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

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

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

Millions switched banks in 2007

According to recent report millions have dissatisfied customers have switched from their existing bank to another bank this year, indicating the high dissatisfaction levels with the banking industry.

As a result of being unhappy with the services and the staff members at banks around eight million customers are thought to have changed to another bank this year, reflecting an enormous rise compared to just four years ago. Experts have stated that although dissatisfaction levels are high in other industry sectors, such as the mobile phones industry, the largest proportionate rise in dissatisfaction levels has been within the banking sector.

The report, put together by Coleman Parkes, shows that in 2003 fewer than one in ten consumers switched bank accounts, so the overall figure was around 8%. However, this has more than doubled now, with the number of people switching banks in 2007 equating to 18.3%. The report indicates that unhelpful staff and impersonal service were amongst the major reasons for switching, and many said that they did not feel valued by the bank.

In a breakdown of the report around half of the people that were surveyed stated that they switched because they did not feel as though the bank saw them as a valued customer. Around 40% of those surveyed stated that they were not happy with the bank’s call centre set up. Many others stated that banks were too official and needed to be more personal with customers.

Consumers stated: ‘Banks are still too impersonal when communicating with me – they need to be more informal’.

One official from Coleman Parkes stated: ‘Banks can ill-afford to make mistakes. Poor customer service and a major error by the bank are two of the top three issues that will drive a consumer to change banks, so banks need to focus on a high level of customer service and quality of information management.’

Tom Smith
10th December 2007

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

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

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

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

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

‘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

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

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

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

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

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

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

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

Mortgage lenders try and pull in retail deposits

Mortgage lenders across the UK are trying to pull in deposits from savers after facing difficulties with borrowing money in the short term wholesale market.

In order to aid funding through retail deposits mortgage lenders have been offering some excellent rates of interest in order to tempt savers into increasing deposits. Until recently Guaranteed Income Bonds have led the market, but now a number of lenders are offering new bonds that offer better returns.

The best rate on a Guaranteed Income Bond at present is 4.77% for a one year fixed rate bond. However, the Nationwide has now launched a number of fixed rate bonds that pay up to 6.5%. Some of the bonds are available to existing accountholders and those that have been with the bank for three years, whereas others are available to new and existing customers. Bradford and Bingley has also launched two Internet e-bonds, which offer similar rates.

Bradford and Bingley also offers another bond for those without Internet access, and this pays 6.40% gross. Birmingham Midshires is also offering an Internet bond with an interest rate of 6.86% gross, and this is a one year bond. Sage and Icesave are also offering bonds with similar rates. According to reports Skipton offers a bond with 7.75%. However, this is not a fixed rate but savers are locked into the bond for a year.

Savers that want to take advantage of lenders’ need to encourage savers to make deposits should make sure that they compare different products from a range of lenders, as there are different rates and products to suit different needs.

Mark Wright
8th November 2007

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

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.

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.

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

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

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

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

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

FSA investigating banks’ stability

Following the recent turmoil in the financial markets, which has spread from the sub-prime sector in the United States, the Financial Services Authority is to launch an investigation to review the stability of mortgage lenders.

This comes in the light of the problems suffered by the Northern Rock bank, which is the UK’s fifth larges mortgage lender. Over the past few days, since learning that Northern Rock had taken a loan from the Bank of England, shares prices in the bank have plummeted and customers have been queuing around the clock to take out billions of pounds in savings.

The FSA now wants other mortgage lender to prove their stability amidst fears that the Northern Rock situation could result in a domino effect. The regulator is focussing on lenders that it sees as being at risk, and wants these lenders to prove that they are solvent and secure. One industry official stated: ‘The banks have been told to open their books. They need to prove they have stress-tested their finances to ensure they are prepared for the risks inherent in these market conditions.’

According to reports amongst the banks and lenders that are receiving attention from the Financial Services Authority at the moment are Paragon, the Alliance and Leicester, and the Bradford and Bingley. All of these lenders have high loans to savings ratios, state reports, which means that they lend out more money than they take in by way of savings deposits from customers.

The FSA wants these and other lenders to prove that they have access to enough funds to continue offering loans and to cover debt repayments. Lenders would be expected by the FSA to seek assistance from the Bank of England, as Northern Rock has done, until other sources of funding are available through commercial means.

Tom Smith
17th October 2007

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Banks have already been under fire since the spate of interest rate rises over the past year, and this is because they have been very quick to apply interest rate rises to borrowing in order to increase profit, but have been notoriously slow to apply the rate rises to savings accounts. In some cases the interest rate rises have not been passed on in full or at all.

The interest rate was hiked up to 5.75% after a fifth 0.25% rise in the space of a year in July. Many savers are still awaiting news from their banks with regards to how they will benefit from the latest interest rate rise. Even worse, many banks will make savers wait longer still before applying any rate rise even after informing them of what they intend to do. Amongst those that are under fire are the Yorkshire Building Society, Lloyds TSB, NatWest, and Co-op.

Some banks, such as Barclays, have passed on only a fraction of the 0.25% interest rate rise to savers, with this leading UK bank raising the interest rate on it Flexible Savings Account by just 0.05%. ING Direct customers have been disappointed by the failure of ING to pass on rate rises, and the company has been slated for this over recent weeks.

