No change in UK interest rates

Following the August Monetary Policy Committee Meeting the Bank of England has announced that the base interest rate is once again to remain on hold at its lowest level in the history of the Bank of England. The base rate has been at its all time low of just 0.5 percent for well over two years now, which has provided relief for many homeowners and borrowers who have seen their monthly repayments plummet.

Economists have now predicted that the base rate will remain at this record low for the remainder of this year, with some even going as far as to say that it could remain at 0.5 percent next year as well. In a poll that included 32 economists the majority believed that it would be next year before the base rate was increased and a handful said that it could be 2013 before rates increased.

The news that the base rate is to remain on hold comes as no surprise to most industry experts, as the MPC is reacting to the fragile economy by keeping the base rate low. There will be many people that welcome the decision to keep rates low, such as those with mortgages on variable rates. However, there are also some groups that want to see rates increased in order to try and bring inflation levels down.

One group said that rather than increasing the base rate the MPC could look at further increasing the quantitative easing scheme, as this would increase the amount of money available to companies.

David Kern, chief economist at the British Chambers of Commerce, said: “Every effort must be made to sustain the recovery. If the economy weakens further, the MPC should not hesitate to increase the QE programme.”

Tags: bank of england, scheme, time, rates, chief economist, inflation, history, interest

Rising unemployment sparks debt fears

Increases in unemployment levels seen in the final quarter of last year have sparked concerns about rising repossessions and spiralling debt problems according to recent reports. Personal debt levels in the UK have been causing concern for the past few years, with the recession, global credit crisis, and difficult financial climate highlighting the debt problems that many people were experiencing.                                                                     

It has been revealed recently that the level of unemployment in the UK soared in the last three months of last year, with the figure increasing by 44,000 taking the total number of unemployed to nearly 2.5 million. Many of those affected by unemployment are younger people. Concerns have now increased with regards to how the rising level of unemployment will affect people that have debts that they are already struggling with and those that have a mortgage to pay.

In addition to this the strong possibility of interest rate rises this year will also impact upon the ability of consumers to pay both their mortgages or rent and their other debts such as credit cards, loans, and other forms of finance. It is thought that the base interest rate, which has been at an all time low of just 0.5 percent for the past twenty two months, will soon have to increase in order to curb spiralling inflation, which is at twice the target level set by the government.

The government has acknowledged that the level of unemployment soared in the latter part of 2010 but claims that it has now started to improve again. Chris Grayling, the Employment Minister, stated: “We’ve got a long way to go and I want to see these figures start to come down, but certainly the evidence is over the past month things have settled down and we are not seeing the increases we saw earlier in the last quarter.”

Tags: business, addition, inflation, concern, evidence

Are you looking to consolidate your debt?

The start of the year is a time when many people decide to try and sort out their finances, and this is because they want to look forward to the rest of the year without the burden of financial constraints hanging around their necks. By sorting through their finances households are able to cut back on their outgoings, leaving them with more disposable income for other things. Reducing outgoings has become especially important given the increases in living costs and VAT, which are set to put further strain on the finances of many households across the UK.

Many of those that will be facing further pressure on their finances are people that already have a number of outstanding debts such as unsecured loans, credit cards, and store finance. These repayments can be crippling at the best of times due to the high rates of interest that are often charged on them, but with the added pressure of the VAT hike and cost of living it could tip some people over the edge financially.

This is why it may be worth considering consolidation if you do have a number of outstanding debts that you are repaying, especially if they are high interest debts, which credit cards and store finance often are. A low rate consolidation loan could enable you to repay all of these higher interest debts, and then benefit from just one lower interest debt instead.

Whilst this will not reduce the amount that you owe what it can do is reduce the amount that you pay out each month. By finding a consolidation loan with a lower interest rate, taking it out over a longer period, and borrowing just enough to pay off your exiting debts rather than borrowing extra, you could dramatically reduce the amount that you owe each month, which means that you could effectively have more disposable income.

It is important to look around for the best deal on a consolidation loan. A number of lenders have been reducing the rates on their loans of between £5000 and £15,000, so this could be a good time to take advantage of lower rates. Consolidation will also provide you with increased convenience, as it means that you will only have one repayment and one creditor to deal with rather than dealing with a range of different payments, saving you both time and money.

Tags: rest, VAT hike, financial constraints, period, finance, debt consolidation, convenience, interest

Financial regulator defends plans over mortgage lending

The UK’s financial regulator, the Financial Services Authority has recently been defending its plans and proposals with regards to the mortgage and property markets, stating that something has to be done in order to avoid another crisis like the one seen over the past couple of years since the onset of the global financial crisis.

The FSA has taken a lot of flack from group such as the Council of Mortgage Lenders over the plans and proposals that it made relating to the mortgage sector. The regulator wants to put an end to the interest only mortgage, which the CML believes will eliminate any chance of some people getting onto the property ladder. It is also thought that plans to reduce the LTV levels that can be offered by lenders could further decrease affordability for potential buyers.

The FSA has now said that individual affordability needs to be carefully assessed to help the industry from experiencing the chaos that has been seen over the past couple of years. He said that in the past it was assumed that lenders were being responsible when it came to mortgage lending and taking risks, and that’s why these measures had not been required in place at the time. However, he added that times had changed especially in the financial market and measures were now needed to increased security.

She said: “We believe that a robust and effective assessment of individual affordability has to underpin any sustainable lending model. When developing the current regime, we assumed that lenders would have a prudential self-interest to manage their credit risk responsibly and, therefore, prescriptive conduct requirements were not required. That has been shown to be a mistake and we are therefore proposing to be much more explicit about the standards we expect.”

Tags: finance, mortgage, fsa, interest, Financial Services Authority, onset, prescriptive conduct requirements, council of mortgage lenders

Record low base rate remains static

For the past eighteen months the base interest rate in the UK has stood at a record low of 0.5 percent, which is the lowest it has ever been in the history of the Bank of England, which spans over three hundred years. It has now been announced that the base rate will remain at this record low for a nineteenth month, with a decision to keep the base rate at 0.5 percent being made after the October Monetary Policy Committee.

Although one member of the MPC has been calling for the base rate to be increased for the past four months according to the meeting minutes the fragility of the economy has been taken into consideration, hence the decision to keep the base rate at 0.5 percent. Andrew Sentance, the MPC member that wanted to increase rates, said that this was necessary in order to keep a lid on inflation.

For homeowners that are on variable rate mortgages the decision to keep the base rate static will come as good news, as it will help them to avoid costly repayment increases, which many may struggle to keep up with in the current financial climate.

The Bank of England said that it is vital to stimulate the economy by encouraging spending, and this is why the interest rate needs to be kept low. The central bank said that this had to be a priority over inflation, which is currently 1.1 percent over the 2 percent target set by the government.

The Bank of England also said that it would not be extending the quantitative easing scheme, which has already seen £200 billion ploughed into the economy.

One economist said: ‘So far the effects of QE in stimulating the wider economy have not been impressive. The bank sector remains weak and unable to increase lending to companies. There are dangers that further QE could lead to major new problems rather than leading to economic recovery.’

Tags: interest, bank of england, interest rates, Monetary Policy Committee, record

Personal loan rates need to be capped

Calls have been made for the government to put a cap on the interest rates charged on personal loans. This follows research that showed that most consumers in Britain want to see a cap on the rates of interest that lenders can charge for personal loans. The research was carried out recently by Compass on behalf of YouGov.

According to the results of the study around 68 percent of consumers believe that the government has a responsibility to protect consumers who take out personal loans by ensuring that a cap is put on personal loan interest rates. In addition to this the research found that a similar number of people, around 69 percent, wanted to see government officials promoting affordable means of credit such as credit unions.

Earlier this year a report was produced by consumer watchdog group Consumer Focus, and this showed that the popularity of ‘legal loan sharking’ was increasing. The watchdog’s report showed how the number of people that were taking out payday loans had quadrupled in the past four years, with around 1.2 Brits now taking out such loans.

The Association of British Credit Unions also issued a recent warning to consumers, warning them to be vigilant for loans that seemed attractive but in actual fact charged up to 2500 percent in interest per year. Compass said that the calls for caps on personal loans would be a test to see whether the new government would be supporting consumers or lenders.

One Compass official said: “This is a key test of the coalition government’s stated commitment to create a fairer society. Now we need to see if it backs the people or the financiers.”

Tags: credit, Britain, finance, cap, interest, loan

Lenders cut fixed rate mortgage rates

According to industry reports a number of lenders have slashed the rates on their fixed rate mortgage offerings even though the Bank of England decided to keep the base interest rate on hold again this month at its record low of 0.5 percent. A number of building societies and banks have cut the rates on their fixed rate deals.

High Street banking giant HSBC recently launched its lowest ever five year fixed rate deal, and last week saw Coventry Building Society and Nationwide Building Society reduce their fixed rate deals. One industry expert said that the reason why lenders were slashing their fixed rates even though the base rate had remained static was because they wanted to try and entice people off going for low standard variable rates. With banks already struggling the situation is being made worse by people opting for low standard variable rates, and this has led the banks to start taking action.

She said that many people that had come off special fixed rate deals had then moved onto standard variable rates, and with the base rate being so low this had been their cheapest option. This has resulted in lenders struggling, and many are now working on the hope that by cutting their fixed rate deals they can tempt people into remortgaging and taking out a fixed rate deal rather than a standard variable rate one.

Financial expert Michelle Slade stated: ‘Millions of customers who have come off short-term fixed-rate and tracker deals in recent years have gone on to their lender’s standard variable rate as it has been cheaper than fixing again. For example, Nationwide’s base mortgage rate is just 2.5%.’ She added: ‘The new fixed rates are certainly mouth-watering and could be worth grabbing for some borrowers.’

Tags: mortgage, variable rate mortgage, interest, interest rates, fixed rate mortgage

What to look for with a personal loan

Whilst credit conditions have undoubtedly been strained over the past couple of years many believe that things are now easing up in the financial markets, and whilst lenders have not gone back to the days of easy credit the availability of loans and finance does appear to be easing up to some degree.

With this in mind many people may now start to think about taking out a personal loan for a variety of purchases, and with things easing up in the financial markets the choice of personal loans is greater than before, and there are some pretty good deals available for those that have a decent credit history and score.

There are many lenders that offer personal loans, and which cater for the needs of a wide range of people and needs. It is important for those that are looking for a personal loan to do some research and familiarise themselves with the different loans and deals available so that they can make a more informed choice when it comes to deciding which of these loans to opt for.

It is easiest to use the internet to browse and compare the different personal loans available, as this will allow you to quickly see which loans fit in with your needs and your budget without having to deal with any pushy sales people or feel embarrassed about going through your finances with someone on the phone or in person.

There are a number of key areas that you need to look at when browsing personal loans with a view to taking one of these loans out. The interest rate that you will be charged is a very important consideration, so this is something that you need to compare. However, do bear in mind that if a lender advertises a typical APR this does not mean that you will necessarily get that rate of interest but that most of the lenders customers get that rate.

The repayment periods on personal loans can vary from one provider and loan to another, so this is something else that you need to look at when you are deciding which loan you should go for. If you want to keep your repayments down then you need longer repayments periods, so make sure that you know what’s on offer.

Other things that you need to look at include the overall monthly repayments to ensure that you can afford the repayments, the eligibility requirements, the terms and conditions of the loan, and the borrowing limits, although this will vary based on your financial status.

Tags: personal finance, loan, overall monthly repayments, interest, Unsecured loan

Lack of awareness about mortgage rates amongst UK consumers

It has been claimed in a recent report that there is a severe lack of awareness amongst UK consumers when it comes to their mortgage interest rates. The data comes from a study that was carried out for the Consumer Financial Education Body, and involved polling over two thousand consumers about their mortgage interest rates.

The results of the study indicated that a massive three quarters of mortgage holders in the UK had no idea how an interest rate rise of 1 percent would affect their mortgage repayments and their budgets. The poll also found that many mortgage holders did not know what type of mortgage they had, and many also had no idea when their mortgage would expire.

The survey looked into a number of different mortgage related issues. The base interest rate has been kept on hold at its lowest level on record for sixteen months now, standing at just 0.5 percent. However, the survey results showed that over 50 percent of consumers thought that in the next nine months the base interest rate would increase.

Around 15 percent of those polled did not know what sort of mortgage product they had, such as a fixed, tracker, discounted, or standard variable rate mortgage. Around 8.6 million people out of 14.6 million had mortgages that formed part of a time limited deal. However, 15 percent of these mortgage holders did not know when their deals came to an end.

