Consumers advised to pay credit card debt and not save

In the current economic and financial climate, with the recession threatening the jobs of many people, it is not surprising that many people decide to put every spare penny into savings in the event that they should find themselves short of cash or experience a drop in income. Read more

Tags: credit card debt, savings, Stoozing, savings account, fact, base, Credit Cards

Officials encourage mortgage overpayments

A number of industry officials have recently highlighted the benefits of overpaying on a mortgage, stating that borrowers could benefit hugely by taking advantage of the lower interest rates and making higher than necessary repayments on their mortgages. Read more

Tags: fortune, interest, bank of england, industry, industry officials, england, interest rates, base

Consumer may end up paying through the nose for using overdrafts for Christmas spending

Industry officials have warned that many consumers may end up paying through the nose for using their overdraft facilities to fund the expense of Christmas. Many may also be planning to dip into their overdrafts to make purchases in the January sales, resulting in an increase in the number of people that will be hit with these charges. Read more

Tags: New, overdraft costs, borrowing, Christmas spending, sales bargains

RBS will take action over refunding bank charges

High Street bank Royal Bank of Scotland has reportedly decided that in the event that the ongoing High Court case in to bank charges is lost by the banks it will be pro-active in ensuring that all customers receive a refund on their bank charges that were applied for exceeding the credit limit on the account. The banks, along with seven others, is currently appealing against a ruling made by the courts earlier this year, when it ruled in favour of the Office of Fair Trading. Read more

Tags: bank charges, bank charge refunds, finance, rbs, base, year, bank, high street bank

BCC states that interest rate must be cut

After several months where the interest rate has been left on hold at 5% by the Monetary Policy Committee and the Bank of England, the British Chambers of Commerce is now calling for action, stating that the base rate has to be cut in order to ensure that the economy does not grind to a halt. The government is facing tough decisions when it comes to the base rate, as the nation is going through a period of stagflation, where the economy has slowed down and stagnated and the level of inflation is soaring way out of control. Read more

Tags: consumer spending, British Chambers of Commerce, base, interest rates, chelsea building society, interest rate, bank of england

Bank savings interest rates start to come down

The interest rates being offered to savers with some banks have already started to fall following the recent base rate cut from the Bank of England. Following the latest Monetary Policy Committee meeting early in December the Bank of England announced that interest rates would be falling by 0.25% taking the rate from 5.75% to 5.5%. This followed a series of five interest rate rises between August 2006 and July 2007, after which there were several months where the interest rate remained unchanged at 5.75%. Read more

Tags: United Kingdom, base, interest rtae, bank of england, lloyds tsb

Mortgage borrowers urged to “think carefully”

Following the Bank of England’s decision to keep the base rate of interest on hold, one expert has advised borrowers to consider the possible downsides of taking out a variable-rate mortgage.

Mark Blackwell, director of intermediary sales at Alliance & Leicester, said that while those with variable-rate mortgages may have “benefited” from the rate cut announced last month, further rate reductions may not be so forthcoming.

According to Mr Blackwell, under present conditions borrowers ought to “think carefully” about the negative aspects of “locking” into a variable-rate product, particularly as the Bank may choose to tackle rising inflation with a rate hike.

“Fixed-rate products continue to remain a wise choice for first time buyers, people moving house or refinancing,” he said.

As 1.4 million borrowers are likely to come to the end of their fixed-rate deals this year, a similar product may “help to manage the impact of higher monthly payments”, he added.

The Bank chose to maintain the base rate at 5.25 per cent yesterday, having reduced from 5.5 per cent a month earlier.

Tags: mortgage, people moving house, decision, yesterday, director, base, base rate

Rate falls ‘will not affect mortgage market’

Any drops in the interest rate over the coming year will have little affect on the mortgage market, an industry expert has said.

According to Firstrung, following the credit squeeze this year the market is “completely detached” from the Bank of England base rate, with the average rate at two per cent higher than that of the base rate.

Paul Holmes, chief executive of the mortgage brokers, commented: “We always used to look at Bank of England decisions to see what our mortgage rate was going to do.

“But all of a sudden the dislocation, the gap, is huge between what the lenders do and what the Bank of England does.”

He added that in excess of 40 per cent of mortgage products have been “stripped” from the market, although there is no shortage of products.

Furthermore, he said, there is a need for a “contraction and consolidation” of the market, rather than increased product innovation.

