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Equilibrium’s finance and investment news roundup

This week’s roundup includes news of a lack of uptake for the government’s marriage tax breaks, a rise in the amount that young people are spending on housing compared with older generations, news of a debt bubble risk from the Bank of England and a widening gap in motor insurance quotes between men and women.

Half of couples ‘missing out on marriage tax break’

Nearly half of the couples who are eligible to claim marriage tax allowance are still failing to do so, HM Revenue and Customs (HMRC) has revealed. New data released by the body showed that, since it was introduced in 2015, only 2.2 million couples have claimed marriage tax allowance out of the 4.4 million who are eligible.

Last year, HMRC reported that only a quarter of eligible couples had claimed the tax break. However, the government has said it has now simplified the application process for married couples, which it expects should lead to an increase in the number of claims made.

The latest figures were obtained following a Freedom of Information request to HMRC by insurance company Royal London. Steve Webb, Director of Policy at Royal London, said: “When family finances are so tight, I would encourage every married couple to check whether they might be eligible, including for the last two years, as they could qualify for a useful lump sum as well as a reduction in their ongoing tax bill.”

In order to be eligible for marriage allowance, one partner needs to be earning at least £11,500 a year and paying tax at the basic rate of 20%. If he or she is earning over £45,000, they are not eligible.

Young people ‘spending more than grandparents on housing’

Young Britons are spending three times more on housing than their grandparents, new research has revealed. According to the Resolution Foundation think tank, millennials - those aged in their 20s and 30s - spend on average 23% of their total earnings on housing costs.

This is compared to the baby-boom generation - now in their 50s and 60s - who spent 17% of their income on housing at the same age. Those now in their 70s and 80s spent just 7% of their annual income on housing at the age of 30.

Millennials also have to cope with less space and longer commutes to get to work, the data revealed. Since 1996, the average floor space occupied by someone over the age of 45 has fallen by 4%. For those older than 45, floor space has grown by 2%.

Lindsay Judge, one of the report’s authors, said: “The big danger today is that young people are having to settle for lower quality, longer commutes and less security in order to afford a place to live, despite spending a record share of their income on housing.”

BoE points to widespread debt bubble risks

Lenders in the UK are underestimating the impact they would face from consumers defaulting on debt in the event of another downturn. This is according to the Bank of England (BoE), which said there were currently “pockets of risk” in the current level of lending on loans, overdrafts and credit cards.

The Bank’s Financial Policy Committee (FPC) said that in a “severe downturn”, UK banks could incur losses of £30 billion, which is the equivalent of 20% of consumer credit loans.

BoE has aired its concerns over the need for vigilance regarding growth in the consumer credit market during “benign” economic conditions, although the FPC said it was relevant for the banks’ resilience in an economic downturn, rather than a threat to the economy as a whole.

Consumer credit, which includes car finance, increased by 9.8% in the year to July, but has been at double-digit levels in recent times.

Cost of motor insurance widening between sexes

Men are being quoted considerably more than women for vehicle insurance, and the gap looks likely to widen further, Comparethemarket has warned. According to the price comparison site, men are now quoted 27% more than women for the cheapest deals.

The difference between quotes was wider than four years ago, despite European rules stating that gender should not be considered as a factor when setting premiums. In January 2013, the month after the rules were rolled out, the gap stood at 20%.

Factors that are allowed to be considered as part of the rules, which affect average quotes for men and women, can include the type of car, number of miles driven, driving record and claims experience.

Malcolm Tarling from the Association of British Insurers said: “Men and women are likely to drive different types of vehicle, do different mileage, and these variations, not gender pricing, will reflect in premiums.”

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