One industry official said: “Interest rates have been at record lows for some while now. Although there is uncertainty about when this will change, it is clear from our research that many people with mortgages have not thought about what it would mean for their monthly payments, or where they would find the extra money in their household budget if their mortgage rate was to go up. Lack of time means many of us often put off reviewing our finances.”

Tags: mortgage, deal, Mortgage loan, interest, finance

Further increase expected with credit card interest rates

Over recent years there has been a lot of controversy with regards to the high rate of interest that is charged on many credit cards, with campaigners, consumers, and various other officials pointing out that the gap between the base interest rate – which is at its lowest level on record at just 0.5 percent – and the average credit card interest rate was getting wider and wider.

Whilst the base rate has been at its all time low for well over a year now credit card interest rates have continued to increase, leaving many credit card customers who are unable to settle their balances in full at the end of each month facing very high levels of interest on their debts. However, despite the controversy it appears that the problem could be set to get worse.

According to reports experts from the credit card industry are predicting that credit card companies are set to increase credit card interest rates even further, and this could further impact on the finances of many people that are already struggling to stay afloat. Experts believe that credit card providers will increase their rates in order to offset the risks that they are having to take.

Recent research showed that over five million consumers in the UK had admitted to using their credit cards on a regular basis to make bill payments and other essential payments, and this means that the higher interest rates could take their toll on many people.

A spokesperson from Moneyfacts.co.uk said: “Providers have been putting rates up and obviously there’s high unemployment and the risk of people defaulting and not repaying their debts is still quite high, so they’re very strict on who they give their cards to. The customers that pay off just the minimum every month are going to be the ones who are hit hardest. They’re going to add, maybe, hundreds of pounds extra on to their debt and take a lot longer to repay [it].”

Tags: increase, credit card interest rates, Credit card, rate of interest, Credit Cards, risk, personal finance, interest

Consumers can benefit from rewards based credit cards

One popular finance website has recently highlighted the benefits of rewards based credit cards, stating that many consumers could benefit from having these credit cards providing they use them properly. Officials from the site, Confused.com, said that in the current climate many people could benefit from effectively being able to get something for nothing.

With rewards based credit cards consumers are able to earn points, rewards, or cash back when they make purchases on the card, and there are various different rewards based credit cards to choose from offering a choice of different rewards. Some of the rewards available with these credit cards include air miles, points towards discounts, vouchers, and more, as well as cash back.

Those that use these credit cards need to ensure that they clear the balance in full each month otherwise the interest that they pay on their balance could by far outweigh the rewards that they earn for making purchases on the card. However, by repaying the balance in full each month no interest is charges and customers can effectively get something for nothing by earning their rewards.

The level of rewards offered on these cards can vary depending on the card and provider that you go through, and rewards can only be earned by making purchases on the card and not for cash transactions and withdrawals.

A Confused.com official said: “Using a reward based credit card can be a great way to earn incentives like cash back, flights and shopping vouchers.  Our findings show that it is still possible to get something for nothing and that savvy shoppers really can be rewarded for using a credit card, with incentives that all the family can benefit from.  Customers who are able to pay off their balance in full each month are likely to benefit the most from a reward card, otherwise the benefits could be outweighed by interest charges.  For customers who find it harder to do this, a zero percent purchase card may offer a more suitable and beneficial proposition.”

Tags: Credit card cashback, rewards, points, Credit Cards, interest

Should Brits take out loans for weddings?

As most married couples will already know getting married can be an expensive affair if you want all the trimmings, and those that are looking to have the perfect wedding, entertain guests, provide food and entertainment, and round things off with a romantic honeymoon will know that the cost can run into thousands of pounds.

In the current financial climate it can be difficult for couples to save the kind of money that they need for a wedding within a reasonable space of time, particularly if they also want to put a deposit down on a property. It would therefore be natural to think that many couples look into taking out a loan for their special day.

Many couples do turn to personal or wedding loans in order to pay for the big day, and those that do are advised to look for the best rate of interest and the best deal possible, although some people may be put off from starting their married life in debt.

Whilst those getting married may consider a loan for their big day, recent research has shown that attendees are far less likely to take out a loan in order to pay for expenses at the weddings of their loved ones. In fact, Santander carried out research showing that only 1 percent of Brits would actually take out a personal loan to fund the cost of going to the wedding of a loved one.

Emma Roberts from Santander said: “It’s easy to overlook the cost involved in being a wedding guest but the outlay can be significant, both before and during the big day. The last thing people want to be thinking about when preparing for a loved one’s wedding is the expense involved but costs can quickly mount up.”

Tags: interest, Brits, Marriage, whilst, property

Overdraft interest charges hit highest level in ten years

Since the catastrophic global credit crisis swept across the UK, leaving the banking industry to face huge losses, the UK’s banks have been taking whatever steps necessary to try and recoup the massive losses, which were made worse by the recession, which left many borrowers unable to continue with repayments on loans, credit cards, and other forms of finance.

Reports have highlighted the various ways in which banks have been trying to claw back their financial losses and shore up their own finances, including reducing the interest paid on savings accounts to little or even nothing in some cases, and sneakily increasing the interest rates charged on loans and other forms of credit.

Another recent report claims that the interest rates being charged on current account overdrafts have now been hiked up to their highest level ten years, with the average rate of interest being charged on accounts that are in the red increasing to 14.22 percent.

The report states highlighted that this was twenty eight times higher than the base interest rate, which is at an all time low of just 0.5 percent, where it has been since March of last year. It also stated that the base interest rate was a massive 6 percent last time average overdraft interest rates exceeded 14 percent. Officials believe that this is yet another move by banks to try and make more money from customers and improve their own profits.

An official from the financial industry group Moneyfacts stated: “Despite eventually winning the OFT case banks made significant changes to the level of charges they will levy for unauthorised borrowing. As one revenue stream closed inevitably they have moved to find another. Banks are likely to be making more now from these increases than they ever were from penalty charges.”

Tags: finance, bank, overdraft, Bank charge, interest

Students in line for loan rate shock

It has been claimed that many students that are studying at university in the UK could be set to face a loan rate shock, with interest rates on student loans set to increase as a result of the rise in inflation levels. Students already face a tough time when it comes to being able to afford everything they need whilst studying at university, but if interest rates do increase the situation could get even worse for many of those studying in the UK.

This week it was reported that the level of inflation had increased to 3.4 percent, which is 1.4 percent higher than the government’s target of 2 percent. The increase in inflation was said to have been driven by price increases on things such as petrol, food, and energy compared to last year when prices on these products and services were falling.

The interest rates on student loans are increased by the Student Loans Company each September based on the level of RPI inflation seen in March of that same year. According to reports around three million students as well as graduates could see their rate of interest increase when September comes around. The rate of interest that students are paying on loans can vary based on when the loan was taken out.

In addition to facing increased interest rates on loans students are also up in arms about the lack of clarity over student funding and university fees from the three main political parties in the run up to the general election. Student unions have accused parties of failing to provide clarity over these issues and hiding behind a review that was carried out last year in order to avoid having to go into too much detail about their policies with regards to this matter.

Tags: time, finance, interest, Student loan, education

Tips to make 2010 a money saving year

If you are one of the many people that have decided that their New Year’s resolution involves cutting back on costs and saving money then you may still be thinking of ways in which you can achieve your goal. Saving money and cutting back on your outgoings isn’t always easy, and you may have to think carefully about the different areas in which you can make cutbacks. However, there are actually a number of ways in which you can save money, and some of these are outlined below. Read more

Tags: interest, insurance market, debt consolidation, finance, Direct debit, Credit card

Credit card firms try to woo back customers

Over the past couple of years credit card firms in the UK have been turning away an increasing number of clients, with the global credit crunch seriously affecting lending levels and leaving many people with little to no chance of getting credit. Read more

Tags: reward credit cards, cash back rewards, United States, interest, cash back credit cards

Whopping overdraft charges from Halifax

The High Street lender Halifax is to increase its borrowing costs from December of this year, and this will see customers having to spend a small fortune on the cost of borrowing, with the lender planning to hike up borrowing costs significantly. Read more

Tags: income, halifax, overdraft facility, interest, halifax bank charges

Further limit reductions on credit cards could be in the pipeline

It has been claimed in a recent report that a growing number of credit card customers in the UK could see their credit limits reduced as credit card providers do their best to shore up their finances and claw back some revenue. Read more

Tags: credit, mention, Credit Cards, credit card limits, interest, United Kingdom

Dramatic fall in balance transfer card deals over recent years

Over recent years many consumers have benefited from using balance transfer credit cards, as these cards have allowed them to save money on their credit card debt interest. Read more

Tags: period, balance transfer credit card, credit card balance transfers, balance transfers, Business Finance

Banks take taxpayer’s money but won’t lend any back out!

Over the past year the UK government has spent billions of pounds bailing out the banking industry following the global credit crunch and the ongoing financial crisis. Banks have run into severe difficulties in terms of their finances, and at one point the banking industry in the UK was said to be on the verge of collapse. Read more

Tags: bail out, banks, high interest rate, mortgage applications, interest, business, move, Mortgages

Egg charges monthly fee on new card

Internet financial giant Egg has recently announced that it will be charging a monthly fee of £1 on its new credit card, which is the Egg Money World Mastercard. Read more

Tags: ban, Electronic commerce, mainstream products, Credit Cards, annual fees, interest, Egg Money World, MasterCard

G8 finance ministers discuss stabilising of economies

According to a recent report G8 finance ministers have stated that major economies around the world are starting to stabilise following the turbulence and chaos caused by the global financial crisis and the recession, the UK being one of these economies. Read more

Tags: Ministers, global recession, South Korea, interest, G8, report, Tim Geithner, economies

Lower income consumers can apply for many credit cards

It has recently been revealed that despite the tighter credit conditions that have come into play since the onset of the global credit crunch many consumers who are on relatively low wages are still eligible to apply for the majority of credit cards that are available on the market. Read more

Tags: low income families, interest, Credit Cards, labour credit cards, debt

Consumer wasting money by failing to switch credit cards

It has been reported that many consumers in the UK are simply wasting their money and paying far more than they need to on their borrowing, simply because they haven’t taken the time or made the effort to switch their credit card to a more suitable and affordable one. Read more

Tags: New Year period, festive season, balance transfers, interest, Business Finance, credit card debt, switch credit cards, tighter credit conditions

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

2008 saw 30 percent drop in mortgages

Over the past twelve months mortgage lending has fallen by around 30 percent according to officials from the Council of Mortgage Lenders. This drop in mortgage lending has apparently resulted in lending falling to its lowest levels since 2002. Total mortgage lending last year fell to £256.4 billion, whereas the previous year mortgage lending levels came to £363.7 billion. Read more

Tags: percent drop, mortgage drop, percent, thing, number, interest, credit crunch, Credit (finance)

Tesco lost out to supermarket giants over Christmas

One of the leading supermarkets in the UK has admitted that over the Christmas period it lost out to its rival supermarket giants, with the weakest sales growth in nearly two decades. In the run up to Christmas sales levels for Tesco only went up by around 2.5 percent, which was far less than its rival supermarkets. Read more

Tags: supermarkets, price, sales figures, torrid, interest

Future bleak for economy in UK

According to business leaders the future for the economy in the UK is looking very bleak, with many claiming that in the final part of last year the economy experienced ‘frightening deterioration’. Read more

Tags: Business Finance, uk economy, recession, interest, British Retails Consortium, rate, part, consumer

Compensation process begins for Icesave customers

Earlier this month there was widespread panic amongst consumers, charities, local authorities, and businesses when the Icelandic bank Landsbanki collapsed, leaving many people, firms, and agencies that had put money into high interest Icesave accounts wondering whether they had lost all of their money. The panic became worse after it was revealed that the Icelandic authorities were failing to honour obligations with regards to compensating UK consumers. Read more

Tags: interest, icesave, result, Business Finance, BACS

Sixteen year high for inflation in UK

According to recently released figures the level of inflation in the UK has now reached a sixteen year high, with inflation for September registering at 5.2%. The high cost of food, oil, and energy has been blamed for pushing inflation levels up to such a high figure, and the level of inflation is now way more than the 2% target set by the government. Inflation has been soaring for some months, and as a result of this the Bank of England has been unable to cut the base rate as quickly as had been expected at the start of the year, although it did apply a surprise 0.5% cut recently. Read more

Tags: key issue, sixteen, government, September, interest, deflation, inflation, surprise 0.5% cut

