Competition pushes loan rates down further

A number of lenders across the UK have reduced their personal loan interest rates over the past few months, which has increased affordability when it comes to borrowing in the UK. Most lenders have applied their best rate reductions to loans in the mid-range section, which are generally unsecured loans of between £7500 and £15000.

It has been reported recently that competition in the personal loan sector is resulting in increasingly affordable deals coming onto the market for potential borrowers. The base interest rate in the UK has been standing at just 0.5 percent for twenty two months now, which is the lowest level it has ever been in the history of the Bank of England, which spans well over three centuries.

The increasing competition means that lenders are continually trying to get one over on one another by reducing personal loan rates to make themselves more popular amongst consumers. This is helping to further drive down the interest rates charged on loans, as when one lender reduces the rates the others tend to follow. One lender, M&S, has now reduced the interest rate on its mid-range personal loan to just 6.9 percent, and this is the first time in around two and a half years that it has dropped below the 7 percent barrier.

According to one industry official restrictions are being eased up to some degree, giving consumers access the more affordable deals on the market. He said: ‘At long last, after a period of inactivity, we are starting to see the whole personal loan market starting to open up. Many lenders are beginning to open their books to more consumers and we are seeing more competitive deals, even for loans below £7,500.’

Tags: rate reductions, Affordability, best rate reductions, competition, lenders, section, drive, rate

Northern Rock forced to cut savings accounts

Just a year ago Northern Rock was being branded the victim of the first run on a British bank in almost 150 years, and customers were flocking to get to the bank and take out their cash amidst rumours that the bank was on the verge of collapse. However, since this time the bank has been nationalised and since falling into government hands now offers a 100% guarantee on savings deposits for customers – a guarantee that had previously only been available on National Savings & Investments. Read more

Tags: rush, savings accounts, northern rock, collapse, lloyds tsb

Get a good deal on your savings from a British bank

There was a time not so long ago when consumers in the UK who wanted to get a good return on their savings were looking more towards foreign banks that had recently entered the UK market for savings accounts, as they were pretty sure that this is where the best interest rates would be found. They were not wrong, as a number of foreign banks have stormed into the UK savings account market over the past couple of years, and have stormed to the top of the best buy tables by offering impressive interest rates in a bid to attract customers and keep the competition at bay. Read more

Tags: interest, slump, Money market, housing slump, deal, savings account, competition, Financial institutions

Government needs to rebuild consumer trust

The Northern Rock crisis has eroded customer confidence with one in five admitting they have lost trust in banks, according to new research.

Findings from Fool.co.uk reveals that up to one in thirty consumers have considered moving their investments in the wake of the financial turmoil caused by the collapse of the bank.

David Kuo, head of personal Finance at Fool.co.uk, said that it was not only trust in Northern Rock which had been damaged by the upset.

“The ability of the Treasury, the Bank of England and the Financial Services Authority to regulate banks has also been called into question,” he stated.

He concluded that the government should ensure that the bank is returned to private ownership to prevent distortion of the banking market and ensure “healthy competition” remains to give customers the best deals.

Meanwhile, Ron Sandler, appointed as the new chairman of Northern Rock, has informed staff that the bank will remain in the hands of the state for several years to ensure stabilization.

An unspecified number of job cuts are also expected among the 6,000 strong staff.

Tags: consumers, treasury, stabilization, Ron Sandler, financial turmoil, Employment Change

Competition Commission still investigating PPI

The controversy over payment protection insurance has been going on for some time now, and regulators have been investigating the problems surrounding the sale of PPI after it was found that many consumers were being mis-sold this insurance, and that in some cases the cost of PPI was higher than the interest costs on a loan.

The Competition Commission has stated that its investigation into PPI is still ongoing as no conclusions have yet been reached.

The Competition Commission has stated that the issues that are being considered are complex and therefore more time and consideration is required. The Competition Commission plans to publish its provisional findings in May of next year. The chairman of the inquiry stated that the Competition Commission had already reviewed a substantial amount of evidence, but added that there were areas that needed to be looked into further.

The chairman stated: “We are far from making up our minds. But we are focussing on the amount of competition for PPI that distributors face at the retail level.”

He added that the Competition Commission was aiming to complete the inquiry as soon as possible but had to take into consideration areas that needed to be looked at further. He said: “…we are also conscious that the issues we are deciding upon are by no means simple and it is vital that we carry out our work thoroughly, ensuring that all parties receive a fair hearing.”

A number of issues relating to PPI are being looked into by the Competition Commission. This form of cover is designed to protect against falling behind on repayments on loans, credit cards, and other forms of finance.