However, some savings accounts will benefit from the full rate rise being passed on, and consumers are being urged to shop around and look for a savings account that offered a decent interest rate.

Tom Smith
19th September 2007

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

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

Are banks playing on the consumer’s conscience?

Over recent months consumers in the UK have been finding more and more services and products that are going ‘green’, enabling them to get the services or products that they need whilst also helping the environment.

The latest to jump on the environmentally friendly bandwagon is the credit card, with a number of issuers now offering the consumer the chance to enjoy the convenience and flexibility of credit card spending whilst contributing to the environment.

Depending on the green card that you opt for, the credit card issuer will make a lump sum donation to an environmentally friendly cause when you open an account, generally around £20-£25. The card issuer will then make a contribution to the cause with every pound that you spend on the credit card. These cards work in the same way as charity credit cards, and the more that you spend the more money gets donated to the environmentally friendly cause.

Consumers can also enjoy various benefits, such as very low interest rates charged on any environmentally products purchased on the card. However, some experts are wondering whether the banks are exploiting consumers’ concern over the environment with these cards. Green cards offer competitive interest rates, but they are not the lowest rates out there, and therefore these cards will help consumers to help the environment but will not necessarily enable them to help themselves when it comes to finances.

According to one expert:  “The environment is of prime concern to many people today, so seeing financial institutions donating to green causes will please many people. You still need to be diligent in taking on any credit card, though. You need to weigh up all the benefits against any potential costs, whether those are higher rates or hidden fees. An eco-friendly card may not be the right option for everybody.”

Tom Smith
14th September 2007

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

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

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

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

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

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

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

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

Chancellor Darling Would Like Longer Fixed Rates

New Chancellor of the Exchequer, Alistair Darling, has indicated that he would like to see longer terms for fixed rate mortgages in the UK.

Darling would like to see more fixed rates lasting up to 25 years and on Monday 9 July he pledged a shake-up of the housing market following concerns that have been expressed regarding lenders only offering short term fixed rates in order to maximise their profits.

If homeowners have to renew their fixed rate deals more often, they will be liable for thousands of pounds worth of charges in arrangement fees, which have rocketed in the last couple of years. As interest rates have risen five times in the last twelve months, consumers are looking to fix their interest rates so they know what their payments will be for a reasonable period of time, but the number of deals beyond two years are few and far between.

The Chancellor said that longer-term fixed rates were available around Europe and would be useful in the UK to reduce volatility. He was unhappy with the incentives built in to products that meant mortgage brokers were more likely to advise homeowners to choose short-term products – and the associated high arrangement fees – some now nearly £2,000.

Mr Darling said that the Financial Services Authority have noted the problem of brokers wanting homeowners to return to them every two or three years rather than every ten or twenty.

The Chancellor also talked about the possibility of building on greenbelt land in the future as the lack of affordable housing in the South East in the last five years was now becoming a problem for the whole country. Last year’s Government target of 223,000 new houses was not met with only 160,000 being built. Mr Darling agreed that planning is a sensitive issue, but whilst determined to protect Britain’s heritage he said that if we don’t increase the supply of houses the problem will get worse and worse and worse. There was no way he would accept that housebuilding should stop.
   
Ex-Chancellor Gordon Brown, now Prime Minister, oversaw house prices that trebled between 1997 and 2007, and promised to end the boom and bust cycle in house prices, but as it is evident that we are coming to the end of a boom cycle in house prices, both Brown and Darling will be hoping that we don’t enter a bust period of falling or crashing house prices. However, with interest rates having risen from 4.5% last August to 5.75% last week the increased payments to be found by most homeowners will bring about a slowdown in the market.

Malcolm Harris, CEO of Bovis Homes, yesterday warned that any further rate rises could bring the housing market to a grinding halt. Average mortgage payments are now at a record level when compared with how much people earn.

Mr Darling acknowledged that housing is a huge issue and concerns more than the buyers, with parents and grandparents keen for their children to be able to afford housing, but a monthly repayment on a £125,000 mortgage s now £130 higher than it was last year.

Tom Smith
16th July 2007

Actions To Ease The Mortgage Pain

There have already been several interest rate rises since August 2006, taking the Bank of England’s base rate from 4.5% to 5.75%. Read more

Interest Rates Up To 5.75%

The Bank of England has increased interest rates by another quarter point in July, to 5.75%, the highest level since March 2001.

Only twelve months ago interest rates were down at 4.5%. The last year has seen hundreds of pounds added to mortgage repayments of householders. On an average £200,000 loan, there will be another rise in payments of £33 to add to the £127 since August 2006.

There are also more than a million homeowners with fixed rate deals from two years ago which are around the 4-4.5% level, who will soon have to look for a new mortgage deal and they are going to be faced with rates of over 7.5% on the lender’s standard variable rate (SVR). That could mean crippling increase of £215 per month. Even with a new deal, they are looking at two-year fixed rates of 5.5% and a rise of nearly £100 per month, plus the fees on top.