Widow fined £800 by Northern Rock

A woman who previously had tens of thousands of pounds worth of savings with ailing bank Northern Rock was outraged when she was hit with an £800 fine from the bank for withdrawing her savings, even though she had followed the procedure required in order to avoid these charges. The elderly widow, Mrs Heather, had savings of £173,000 with Northern Rock, but like many other customers decided that she wanted to withdraw her money when Northern Rock ran into problems in September 2007. Read more

Tags: savings, interest, error, face financial penalties, fine, finance, worth, account mrs

Many people could find it even more difficult to sell their homes

A recent report has shown that many homeowners in the London area could find it increasingly difficult to sell their homes in the near future, as a result of new plans that may be introduced to force homeowners to inform potential buyers about the risk of flooding. It is already very difficult for many homeowners to sell their properties due to problems in the mortgage and housing markets, and this could matters even worse for many more. Read more

Tags: housing markets, risk, United Kingdom, danger, housing

Banks make huge profits from overdraft fees

A recent report has suggested that banks are making huge profits from the controversial overdraft fees, which have been in the financial headlines lately having been at the centre of a high court test case with regards to their fairness, with some banks charging close to £40 per fee even though the cost to the bank is often just a few pounds. Read more

Tags: overdraft limits, court test, centre, conclusion, overdrafts, interest, cut, Insurance

Survey shown AA low down in breakdown rankings

Many people class the AA as a household name when it comes to breakdown services, and many may think that the AA provides one of the best breakdown services. However, according to a recent survey the AA actually came pretty low down the list in terms of its breakdown services, with a survey that involved interviewing over 32,000 drivers showing that the motoring giant only came eleventh. Read more

Tags: bottom of the list, interest, motoring giant, breakdown cover, RAC, family, Reorganization, line

2007 ended with lower lending levels from banks

A recent report has shown that there was a significantly lower level of lending to households from banks in the UK during the fourth quarter of last year. The information was released by the Bank of England, and officials from the Bank of England have put the drop in lending levels down to a number of different factors. The data came from the Bank of England’s Quarterly Credit Conditions Survey result. Read more

Tags: bank of england, end, interest rtae, interest, summer, higher inter-bank charges

Employers say economy at risk of recession

Employers from small and medium sized businesses in the UK have said that the economy is at serious risk of recession. The warning came after a small business survey was carried out earlier this month, with businesses warning that the economy could slide into recession within a matter of months. The survey showed that orders and sales for small and medium sized businesses in the manufacturing and services sector had been drying up over the past three months. Read more

Tags: bank, recession, recessions, economy, interest, Late 2000s recession in Europe, day, mortgage lender

What the experts think of falling house prices

It has now become pretty clear to most industry professionals and consumers that house prices in the UK have already dropped significantly compared to last year, and are set to keep falling over the course of this year. Some officials think that house prices could fall in excess of 20% whereas other think the house price falls are more likely to be around 5-10%. A number of officials have already expressed their opinions on recently released figures relating to falling house prices. Read more

Tags: house prices, department of communities, interest, support, latent, finance, Payday, consumer confidence

Mortgage lender offering some impressive rates on savings

According to a recent report a number of mortgage lenders have been offering some impressive interest rates on savings accounts in a bid to increase deposits from savers to aid funding. Many banks and lending institutions have experienced funding problems as a result of the credit crunch, which has swept across the country leaving a trail of turmoil in the financial markets. A number of high profile casualties, such as Northern Rock, have suffered terribly as a result of the problems in the financial sector, and mortgage lenders are desperate to avoid heading down the same route. Read more

Tags: mortgage, interest, bank, result, issue

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: savings account, deal, housing slump, Financial institutions, competition

Store cards reduce their APR’s – just

Following new regulations made by the Competition Commission, retailers have had to reduce the annual percentage rates (APRs) on their store cards to below 25 per cent, however, many have continued to hover just below this rate, it has been reported.

According to Fool.co.uk, a number of store cards offer only just below 25 per cent APR, including Jaeger’s card (24.9 per cent), Russell and Bromley (23.9 per cent) and Marks and Spencer (23.9 per cent).

The research found that some companies even increased their rates after the new rules came in, such as Marks and Spencer which hiked its rate by four per cent.

Ed Bowsher, savings expert at Fool.co.uk, said: “Store card-holders should be aware of the high interest rates which come hand in hand with introductory offers – and should remember that these cards are designed to make you spend, rather than help you save money.”

According to Halifax, the average balance on a credit card at the end of the month stands at £1,859.

Tags: interest, Bromley, expert, hover, 25 per, high interest rates, percentage, Fool.co.uk

Do you want to earn an income from your interest?

With a wide range of savings accounts to choose from consumers in the UK can enjoy finding the ideal account to suit their needs and their circumstances. The savings account that you choose will be based not just on your needs and circumstances but also on the amount that you have to invest and what you want from the account. For instance, those looking to gain instant access to a savings account would not fare well with a notice account. However, those wishing to get a tighter reign over their savings accounts withdrawals could really benefit from an account that restricts the number of withdrawals that can be made. Read more

Tags: bank accounts, monthly income accounts, tighter reign, interest, rise, bank account, savings account

Is a variable rate mortgage the right choice for me?

Consumers in the UK can enjoy a choice of mortgage options these days, and no matter what your needs and circumstances there is a good chance that there is a suitable mortgage product on the market for you. When it comes to mortgages consumers can enjoy options such as the standard variable rate, the fixed rate, base tracker mortgages, capped rate mortgages, and more. The most popular of these are the variable rate mortgage and the fixed rate mortgage, both of which offer benefits as well as disadvantages. Read more

Tags: variable rate mortgages, UK mortgage terminology, Floating interest rate, Real estate, Mortgages, interest

Savers should look at alternative accounts, says expert

People who have a lot of money tied up in savings accounts may not be getting the best interest rates and should look at alternative options, a financial expert has said.

Kevin Mountford, head of savings and current accounts at Moneysupermarket.com, said that although there are a lot of good deals available at the moment, many people are probably “not getting their just returns” on their savings.

Mr Mountford warned that consumers often forget that “with most tax payers that rate of interest is subject to tax at either a standard or higher rate so the net return they are getting often is even less than the RPI at the moment”.

According to the Telegraph, many savings accounts have interest rates of around seven per cent, even thought the Bank of England base rate is five per cent.

The newspaper says that the credit crunch is largely responsible for banks being more cautious with their money and seeking alternative sources of funding through higher rates on savings accounts, which give them a ready supply of cash.

Mr Mountford warned that consumers often forget that “with most tax payers that rate of interest is subject to tax at either a standard or higher rate so the net return they are getting often is even less than the retail prices index at the moment”.

Tags: head of savings, interest, mountford, cent, cash, the Telegraph, tax payers, financial expert

Nationwide cuts fixed-rate mortgages

Nationwide, the UK’s third largest mortgage lender, has announced it is cutting interest rates on some of its fixed-rate mortgages by 0.3 per cent. Read more

Tags: market, com, fixed rate mortgages, credit, building societies, interest

Look to remortgage in advance

With conditions within the financial markets currently volatile, one expert has suggested that homeowners looking to remortgage ought to review their options months before their existing deal runs out.

Ray Boulger of John Charcol said that lenders are choosing to change their mortgage rates “increasingly quickly” and most new rates tend to be “higher than the ones they replace”.

The expert advised borrowers wanting to remortgage to “investigate their options as much as six or seven months before their current deal ends, because some mortgage offers are valid for six months, although others only last three months”.

Mr Boulger also suggested that people seeking to buy a new home ought to speak to a broker first to find out what mortgages are currently available, given increasingly tighter lending criteria.

Commenting on the decision taken by the Bank of England to keep the base rate of interest at 5.25 per cent, David Kuo, head of personal finance at Fool.co.uk, said that the news will be “disappointing” for homeowners.

Tags: interest, homeowners, tighter lending, finance, advance, remortgage, decision, head

Tracker mortgages ‘best bet’

Tracker mortgages are the “best bet” for those consumers who want to benefit from falling interest rates this year, according to finance experts.

Moneysupermarket.com said that while rates have been going down, increasing numbers of consumers have been reverting to tracker mortgages.

Louise Cuming, head of mortgages at moneysupermarket.com, said: “At the moment, the percentage of customers that are on trackers… although it’s only 24 per cent, that’s the highest it’s been since back in 2005.”

She added that trend for rates is going to be down, so these products are useful for those spenders where affordability is no issue.

However, moneysupermarket.com warned that tracker mortgages should only be used by those consumers who can afford to risk higher repayments in the future.

The most recent figures from the Council of Mortgage Lenders, for December 2007, show that 29,600 tracker loans were taken out by homebuyers – making up 24 per cent of all home loans.

A survey by Fairinvestment.co.uk last week revealed that 23 per cent of Britons polled would favour a tracker mortgage.

Tags: tracker, favour, Business Finance, Mortgages, interest, december, show, home loans

Economists give views on where interest rates will go next

There was a sigh of relief across the UK earlier this week when the Bank of England announced that interest rates had been cut by 0.25% from 5.75% to 5.5%.

There are now mixed predictions with regards to what will happen with the interest rate next, with some predicting that 2008 will see another one or two interest rate cuts and others believing that the interest rate could fall as low as 4% in 2008. Financial experts from This is Money interviewed some economists to get their views.

An official from Investec stated: ‘Evidently the MPC is taking much more note of recent signs of a slowdown in the economy and its fears over the possible effects of the credit squeeze have begun to crystallize. The question obviously now is whether rates come down again and if so how quickly. The outlook is very uncertain. We are pencilling two further 25 basis-point cuts over the first half of next year.’

Roger Bootle from Deloitte and Touche stated: ‘Today’s decision by the MPC to cut interest rates from 5.75% to 5.5% is the first step in a prolonged period of monetary easing that could see rates fall very sharply. I previously thought that rates would drop to 5%, but I now think that they could eventually be cut all the way to 4%. Inflation is likely to rise further in the coming months. However, the rise in interbank interest rates means that the risk of a very sharp and prolonged economic downturn is growing by the day.’

A spokesman from Bear Stearns said: ‘We expect another cut in January, with rates to target 5% by the second quarter. UK rates should be at 4.5% by the end of 2008, possibly even lower if the downturn is more severe. This has been a cut to alleviate the credit crunch and provide a rescue remedy for growth. Lower rates should help to put a prop under the UK housing market.’

Tom Smith
10t December 2007

Tags: uk, england, crunch, housing, credit, bank, propert

Do you need additional insurance for your Christmas gifts?

With consumers across the UK clamouring to the shops to get their Christmas shopping sorted out, retailers are raking in the money despite the apparent slowdown in the economy and in consumer confidence.

Many retailers are also looking at ways to increase profits at the busiest time of the year, peddling everything from high interest rate store cards to costly insurance policies. Most people are aware of the dangers of store cards, which charge a fortune in interest if the balance is not repaid in full each month. But what about insurance cover on the gifts that you buy?

Most people will be familiar with the patter that sales employees give when purchasing certain items such as electrical gadgets. This is where the employee tries to persuade you to take out additional cover to get the item replaced if it breaks down or gets damaged within the first three years. However, this cover can be expensive, often coming to a third of the price of the actual item, and many retailers try and push this cover on items as cheap as a fiver, which could be easily replaced by the consumer in the event that anything happened.

However, experts are warning that even with more expensive items consumers should think carefully before shelling out on cover, as in many cases this cover may be unnecessary. Industry experts state that consumers already enjoy a high level of protection without having to take out additional cover, with the manufacturer’s warranty, credit card purchase guarantees under Section 75 of the Consumer Credit Act, and the Sale of Goods Act.

Those that do wish to benefit from additional protection on the gifts and items that they purchase over the Christmas period may fare better by looking into specialist stand alone policies that provide cover for several items rather than a specific item. In addition, consumers should remember that many of the items may be covered under their home insurance policy.

Tom Smith
10th December 2007

Tags: interest, cost, Insurance, payments, purchases, extra

Earning money from banks

Over recent years banks in the UK have not seen much positive publicity, and have come under fire for everything from security breaches to hefty charges. Read more

Tags: transfer, bank, accounts, earn, interest, current, referrals

Many savers being fooled by Internet savings accounts

According to a recent report from This is Money, many savers across the UK are being tricked into parting with their hard earned cash by seemingly tempting high interest Internet savings accounts that look far better than they actually are.

A number of Internet savings accounts, some from big name banks such as Alliance and Leicester or the Abbey, are offering eye-catching interest rates that have got consumers flocking to open up an account. However, experts state that there is a massive sting in the tail.