Tags: base rate.paul holmes, mortgage, lenders, average rate, bank of england

Families reign in their borrowing

Families with mortgages are taking measures to limit their debt, according to one industry expert.

Alliance and Leicester said that this demographic group is reducing the amount they spend on credit cards and cutting back on savings in order to take control of their debts.

The company puts this to consistent rises in the interest rate which now stands at 5.75 per cent and does not look like increasing further.

Sean Murphy, director of strategic planning at Alliance & Leicester, said: “Even though average interest rates on unsecured borrowings have actually fallen over the last 12 months, that has not been enough to tempt mortgage borrowers to take on more unsecured debt.

“Their family budgets have been under pressure and they have cut their cloth accordingly.”

Alliance and Leicester’s Borrowing Monitor showed that it is mortgage borrowers in particular that made cuts to borrowing with their rates falling while other groups’ borrowing rates saw “modest growth”.

Mr Murphy concluded that the base rate likely to see downward movements in the future, “some welcome comfort” would come to families with mortgages.

Tags: reign, industry expert.Alliance, order, base, family, rate, credit, Monitor

Rush on remortgages amidst fear of rate rises

July of this year saw over a billion pounds worth of mortgages being taken out each day with many homeowners deciding to remortgage amidst fears that that interest rates would continue to rise following five interest rate hikes in the space of a year.

The highest in over six years the base rate currently stands at 5.75%, following five rate hikes of 0.25% each since August of last year. Many homeowners have had to cope with rising repayments as their mortgage repayments have soared along with interest rates.

According to figures from the Council of Mortgage Lenders nearly £35 billion was borrowed in the month of July on mortgages, which reflects a 13% rise on the amount that was borrowed in July of last year. According to the CML this increased figures result from the surge of homeowners that have decided to remortgage in order to try and get a better deal on their mortgage in the light of the series of interest rate rises that have taken place – and the threat of further interest rate rises that may yet take place.

A spokesman from the British Bankers Association stated: ‘Longer-term trends in mortgage lending are little changed but July’s strong rise was surprising, given the expected cumulative impact of higher interest rates. The resilience shows the popularity of home ownership and also reflects more remortgaging activity.’

 An official from the Building Societies Association stated: ‘As mortgage payments increase, household finances are likely to be squeezed further. Even if interest rates are near their peak, potential borrowers need to think about all their outgoings to make sure they do not overstretch themselves financially.’

Tom Smith
21st September 2007

Tags: rate, increase, interest, england, remortgages

Interest rate rises result in increase in repossessions

The five interest rate rises that have been enforced by the Bank of England over the past twelve months have taken their toll on the finances of many consumers, and there are many households that are now struggling to keep up with repayments.

A number of experts have been predicting that an increasing number of people will find it extremely difficult to keep up with repayments due to the rising interest rates, and recent figures indicate that this has already started to take effect.

Interest rates in the UK have shot up from 4.5% to 5.75% in the past year, after a series of five interest rate hikes, each of 0.25%. Homeowners have seen their repayment shoot up considerably over this time, and those with already steep mortgage repayments have had to find hundreds of pounds more in some cases as interest rates have risen. Those that went on fixed rates several years ago are now finding themselves in hot water too, as the fixed rate period ends and their interest rates shoot up to today’s base rate.

The predictions of many experts is already coming true as the first half of this year has seen home repossession resulting from bad debts hit an eight year high. Interest rates at the moment are at their highest in six years, and struggling homeowners are risking their homes because of difficulties in making repayments on their mortgages. Around 77 homes per day are currently being repossessed.

One official from the Royal Institute of Chartered Surveyors stated: “With the housing market slowing into 2008 and interest rates expected to hit 6 percent, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble.”

Tom Smith
17th September 2007

Tags: payments, bank, base, rise, increase, interest, rate, Mortgages, england

Bank of England makes quarterly report

The Bank of England’s latest Quarterly Inflation Report, published today, seems to hint at future interest rate rises.

Charts in the report seem to suggest that inflation will not drop to the bank’s desired level of 2 per cent if rates stay as they are.

The base interest rate has been increased five times in the last 12 months, and currently remains at 5.75 per cent.

Economist James Knightley at ING said that the report was “mildly on the hawkish side”, and signalled that “interest rates have to rise”.

He predicted a rate of 6.25 per cent by the beginning of 2008.

