

The bank said this was mainly due to write-downs of bad loans.

Yesterday Anne Breen, head of property research at Standard Life Investments said the Irish property market has still "some way to go" before reaching its low.

"The unsustainable peak in values reached in the Irish market compared with the rest of Europe mean its correction can be expected to be sharper and deeper than its European peers.

"Although there are signs of revival in the real estate market, with yields becoming more stable attracting international attention, capital values will continue to be impacted by rental declines going forward. We don't expect the market to bottom until 2011," she said.

Ireland's banks face loan losses of about €35bn following the property bubble burst, the International Monetary Fund has said.

House prices have fallen 22% from their January 2007 peak, while banks have applied tougher conditions on loans as risks increase.

The decline "is mainly due to write-downs of existing credit arrangements and increased provisions for bad and doubtful debts", the Central Bank said.

In the year to the end of Q2, personal sector credit was broadly unchanged, as falls in non-mortgage lending have been largely offset by the increase in residential mortgages outstanding over the year.

Meanwhile, Irish residential mortgage-backed bond delinquencies increased on expectations for a prolonged recession, Moody's Investors Service said in a report.

The weighted average 90 days-plus delinquency trend reached 2.3% in Irish prime RMBS transactions in the second quarter, up from 1% in the year-earlier period, the report said.

Moody's also notes that the weighted-average 360+ days delinquency trend stood at 0.37% at the end of quarter two 2009, which compares with 0.14% a year ago. Seven transactions recorded more than 0.60% of 360+ days delinquencies, while three showed more than 1.00%.

"The 360+ days delinquency trend is a lagging indicator, which means the full effects of the strong economic deterioration may not yet be fully reflected," said the report's co-author.

 

This story appeared in the printed version of the Irish Examiner Friday, August 21, 2009



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How about help on 401(k) loans? (The Gainesville Sun)

Posted: 20 Aug 2009 03:17 AM PDT

For some, a 401(k) loan can be an appropriate bailout during difficult times. After all, you're borrowing your own money from your retirement plan and paying it back in monthly installments over five years, unless the loan is used to buy a primary residence. Plus you are paying interest to yourself - typically the prime rate or prime plus one percentage point.

But if you leave your job, either voluntarily or you get laid off, the loan becomes due within 90 days. If you default, it will be costly.

First, the loan amount is subject to federal and state income taxes because the loan disbursement is considered taxable income. Remember, when you put money into a 401(k), it is not taxed. On top of the taxes due, if you are younger than 59 1/2, you have to pay a 10 percent penalty for early withdrawal.

For a laid-off worker with no immediate job prospects, the penalty and pending tax bill can be financially devastating.

With all the temporary measures flying through Congress, it seems logical and compassionate to give a reprieve - if only temporarily - to employees who took out 401(k) loans and now can't pay them back.

In a report earlier this year, the Federal Reserve said that in its 2007 Survey of Consumer Finances, the share of eligible households with 401(k) loans was about 15 percent.

Interestingly, the Fed report breaks with conventional wisdom that it's always a bad idea to borrow from your 401(k). Fed economists Geng Li and Paul A. Smith contend that tapping your retirement money can be a better move than using high-cost consumer credit.

The economists estimate that households could have saved as much as $5 billion in 2007 by shifting expensive consumer debt to 401(k) loans, or about $275 a year per household.

"We find that many loan-eligible households carry relatively expensive consumer debt that could be more economically financed via 401(k) borrowing," they write in the report.

I generally dissuade people from borrowing from their retirement funds unless it's absolutely necessary. When you pull money out of a retirement account, you lose whatever return you might have gotten on the portion of the cash not yet repaid. And although employees have seen their 401(k) balances drop by 30 percent or more recently, over the long haul portfolios have traditionally shown gains.

If that's not a good enough reason, then how about the risk of losing your job and having to pay back the loan in a short time?

Li and Smith suggest two changes that would reduce the risk of 401(k) borrowing. The first would make 401(k) loans "portable." Loan servicing could roll over to a new employer after a job change, along with the account balance, the economists argue.

"This would allow participants to continue to repay outstanding balances over time via payroll deduction," Li and Smith write.

Second, employers could be required to continue servicing the loans of their unemployed workers. This would allow laid-off workers to keep making monthly 401(k) loan payments rather than coughing up a lot of cash within the 90-day window.

Li and Smith acknowledge these changes would impose some new requirements on employers. And I'm sure employers would complain about the added work. But it would make borrowing from a 401(k) less of a burden for people going through a period of unemployment or for others changing jobs.

"Households are often better off financing consumption out of their own assets instead of by borrowing from outside lenders," Li and Smith conclude. "Allowing participants some pre-retirement access to their savings can increase 401(k) participation and contributions, particularly among younger and more liquidity constrained households. Given that 401(k) loan programs exist, it seems appropriate to design them in a way that minimizes financial risks to participants and maximizes 401(k) participation and contributions."