What many consumers are failing to realize is that many of these accounts will only pay this rate of interest in the event that the money in the account remains untouched, and just one withdrawal from the account could seriously impact on the amount of interest that you receive. For those that do make withdrawals the interest rate is docked to the point where it falls behind many of the best buy savings accounts on offer at present.

The highest paying of these seemingly high interest savings accounts is Coventry Online, but industry officials state that even if you did open an account and did not make any withdrawals you would only receive 80 pence more for each £1000 of savings than you would with the ICICI Bank’s HiSave Account, which is currently Money Mail’s best buy savings account.

Consumers that are hunting around for a place to put their savings are urged to ensure that they read the small print with these Internet savings accounts, and do not jump in feet first based just on the eye-catching interest rates that are advertised, as the amount of interest that is received may not be close the interest rate advertised.

Tom Smith
5th December 2007

Tags: interest, rates, attractive, introductory, deposits, earn, savings

IVAs – what are they?

An IVA is an individual Voluntary Arrangement, and has become known as the softer alternative to bankruptcy for those with high levels of unsecured debt. Read more

Tags: interest, iva, debts, arrangement, individual voluntary arrangement

‘Tis the season to avoid store cards

As Christmas continued to get nearer and nearer experts have been warning consumers across the UK to avoid the temptation as taking out a store card, as this could lead to high levels of debt and real financial difficulties once the festive season is over.

With December upon us millions of shoppers are hitting the high streets and shopping malls to get their gift, clothes, and other Christmas goodies, and many retail staff are just waiting to pounce and talk vulnerable consumers into taking out a store card.

Store cards are fine for those that will repay their balance in full each month, thus avoiding any interest charges, but many experts state that consumers would be far better off with a rewards based credit card, as you can still avoid paying interest by repaying the balance in full each month, you can still enjoy benefits in the form of rewards, and you have the luxury of choice, as you can use the card in any shop rather than only at a specific shop.

However, the real problem is with those that do not repay their balance in full, as store cards charge very high rates of interest, and the interest that you will pay on any outstanding balance will by far exceed any rewards and discounts that you receive. Therefore those that wish to spread repayments on their Christmas spending are strongly advised to opt for a 0% purchase credit card in order to avoid paying interest rather than an expensive and restrictive store card.

One industry official stated: ‘With storecards the advice is simple: Don’t use them, avoid the gimmicks, don’t be lured in. Invariably people forget about spending on their plastic, or they use credit precisely because they know they won’t be able to repay the debt immediately. Under those circumstances there is no more expensive form of borrowing than a storecard. The discounts can be attractive, and some storecards offer 0% deals if you spend a lot of money in-store. So if you’re adamant you need a storecard, ensure you make the most of it by keeping up to speed on all the incentives on offer.’

Tom Smith
1st December 2007

Tags: uk, high, cost, store, purchases, credit, interest, cards, incentives

Customers can save for Christmas with the Post Office

Over the last few years the Post Office in the UK has diversified into a variety of different areas, and in a recent announced the Post Office has stated that consumers will be able to start saving for Christmas 2008 with a Christmas savings club that is to be launched by the Post Office service.

The service will allow consumers to deposit their cash into any of the fourteen thousand branches of the Post Office, but they will not be able to access the money again until November of next year.

Once they have saved the money consumers will be able to spend it either by using vouchers or via a pre-paid debit card that will be accepted by over two hundred retailers. The account provided by the post office will be protected, and will only be accessible by the customer. Those wishing to save through this scheme will receive a Christmas Club card, which can be used to make deposits at Post Office counters.

There will be a minimum deposit level of £5.00 and a maximum level of £500. Savers will be able to put away a maximum amount of £1000 per club card. According to officials from the Post Office service there is a gap in the market for this type of scheme since the collapse of Farepak last year. Members that use this scheme will be able to access their funds from 1st November 2008.

One Post Office official stated: “As one of the UK’s most trusted brands with an unparalleled retail network, we are responding to the need for a safe and convenient way for people to put money aside for Christmas.”

Tom Smith
25th November 2007

Tags: office, interest, redeem, save, spend, club, earn, savings

Three interest rate cuts predicted for 2008

According to city economists homeowners in the UK will be able to enjoy easier financial management next year with predictions that interest rates will fall two or three times over the course of the year.

Since August 2006 interest rates have risen five times, each time by 0.25%, and this took the base rate from 4.5% to 5.75% in under a year. Since July of this year interest rates have remained stable at 5.75%, despite calls from some agencies for the Bank of England to cut rates.

Economists are now predicting that interest rates could fall back to 5% next year through a series of interest rate cuts. Some economists predict that there may be one interest rate cut by the end of this year and a further one early or mid next year. However, the timing of interest rate cuts will be dependant upon data reflecting continued economic slowdown. GDP growth forecasts have been downgraded for next year, and this is because of factors such as the series of interest rate rises, volatile financial markets, and the current strength of the pound.

One economist stated: ‘Crucially the Bank has validated market expectations that we are going to see two or three interest cuts in 2008.’

Another said: ‘The report is markedly more doveish and indicates that at least two interest rate cuts are likely.’

Any interest rate cuts are likely to be welcomes by homeowners, who have seen their repayment rocket over the past year, with interest rate rises adding hundreds of pounds to the mortgage repayments of some homeowners. There is also set to be financial turmoil for those due to come of cheap fixed rate mortgages deals over the coming months, and an interest rate cut could help to ease the financial impact.

Alan Wright
24th November 2007

Tags: Mortgages, cuts, interest, rates, property, offers, cheaper, deals, fixed, Loans

Payment Protection Insurance Cover

Anyone that takes out finance likes to have the peace of mind that they are protected against situations that could render them unable to make repayments, and payment protection insurance cover is an effective way to do this. Read more

Tags: Loans, cover, finance, ppi, cards, accident, credit, protection, illness

Hidden savings costs revealed

Easy access savings accounts can hold hidden charges for savers wishing to take out any of their money, it has emerged.

Consumers are urged to look at the small print of a savings deposit before entrusting their cash and laying themselves open to punitive measures, said Kevin Mountford, head of savings at moneysupermarket.com.

He commented: “It’s clear that some of these accounts deserve their place in the ‘easy access’ sector, but others should perhaps be categorised as ‘new notice accounts’.

“They do have a part to play in the market, but they are very much aimed at more disciplined savers. We know from experience that savers are different and save for different reasons.”

Mr Mountford added that savers should consider the details beyond the advertised rate and make sure they truly understand what they are signing up for.

Research from the website found that just four in ten of the highest interest-paying accounts give savers the chance to have unlimited access to their cash without losing any interest.

Tags: different reasons, research, which, moneysupermarket, punitive measures, highest interest-paying accounts, access savings accounts, interest

Halifax house price data contradicts Nationwide data

Recently Nationwide released data that showed house prices in the UK had picked up during the month of October, following an unexpected tumble of 0.6% during the month of September.

The news of rising house prices came as a surprise for many, particularly given industry predictions that house prices would continue to fall over the last quarter and into 2008. However, the Halifax has now released data that contradicts the information provided in the Nationwide report.

According to the Halifax house prices actually fell during the month of October, taking another tumble of 0.5% and bringing the annual rate of inflation to 8.9% for October from 10.7% in September. According to the Halifax report the average house price in the UK is now just over £197,000. If house prices have fallen for the second consecutive month this is the first time since April and May 2005 where there will have been two house price drops in a row.

In the three months to October house prices were 0.3% higher than the same time last year according to reports. The Halifax stated that its figures reflect the steady ‘downward trend’ that many analysts and industry experts have been predicting would take place over the final months of the year.

The Chief Economist at Halifax stated: “The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity.”

He added that the data signifies a cooling market but not a crash. “The UK economy is in a strong position. Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices.”

Tom Smith
15th November 2007

Tags: england, houses, bank, rates, cost

Millions may decide to switch banks

According to a recent report from consumer group Which? millions of UK consumers may end up switching bank accounts in the future if monthly or yearly bank charges are introduced for those with bank accounts.

Which? conducted a survey of 1022 people, and out of the respondents nearly 80% stated that would look at switching to another bank. Around 73% stated that they thought that fees charged on current accounts would be unfair. However, banks have indicated that these fees are a possibility in the event that they lose the right to impose charges for exceeding overdraft limits, bouncing cheques, and for returned direct debits.

A High Court test case is scheduled for next year to determine the legalities of these charges, which have been at the centre of controversy for the past couple of years. If the banks lose the case then many banking customers could be hit with high monthly or annual fees simply for having a bank account. Nearly 90% of those polled by Which? added that the government needed to ensure that caps were placed on any such account fees.

An official from Which? stated: “Consumers don’t want to be charged for their current account and will vote with their feet if their bank introduces a monthly or annual fee. Our research shows that customers would support Government intervention to make sure banks don’t overcharge.”

A spokesman from the British Banker’s Association said: “UK banks offer the most cost effective and comprehensive package of current account services around and are keen to continue to do so. We have always said there is a place for the current model of free banking and part of the reason for seeking the clarity of a court decision on bank fees is to defend this.”

Tom Smith
14th November 2007

Tags: switch, increase, bank, accounts, interest

Bank of England comes under fire for failure to reduce interest rates

Following its most recent decision to keep interest rates on hold for a fourth consecutive month the Bank of England has come under fire from a number of agencies for failing the economy by making the decision to keep interest rates unchanged at 5.75%.

Some say that the Bank of England is putting the stability of the UK’s economy at risk by failing to cut interest rates, and both lender and brokers had been hoping for an interest rate cut of at least 0.25% for November.

A broker from firm John Charcol stated: “A cut of 0.25% today would at least have pushed three-month Libor back down to about 6%. It would also have started to redress the Bank of England’s policy mistakes, as outlined in last month’s Financial Stability Report, in dealing with the credit crunch.These are all good reasons why the MPC should have cut today. Their failure to do so means that today’s opportunity to mitigate the potentially serious problems building up in the banking system has been lost.”

A property investment official added: “It’s about time that the Bank of England’s MPC saw sense and realised that the clear and present danger to the UK economy from the continuing effects of the credit crunch is more important than the less clear possibility of future pressures upwards on inflation.”

One economic adviser added: “Credit conditions have become tighter since August, both globally and in the UK. The dangers to the economy have worsened and businesses require easier credit conditions without undue delay, to avoid a nasty reversal. We urge the MPC to announce a small interest rate cut in December.”

Tom Smith
13th November 2007

Tags: growth, cut, bank, finance, businesses, interest, rate

Fewer analysts predict a cut in interest rates in November

Following the last Monetary Policy Committee meeting in October, 14 out of 52 economists that were polled by Reuters expected interest rates to fall in November.

However, according to the latest poll the number of analysts that are predicting a fall in interest rates has now fallen, with just 5 out of 60 analysts polled expecting the Bank of England to cut interest rates by a quarter point. It is thought that healthy economic growth could have something to do with the change in the level of predictions in terms of whether interest rates will fall.

Out of the 60 analysts and economists that were polled by Reuters at the end of October 55 predicted that after the next Monetary Policy Committee meeting on November 8th interest rates will remain on hold at 5.75%. Rates have gone up five times between August 2006 and July 2007, each time by 0.25%, which took the rate from 4.5% to 5.75%. However, since July of this year interest rates have remained stable at 5.75%, which is thought to be partly due to the possible effects of the credit crunch.

The poll also showed that 47 out of 59 economists that were polled expected interest rates to fall by at least a quarter point by the first quarter of 2008. Many had predicted that this interest rate would come in November’s meeting. However, these predictions fell after it was revealed that the British economy grew at its fastest rate in three years in the third quarter of this year.

One industry professional stated: “We would expect them to continue to bide their time and allow more data to come in on the extent of any economic slowdown before changing rates. With the UK economy as a whole apparently still growing slightly above trend in Q3, there is certainly no immediate need for such a cut.”  

Tom Smith

Tags: interest, Mortgages, november, england, cuts, rates, bank

Savings could hit one trillion in five years

According to a recent report the level of cash savings in the UK could hit £1 trillion by 2012 based on current savings trends.

According to the Alliance and Leicester the level of cash savings has grown five times faster than unsecured borrowing over the past seven years, and if this keeps up cash savings could hit £1 trillion within the next five years. There are have been many concerns raised in recent years over the high level of consumer debt in the UK as well as about lack of savings.

The research also showed that there was an ever widening gap between those with liquid assets and those without, and those that move money from investments into cash accounts. Since 2000 the level of cash savings has nearly doubled, and has increased by £426 billion to £876 billion. In contrast, unsecured borrowing has gone up by £79 billion in the same period, taking it to £214 billion.