Many experts think interest rates will go up again. A rate of 6% has been forecast, and Mervyn King was unhappy at the rate being held at 5.5% in June. He warned a higher peak might be needed in the future. That sounded like a threat of 6% to come.

The Bank has been striving to keep inflation and house prices under control, but the signs that they have started to do this since the last rate rise in May, they didn’t come soon enough to head off July’s rise.

Consumer Price Index (CPI), the government’s measure of inflation, reached 3.1% in March and has come down to 2.5% in the most recent figures. Nevertheless, this is still above the government target of 2%, and the MPC may still feel that more action will be needed. Lower gas and electricity prices should help CPI fall again soon. The MPC said: “Although pay pressures remain muted, the margin of spare capacity in businesses appears limited and most indicators of pricing pressure remain elevated. The committee judged that, relative to the 2% target, the balance of risks to the outlook for inflation in the medium term continued to lie to the upside. Against that background, it further judged that an increase in Bank Rate of 0.25 percentage points to 5.75% was necessary to meet the 2% target for CPI inflation in the medium term.”

Higher rates have begun to slow down the housing market. The Halifax, the UK’s biggest mortgage lender, has reported that house price inflation has cooled in the last quarter, lower than the first quarter of the year and the last quarter of 2006.

New Prime Minister Gordon Brown and his new Chancellor Alistair Darling will be frustrated by the rate rise, fresh as they are in their new roles. Mr Brown was always very please with the way his prudent monetary policies worked, but he may have to revise his comments if rates hit 6%, the level they were at when Labour came to power in 1997.

The UK has a big debt problem and these are becoming a bigger burden as interest rates continue to rise. PricewaterhouseCoopers suggest that 19% of an average household’s income goes towards paying debts which is a record level and beats that of 1990 when interest rates stood at 15%.

Tom Smith
15th July 2007

Abbey customers find mortgages been extended

There was a shock in store for many customers with the Abbey bank last week, as an oversight resulted in many customers’ mortgages being extended by years without them even being informed about it.

The blunder meant that thousands of homeowners have seen their mortgage repayment term extended, in some cases by up to fifteen years. This resulted from the bank failing to make changes to customers’ repayments, and meant that the term of the loan was increased by a considerable amount of time.

Rising interest rates in the 1980s and 1990s resulted in the customers’ paying more in interest on their mortgage, which meant that out of each repayment a higher amount was being applied to the interest. However, because the bank failed to increase customers’ repayments less of the capital was being repaid. As a result of years of underpayments, many have now found that they will be lumbered with a mortgage for up to fifteen more years.

Abbey should have contacted mortgage customers to explain that the rise in interest rates meant that their repayments would have to increase to enable them to pay off the loan within the arranged mortgage term.

However, the bank did not do this, and as a result customers continued with the same repayments, oblivious to the fact that they were not paying enough to cover the capital and interest repayments without extending their mortgage term.

Following a flood of complaints from those affected, an official from the Financial Ombudsman Service stated: ‘This is an issue specific to Abbey because it was not explained to the customers and they were surprised to discover they would have to pay over longer terms. Those affected could still be entitled to compensation.’

Tom Smith
15th July 2007

BOE governor warns on borrowing and lending

The Governor of the Bank of England, Mervyn King, has stressed the importance of consumers being careful not to borrow money that they cannot afford, and lenders being more careful about who they lend money to.

Mr King stated that consumer debt levels in the UK could lead to a major debt crisis. And with another interest rate rise due in July – which will be the fifth interest rate rise since last August – many more people in the UK could find themselves struggling with unmanageable debt.

Speaking at the Mansion House Banquet in London, Mr King addressed families and individuals, stating: ‘be cautious about how much you borrow’.

He also addressed lenders stating: ‘be cautious about how much you lend’.

At last month’s Monetary Policy Committee meeting Mr King actually voted for a quarter percent rise in interest rates, but the majority vote was to keep interest rates stable in June. However, this month’s meeting is likely to see a different result, and a further quarter percent rise is widely predicted.

At the dinner – also attended by new Prime Minister Gordon Brown – Mr King stated: ‘Be cautious about how much you borrow is not a bad maxim for each and every one of us here tonight.’

He also addressed lenders, adding: ‘Excessive leverage is the common theme of many financial crises of the past. Are we really so much cleverer than the financiers of the past?’

One LibDem spokesman said: ‘A combination of an economic slowdown and higher interest rates could spell disaster for large numbers of heavily-indebted families. If interest rates rise further, many home owners will simply not be able to pay.’

And the Shadow Chancellor added: ‘Millions of people are struggling as the cost of living is rising faster than their incomes.’

Tom Smith
9th July 2007

Variable rate borrowers could be heading for a fall

Industry professionals are warning consumers that they could be heading for a fall if they have high levels of variable rate debts, from mortgages and secured loans to credit cards.

With four interest rate rises over the past year the Bank of England base rate has gone from 4.5 percent to 5.5 percent between last August and this May, and further interest rate rises have been predicted by experts before the year is out.

Many borrowers with variable rate loans and cards have seen their interest rates rise, and for many this has resulted in real financial difficulties when it comes to making repayments. Many consumers seem to have been banking on interest rates remaining stable in order to comfortably afford repayments on their borrowing, and the four interest rate rises since last August have really taken their toll.

