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Most people would expect young people, with a new home owner loan and perhaps a young family, to be those worst affected by loan debt and a lack of financial planning and although this is often the case, many individuals who are now approaching retirement are in a worse financial state than those people who are already retired.

The news comes from a new report by Insurance giant Aviva, who have found that people in the age group 55 to 64 are in a worse financial state, due to a lack of savings and higher loan and credit card debt, than those in the over 65 age range.

The report also found that, at an age when they should be planning for retirement by clearing their loans and saving and investing to maximise their returns, around 86 per cent of this age group do not have their own financial adviser.

Furthermore, the 55 to 64 group has a much lower level of home owner ship than the over 65’s, with just 76 per cent, yet the average outstanding home owner loan stands at £16,694, although around one in five still owe more than £75,000 on their home owner loan.

The average level of savings amongst the 55 to 64 age range is currently just £8,593 and despite this low level, only around 40 per cent of the pre retirement age group are actively saving on a regular monthly basis.

Although many over 55’s have cleared any previous unsecured loans and credit card debts, some are still struggling to clear unsecured loan debt and the average unsecured debt for the 55 to 64 group is £2,851, but for many of those who owe money on loans this figure is significantly higher.

This shows a much more relaxed attitude towards debt as people get younger and does not bode particularly well for future generations.

Over recent years there have been several problems for consumers which have been caused by them not understanding the contact they have signed, leaving them in a financially difficult situation.

Whether it is for a personal loan, or a mobile phone or credit card, for example, many contracts can be long, complicated and full of technical jargon, which invariably leads to consumers not even bothering to read them, or not fully understanding them even if they do.

As a result of this confusion, the Office of Fair Trading (OFT) is planning to conduct an investigation into contracts, particularly in the area of financial contracts such as personal loans, home owner loans and credit card agreements, in order to ascertain how well consumers understand what they are taking out, along with the long term financial implications.

The study will also look into how the contract is presented, whether this is on line, by post, over the telephone or in a face to face interview.

The OFT aims to help those companies which are trying to help customers by making their contracts clearer and easier to understand, whilst closely examining the practices of those firms which deliberately make their contracts complicated and unclear, which could lead to consumers being disadvantaged by a lack of understanding. An example of this might be someone wanting to make overpayments on a loan, or pay the loan off early, without realising that there may be heavy repayment penalties.

Heather Clayton of the OFT said “Today consumers are offered a range of complex contractual arrangements, particularly for goods and services offered online. We often see situations in many different markets where people lose out as a result of not understanding contracts.

“We want to understand the cause of these problems and look for remedies that will not only protect consumers, but also help those businesses that are trying to provide clarity to their customers.”

With the Bank of England base rate of interest at the lowest level it has ever been and banks and building societies failing to offer most people any sort of competitive home owner loan or mortgage deal over the course of the past two years, the majority of home owners have chosen to remain on their existing lender’s standard variable rate once their initial loan deal has expired.

In a large number of cases, the reversionary rate on their existing loan has been cheaper than anything else on offer from the market. But in other cases, borrowers have been unable to switch their loan and remortgage due to having a high loan to value on their existing loan, or perhaps having a less than perfect credit rating, or requiring a self certification loan or mortgage.

For many of these people, it has not been possible to obtain a new loan, due to much tighter lending criteria on loans from banks and building societies and this situation is likely to continue for some time.

But due to a recent wave of more competitively priced home owner loan deals from lenders and an increase in the maximum loan to value they are prepared to offer, many borrowers could now actually be better off looking for a remortgage.

The news comes from a new survey conducted by Moneysupermarket.com, who now believe that a large proportion of people with a home owner loan could save money with a remortgage, particularly since a large number of lenders are starting to increase their standard variable rates on existing loans.

Hannah Mercedes Skenfield of moneysupermarket.com said “Over the last month or so, we’ve seen the market shift. Standard Variable Rates have increased, rates for new borrowers have been falling and we’ve seen an increase in the availability of mortgages at higher loan to values.  The remortgage market is open for business once again.”

A large number of home owners in the UK have high levels of debt through personal loans and credit cards and although a secured loan may be cheaper than an unsecured loan, many individuals choose to take out an unsecured loan in the belief that they will protect their home in the event of a default on the loan.

However, this is not the case, as many people are beginning to find out. Even if someone has an unsecured loan, it is possible for the lender to place a “charging order” on their property in the case of arrears or default, which could eventually lead to repossession of their home.

As a result of an increase in charging orders in recent months, the Ministry of Justice has released a consultation paper on whether a borrower should have a minimum level of unsecured loan debt before a charging order is able to be applied, thereby providing extra protection for the home owner.