In a recent poll conducted by the Alliance and Leicester amongst two thousand respondents, over one third stated that they planned to increase their cash savings over the next few years. Based on this the Alliance and Leicester has stated that cash savings could indeed hit £1 trillion. According to one industry official part of the reason for the rise in cash savings is consumers recycling money from pensions and long term investments.

He stated: “We have a savings paradox. Households appear to be stretching themselves to meet increased taxation and a general rise in the cost of living. However, perhaps surprisingly, overall savings balances have continued to increase. It seems that the pressure has fallen on pension contributions: evidence suggests that people in their prime years are saving more cash with a view to funding their retirement.”

Tom Smith
8th November 2007

Tags: earn, interest, accounts, cash, Banking, savings

New account launched by Alliance and Leicester

A new current account has recently been launched by the Alliance and Leicester. The Account, which is known as the Premier 50 account, is aimed at customers aged 50 and over, and offers a wide range of benefits that could suit consumers in this age group.

Older travellers can find it notoriously difficult to get travel insurance, and one of the benefits that this bank account offers is annual worldwide travel insurance that provides cover up to the age of 79.

Other benefits that come with the Premier 50 account include a credit interest rate of 7% AER, a range of medical benefits, and a range of lifestyle and leisure benefits. However, despite all of these benefits it is uncertain how successful the account will be. This is because research shows that consumers aged 50 and over tend to be reluctant to change their current accounts, and survey results show that nearly 50% have never switched banks.

Customers of the Premier 50 account will be able deposit cash and cheques, and make withdrawals at over twelve thousand post office branches throughout the country. A monthly fee of £10 is charges on the account, which covers the cost of all of these benefits. Medical consultations, diagnostic tests, and a 24 hour helpline are included in the benefits that are offered with the Premier 50 account.

Another bank, NatWest, recently launched an age specific account, with its NatWest Adapt account, which is aimed at those aged between eleven and eighteen. Bank officials stated that the account was aimed at helping people in this age group to learn how to manage money responsibly and sensibly.

Tags: bank, leicester, alliance, interest, accounts, personal

Credit cards hit by widespread rate increases

Over 120 increases in rates and fees have hit the UK’s credit cardmarket.

According to Moneyfacts.co.uk, in the past two months, cards have felt the indirect impact of the sub-prime mortgage crisis that has led to a global credit squeeze and resulted in rising charges.

The website’s research has found that cash withdrawal fees have increased on 69 cards, 25 now have higher rates on cash withdrawals and foreign usage charges have spiralled on 18 cards.

Esther James, credit card analyst at the website, said: “Following a year of rising rates and fees, its time to take a look at your card. Check the interest rate you are paying, as there are still some great 0 per cent deals on purchases and balance transfers to be found.

“So don’t pay interest unnecessarily. Make sure you look after your own pocket instead of fuelling the profits of the card providers.”

She added that there is enough choice for consumers not to be caught out, with 300 credit card providers on the market.

Tags: rates, apr, increase, credit, interest, cards

Start saving if you are under forty

According to a recent report younger consumers in their twenties and thirties have become so reliant on credit that many are simply spending all of their money on frivolous spending or repaying debt rather than putting money away for their future.

Twenty and thirty-somethings are now being urged to put money aside into savings or investment for their future to reduce the risk of being left without an adequate retirement fund when they reach retirement age.

The government’s state pension has declined over the years, and with increased life expectancy and higher living costs to also consider younger consumers now need to start thinking about their future in terms of how they will manage financially.

Historically, most people in their twenties and thirties tend not to think much about mortgage provisions, but this has become an increasingly important consideration for the younger generation if they wish to enjoy a certain standard of living when they come to retirement age.

One official advised younger consumers to start putting money into savings or an investment fund as early on as possible to ensure that they had a tidy sum available for when they retire. Increased life expectancy means that consumers must put aside more money to cover the cost of living after retirement, and this has made it even more important for younger consumers to start putting money aside as early as possible.

Consumers in their twenties and thirties are advised to cut back on their frivolous spending, try and avoid getting into further debt, and start putting money aside on a regular basis. Many younger people are wasting a small chunk of their income each month on repayment of interest on their debts, all of which could be used towards saving for the future.

Tom Smith
5th November 2007

Tags: retirement, earnings, wages, interest, saving, Banking, salary, save, future

Interest payments on current accounts to be abolished by First Direct

The Internet banking arm of the HSBC, First Direct, has announced that it will be cutting interest charges on current accounts for customers.

According to officials from the bank the money that is saved from not having to pay interest on current accounts will be used to increase interest rates paid on savings accounts. However, following the mass exodus of customers earlier this year, after the bank announced that some customers would be charged monthly fees of £10, this could be a bad move for the online bank.

First Direct currently has two current accounts in place, and although these accounts do not enjoy the greatest interest rates there is still interest paid on deposits. The cheque account offers an interest rate of just 0.1% on credit balances, whilst the bank account offers 2%. However, in November the two accounts will be merged to create just one standard account known as the 1st Account, and this will pay no interest at all on credit balances.

Officials from First Direct state that customers will be compensated by way of better deals on their savings. An instant access account paying 5.5% will be available, although this is still far lower than the best buy savings accounts offered by other financial institutions, with the highest currently standing at 6.3%. An interest free overdraft facility of £250 will also be available to customers, along with free text banking that could help customers to avoid penalty charges applied when the account goes over its limit.

An official from the bank stated: “A staggering 96 per cent of our customers told us credit interest wasn’t an important factor in choosing to bank with us. We figured it made far more sense to use every single penny we now pay in credit interest to give customers the chance to earn serious interest on higher-interest savings accounts.”

Tom Smith
26th October 2007

Tags: accounts, customers, high, savings, financial

Borrowers reassured by mortgage advisers

Mortgage advisers in the UK are reassuring borrowers following major concerns over rising interest rates.

Many consumers are panicking over how they will be able to get a mortgage when interest rates are so high, particularly in the light of the recent credit crunch, which has resulted in a number of lenders hiking up interest rates even further, exceeding the Bank of England base rate by a considerable amount in some cases.

The worry over mortgage interest rates is being further fuelled by the fact that there are thousands of homeowners that are due to come out of fixed rate deals over the next couple of months, and they will be hit hard by the higher interest rates and rise in repayments, with many paying hundreds of pounds extra a month if they stick with their lender’s standard variable rate. Many will be looking to remortgage and go into another fixed rate deal in light of the current economic climate, but they are worried that they will not be able to find a competitive fixed rate mortgage deal to switch to.

Many mortgage advisers, however, have been reassuring consumers and have stated that there are still mortgages available at rates of 6% or under. Although this is much higher than the interest rate that many people that took out fixed rate deals in 2005 are currently on, it is still preferable compared to the standard variable rates of 8% and beyond that some lenders are charging.

The Britannia Building Society currently offers a fixed rate deal of 5.49% for a two year period, which one broker at John Charcol recommends. There are also other fixed rate deals that consumers can choosing from state mortgage advisers.

Tom Smith
26th October 2007

Tags: interest, offers, Loans, deals, bank, rate, fixed, Mortgages

Icesave launches new fixed rate accounts for savers

Icesave, which is currently celebrating its first birthday, has announced the launch of a number of fixed rate savings accounts for customers wishing to save between £1000 and £2 million.

These accounts allow customers to choose from one, two, or three year terms, also enabling them to choose between having their interest paid on a monthly basis or an annual basis. By choosing one of these accounts savers can lock in the interest at a fixed rate for the set term, which means that the interest rate on the savings account will not fall even if the base rate set by the Bank of England does.

Experts state that the two and three year fixed rate deals from Icesave are impressive. The three year account enables savers to enjoy interest rates of 6.31% if paid monthly and 6.5% if paid annually. With the two year account savers can enjoy 6.41% if paid monthly and 6.6% if paid annually. The one year account enables savers to enjoy 6.5% if paid monthly and 6.7% if paid annually. However, a number of industry professionals have stated that there are better one year accounts out there, and savers should shop around.

One industry professional stated: ‘The fixed-rate market is not like the variable market where you have a whole load of other factors and restrictions to consider, so the rate itself is key. On that basis, the Icesave two- and three-year accounts are the best at the moment, but you should probably look elsewhere for a one-year rate.’

Another industry official said: ‘In the fixed-rate market, if you are not being offered the best rate then it is so-so. However rates in this market are not good at the moment: they are so close to variable rates, you have to question whether it is worth locking in your money for the given period. The one-year market is very competitive at the moment. Nottingham’s 6.83% offers a good margin over variable rates, so if you are looking for a one-year bond at the moment, that’s the one you should go with.’

Tom Smith
26th October 2007

Tags: Banking, savings, market, high, fixed, bank, savers

No interest will be charged on A&L overdrafts

Another bank has revealed its new charge structure with regards to overdrafts and bounced cheques. According to recent reports the Alliance and Leicester will now no longer be charging any interest at all on its overdrafts on current accounts.

The bank will also be reducing the charges applied for a bounced cheque, which will go down from £34 to £25. Officials from the Alliance and Leicester state that in place of interest charges on overdrafts new daily charges will come into force.

Banking will still be free for customers that keep their accounts in credit, state bank officials. The new charge structure is due to come into force around the third week of October. Some banks, such as Lloyds TSB, have already announced their plans to reduce overdraft charges and fees for bounced cheques, which many think is a direct response to the investigation into bank charges that has been carried out by the Office of Fair Trading.

However, officials from Alliance and Leicester claim that this is not the case, and that they had plans to change the fee structure prior to the investigation.

One official from the Alliance and Leicester stated: “The combination of fees and interest is unnecessarily complex when you are trying to present your business as simple.”

Under the new charge structure customers using an authorized overdraft will be charged 50p per day up to a maximum of £5 per month. If the overdraft is unauthorized then the customer will have to pay £5 per day until the account is brought back into order.

One industry professional stated: “Customers should ask themselves whether the new simplified fee structure does actually save them money in the long-term.  According to our analysis, the new way of charging will result in Alliance & Leicester customers being marginally better off.”

Tom Smith
24th October 2007

Tags: authorized, unauthorized, leicester, account, cost, pay

Personal loan rate increases ‘disproportionate’

There have been widespread increases in personal loan rates in wake of the interest rate hike in July, according to recent research.

Figures show that the rises are disproportionate to the interest rate increase with an average increase of one per cent APR to personal loan rates since July this year compared to the 0.25 per cent base rate increase.

Differences also exist between offline and online deals, with APR currently at 8.7 per cent offline and 7.7 per cent online.

Mike Naylor, personal finance expert at the company carrying out the research, uSwith.com, said: “There are already huge variations in the loan rates available to consumers amongst both online and offline deals.

“Throwing the personal pricing smoke screen into the melting pot is just causing further confusion, making it a complete minefield for consumers to shop around and get the best deal.”

He added that consumers should exercise “caution” if offered “personal pricing” for offline deals as this was not necessarily in their interests.

Banks have also been criticised recently for excessive charging on credit cards and overdrafts as well as on currency exchange.

Tags: economics, interest, loan rate, rate increase, Currency, exchange, year, smoke screen

Predictions of further interest rate rises fall

Earlier this year, following July’s 0.25% interest rate rise in the UK, many economists and analysts in the UK predicted that there would be another interest rate rise before the end of the year.

Interest rates have gone up five times since August of last year, with the series of 0.25% interest rate rises taking the base rate from 4.5% to 5.75%. Another 0.25% rise, as predicted by these industry experts, would have taken the base rate to 6% – it is already at its highest in over six years.

However, many industry experts appear to have changed their minds in light of the current turmoil that is hitting the mortgage markets, and following the credit crunch that is having global repercussions the number of analysts predicting a further interest rate rise has fallen. According to reports only one fifth of economists and analysts now believe that the interest rates will rise again this year.

The drop in the number of experts predicting another rise is in part the result of a recent statement that was released by the Monetary Policy Committee following its last meeting early in September, where it was decided that interest rates would remain on hold. The MPC claimed in its statement that its two main reasons for leaving interest rates on hold were that CPI inflation was now within government targets, and also because of the effect that the credit crunch could have upon the industry.

Howard Archer, an economist at Global Insight, stated: “We now no longer expect interest rates to rise to 6 percent in the fourth quarter, but instead anticipate that the Bank of England will sit tight for an extended period. We suspect that growth will lose momentum over the coming months, and that underlying inflationary pressures will gradually abate. This will become even more likely the longer that the current financial market turmoil continues.”

Tom Smith
16th October 2007

Tags: bank, monetary, fall, england, committee, rates, interest, policy

Is a house price crash on its way?