With interest rates whole percentage points lower two or three years ago, mortgage holders on variable rates are currently being faced with big hikes in their monthly payments – a situation which will get worse still if rates rise yet again.

Analysts Morgan Stanley estimate that 70 per cent of mortgage holders in the UK are now on variable rates, compared with 20 per cent just five years ago.

Tags: interest rate, quarterly inflation, percentage, inflation, Morgan Stanley, mortgage

Further disappointment for ING Direct customers

ING Direct customers are facing increased disappointment when it comes to their savings, with ING once again failing to pass on the interest rate rise that was applied by the Bank of England.

The online savings account from ING Direct now pays 5% to savers, which is well below the best rate savings account and stands at 0.75% less than the base interest rate. The account initially attracted over a million customers when it advertised its impressive interest rates in 2003, but since then ING has come under fire for leaving interest rates to stagnate despite a series of rate rises.

The Websaver account from ING will also see interest rates remain static, at 5.5%. The rate on this savings account was actually higher than this initially, opening at 5.65%, but was cur to 5.5% before the interest rate rise in May of this year. Since this time the interest rate has not gone up, despite Bank of England rises of 0.25% in both May and July. ING Direct was hugely popular amongst savers previously, but has lately received a great deal of negative press over its refusal to pass on interest rate rises.

According to recent figures customers of ING Direct have taken over £3 billion worth of savings from their accounts and placed the money with other banks as a result of poor interest rates based on the current base rate. Although interest rates in the UK have gone from 4.5% to 5.75% in the past year through a series of five interest rate rises, the interest rate on the ING Direct savings account has risen by only 0.5% in this time.

According to ING Direct other banks get around this by offering lower rates on other accounts. One official stated: ‘If these savings providers had to pay all of their customers our 5% it would cost them a fortune and they wouldn’t be able to afford to keep offering their headline grabbing accounts.’

Tom Smith
26th July 2007

Tags: bank, customers, rates, interest. lower, accounts, Banking, base, rises, leave

John Charcol unveils buy-to-let mortgage brace

Mortgage broker John Charcol has launched two new tracker mortgages for buy-to-let investors, with rental cover requirements which are “not too onerous”.

One of the John Charcol mortgages possesses a 90 per cent loan-to-value (LTV) rate and will track the Bank of England base rate at plus 0.74 per cent for the term.

No early repayment charges apply and rental cover of 100 per cent is also applicable to the deal.

The group’s other package has a maximum LTV rate of 85 per cent and is available to both new purchasers and remortgagers.

Its rate is set at the Bank of England base rate plus 0.39 per cent, with the fee for the package set at £999.

Ray Boulger, senior technical manager at the broker, said that with gross rental yields on many other packages seriously restricting choice, the two mortgages “have been designed with rental cover requirements that are not too onerous”.

He added: “For most buy-to-let investors the choice for the best value mortgage tracker is now primarily between taking out a cheaper two-year tracker, with a view to continuing to take up a new deal every two years, or securing the convenience of a lifetime tracker at a slighter higher rate.”

Tags: Loan to value, LTV, cent, package, group

Interest rates frozen

Interest rates are to remain at 5.25 per cent after the Bank of England decided not to increase the rates further.

Last month the bank surprised everyone by announcing an increase of 0.25 per cent, but today’s decision had been widely anticipated.

The Bank of England’s Monetary Policy Committee (MPC) has increased interest rates three times in the last six months, as it tried to bring inflation rates under control.

Today’s decision to freeze interest rates will be welcomed by those who have a mortgage, but there are warnings that future rises are almost inevitable.

“Today’s MPC decision to maintain the base rate at 5.25 per cent will come as a welcome relief to borrowers, but many market analysts will view this latest decision by the Bank of England as a mere delay of an inevitable further rate rise,” said Mehrdad Yousefi from Alliance & Leicester.

“Inflationary pressures on the economy remain strong, including some above inflation pay deals, and they will play a key part in future base rate decisions.

“The consensus of opinion is that it is very likely that we will see another rate rise in the first half of 2007, so it is crucial that borrowers assess what impact any possible future base rate rises could have on their finances,” he added.

In January it was revealed that inflation was running at levels not seen since 1997 when the Bank took control of setting interest rates from the chancellor.

People borrowing money should be sure that they have the financial flexibility to cope with a sudden rise in interest rates.

Tags: Mehrdad, today's decision, base, england, yousefi, inflation, pay, base rate