Profits at banking giant HSBC have surged 20% to more than £6bn after reducing the amount it takes to cover bad and doubtful debts, writes Graeme Evans in the Western Morning News (04/03/03).
But, he reports, HSBC said prospects for this year were hard to predict, with the beginning of the year characterised by a high degree of economic uncertainty.
Evans writes that sales of general insurance, life, critical illness and income protection cover grew strongly, accounting for some of the profits increase. According to HSBC, it will contribute an extra £500m to its pension scheme in 2003 because of the impact of weaker investment returns.
People who take out unsecured loans from high street banks are sold payment protection insurance that costs up to five times as much as virtually identical cover available from independent insurers, writes Nic Cicutti in the Sunday Telegraph (23/02/03).
He reports that a survey of the UK’s leading banks, including Barclays, Lloyds TSB, NatWest, Royal Bank of Scotland and Halifax, shows that accident, sickness and unemployment (ASU) cover can add up to 20% to the cost of a loan.
And, he says, sometimes the cost of IP is greater than the interest paid on the loan itself. Many lenders add the full threeyear cost of the cover to the loan at the outset, meaning people pay interest on the cover as well the sum borrowed.
He writes that a survey by the Sunday Telegraph also found that in most cases people who phone for a quote from high street banks are not told that the monthly cost of the loan includes insurance.
All bar two lenders, Halifax and First Direct, quoted the ASUinclusive price. They only gave the lower rate when prompted.
According to Which? around 60% of all unsecured loans are sold with added ASU cover, more than twice the proportion of mortgages sold with insurance. Experts believe protecting a mortgage is much more important, given the risk of losing one’s home if payments are missed.
With house values rocketing, pensions down and savings giving a miserly return, more and more homeowners are turning to equity release to help pay their way, reports Jim Dow in The Scotsman (08/03/03).
He says that to qualify, an individual has to be a genuine homeowner – i.e. if the mortgage has been paid off the house can be a valuable source of income, allowing people to release funds that are tied up in bricks and mortar.
A 60-year-old homeowner can get a loan that is 20% of the value of the property, according to the article. This percentage rises as the age range increases: 21% for those who are 63 years old; 28% for those aged 70; and 33% at 75 years of age. The rate is fixed and the loan is paid off when the house is sold after the owner’s death.
The borrower can choose to make no repayments and the loan will be repaid in full from the sale of the house on death. If the loan is taken in joint names it will not be paid until the second death or the surviving borrower moves into residential or nursing care.