According to some experts in the UK there could be a housing market crash around the corner, similar to that seen in the 1990s.

The predictions come from industry professionals at the Royal Institute of Chartered Surveyors. Over the coming year expectation for house prices in the UK have been lowered by the RICS. According to one senior official from the institute the predictions are perfectly ‘legitimate’ and have not been made irresponsibly.

Over the coming year officials from RICS are predicting that there is a 20% chance that house prices will fall by 10% in the London area. In a similar housing market crash in the 1990s, house prices plummeted on average by around 35%. However, despite these predictions from RICS officials there are other industry professionals that disagree and feel that the chances of a housing market crash are very slim.

One industry expert stated that although interest rates have gone up by a total of 1.25% over the past year in
a series of 0.25% rises, there has been no sharp rise in interest rates. This, along with other factors, made the chances of a housing market crash very unlikely, he stated. Banks and building societies in the UK have been reporting a slowdown in the housing market, and independent research has indicated that both consumer interest and agreed sales have been slowing down over the past few months.

If the housing market does crash, as it did a decade ago, many could see the equity levels in their homes plummet, and for those that have recently taken out 100% loan to value mortgages this could leave them in negative equity, which means that they will owe more on their mortgage than the value of their property.

However, for first time buyers who are looking to get onto the property ladder a housing market crash could prove to be the ideal opportunity to increase affordability – recent reports have indicated that many first time buyers are taking a ‘wait and see’ stance rather than rushing into purchasing, amidst rumours that house prices will fall over the coming months.

Tom Smith
16th October 2007

Tags: Mortgages, rates, price, crash, house, fall, cost, interest

Many first time buyers taking a ‘wait and see’ stance

Over the past couple of years things have been extremely difficult for first time buyers in the UK.

Firstly there were problems being able to raise the money needed to purchase a property, with house prices soaring in the UK requiring buyers to obtain larger mortgages.

For first time buyers there is not equity from a previous property to rely on, which means that they have to take out a loan for all or the majority of the value of the property they wish to purchase. In order to address this problem many lenders have started offering increased income multiples and longer repayment periods on mortgages for first time buyers.

However, there is now a fresh problem for first time buyers to consider. Rising interest rates mean that in addition to having to take out a huge mortgage in order to buy a property these buyers also have to deal with huge repayments because of the increased interest rates, which have shot up by 1.25% in the past year.

Even those starting out on fixed rate mortgages have to put up with a high fixed rate, and will therefore be stuck with this high rate for a fixed period even if interest rates start to fall again in the near future.

Rumours of house prices falling towards the end of the year, combined with predictions of further interest rate rises, has now seen many first time buyers take a step back, with many deciding to rent and wait it out to see what happens before rushing to get onto the property ladder in the current economic climate.

One first time buyer stated: “I am desperate to get onto the property ladder, because I feel that the chances of ever getting my own place are getting slimmer and slimmer. But with all of these rumours about decreasing house prices and rising interest rates I want to see what happens before I make any long term commitment.”

Tom Smith
6th October 2007

Tags: increase, first, future, rates, buyer, rise, time, bank

Worries over interest rates from 40% of consumers

According to a recent report around 40% of consumers in the UK are concerned about further rises in interest rates, with many already having been hit hard by rising repayments on their variable rate mortgage.

Interest rates have already risen five times since last August with a rise of 0.25% each time, taking the base rate from 4.5% last August to 5.75%, and reflecting a total rise of 1.25% within the period of a year.

Although inflation has come down to within the government’s target of 2% recently, many consumers fear that the next Monetary Policy Committee meeting will result in yet another interest rate rise, which could make matters even worse for those that are already struggling to keep up with repayments.

The rising interest rates have affected many financial areas, including resulting in an increase in repossessions as the result of many consumers being unable to keep up with repayments on their mortgages. Fixed rate mortgages have been taken up by many consumers to try and combat the problem of rising interest rates, and the Council of Mortgage Lenders stated that a record number of fixed rate mortgages were taken out in June of this year.

The recent survey was carried out by Intelligent Finance. According to the research four out of every ten consumers are very concerned about a further rise in interest rates, as they feel that they are not covered or prepared for yet another rise in repayments. Officials from Intelligent Finance state that consumers must take preventative action to try and ease the pressure of another interest rate rise by tightening the purse strings where necessary, and making every penny count.

One official from Intelligent Finance stated: “With interest rates on the rise and purse strings tightening, it’s important to make every penny work as hard as possible.”

Tom Smith
6th October 2007

Tags: rate, increase, bank, committee, interest

Students protest against HSBC

Students in the UK have launched a protest against one of the UK’s leading banks, HSBC, and the protest has been quickly gaining popularity through the Facebook website.

Students are now threatening to boycott HSBC over new regulations that will mean the end of the hugely popular three year interest free overdraft facility on graduate accounts with the bank.

Many graduates have benefited from this three year interest free overdraft facility with the HSBC over recent years, enabling them to enjoy a financial lifeline without paying interest between leaving university and starting work.

However, the bank has stated that many of these accounts were abused, and this combined with high levels of bad debt have resulted in the bank having to make a commercial decision to scrap the three year interest free overdraft facility.

However, students are arguing that the reason they joined the bank in the first place was to be able to take advantage of these popular graduate accounts. The protest comes at a bad time for the bank, which along with other banks in the UK, is now vying for the business of new students that are starting university as the academic year kicks off.

One student stated: “They’ve shot themselves in the foot to be quite honest. Why would they want to alienate themselves from graduates who’ll be earning high salaries in years to come?”

Another stated: “I am so disgusted with HSBC right now – it actually makes my blood boil… Never before have I lost so much faith in an organisation. As soon as I can I am closing my account, moving my ISA and finding a new decent bank.”

Tom Smith
6th October 2007

Tags: debt, accounts, interest, free, graduates, hsbc

Students need to be more careful over getting into debt

According to a recent report the level of student debt in the UK is on the up, with many students graduating from university having racked up huge levels of debt along the way.

One credit reference agency is now urging students to think very carefully before getting themselves into debt, and to ensure that when they do take out credit cards and loans that they use the money sensibly and for necessities, and they make the repayments sensibly and on time.

Melanie Mitchley, an industry expert from the firm Call Credit has stated that students need to be mindful of the effects of getting into debt, and need to be careful about building up debt. She stated that new students need to manage their finance more sensibly, and need to keep on eye on their finances.

According to Barclay’s figures former students have been graduating with debts that are in excess of £13,000 on average. Another survey into student debt indicates that students could soon be graduating with average debts of around £20,000.

Ms Mitchley stated: “We are urging all students whether freshers or in their final year to be aware of the potential pitfalls if they don’t take control of their financial affairs. Our experience has shown that taking on credit needn’t be a problem if you manage your finances well and ensure you keep up your repayment.”

Another survey carried out by the Halifax showed that credit cards, overdrafts, and loan were amongst the most common forms of debts for students, with 43% of students surveyed having borrowed on credit cards, 73% using an overdraft facility, and 83% having taken out a loan.

One Halifax spokesperson stated: “These are significant sums for anyone, let alone someone who is not yet working full-time.”

Tom Smith
5th September 2007

Tags: owe, credit, Loans, repayments, cards, debt, interest, student

Victims of mis-sold endowments owed millions

According to a recent report the victim of mis-sold endowment policies are owed at least £200 million collectively.

Endowments are policies that are sold alongside interest only mortgages, and this is where the mortgage repayments made by the borrower will only cover the cost of the interest, so at the end of the mortgage term the initial loan amount is still outstanding even though the interest on the loan will have been paid off in full over the term.

Although the popularity of interest only mortgages has fallen, with some lenders refusing to offer mortgages on an interest only basis, they were very popular in the 1980s and 1990s. In order to be able to pay off the initial loan at the end of the mortgage term those taking out interest only mortgages also had to pay towards an independent investment, which was the endowment, and this was designed to mature over the mortgage term to raise enough cash to pay off the initial loan once the mortgage ended.

However, according to many reports consumers have been mis-sold these policies in many cases, where they were not warned of the risk associated with this sort of investment and were instead led to believe that the investment would definitely raise enough to cover the principle loan amount at the end of the mortgage term. However, many consumers have been informed that their endowments are under-performing, which could lead to severe problems once their mortgage term ends.

Many companies that sold these endowments have now put aside funds to deal with claims, and there are various campaign groups such as Which? offering advice to those that feel they were mis-sold an endowment policy. Because standard charges were also used when selling these policies in the past the impact of charges on future returns was also underestimated.

Tom Smith
1st October 2007

Tags: endowments, borrowing, interest, Mortgages, Loans, savings

Make sure you have savings for an emergency

An independent financial advisor is urging consumers in the UK to make sure that they have some savings put aside to serve as a ‘financial cushion’, which can then be used in the case of emergencies.

The advisor, from Christie Scott, states that consumers should always have at least three months worth of wages put aside in savings to fall back on should the need arise. This is particularly important for the self employed, who may find that income for some months is far lower than for others, and therefore may need extra money to subsidise their income now and again.

The firm Christie Scott has pointed out that in order to ensure that there is money in the savings account for emergencies consumers will not necessarily have to dramatically cut down on their social life and spending. Simply making some basic cutbacks and reassessing expenditure could help to top up any savings in order to try and get the balance up to three months worth of salary. Consumers are urged to look through their monthly income and outgoings in order to try and direct some extra cash into savings each month.

The financial advisor stated that in some cases people believed that savings was only worth it if interest rates were high, but this was not necessarily the case.

She stated: “More people may be inclined to save when interest rates are higher. When rates are low some people see little point. Most don’t understand the concept of compound interest – meaning that even low interest rates added steadily over time will make a difference.”

Research has shown that in the second quarter of last year the average amount being saved was £1376 per person, and this has fallen to £910 per person for the second quarter of this year.

Tom Smith
1st October 2007

Tags: salary, emergency, self employed, interest, accounts, savings, average

Inflation Report Signals Further Rate Rise

The Bank of England has given clear signals that interest rates may have to rise yet again to make sure that it keeps inflation under control. Homeowners will be dreading the possibility of yet another rate rise as they have seen five quarter point rises already ion the past 12 months.

Experts now believe that the rise will come sooner rather than later after the Governor of the Bank, Mervyn King, said that he believed the turmoil in credit markets – set off by the sub-prime crisis in the US – was far from being an international financial crisis. Given that comment, experts think that he will not be afraid of recommending a further rate rise in the UK in the near future. Indeed, there are some doom-mongers who suggest that an interest rate of 6.5% – or even higher – could be reached.

A quarter point rise on a mortgage of £110,000 would mean an increase in monthly repayments of over £16, and on a mortgage of £200,000 the increase would be £30 a month.

A further quarter point rise now looks likely in September. Mr King said: “[We] cannot be sure if what we’re seeing so far foreshadows a more disruptive move on the markets or whether there’s a more gradual easing of pressure that allows credit spreads to widen to more sensible levels. So it’s impossible at this stage to judge how large and how persistent the tightening of credit conditions is likely to be.”

Adding that he did not see the recent events, which have seen some US investment banks in trouble because of defaults on loans and some big takeovers postponed, as an international financial crisis, he went on: “We are seeing signs of bad loans arising clearly in the US, but I don’t think we are seeing signs of these bad loans in other markets. The developments in [the widening of] spreads is a more realistic pricing of risks which we welcome.”

Mr King said that it was not the duty of central banks to give protection to any financial institutions if they get in trouble for poor lending practices.

The Bank’s quarterly inflation report said that inflation would come back down to 2% if interest rates rose according to market expectations, and that would be one more quarter point rise before the end of the year. It is difficult to see the Monetary Policy Committee waiting too long before implementing the rise. The report said that risks to inflation remained on the upside but not as much as a few months ago. It now expects economic growth to dip to 2.5% in the next two years from about 3% now.

Mr King was concerned that official figures did not accurately measure the strength of the economy, and may be revised upwards. The near term outlook for inflation had the bad news of higher food prices from flooding influencing it.

Inflation was also under threat from rising oil prices and potentially increasing wages demands, but Mr King did note that consumer spending was cooling. However, there has been surprise at the resilience of consumer and housing markets despite the five rises since last August.

Mr King insisted that 6% was not yet a done deal.

Tom Smith
1st October 2007

Tags: increase, costs, Loans, inflation, rates, interest

Over 50s could enjoy great deal on their savings

Over recent weeks a number of high interest savings accounts have come to light, with many experts urging apathetic consumers to make the effort and switch from a lower interest account to one of the higher interest ones, including Icesave, ICICI, and Sainsbury’s Internet savings accounts.