The Governor of the Bank of England stated: ‘Anyone who borrows at a variable rate should recognise that the interest rate they will pay in the future may vary. It is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels.’

To many, this is something of a warning that further interest rates are indeed on the way, and those planning to take on more debt should be very careful as they may not be able to afford repayments should the interest rates continue to rise.

One economist stated: ‘Rates are going to go higher. A base rate of 6% is not necessarily the top. Borrowers should brace themselves for another increase. I would be surprised if base rate hit 7%, but not if it reached 6.5%.’

An official from the London School of Economics stated: ‘Base rate will peak towards the end of the year at or close to 6%. As long as inflation is under control, it could come down in a couple of years.’

Tom Smith
7th July 2007

Good news for savers with Sainsbury’s

Those with Internet savings accounts with Sainsbury’s are in for some good news, as the supermarket giant and bank has now raised the interest rate on its Internet savings account to 6%, a rise of 0.25% from its previous interest rate of 5.75%.

According to This is Money this makes the Internet savings account from Sainsbury’s one of the best savings accounts to have. Prior to the interest rate rise the top savings account according to This is Money was with Icesave, which offered a rate of almost 6 percent.

Last week the Bank of England opted to leave the interest rates stable at 5.5 percent. Interest rate rises have taken place four times within the last year, rising each time by 0.25 percent.

However, in many cases savings accounts operators have been very slow to apply any interest rate rise to savings accounts, and in some cases have failed to pass on all or any of the rises to savers.

One the other hand they have been quick to apply to interest rate rise on borrowing, which means that those that have borrowed money have to repay more and those that are saving money get lower returns.

Sainsbury’s, on the other hand, has decided to raise the interest rate on the Internet savings account by 0.25 percent, even though there was no interest rate applied by the Bank of England last week.

The account does no require any notice and does not have any penalties attached to making any withdrawals. There is also no minimum deposit with the Internet savings account.

One spokesperson from Sainsbury’s stated: ‘With so many accounts in the market, savers need to think about which savings account best suits their needs, whether that’s benefiting from a short term bonus or being able to access their funds without any penalties. Our Internet Saver is ideal for those savers who want to receive a great rate but also want to have regular access to their cash without any restrictions.’

Tom Smith
5th July 2007

Do your kids have the right savings account?

Banks and building societies have come under fire on many occasions over the past year due to the failure of many to pass on the full level of interest rate rises onto savers whilst applying the full amount and sometimes more besides on borrowing.

And it seems that it is not only the adults savers of the UK that are getting a raw deal with some banks – many are paying even less in the way of interest on savings accounts for younger savers, often paying way below the Bank of England interest rates.

According to recent reports some savings accounts for younger savers pay under 4 percent in interest, which is over 1.5 percent less than the current base rate. Amongst those paying considerably less than the base rate on children’s savings accounts are C&G, Royal Bank of Scotland, Birmingham Midshires, the Woolwich, and Barclays. Even where balances on the accounts are close to one thousand pounds, many of these banks and building societies pay poor interest rates compared to the current base rate in the UK.

On the other hand there is a great deal on children’s savings account with the Nationwide. The interest rate on the Smart Account with Nationwide has been hiked up to 5.78 percent before tax, and in addition to this the Nationwide has pledged to pay at least 0.25 percent more than the base rate until 2010. This savings account is available to those up to the age of eighteen, and with this impressive interest rate and guarantee younger savers can look forward to seeing healthy returns on their savings.

A number of other banks and building societies are offering some impressive deals on savings, and consumers with kids that are getting a raw deal on their savings should look around and compare different accounts to see whether there is something more suitable available

Tom Smith
29th June 200

Overdraft interest rates go up

Recent reports have indicated that some banks and lenders have raised their overdraft interest rates by huge amounts over the past year, by far exceeding the interest rate rises that have been imposed by the Bank of England in terms of the base rate.

In some cases there has been an interest rate rise of three percent on overdraft borrowing over the past twelve months, whereas the total base rate rise has been one percent. Some of the costliest overdraft charges stand at around twenty percent, which is almost four times the Bank of England’s base rate.

Experts think that this is yet another move by banks to try and generate more profit from customers following the huge financial losses that have resulted from moves such as capped credit card penalty fees and reclaimed bank charges. Many consumers are unaware of the raised overdraft interest rates because the majority of consumers with overdrafts do not take note of the fluctuation of rates on their overdraft, and banks certainly do not make a big song and dance about it.

An investigation showed that the leading banks in the UK are all charging hefty interest rates on overdrafts, which means that they are netting huge profits from those that use their overdraft facilities on a regular basis. For instance, both Lloyds TSB and HSBC have raised their overdraft interest rate charges by over three percent since last August, which is over three times the interest rate rise on the base rate.

One financial analyst stated: ‘A few providers have taken full advantage of the opportunity to increase their rates, but instead of passing on the extra costs of the base rate rise, many have exploited the situation.’

Tom Smith
17th June 2007

Online banking is booming

Ten years ago the Nationwide Building Society started the huge phenomenon that has become online banking.