No matter what's happening in the economy, it ought to be difficult for people to take out loans against their retirement savings. Make it too easy and people will pull money out too often and for frivolous purchases. But the reality is that people experience financial setbacks.

If the choice comes down to borrowing on a credit card to buy food or make rent or mortgage payments, or taking it from a retirement account, I'd go for the 401(k) loan.

Write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071, or singletarym@washpost.com. Listen to Singletary discuss personal finance every Tuesday on NPR's ''Day to Day.'' To hear her reports online go to www.npr.org.



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Personal debt down €563m in second quarter (Belfast Telegraph)

Posted: 20 Aug 2009 04:28 AM PDT

Thursday, 20 August 2009

Personal debt in Ireland fell by €563m in the second quarter of this year, according to the latest statistics from the Central Bank.

The bank says mortgage debt was down €194m.

Overall, the outstanding debt owed by private individuals and businesses was down 1.2% (or €4.7bn) in the second quarter of the year.

The Central Bank, however, says this was mainly due to write-downs of bad loans.

It also says evidence from credit providers suggests that demand for loans is down and lenders are also tightening their standards for issuing loans.

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Tesco Personal Finance to create 800 jobs at new Glasgow call centre (Finextra)

Posted: 20 Aug 2009 02:24 AM PDT

UK supermarket giant Tesco is set to create more than 800 jobs at its fast-growing personal finance unit by opening a customer service centre in Glasgow.

The centre, at Broadway One in central Glasgow, will open in the first half of 2010, managing customer sales and service for Tesco Personal Finance. The site is being built with the help of a 5 million grant from the Scottish government.

Tesco is making an aggressive push into financial services as it seeks to take advantage of public disillusionment with high street banks.

In December it bought out the Royal Bank of Scotland to take complete control of Tesco Personal Finance and has been mooted as a possible bidder for the government-owned Northern Rock.

The unit already claims nearly six million customers for its products - which include credit cards, loans and savings accounts - and plans to open 30 bank branches in stores by the end of the year.

In March the supermarket outlined plans to create 200 banking jobs at a new Edinburgh headquarters for the financial services business.

Commenting on the new centre, Andrew Higginson, CEO, Tesco Retailing Services, says: "The opening of the new customer service centre will be a significant step towards TPF offering a full banking service. It is hard to ignore that people's trust in the banking sector is at a very low ebb. Offering first class customer service, however, is central to our Tesco values and the new centre will most certainly help us put the Tesco into Tesco Personal Finance."



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Tesco to create 800 personal finance jobs (Business Standard India)

Posted: 20 Aug 2009 03:14 AM PDT

Britain's biggest retailer Tesco today said that its personal finance unit would open a customer centre in Scotland, creating 800 jobs and bringing the group nearer to providing full banking services.

Tesco Personal Finance (TFP), which provides credit cards, small loans and insurance policies, will open a new centre in Glasgow during the first half of 2010, Tesco said in a statement.

Britain's biggest supermarket and third largest in the world said the centre would be built with the help of a Scottish government grant worth five million pounds (euro 5.8 million, $8.3 million).

"This is a strong vote of confidence in Scotland's financial services industry from one of the UK's leading companies," Britain's finance minister Alistair Darling was quoted as saying in the joint statement.

"And it shows that even at this difficult time, the Scottish and wider UK economy is still creating high quality jobs," he added.

Britain remains stuck in recession as the number of unemployed people rises towards three million, while the nation's banking sector has been shattered by the financial crisis.

As lenders such as Royal Bank of Scotland have fallen into state hands amid the ongoing credit crunch, Tesco has managed to win new customers for the limited financial services it offers.

"The opening of the new customer service centre will be a significant step towards TPF offering a full banking service," said Andrew Higginson, chief executive of Tesco Retailing Services.

Darling, also speaking Thursday on BBC radio, said Tesco's announcement should be welcomed as Britain's banking sector needed greater competition.

"The last couple of years has seen a significant reduction in the number of people, both from abroad and British-based banks, who are lending into the market. We need more competition and that's something that we intend to encourage," he added.

In early trade following Tesco's announcement, the retailer's share price rose 1.24 per cent to 367.8 pence on London's FTSE 100 index, which was up nearly one per cent to 4,734.46 points.

Tesco recently said it planned to open banking outlets in 30 of its supermarkets by the end of 2009 as it seeks to tap into growing public anger at the crisis-hit traditional banking sector, but won't be offering home loans.

Meanwhile, it has been suggested that Tesco may bid for nationalised bank Northern Rock, which the British government is reportedly considering selling later this year.



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