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Your Money > Mortgages Articles > The perils of...
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By Sarah Modlock
Buying a house in Northern Ireland or already own one in Northampton? Living in a flood-risk area or speeding in Radlett? Get ready to pay up as the financial postcode penalties kicks in. Negative equity One in ten home owners faces negative equity - where the property is worth less than the outstanding loan - according to international ratings agency Fitch. Of course this is only an issue if you want to sell or remortgage but those hit hardest live in the East Midlands - and in particular Northampton, Nottingham and Derby. In Northampton, almost a quarter of homes are valued at less than the mortgage on them which seems high but the figures are far higher for specific postcodes in which prices rose most during the housing boom. In central Birmingham, a third of borrowers are in negative equity and in Salford Quays, Manchester, the figure is just under a third. The CB25 postcode area of Cambridgeshire has also suffered badly, with almost a third of homes mortgaged for more than their value. The same is true for central Sunderland and Hull. Those least affected are in Scotland, where the total is just 3.6%. The report said the typical amount of negative equity in Northern Ireland was £23,056. The Midlands may be suffering from negative equity but borrowers there have wider access to a higher number of mortgages than anywhere else in the UK according to Moneyfacts.co.uk, especially those in Leicestershire. This is because of a proliferation of local lenders according to Moneyfacts: "In this region there is a higher concentration of smaller building societies which offer selected products only to borrowers living in nearby counties and/or selected postcodes in that region," explains analyst Michelle Slade. Borrowers looking for a mortgage in Northern Ireland have the most restricted choice, followed by those living in Scotland. We all know how hit and miss council tax is but in the Hammersmith and Fulham area of London, the council has been able to cut bills, while other parts of England saw increases of around 3.5% this year. And because the devolved Scottish Executive has frozen council tax bills as a result of the economic downturn, home owners in England will pay almost £300 more a year than their Scottish counterparts following the rise. Figures from the Chartered Institute of Public Finance and Accountancy show that rural councils are the hardest hit, facing rises which are nearly three times more than London boroughs. The institute found that people living in English shire counties would have an average bill for a Band D property rising 3.2% to £1,464.63. A spokesman for the Local Government Association said the regional difference could be explained by councils using different methods to keep bills low. But Local Government Minister John Healey said: "People are relying on their public services and keeping council tax down should not mean cutting services. "So, there is no excuse for excessive council tax rises or service cuts, and we have made clear that we will take capping action where necessary to protect council taxpayers." Applying for cover for your home or car will involve the insurer looking closely at you postcode to asses what premium to charge you. For home insurance, risks of flood, theft or subsidence are key. "The difference between a good and bad location can be 50% on a home insurance premium," reveals Martin Hill, director of home underwriting at RBS Insurance. However, Norwich Union has spent millions of pounds putting together its own flood risk map because it found that postcodes could give misleading information and wanted to be fairer about the quotes it gave to individual home owners, especially in areas which had previously been badged as high risk. For car cover, insurers look at whether you live and drive in is an accident hotspot or whether the risk of theft is high. "We look not only at a single postcode but at our experience of claims in the surrounding postcodes," says Simon Warsop, director of pricing for Norwich Union.
Speeding convictions So the cost of your car insurance is certainly affected by where you live but what about your chances of getting a speeding conviction? Well you would have to be speeding to start with, of course. But try racing around parts of Hertfordshire, Buckinghamshire or Dorset and you are more likely to get points on your licence. Research by car insurance expert Admiral looked at data from 1.5 million motorists to see which postcode areas have the highest percentage of motorists with a speeding conviction. It found that 27% of motorists in Radlett, Hertfordshire have a speeding conviction, the highest percentage of anywhere in the UK. This compares with just 4% of drivers living in the Possil Park and Milton areas of Glasgow, the lowest in Admiral's statistics. The national average percentage for motorists with speeding convictions is 13%. It won't surprise motorists in the Thames Valley Police Force area to find there are more cameras there than anywhere outside of London. Thames Valley covers 10 of the 20 areas of the UK with the highest frequency of people with speeding convictions. Admiral's Sue Longthorn says: "The statistics for the Thames Valley police area are quite extraordinary. We looked at data from 1,600 postcode areas of the UK, and the fact that half of the top 20 for speeding convictions are in the Thames Valley area does suggest there could be a link. There is also a possibility that a lot of these people use the M25 or main roads into London, both of which have a high number of cameras." However Thames Valley is the exception, and the other forces Admiral looked at suggest that more speed cameras don't necessarily result in a higher percentage of convictions The South Wales Police Force has the