And as we reach a decade of banking via the Internet it seems that this method of dealing with finances and applying for banking services has become more popular than ever. There have been some concerns over the ease of banking fraud via the Internet, but with increasingly stringent safety measures in place and customers becoming savvier than ever when it comes to security, online banking continues to thrive.

One of the UK’s leading banks, HSBC, as reported an increase of fifty five percent in terms of its online business. According to recent figures around eighteen million people in the UK now use the Internet to deal with their finances and manage their bank accounts, and HSBC alone has received nearly two billion visits.

At a recent Annual General Meeting the chief executive of HSBC stated: “More and more of our personal and commercial customers are seeing the benefits of buying online. Our websites handled 1.8 billion visits last year and online sales increased by 55 per cent.”

He also stated that the bank was starting to move more towards interaction with customers through the Internet rather than through the branch.

A number of banks that are trying to encourage customers to deal with them online have offered various incentives and rewards such as increased interest rates on savings and bonuses – this is because it is easier, faster, and more time effective for banks to deal with customers in this way rather than through a branch.

When banking online customers can make bill payments, transfer cash, check balances, apply for services such as credit cards and loans, set up and cancel direct debits and standing order, and more.

Tom Smith
11th June 2007

Bank Considers Latest Rate Decision

Since the last announcement on 10 May when rates increase by a quarter of a percent to 5.5% there has been a lot of speculation about the way interest rates may go in June.

The latest forecast is for rates to remain unchanged, but another quarter percent rise is still possible. At 5.5% in May rates went up to their highest level since February 2001. Read more

Brits losing a fortune by failing to put their cash in savings accounts

In the olden days stashing your money in various cunning locations around the house seemed to be the norm, as many people did not have access to savings accounts as they do today.

However, according to a recent survey there are still an alarming number of Brits that insist on keeping their cash in the house, which not only raises security issues but also means that collectively Brits could be losing out on millions of pounds worth of interest from banks and building societies each and every year.

A recent survey was carried out by Virgin Money, and according to the result of the survey around one in every six adults in Britain are still keeping cash in the home rather than opting to place it in a savings account. The results indicate that if these people were to put the cash that they have kept in the house into an average Internet savings account they could be accruing around £174 million each year in interest collectively. Instead, this money simply sits around earning nothing for them, and increased the risk of financial losses through theft in the event that the cash is stolen by a visitor or the house is burgled.

The survey showed that one percent of Brits that were surveyed admitted to having up to one thousand pounds in the home, whereas two percent of Brits stated that they had up to five thousand stashed in the home. Experts warn that since inflation has been on the rise, and the money is simply lying around failing to accrue any interest, it is in danger of losing its purchasing power, so consumers are doing nothing to help themselves by leaving it in the home.

Industry professional add that there is around three and a half billion pounds in total that is lying around the homes of Brits rather than being placed into savings account, and that this amount could depreciate by two hundred million pounds within the next three years.

Tom Smith
10th June 2007

Three billion barrier smashed by Icesave

In a recent announcement Icesave, which only launched in October 2006, has revealed that since its launch it has taken over three billion pounds in deposits and has opened over eighty thousand savings accounts.

Part of Iceland’s Landsbanki, Icesave officials feel that the combination of easy, convenient online savings management along with highly competitive interest rates has helped to secure this level of success in such a short period of time.

Icesave has been offering interest rates in nearly six percent to savers, with a minimum account balance of £250 and a maximum of £1000,000. There is no penalty of loss of interest for withdrawals on the accounts, and all that is required of savers is for the account to have a t least £250 in it at all times. Those wishing to open an account with Icesave must be over the age of eighteen.

On the other hand the Dutch bank ING has seen around £3M worth of deposits withdrawn from its operations after failing to pass in interest rate rises to savers. Although ING is planning to pass on the latest interest rate rise in June, the interest rate has been stagnating at under five percent for some time, which has outraged savers, many of whom have decided to try and open accounts elsewhere in order to get a better rate of interest.

One official from the online savings operation Icesave stated: ‘In achieving this new milestone of £3bn in total deposits, Icesave has shown Landsbanki’s ability to diversify its balance sheet and develop its proposition in the UK market place.’ 

Icesave has guaranteed customers that the AER on savings accounts will exceed the Bank of England base rate by at least 0.25% until 2009.

Tom Smith
7th June 2007

Over six billion in premium bond sales

With a number of juicy million pound jackpots up for grabs next month, there has been a massive boost of six billion pounds in premium bond sales.

Savers are ploughing in billions into Premium Bonds in the hope of becoming one of the lucky few that become a millionaire when the draw takes place in June. The million pound jackpots are part of the fiftieth birthday celebration for Premium Bonds. Five people will be drawn as million pound jackpot winners next month as part of the celebration.

Last October saw sales of over two billion pounds worth of premium bonds, which was the highest monthly total on record. Since the start of the celebrations, over six and a half billion has been invested in premium bonds by savers. Half a million new savers have also jumped on board during this period, which gives Premium Bonds a customer base of nearly twenty four million savers.