A new player has now entered the field of higher interest savings accounts, this time targeting the over 50s. The account is being made available from Saga, and is offering 6.2% before tax on deposits of £1 and over.

The account will pay a minimum of the base rate plus 0.45% for the first year, and then for the second year will pay a minimum of the base rate. After year two the account promises to pay at least the base rate minus 0.25%. Any base rate changes will also be passed on to savers within two days, which will be refreshing news for many savers that have been left waiting following base rate rises whilst banks quickly act upon pushing up the rates on borrowing and then dawdle over putting up interest rates for savers.

Savers in the UK have been urged by industry professionals to start taking action in order to make the most of their savings, as it was found that many had left their savings stagnating in low interest accounts where the banks had failed to pass on all of sometimes any of the interest rate rises. Although the savings such as those from Sainsbury’s and IceSave are still recommended for the under 50s according to This is Money, the new Saga account could prove invaluable for savers over the age of 50.

Tom Smith
27th September 2007

Tags: bank, building society, accounts, grow, high, Banking, low

Don’t rush in to long term fixed rate deal

Gordon Brown’s new cabinet has been pushing the issue of longer term fixed rate mortgages in the light of decreased affordability across the housing sector in the UK, and in response to this a number of lenders have started to offer longer term fixed rate deals, with many fixed for as long as 25 years.

The latest to offer these extended fixed term deals is the Halifax, which is offering a 25 year fixed rate mortgage set at 6.39%. The Nationwide also offered a 25 year fixed rate deal on the same rate following the government’s call for longer fixed terms.

However, consumers are being urged to think very carefully before jumping into a fixed rate deal for such a long period. The Halifax and Nationwide mortgages both charge an arrangement fee of £599 and also penalties for early repayment for the first ten years of the mortgage. Consumers are being urged to ask themselves whether they want to face the tough decision of either sticking with the same mortgage for at least a decade or paying potentially extortionate penalties for attempting to switch lenders by paying off the mortgage early.

Of course there are benefits to these longer term fixed rates, the main one being that borrowers can enjoy stable repayments and interest rates throughout the term of their mortgage without having to worry about the effects of rising interest rates. However, should interest rates fall these borrowers will be stuck with a very high interest rate throughout the term of their mortgage, or at least until they can switch mortgages without being hit by early repayment fees.

One official stated: ‘At first glance the option of a 25 year mortgage might seem attractive. Interest rates are rocketing and the cost of living is increasing, making money tighter than it has been for years. So you might be forgiven for thinking that Halifax is offering you a quarter of a century’s peace of mind. The reality of course is that rates go down as well as up – true, rates were as high as 14% 25 years ago, but they also went as low as 3.5% when the going was good.’

Tom Smith
27th September 2007

Tags: long, increase, rate, bank, deals

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: base, bank, rise, england, remortgages, increase, interest

Britain gets saving

According to recent report there are now more people in Britain saving up their hard earned cash than there were at the same time last year.

The research was carried out by Birmingham Midshires, which showed that the number of people putting their money into savings had risen compare to a year ago. However, the research also showed that the amount of money that was being put aside in savings was actually down by a third compared to the same time last year.

Although the rise in the number of people putting money into savings is encouraging, showing that more people are realizing the importance of putting money aside, the level by which the amount of money being saved has fallen does not make for very encouraging reading. Around 67% of consumers are now putting money aside into savings accounts compared with 62% this time last year.

Some officials think that the rise in interest rates has shocked many people into putting aside money for emergencies rather than spending it frivolously, but for the same reason Brits are not able to put aside as much as they were last year because rates have risen five times since then and therefore mortgage repayments are way higher than they were in August of last year.

One official from Birmingham Midshires stated that putting money aside is a good idea. He stated: “It’s easier said than done but it’s recommended that people have three months’ salary put aside in case of financial emergencies – this equates to £5,899 for those on an average income.” However, with another interest rate rise on the cards many people cannot afford to put as much away as they might have done a year ago, with many struggling to keep up with their repayments.

Tom Smith
21st September 2007

Tags: bank, internet, account, interest, earn, Banking, grow, savings, compound

Overdraft warnings will be displayed to HSBC customers

In a recent announcement the HSBC bank has revealed that its customers will now receive a warning if they try and withdraw money from one of its cash machines and the withdrawal could take them over their overdraft limit.

The machines will display the warning to customers that risk going overdrawn as the result of taking out the cash, which will offer additional protection and help to safeguard the customers from being hit by expensive bank charges.

The bank has warned that this facility will only be available to its own customers and not to customers of other banks that are using the cash machines, and this is because the bank has no access to the overdraft details of customers of other banks even if they are using HSBC cash machines. Over 3500 machines will have the facility to display this message, and the scheme is due to come into force at the beginning of October.

Although the precise wording that will appear to customers has not yet been confirmed HSBC officials state that this will help to make its charges more transparent and help customers to avoid having to pay the charged at all by enabling them to stay within their limits. The bank has also stated that if unauthorised borrowing amounts to under £10 per day no charge will be made. This will also be the case if money is paid back into the account by the end of the day to cover the amount of the money withdrawn or if the customer has not exceeded his or her limit in the past six months prior to going over the limit.

One HSBC official stated: “More than 95% of HSBC cash withdrawals are now made at ATMs and while you can already check your account balance before you make a withdrawal, few people do. We believe that alerting customers at this point will enable them to make an informed choice about whether to proceed.”

Tom Smith
20th September 2007

Tags: limit, bank, hsbc, account, interest, savings, overdraft

Home purchase costs revealed

A homeowner will have to pay over £11,000 in the first year after purchasing a property, it is claimed.

Figures from GE Money Lending have revealed that home purchase costs are equivalent to 30 per cent of a borrower’s annual income in the first year of owning a property.

With essential bills estimated to set an average UK homeowner back £3,500 each year, stamp duty fees also contribute an average of £1,200 while the cost of moving in an equipping a new property is estimated at £4,721.

GE Money Home Lending head of mortgage marketing Gerry Bell commented that consumers need to look beyond the financial burden of “getting on the ladder” and consider the additional expenses involved in purchasing a home.

However, on the finding that prospective borrowers over-budget for these costs by about 30 per cent, he added: “It is reassuring to see that despite rising interest rates and general market turbulence, borrowers appear to have such a realistic outlook.”

Meanwhile, recent financial turmoil in the markets, which has emerged after the US sub-prime mortgage crisis, is believed to stabilised house prices in London for the whole of next year, according to the Royal Institution of Chartered Surveyors as reported by the Times.

Tags: institution of chartered surveyors, burden, interest, GE, financial burden, general market turbulence, cost

Further controversy over banks’ failure to apply interest rate rise to savers

Once again many banks in the UK are coming under fire as a result of leaving savers hanging on to find out if and how they will benefit from the latest interest rate rise, which was applied four weeks ago by the Bank of England. Read more

Tags: Loans, banks, savings, bank of england, interest

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: rate, Mortgages, rise, england, interest

Many banks and card companies to be sympathetic over postal delays

Over recent weeks the UK has been hit by a number of postal strikes, which has disrupted many services.

A number of banks and credit card companies in the UK have stated that they intend to be sympathetic with customers who may have suffered as a result of the postal strikes in terms of payments coming in late because of the postal delays. Although banks have suffered a fair amount of bad press lately some of the leading banks and credit card companies stated that they would take the postal strikes into account when it came to customers’ accounts.

The postal strikes were set to go on for two week in total, and this means that those paying by cheque will find that their payments may be delayed, which could result in their bank accounts exceeding the overdraft limit or their credit cards going over the credit limit due to late payment. Banks and credit card companies are urging consumers that experience this problem to contact them, stating that they will ensure that they are sympathetic when it comes to the removal of charges that were applied as a result of late payment because of postal delays.

One Barclaycard official stated: ‘We will take an understanding approach and if anyone does incur a fee they should come and talk to us.’ Lloyds TSB, Halifax, and HSBC have also stated that they will treat each case sympathetically, and that customers that have experienced postal problems that have affected their accounts should contact them as early as possible. Other banks have added that customers may want to look at alternative methods of payment whilst the postal strikes are underway.

Consumers are warned that trying to dupe the banks into thinking that payment is late because of postal strikes will not be easy. One bank spokesperson stated: ‘We will treat every customer individually and do our best to be sympathetic. But if someone is always in the red, the postal strike will probably be just another excuse and will be seen accordingly.’

Tom Smith
17th September 2007

Tags: cards, postal, interest, delays, payments, credit, strike, red

Downturn for house price growth

House price growth finally changed direction for the first time since October 2005, as property prices began to fall in many areas of the country, the latest housing market survey from the Royal Institution of Chartered Surveyors (Rics) has revealed.

With higher interest rates and market volatility, demand continued to weaken throughout August, particularly in the West Midlands, the north-west and East Anglia.

During the month, 1.8 per cent more chartered surveyors reported falls rather than rises in house prices, although London has yet to be affected by the credit market situation and continues to show the strongest growth in England.

Ian Perry, a spokesman for Rics, said: “Potential house buyers have become far more cautious as they wait and see what affect interest rate rises will have on household finances. Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far.

“The market will soften further, going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target.”

According to a recent report from the National Association of Estate Agents, the introduction of Home Information Packs (Hip) for three-bedroom properties is likely to lead to a similar decline in the number of these properties on the market as that which was seen after the introduction of the four-bedroom Hip.

Tags: three-bedroom properties, Chartered Surveyors, month, house price, home

Beware the bullying banks

The row over bank charges has been dominating the financial news in the UK over recent months, with thousands of customers attempting to reclaims charges for exceeding the overdraft limit on their bank accounts after UK regulators deemed the fees as unfair and unlawful.

However, although many people have managed to reclaim their money back, going back up to six years, it has not been a smooth or easy process for many, and banks have been using a range of underhand tactics to try and discourage consumers from reclaiming these fees.

A recent study that was conducted by This is Money has shown the extent of the bullying tactics that banks have used to try and stop people from reclaiming their bank charges. According to the study banks have breaching industry guidelines on a frequent basis by threatening thousands of customers with account closure in the event that they make a claim for their charges. Many vulnerable customers are being targeted by some of the leading banks, and these tactics are pushing many into avoiding claiming their charges for fear of losing banking facilities.

The report showed that over one in eight customers that have tried to reclaim their bank charged have been threatened with closure of their accounts, which is in direct breach of industry guidelines in accordance with the Banking Code. A spokesman from the Banking Code Standards Board stated: ‘Banks are allowed to close down accounts for commercial reasons. But they must also treat fairly any customers who are experiencing financial difficulties.’

Experts state that consumers should not let themselves be bullied in this way, and that any threats such as this should be directed to the Financial Ombudsman Service.

Tom Smith
13th September 2007

Tags: fees, companies, claim, bully, interest, stron

Bank holds interest rates

The Bank of England’s monetary policy committee (MPC) has decided to keep interest rates at 5.75 per cent for at least the next month.

Although rates have not risen since July, that was the fifth rise within 12 months and there were concerns earlier in the year that rates would hit six per cent before the end of 2007.

However the inflation rate currently sits at 1.9 per cent, below its target level of two per cent and the current problems in the financial markets are making further rises less likely.

In a statement that accompanied the decision, the MPC said that it had considered carefully the effects that recent credit market problems, brought about by the collapse of the US sub-prime borrowing market, could have on the inflation rate.

Responding to the news, the Council of Mortgage Lenders (CML) welcomed the bank’s decision to hold rates steady at 5.75 per cent.

Micheal Coogan, director general of the CML, said: “Credit conditions have tightened since the rate went up in July, and a further increase would have added to the liquidity problems we are already seeing in some sections of the market.

“At the same time, there is now much clearer evidence that the cumulative effect of five rate rises since last August is slowing activity in the housing market.”

Tags: bank, cml, time, bank's decision, Council

Interest-only mortgages ‘can help lower costs’

Interest-only mortgages can be beneficial to people looking to lower the overall cost of borrowing to buy property.

That’s according to Bernard Clarke, spokesperson for the Council of Mortgage Lenders, who said that certain buyers can find this type of loan a good option.

“It’s a clearly an option for buy-to-let investors who usually want to minimise their borrowing costs and are not interested in acquiring ownership of the property outright,” he said.

But for homeowners who would like to start repaying the bulk of their loan, an interest-only mortgage should be reviewed somewhere down the line.

“If they take an interest-only option to reduce their initial costs but do want to eventually own the property outright then they do need to think about transferring to an interest and capital repayment mortgage,” said Mr Clarke.