Alan Wright
13th November 2007

Tags: Loans, competition, protection, credit, Insurance, ppi, Mortgages, finance, payment, commission

NI bankers may get interest-free overdrafts

People who do their banking in Northern Ireland (NI) may soon benefit from interest-free overdrafts.

That is after a report released by the Competition Commission which has been looking at ways of increasing competition and lowering charges in the NI personal current account market.

A list of “proposed final remedies” has been published by the commission and one of them is to force banks to give customers interest-free overdrafts.

Some banks in the province have admitted that the charges they impose on some customers are not directly derived from costs and it has also been found that many are being subjected to charges which are not present elsewhere in the UK.

All of this was discovered by the Office of Fair Trading two years ago and now the commission has come up with its remedies.

Among the ideas are calls for the provision of easy-to-understand descriptions of account services, clear explanations about charges and increased amounts of information on statements.

The Competition Commission would also like to see customers being provided with an annual breakdown of charges and interest charged, an annual reminder that they have the right to close or switch their current account and improvements to the switching process.

Tags: office, competition, Competition Commission, government, trading, provision, payment protection insurance, reminder

Home credit lenders must make it easier to compare deals

Home credit lenders have recently been targeted by the Competition Commission in the UK, and the industry has been told that it needs to make things easier for consumers in the UK when it comes to comparing deals and repayments on finance offered by home credit companies. The commission also added that the industry needed to ensure that consumers that repaid the loan earlier than arranged received some form of rebate. However, the commission has decided not to enforce a price cap, as officials state that this could hit some consumers hard.

Research showed that the average sum borrowed by UK consumers in the form of home credit was £300, with loans starting from around £100. The home credit industry has nearly two and a half million customers in the UK, and the majority of these borrow under five hundred pounds in the form of home credit. The Competition Commission, however, has decided not to place any price cap as more vulnerable consumers that may need more could otherwise find themselves in difficulties.

After it came to light that a small number of home credit companies were controlling the market when it came to this type of finance, the commission was said to be ‘opening the market’ when it came to home credit. The commission is in the stages of doing this, and has stated that lenders in this industry will need to publish their data on a website, so that consumers can then easily compare terms and costs in order to get the best deals.

With regards to its decision not to enforce price caps, the chairman of the commission said that he thought that capping might have “…reduced the availability of home credit to the most vulnerable customers, specifically those with no access to alternative sources of credit. We also felt that price caps could prove to be extremely difficult to apply and enforce in this industry.”

Tags: commission, competition, offers, credit, compare

Fierce Competition Likely to Push Car Insurance Premiums Down

Despite the recent announcement by Norwich Union that it is to increase premiums on its UK motor insurance policies by up to 16 per cent. in the coming year, recent research undertaken by Defaqto indicates that fierce competition among UK car insurance providers is likely going to result in car insurance premiums falling in the coming months.

According to the findings in Defaqto’s recently released report, “Motor Insurance in the UK – Adapting to Survive”, many of the UK’ leading car insurance providers are either electing to keep their car insurance premiums frozen this year or are looking to reduce premium burdens on their customers.  With UK car insurance premiums constituting £7.4 billion in sector revenues for 2006, many of the UK’s leading car insurance policy providers now acknowledge that intense market competition is stopping them from following Norwich Union’s lead and increasing premiums.

To a large extent, most of the competitive pressure on car insurance premiums in the UK is coming from savvy motorist who have now learnt that looking online for discounted car insurance is the easiest and quickest way of finding cheap UK car insurance.  Brian Brown, Defaqto’s head of general insurance research commented that “With the Internet, it is now easy for customers to shop around and so many insurers are still giving introductory discounts, cash-back or guarantees to beat other quotes, that there is little, if any, need for customers to stick with their existing insurer when faced with premium increases”.

The question of whether or not UK motorist can look forward to reduced car insurance premiums is still, however, subject to whether or not large UK motor insurance providers, such as the Royal Bank of Scotland, decide on price freezes.  If RBS were to decide that now is not the right time to push through a price hike, then joint competition from RBS and alternative discount UK car insurance available on the Internet will almost certainly result in premium freezes or reductions in the coming year.

Nonetheless, UK motorist still need to be careful they read their UK motor insurance policy carefully as over 60 per cent. of motor insurance providers in the UK now recoup lost revenue from premium reductions in the form of policy adjustment charges.  Here, Defaqto’s report found that the fee to cancel a UK car insurance policy can cost the policyholder as much as £75.  However, Defaqto are also quick to point out that following the Office of Fair Trading move to reduce late payment fees on UK credit cards, it is likely that these high additional fees will not be round for long – with or without the OFT’s intervention. 

Tags: quote, Insurance, motor, cost, companies, competition, cheap, policy

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