June’s draw will see a record number of bonds, and there is now over thirty six billion invested in Premium Bonds in all. One draw has already been completed in December, which was also part of the celebrations and also saw five bondholders become millionaires. And with the forthcoming draw record number of bondholders can look forward to the chance to become very wealthy.

A spokesman for Premium Bonds stated: ‘The past eight months have seen a huge surge of interest in Premium Bonds. Despite being launched 50 years ago, they continue to attract new customers. In just the last eight months, over half a million people have begun saving in Premium Bonds for the first time. The anniversary draws, combined with the ease of investing online have appealed to old and new customers alike.’

Tom Smith
7th June 2007

Three billion in savings pulled from ING

Annoyed savers with money saved with ING Direct have pulled three billion pounds in savings from the bank.

Many customers have been outraged by the bank’s failure to pass on interest rate rises to savers, and as a result many have pulled large sums of cash that they were savings with ING. According to bank officials there are a number of customers that have removed large balances from the bank to try and find a better interest rate elsewhere, but the bank also stated that overall customer numbers hadn’t been affected.

According to bank officials ING is not prepared to compromise on services for other customers in order to try and get better rates for others. Launched in 2003, ING Direct has boasted a reputation as a bank that offers competitive rates of interest as well as good customer service. However, the interest rates on savings accounts with ING Direct have been stuck at 4.75% for some time.

The Bank of England has raised interest rates four times in the past year, with interest rate rises in August 2006, November 2006, January 2007, and May 2007. Customers are angry because ING has failed to pass on the interest rates that were applied by the Bank of England in November 2006 and January 2007. However, bank officials state that the latest interest rate, which was announced in May, will be applied to savings account in June.

One ING official stated: ‘The vast majority of customers are still with ING but those customers with higher balances who are rate conscious are people who are constantly looking for best rates in the market. Are there better rates out there? Yes there are. Do those companies pay all their customers the same rate? No they do not. We are trying to be consistently fair with all our customers so 5% is the highest and the lowest interest rate they will receive.’

Tom Smith
4th June 200

Savers could benefit from another interest rate rise

Over the past year the UK has seen interest rates rise three times, shooting up from 4.5% in August last year to 5.25% by January of this year.

And with experts predicting that another rise of at least 0.25% will be enforced in May, and possible a further rise in the summer, borrowers on variable interest rates are dreading dealing with their finances, as this means that repayments will go up yet again. However, for some savers the story is quite different.

According to information from Moneyfacts interest rates on fixed rate savings accounts have been climbing, and another interest rate rise could spell good news for savers. According to one expert from Moneyfacts a number of banks and building societies have been raising fixed rate interest rates by up to 0.55%. This has created stiff competition between those offering these savings accounts, and at present the Nottingham Building Society offers the highest rate at 6.2%.

According to Moneyfacts’ Rachel Thrussell: “While rates in excess of six percent are currently very competitive, instant access rates are not far short of this mark, making the reward for tying up your money relatively low. So while these rates will offer a great return and piece of mind, perhaps the market has not yet reached its peak and better rates may still be yet to come.”

In a related report from Sainsbury’s Bank, some experts were concerned that savers were being short-changed in terms on interest on their savings, with many account failing to keep up with inflation and interest rate rises. Consumers that are saving in a low interest account are urged to shop around and look for an account that offers a higher rate of interest, as this could really bump up the amount if interest earned each year.

Tom Smith
28th May 2007

More Information:

• Savings Accounts – Are They Worth It?
• Internet Bank Accounts - The Benefits and Drawbacks

What the recent interest rate rise means for your mortgage repayments

On 11th May the Bank of England increased its rates by another 0.25% to 5.5%, meaning that six million homeowners in Britain will face bigger monthly payments for their mortgages. Read more

Over one fifth of Brits do not save

Over twenty percent of Brits do not put aside any money in the form of savings according to a recent report. Research has shown that twenty one percent of Brits fail to put aside any money in savings.

The savings survey was carried out by Nationwide in a bid to try and determine how best to tempt consumers into opening and running a savings account. The survey also showed other facts and figures relating to Brits and the way that they save – if at all.

According to the survey, over one in five Brits saved nothing at all. However, the results also showed that thirty five percent of Brits do save money on a regular basis. In addition to this the survey revealed that nearly forty five percent of Brits tended to save on an ‘as and when’ basis, putting money aside into savings whenever they had some spare but otherwise using it for day to day cost of living.

Seventy seven percent of those interviewed as part of the survey stated that their most important consideration when it came to a savings account was a good, long term interest rate. Eight four percent also stated that the account needed to allow withdrawals without any form of penalty being imposed. Nearly sixty percent stated that they would only open a savings account with a well known provider.

Shockingly, the survey also showed that some people still use the most primitive methods of trying to save money, such as stashing their cash in various places around the home – including under the mattress. Those interested in savings accounts are advised to shop around and find an account that offers a good interest rate that reflects the rising interest rate in the UK.

Tom Smith
26th May 2007

Consumers should keep an eye on their savings rate

Consumers are being urged to keep an eye on their savings rate following the latest interest rate rise by the Bank of England.