Alternatively, buyers can utilise separate savings or investment plans in order to save up the money to repay the capital.

“People are free – if they are taking out an interest-only mortgage – to choose alternative repayments vehicles,” Mr Clarke explained.

Tags: investors, option, interest-only option, capital repayment mortgage, order

Consumers still failing to get best rates on their savings

According to a recent study many consumers in the UK are still failing to make the most of their savings by finding an account that pays a competitive interest rate.

The news comes despite the five interest rate rises that have been applied to the base rate by the Bank of England over the past year, taking the base rate from 4.5% to 5.75%. Experts state that consumer apathy is resulting in many savers losing out on significant amounts of interest each year.

Many banks have come under fire over the past year for failing to apply interest rate rises in full, or at all in some cases, to their savings accounts. Even those that do pass the rate rises on have been under fire for taking their time to do this, whilst moving much more quickly when it comes to applying the rate rise to borrowing.

Although many savings accounts have let their interest rates stagnate, and some pay very low rates of interest, there are also some account that have passed on all interest rate rises in full, and are now paying above and beyond the base rate.

Amongst the savings account that are now paying well over 6% in interest to savers are ICICI, Sainsbury’s online savings account, and IceSave. However, despite the availability of higher rate savings account research shows that many consumers are allowing their savings to snooze in low rate account where they are earning very little in interest.

Many consumers don’t bother to research higher interest rate alternatives, and some simply feel that they don’t have the time to switch. However, for many – particularly those with substantial savings – switching to a higher rate account could mean a significant difference in the amount of interest earned.

One industry professional stated: “I guess it’s just clients are looking for reliability and consistency; they don’t always want to be chopping and changing their bank accounts. So I think people are aware of it, it’s just a matter of priority. You don’t want to be changing your bank account every couple of months.”

Tom Smith
28th August 2007

Tags: accounts, interest, charges, rates, consumers

Have you lost track of your account?

The government and the British Banker’s Association are working together to try and deal with the issue of dormant bank accounts, where banks are unable to trace the owners of account, which have been left dormant for years with no transactions being made on them.

Accounts that have not bee touched for three years or more are generally classed as dormant, and both the government and the BBA have been looking at ways to try and deal with this issue.

The priority is to try and reunite these dormant bank accounts with the account holders, as even though the account is classed as dormant the money in it is still the account holders. Many accounts have just a few pounds in them, and there are also many dating back ten years or more when many people were opening a number of accounts with £100 deposit in order to cash in with a windfall in the event that the building society became a bank or there was some sort of merger.

So far a number of accountholders have been successfully reunited with their lost accounts. One BBA spokesperson stated: ‘Already this year, we’ve processed 6,000 claims. This compares with 7,000 for the whole of last year.’ Those that think that they have a dormant account are being encouraged to contact the British Bankers Association for further information and to make a claim to the account either by phone or via the BBA website, which is www.bba.org.uk

The government is also looking into options for the use of money from accounts that are not claimed by any consumer. A commission was set up 18 months ago to deal with this, and it is likely that monies from unclaimed accounts will be used towards a number of worthy causes.

Tom Smith
27th August 2007

Tags: savings, personal, uk, charges, current

Eight million Britons have five-figure debts

Britain’s debt crisis is worsening, new figures released today show.

According to debt consultancy firm Thomas Charles, eight million Britons – one fifth of the entire adult population – hold debts of over £10,000.

The firm largely blamed heavily advertised store cards and credit cards for the growth of the problem.

Director of Thomas Charles, James Falla, said that the figures show a “sharp increase” in debt holders over the last year.

“These high levels of debt are linked to the rise in interest rates over the year”, he added.

The Bank of England’s monetary policy committee has also announced today that it will not be increasing interest rates for August.

Rates had been raised five times in the previous twelve months to 5.75 per cent, putting the squeeze still further on indebted Britons.

The chief economist at the Institute of Directors, Graeme Leach, termed the decision “a pause for thought”, and said that a further rate rise to six per cent would likely come in the autumn.

Tags: increase, cent, fifth, britons, Britain

Future demand for buy to let mortgages could fall

According to a recent report the demand for buy to let mortgages could fall in the future, as a slow down in the rise of property values hits, lumbering landlords with higher mortgage repayments but lower house value inflation and rental income.

However, reports have also indicated that at present landlords are doing very well, and in the past year enjoyed returns of around 13%. Reports indicate that landlords saw the property vales rise on average by around 7.3% and saw rental returns of around 5.5% of the property value.

The figures come from a report issued by Birmingham Midshires. The report indicated that although the 13% property value rise seen was up from the previous twelve months of 11.9% rental payments dropped from 5.7% in the previous twelve months to 5.5% last year. Birmingham Midshires warned that the interest rate rises had led to mortgage repayments being higher than rental payments, and that this could have a dampening effect on the popularity and take up of buy to let mortgages.

One economist from the building society stated: ‘While house price growth in the sector is expected to be more subdued near-term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors. There also remains the potential for healthy long-term capital appreciation in the buy-to-let sector, particularly given the backdrop of more households being formed each year than there are new properties being built.’

Along with homeowners buy to let landlords are likely to be hit hard by the interest rate rises that have been applied by the Bank of England over the past year, as it means higher repayments on the mortgage without higher rental income.

Tom Smith
1st August 2007

Tags: rental, rates, let, increase, rise, payments

Is fixing your bills a good idea in light of interest rate rises?

The recent interest rate rises enforced by the Bank of England have hit many homeowners really hard, leaving them with very little in the way of finances due to rising repayments. In light of these rises, many people are now wondering whether it might be a good idea to fix not only their mortgage but also other payments as well in order to benefit from increased financial stability.

Interest rates have gone up five times in the past year, with rises of 0.25% each time, and each of these rate rises has added a significant amount to the repayments of many homeowners, pushing many into the red. With these increased repayments along with the threat of further interest rate rises some experts feel that fixing as many payment as possible, including a mortgage, could prove beneficial in terms of financial management, although others feel that this could prove costly in the long run, particularly when interest rates start to fall again.

One industry expert stated: ‘Having certainty of monthly outgoings is worth its weight in gold, especially for people who are stretching themselves to take out the loan. People have been buying two year fixes, but with arrangement fees and other costs so high, we are now seeing more three and five-year fixes being taken out to avoid paying these fees so regularly.’

Another stated: ‘Fixed rates are going up as lenders factor in possible future base rate rises. Trackers are cheaper, but you have to accept that the rates are likely to go up before coming down, so you have to make sure you can afford higher monthly payments. The rates for three and five-year fixes are quite similar, so the key is to do your homework to get the best deal and make sure you are clear how long you want the fix to last for.’

Tom Smith
1st August 2007

Tags: interest, fix, home, Mortgages, bills

House price growth slows down due to interest rate hikes

According to recent reports there has been a slow down in the growth of house prices in most areas of the UK following further interest rate rises in the first half of the year. Exceptions to the rule are Scotland, Wales, and the West Midlands in England. However, in most regions house price growth has slowed down by around 50%, and it is thought that this is due to lower demand for properties as a result of rising interest rates.

The data comes from the monthly report from the Royal Institute of Chartered Surveyors, and this report is the second one in a row that indicates a slow down in the rate of house price growth in most parts of the UK. According to the figures just 10.6% more members from the RICS reported a rise in house price growth rather than a fall last month, and this compared to 22.5% in the previous month.

The report also indicated that the number of enquiries from new buyers had fallen at the fastest pace since February of last year, reflecting the lower demand for properties. According to the RICS the five interest rate rises over the past year – and in particular the last two interest rate rises – have taken their toll when it comes to buyer demand, with many people having to reconsider property purchase because of the higher interest rates and sky high repayments.

One spokesman from RICS stated: ‘House prices have finally started to cool significantly for the first time since the recent mini boom in the housing market got under way in 2006. Interest rates hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home. The July rate increase may not mark the peak of the current interest rate cycle and earlier rate rises have yet to fully filter through. A softer landing for the housing market is in store as we move into the autumn.’

Tom Smith
31st July 2007

Tags: england, increase, rate, fixed, interest, Mortgages, rises

Government wants longer term fixed rate mortgages to be available

The government, under new prime minister Gordon Brown, has announced that it wants more longer term fixed rate mortgages to be made available in light of the five recent interest rate hikes that have left homeowners struggling to keep up with rising repayments and have made the prospect of purchasing a home even more difficult for first time buyers on a limited budget.

Alistair Darling, the new Chancellor of the Exchequer, has stated that longer term fixed rate mortgages are more important than ever in light of the current state of the economy, as these will enable property purchasers and homeowners to benefit from stable repayments that will make financial management easier and reduced the risk of crippling repayments stemming from further interest rate rises.

Earlier in the week Alistair Darling stated: ‘When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility.’ He also spoke of the profits that some brokers and lenders are making by offering shorter time fixed rates that have to be renewed every few years, netting them thousands of pounds in profit: ‘Brokers want you to come back every two years, rather than every ten or 20. The Financial Services Authority has identified this as a problem.’

In light of the announcement made by government officials the Nationwide Building Society has just announced the launch of a 25 year fixed rate mortgage. However, there are concerns over how many people will want to take on a fixed rate over such a long period in case interest rates start to fall.

Tom Smith
31st July 2007

Tags: young, fixed, time, Loans, first, rate, Mortgages

BCC warns Bank of England against rate rise

The British Chambers of Commerce (BCC) has claimed that “economic damage” will be done in the UK if interest rates go up again.

The Bank of England’s monetary policy committee (MPC) will meet later this week to decide whether to put rates up or not.

According to the BCC’s chief economic adviser David Kern, the MPC should wait for previous rate rises to avert potential damage – and there have been five in the past twelve months – to take full effect before putting another increase on: “There are already signs that the housing market may have started to soften”, he said.

Mr Kern’s position is backed up by the latest monthly house price figures from mortgage lenders Nationwide, which show a seasonally adjusted gain in inflation of just 0.1 per cent for July, dragging down the overall inflation rate for 2007 to 9.9 per cent, well down on previous double digit showings.

A Reuters poll has also previously shown a comfortable majority of city analysts agreeing that rates are scheduled to go up to six per cent by the end of the year.

Tags: inflation rate, signs, bank of england, price, digit, uk, interest, majority

Super-Prime London Prices Shoot Upwards

The price of houses at the very top of the London property market achieved record growth in June. Research by estate agent Knight Frank shows record growth of 3.1%, which is the fastest growth in a month since the agency began its records in 1976. It also found that the annual rate for the same market was 34.5% in June, which is the largest figure for a years seen since 1979.

Those properties seeing the largest rises were between £1m and £2m, and those valued at over £4 million. House prices in the latter bracket have gone up by an amazing 43% in the last twelve months. The areas where house prices have gone up the most are SW3 and SW10, with a 40% rise on houses valued at over a million in the last year. Properties over a million pounds represent 7% of the London property market.

It looks as though prime London is having an almost unstoppable surge in house price inflation, but deeper research actually shows that the highest growth is at the very top end of the market – super-prime London. For example, the growth of properties valued at just below a million in the same areas had slowed down, no doubt under influence from recent interest rate rises and other economic factors putting the squeeze on homebuyers. A slowdown for super-prime London house prices would probably mean that there was a huge economic problem on a global scale as many buyers are foreigners.

Further out of central London, areas like Hampstead, Wapping and Wimbledon have seen growth of 11.4% in the first six months of 2007, giving annual growth of 21.8%. These don’t match up to super-prime increases, but still show superior growth to the broader London house market.

Knight Frank’s assessment is that the normal house market slowdown in the summer will be cooled even further by other economic factors, but super-prime central London will still have annual growth of around 25% come December.

Meanwhile it has been calculated that the cost of an extra bedroom in a large property in London is £161,221. That figure is £20,000 higher than the cost of an average home in Scotland. The figure is worked out from the average price of a three-bedroom property in the capital as £396,387, and the average price of a four-bedroom home is £557,608.

It is such a difference that forecasts are that London homeowners will look for more ways to improve or increase the size of their existing property such as an extension or loft conversion, rather than seek to move.

The difference between and one-bedroom property and a two-bedroom property is much less, at an average of £89,751. In London there are currently around 13,600 two-bedroom properties up for sale, but less than 6,000 one-bedroom properties. Such as shortgage of smaller properties is a concern for first-time buyers as that key difference in price for an extra bedroom would evidently be a showstopper for many new buyers. It is unlikely that this situation will ease with London market continuing to push upwards.

Tom Smith
26th July 2007

Tags: house, Mortgages, london, interest, prices, foreigners, increase, inflation

Next Page »