I was watching the BBC news this morning and in the Reality Check report they were talking about Debt.
Obviously the biggest amount of debt is mortgages and compared to other countries we are close to the average for Debt.
But its not just an issue for families its an issue for businesses too. We often work with landlords and typically their net cash flow out of the rent received is 2% or less.
That’s the Rental Income less mortgage interest, expenses and tax.
Landlords tend to be asset rich and cash poor, liquidity is vital to cover even minor problems such as repairs and void periods. It is of course easier to have liquidity with a bigger portfolio.
Landlords are facing many problems at the moment not least the Section 24 Interest Restrictions which start this year. This will mean large numbers of landlords with high Loan to Value ratios will have negative cash flow and if the sell they face 18% to 28% capital gains tax (as buy to let get an 8% penalty).
I wonder how many landlords have the resources to handle negative cash flow, how long could they cope what are their contingency plans?
The Lenders and Bank of England have anticipated this problem and for sometime now have tightened the lending rules coverage is now 145% for personal borrowers, but its still 125% for companies as they are aren’t affected by Section 24.
A new way to pay is coming this month, its called PAYM and it will be available from the 29th April.
Customers of the following banks can now register to link their mobile number with their bank account: Bank of Scotland, Barclays, Cumberland Building Society, Halifax, HSBC, Lloyds, Santander and TSB.
Other banks – including NatWest, RBS and First Direct – will join the scheme later in the year.
People who wish just to receive money – as opposed to paying it – will still be able to use the system, even if their phone is not a smartphone, or they do not use mobile banking.
To send money, a user will have to log into their bank’s mobile banking app, using a pass code as normal.
They will then have to select the recipient of the payment, using their existing contacts or by typing in that person’s mobile phone number.
After confirming the name of the recipient, they will have to check the amount being paid, type in a reference for it (such as “dinner”), and then press send.