Bridgett Prentice, the Justice Minister said “We know that only a small proportion of charging orders result in the property being sold, so it’s rare for a debtor to lose their home because of things such as unpaid credit cards. There are currently a number of safeguards in place to protect home owners, while ensuring the creditors who need to recoup their money are able to do so.”

“But it is important that the Government consider whether there is a risk that the numbers will increase due to the current economic situation and whether this could result in more people losing their homes because of relatively low levels of debt which they are unable to pay. We’re asking for views on whether a minimum threshold should be introduced in law, to prevent this from occurring.”

It has been a difficult twelve months for the equity release loan and lifetime mortgage market, with house prices falling, reducing the level of equity held in a property and several large lenders withdrawing from the market altogether.

Despite this, an equity release loan is still a popular option for many individuals in retirement, either to provide them with additional income, or to repay outstanding debts on an existing home owner loan, personal loan, or credit cards, or just to give them peace of mind and the financial security of having some cash behind them.

According to the latest research from Hodge Equity Release, one of the founder companies of SHIP (Safe Home Income Plans), equity release loans are still popular among many retired people and their perception of the products is steadily improving, following the bad name the sector got for itself in the eighties and early nineties, with a large proportion taking out the loans for the peace of mind they offer.

Hodge also say that it is vital for anyone looking at an equity release loan to seek professional advice from a fully qualified financial adviser, who can assess a potential borrower’s financial situation and recommend the most suitable product from the whole of the equity release loan market.

In 40 per cent of all Hodge’s cases last year, clients took advice before making a decision and all of these claimed that the advice received was worth the cost of any fees payable.

Jon King of Hodge Lifetime said “There is no denying that the equity release market has taken its fair share of blows during 2009 and the withdrawal of large product providers has altered choice for customers. However, the importance of advice will never be removed and must remain the keystone for the industry going forward.”

We have reported on several occasions over the course of the past few months on how consumers in the UK are generally reducing their outstanding level of personal debt by paying off extra amounts on their personal loans and credit cards.

This has largely been due to the high interest rates which are often charged on personal unsecured loans and credit cards, along with particularly poor rates from high street banks’ and building societies savings accounts, having the effect of encouraging individuals to repay loan debt rather than save. But the latest statistics from the Bank of England have revealed that in December last year, the average amount of individual personal debt on unsecured loans, credit cards and overdrafts actually increased, for the first time since June last year.

With demand for personal loans increasing once again, potential borrowers have been advised to be careful when it comes to looking for a new loan and that they should take time to do adequate research to ensure that they obtain the best loan to meet their needs. Many banks and other loan companies are still licking their wounds following the credit crunch and recent banking crisis and are therefore extremely reluctant to offer personal loans to anyone, unless they have a perfect credit history. Even in these cases, interest rates on personal loans are at the highest level they have been for nine years, according to research from Moneyfacts.co.uk.

Moneyfacts.co.uk have advised potential borrowers that it is vital to shop around the market place, or use a loan broker or price comparison website to ensure that they are not paying over the odds for the personal loan they need. Michelle Slade of Moneyfacts said “With a £1,055 difference between the overall repayments on the cheapest and most expensive £5,000 personal loan, shopping around is the key.”

Although there were some positive signs of improvement in the housing and home owner loan markets towards the end of last year, on the whole it was a particularly bad year for anyone associated with the industry and despite the fact that the UK is now officially out of recession (albeit with only 0.1 per cent growth), many experts are still rather gloomy about the outlook for the coming year, particularly in the loan and housing markets.

One such trade body, the Association of Mortgage Intermediaries (AMI) has said it expects a long and slow recovery and has published its predictions for the coming year.

The AMI has predicted that new lending on home owner loans over the course of 2010 will be between £150 and £160 billion for the year and will consist of around 620,000 individual housing transactions. They also expect that inflation will fall from the high level seen in December last year, to a more reasonable figure, reducing the likelihood of interest rate rises on loans and although recovery is now happening, we could still experience some quarters of negative growth throughout the year.

Robert Sinclair of the AMI said “Although the recovery is now underway, the mortgage market will continue to face significant challenges in 2010. The shortage of housing supply for sale and the continued low level of mortgage funding will continue to constrain the level of activity in the market. Remortgage levels remained low in 2009 but will rise if interest rates are put up and borrowers move to fixed rate deals.

If this happens lenders will switch away from new lending, which could again depress the recovery. If we are to see a real improvement in the mortgage market throughout 2010, the government needs to work harder to get lenders lending again. and the banks in particular need to ensure that the intermediary sector continues to be supported, in order to provide customers with the full range of options available to them.”