Banks and building societies are often notoriously slow at applying any interest rate rises to savings account, yet are quick to apply them on borrowing, which means that they make maximum profits from any interest rate rises. The Bank of England has raised interest rates four times in the last nine months, taking them from 4.5% last August to 5.5% earlier this week. However, although borrowers quickly see repayments on variable rate loans and mortgages going up, savers do not benefit from the same speedy action.

In some cases, according to industry experts, banks and building societies simply leave the interest rate on savings unaltered, and most consumers fail to notice or concern themselves about this, leaving the banks to rake in million in additional profit.

Experts are urging consumers to keep on eye on their interest rates on savings every time the Bank of England imposes another interest rate rise, and to make sure that they either see the rate reflected on their savings account or consider switching accounts to one that does offer a competitive rate of interest.

Many of those with savings account may have to wait until June to see any rise in interest rates on their savings, and even this small delay could rake in huge profits for banks and building societies.

Kevin Mountford, head of savings and current accounts at moneysupermarket.com stated: ‘It takes providers an average of 20 days to pass on an interest rate rise. With each half per cent rise bringing in £12m per day in interest it’s easy to see why providers delay. If the reason for the average 20-day delay is operational then banks and building societies should backdate the rise.’

Tom Smith
21st May 2007

Are You Paying For Your Cash Back Credit Card?

The offer seems to be too good to be true.  Spend money on your credit card and your provider will give you cash back on the card as part of your credit card loyalty program.  The more you spend, the more cash back you become entitled to. This all sounds well and good, but if you’re not careful you may very well find out that it is you who are paying for the cash back bonus you’re getting, not your UK credit card provider.

In order for your cash back reward program to work in your favor you need to be a disciplined credit card user.  This does not mean that you should not use your credit card, or only use it in certain circumstances.  In fact, you really should be using the card as often and as much as you can if you want to take the full benefit of the loyalty program.  What it does mean, however, is that you need to make sure that you clear your credit card balance at the end of each credit card statement billing date.  If you fail to clear your credit card balance on the statement due date, and you carry-over your credit card balance to the next month, then you start to become the person paying for your cash back rewards, not your credit card provider.

The reason why it is so important that you do not carry over a credit card balance to the next payment statement date is because you need to avoid incurring any interest or fees if you want to benefit from the cash back loyalty program.  As soon as you lose this, any benefit you would have got from your cash back credit card loyalty program will be cancelled out by the interest and fees you need to pay for carrying over a balance on the card.  Indeed, you may well find that the interest and fees you pay each month for carrying over the balance on your credit card will exceed any cash back you would be entitled to.  Unfortunately, this aspect of cash back credit cards is something that UK credit card providers are relying on in order to fund the cash back they’re offering you in the first place.

Consequently, if you are the type of UK credit card user who pays off their credit card statement balance at the end of each billing cycle, then having a cash back credit card loyalty program can prove to be very lucrative for you.  However, if like 60% or so of the other users of UK credit cards you are a borrower on your credit card, then it is very likely that you should look for some form of alternative loyalty program or, more importantly, a credit card that offers you a lower monthly interest rate than your current card provider offers, as, in the long run, this is very likely going to save you more money.

If you are in any doubt as to whether or not a UK cash back credit card is for you, be honest with yourself and ask yourself whether or not you have the discipline to pay off your credit card statement each month.  If the answer to this question is yes, then this card is working for you.  If the answer is no, you are paying for your credit card cash back loyalty program offer – and then some.

Richard Smith
13th May 2007

More Information:

• Cash Back or Rewards – What’s Your Preference?
• Available Types Of Credit Cards
• Credit Card Charges

External Links:

• More cash back credit card offers from CardGuide.co.uk
• Cash Back or Rewards - You Choose
  Not sure which would be the best for your spending levels? This article discusses the advantages and limitations of bothtype of credit card offers

Consumers having problems finding online savings accounts

For some time industry experts have been urging consumers in the UK to shop around when it comes to finding a suitable savings account and not to stick with a savings account that they may have held for years just out of loyalty or apathy.

According to experts many savings accounts are not following the interest rate and inflation rises, and therefore consumers that save their hard earned money in these accounts are getting a raw deal when it comes to earning interest.

However, according to recent date many consumers that are taking up this advice and trying to find new savings accounts online are hitting a brick wall, with a number of financial institutes refusing to let new customers open online accounts, and reserving them strictly for existing customers – making it more difficult for those with a poor existing savings account to switch to one that pays better interest or offers more benefits.

More information: The Process and Benefits Of Switching Bank Accounts

The review into online savings accounts was carried out by Global Review, and shows that many consumers are being left out in the cold when it comes to finding better interest rates on their savings. According to Moneyfacts there can be a huge difference in interest rate levels between the best savings accounts on the market and the lowest interest ones, but it seems that despite their efforts many consumers can do nothing about the fact that they are stuck with a low interest rate.

Amongst the banks and financial institutions refusing online savings accounts to anyone other than existing customers are Lloyds TSB, Nationwide, and Barclays. Many other banks, such as Halifax and NatWest, have also been accused of not providing adequate information to those wishing to open savings accounts with them.

