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Money & Rights

Money and Rights News: June

New blow for students as loans to cost more

Readers with children and grandchildren due to start higher education in September will be concerned to learn that, owing to March's Retail Prices Index (RPI) rate of 3.3 percent, students will see yet another increase in the interest on their loans.

From September new and current students will be charged 6.3 percent on student loans, 2012-plus starters who have graduated will be charged anything from 3.3 percent to 6.3 percent (dependent on earnings), while students who stared their courses from 1998 to 2011 will see no increase with their loan interest remaining at just 1.5 percent.

The interest figure charged on student loans is updated each September and based on March's rate of RPI from the same year. The RPI has ballooned from 1.6 percent in 2016, meaning students now accumulate far more interest on their loans.

Students do not start repaying loans until April following their graduation, but interest accumulates from the start of the course. Those who started studying after 2012 only start repaying their loans once they are earning more that £25,000 a year; for those who studied between 1998 and 2011 the threshold is £18,330 a year.

The system of student loans has become complicated and there is not a level playing field, with today's students seemingly penalised with higher interest rates, which is not adequately compensated dor by the rise in the threshold above which loans have to start being repaid.

Theresa May recently announced hat the student loan system is under review and the way that the interest is calculated and will hopefully be on the agenda. The original idea behind he loans was that young people would pay a very low rate of interest to finance their studies, but interest rates of 6.3 percent now look almost punitive.

Car insurance 'gender gap' persists

Despite the EU gender directive, which outlawed basing price on gender, there remains a gulf between the average motor insurance premiums for men and women in the UK, according to research by comparethemarket.

Men pay £789 on average and women an average of £619, equating to a 27 percent difference. The problem  has been getting steadily worse since the EU Gender Directive was introduced, says the website, due to factors such as men having higher accident rates and being more likely to drive higher performance and/or more expensive vehicles, which are considered higher risk. 

Equity release reaches record highs

Equity release lending reached record highs in early 2018, according to figures from the Equity Release Council.

Lending more than doubled over the past two years, reaching £870m in the first quarter of 2018, up from £394m in the first quarter of 2016.

Drawdown products- which see smaller amounts of housing equity withdrawn initially, with an extra amount reserved for future use- were the most popular choice, with two thirds (68 percent) of customers opting for this.

In the first quarter of 2018, new customers agreed drawdown plans with an average initial instalment of £64,797, a rise of four percent from £62,359 on the fourth quarter of 2017 and 11 percent from £58,466 year-on-year.

Among the one in three new customers opting for lump sum lifetime mortgages, the average amount of £96,483 was down five percent from the fourth quarter of 2017 at £101,913.

Dean Mirfin, chief product officer at Key Retirement, said "Whilst customer demand is driving new plan numbers and lending volumes this has been greatly helped by a very competitive market place with rates at their lowest levels ever."

Estate agents face stricter regulation

Estate agents in England must hold a professional qualification, the Goverment has said. At present there is no requirement for them to do so, but housing secretary Sajid Javid said they must also be more upfront about their fees, disclosing any commission they receive from referring clients to solicitor, surveyors and mortgage brokers.

MPs back drawdown for everyone

All pension savers should be offered a drawdown facility at retirement so they can take their cash as they please, with charges capped at 0.75 percent, according to the House of Commons work and pensions committee. It has asked pensions firms to make this available by next April. and added that the proposed online 'pensions dashboard' which will allow savers to see their various pension 'pots' and their State pension in one place should be hosted  but the Government and to private companies.

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