third highest number of speed cameras in the UK, yet motorists there have among the lowest percentage of speeding convictions with an average of just 10%. At the other extreme, Durham police force operates the lowest number of speed cameras in the UK, but people living in some parts of the county have an above average frequency of speeding convictions. Overall 11% of people living there have points for speeding. Sue Longthorn, commenting on this, said, "I guess the jury is out as to whether speed cameras make roads safer, there is a lot of contradictory evidence as to whether or not they stop drivers from speeding. But one thing is for sure, there are certain parts of the country where people are far more likely to have a conviction for speeding and there are parts where hardly anyone has one." Credit reference agencies give each postcode its own score, ranging from 500 to 1,000 based on the risk of bad debts. So you may have an immaculate repayment record but if your neighbours don't then this can damage your chances of getting credit such as a loan, credit card, mobile phone contract or mail order account. "The data comes from sources such as credit files, county court judgments and bankruptcy orders," says Barry Stamp of checkmyfile.com. He says that in general, people tend to live near like-minded people and there is a good correlation between where you live and your credit rating. Electricity: Stick with your local supplier and you could be paying more than £100 a year in 'loyalty tax'. According to price comparison site uSwitch.com, households who have stayed loyal to their incumbent supplier are paying up to 33% a year more for their electricity. All suppliers operate a regional pricing policy for electricity - charging customers different prices according to where they live. While suppliers have been keen to compete by offering lower prices in other suppliers' regions, they have tended to overlook their own areas where they already have a strong customer base. This means that households face a postcode lottery over electricity prices, with prices ranging from as little as £335 (British Gas in Yorkshire) to as much as £482 (npower in Swalec). However, there can also be as much as an £88 difference in the prices offered by one supplier in different regions. "There are two ways of looking at this," says Ann Robinson of uSwitch. "The downside is that suppliers are charging local customers a loyalty tax, but the upside is that they are providing a really good incentive for households to switch, which is what competition is all about. This issue is completely in consumers' own hands, as these extra costs are avoidable if they use the market. Gas: Previously, only electricity costs were subject to regional variation, but energy suppliers are now blaming piping and infrastructure costs for regional gas pricing. Siobhan Parker of Switch with Which? says: "The adoption of regional gas prices by some suppliers further emphasises price variations around the country. Npower has announced an average gas increase of 12.8%, but customers living in regions such as London and the East Midlands are being hit with a much bigger price rise of 23.8%. People must vote with their feet and seek out the best deal to combat the effects of what is ultimately a postcode lottery." If British Gas introduces regional pricing for gas, other suppliers are likely to follow suit - some consumers can expect to pay close to £100 more for their energy compared with others living elsewhere in the country. Water: Research from leading union Unison shows that the postcode lottery for water means some customers are paying twice as much as others If your supplier is South West Water you will pay £686 for drinking water, baths, showers and laundry, while others pay as little as £263, depending where they live and if they have a meter. The figures did not include sewerage charges. It comes as no surprise that the price people paid seemed to bear no relation to the profits made by water companies. United Utilities saw its profits rise by 11%, but early reports suggest it will increase bills by 10% plus inflation between 2010 and 2015. Thames Water's 34.4% jump in profits to £590.1 million has not stopped it asking for a bill increase of 16.2% by 2015, as well as inflation. Southern Water's profits rose by 5.4% to £257.7 million but they are still asking for 21% before inflation rises between 2010 and 2015. South West Water's profits grew 3.6% to £191 million but it is still asking for the right to charge customers 7.4% plus inflation - it has the highest water charges in the country. In contrast, customers in Wales were given a dividend of £21 each in line with Welsh Water's not-for-profit business model. Financial experts have long argued against the current system of giving the same level of pension to everyone, saying the poor subsidise bigger pensions for the rich and the first move came in 2007 when Legal and General introduced pensions postcodes. Norwich Union followed in September last year which means its customers in more upmarket areas will receive less generous pension payments than regions where the residents live less healthy lifestyles and are likely to die sooner. Norwich Union breaks up postcodes into nine groups in a similar way that car insurance is currently split. The firm says that while seven in ten customers should gain, three in ten will be offered less. Incomes are expected to vary by up to 2% between the best and worst although L&G say their gap is around 6%, with one-third being better off. Life expectancy In England and Wales is highest in areas such as Kensington and Chelsea in West London and East Dorset and Hart in Hampshire. It is lowest in Liverpool and Manchester, while Glasgow has the lowest life expectancy in the whole of Britain. Useful links: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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