Tom Smith
13th May 2007

More Information:

• Internet Bank Accounts - The Benefits and Drawbacks
• Can I Have More Than One Bank Account?
• Opening and Closing Bank Accounts
• Savings Accounts – Are They Worth It?

Customers could be losing out on savings accounts

Many consumers in the UK like to save some money towards a rainy day, to build a nest egg, or simply for emergencies, but recent data has revealed that an alarming number of savers in the UK are getting really raw deal on their savings and could net much more in interest each year on their savings simply be taking the time to find a savings account that pays a decent rate of interest.

Experts claim that the apathetic attitude of some savers, and even misplaced loyalty to their banks, could mean that many savers are losing out on a small fortune in interest each year.

Recent research was carried out by Sainsbury’s Bank, and according to the information from the research, around forty percent of savers in the UK are earning less on their savings than the rise in inflation.

With inflation working its way up to over three percent according to the Office for National Statistics, it seems that around two in every five savers are earning under the three percent mark on their savings, with around sixteen percent of banks and building societies paying even less than this, at two percent or under.

The Bank of England has increased interest rates three times since August of last year, taking the base rate from 4.5% to 5.25%, and many predict that there will be a further rise of at least 0.25% in may this year, which would take the base rate to 5.5%. However, despite these increases only a fifth of banks and building societies offer savings accounts that have an interest rate of fiver percent or higher.

As an illustration, officials from Sainsbury’s Bank stated that someone with £3000 in a savings account paying 5.5% could earn around £100 more in interest each year than someone with the same amount of money in an account that paid 1.5%. 

Tom Smith
28th April 2007

Consumer group wants investigation into calculation of credit card interest

The UK consumer group, Which?, has demanded an investigation into how credit card companies calculate the interest to be paid on cards, claiming that many companies are using a wide range of methods to calculate interest, which is not only netting them more money but is also causing mass confusion for credit card users.

According to the watchdog, these credit card companies are using around a dozen different methods in order to calculate interest on credit card repayments, and the confusion that this is causing is resulting in the companies making even more money from their customers.

Which? officials have gone on to say that the way that these credit card companies are calculating the interest to be charged means that comparing APRs on credit cards to find the best deal is ineffective. Which? states that credit card companies that make up for ninety percent of the credit card market are using around a dozen different ways to work out the interest. This includes the top twenty providers of credit cards. According to Which? there are now a number of factors that are used by these companies in order to determine how the interest will be calculated on a particular account.

One official from Which? stated: “People believe that APRs are a dependable way of comparing credit cards, but our research shows that APR cannot to be relied upon for true credit card comparisons.”

However, APACS officials state that using just one way to work out interest would also affect consumers, as the process used may not suit every consumer.

One APACS official stated: “There are a huge variety of cards on the market and some people prefer to have a lower APR but pay earlier, others might like a slightly higher APR but only want to pay interest on the amount left outstanding.”

Tom Smith
28th April 2007

Current accounts now available through credit unions

Credit Unions have recently announced that they will now be able to offer current bank account facilities to their members, giving bank customers that are getting irate with the way that they are being treated by the UK’s major banks another option when it comes to their banking needs.

Banks have come under intense fire over recent months, for everything from charging unfair and unlawful fees to misleading customers, selling payment protection insurance inappropriately, and charging extortionate fees on credit cards.

The Credit Union current account comes with many of the benefits that come with a standard bank current account, along with some extra benefits that are available to member for being part of a credit union, which is a financial co-operative that is run and operated by its own members. Amongst the benefits that come with this account are a debit card and cash withdrawal facilities. However, the accounts do not offer any cheque books or any overdraft facilities.

The announcement regarding the availability of current accounts through credit unions was made earlier this week at the annual general meeting of the Association of British Credit Unions (ABCUL), which is a non-profit organization. The aim of this facility is to try and help those that could otherwise be left without current account facilities, and could end up paying additional fees simply for having to make cash payments rather than pay via a bank account.

The Chief Executive of ABCUL stated: “We can offer members a current account service similar to that offered by banks, but with all the added extras associated with a financial co-operative that is owned and run by its members, for the benefit of those members.” The accounts will be run and managed by each individual credit union, but overall support will be provided from the Co-operative Bank.

Tom Smith

23/4/07

Find the right savings account for your holiday savings

As the festive period disappears and Spring approaches many people in the UK start thinking about saving towards their summer holidays. If you are looking to start putting some money aside to fund your annual holiday in 2007, it could really pay to shop around a little and find a savings account that will make your money work harder for you. There are many different savings accounts available these days, and the interest rates on offer can vary dramatically. Depending on how much you will be saving this could make a big difference to the amount that you earn in interest.

The type of saving account that you opt for will depend on a number of factors, such as the initial deposit that you can make, the amount that you intend to put in each month, and the level of access that you require to your savings. You will find a choice of savings accounts, some of which require a certain period of notice in order to make a withdrawal without penalty and others that offer instance access. Some require a minimum initial deposit of just one pound whereas others require more, and some want to see a regular minimum amount going in each month, whereas others will accept deposits as and when you can afford them.

Amongst one of the highest savings account interest rates on offer is the Alliance & Leicester savings account, which offers twelve percent AER on its regular savings account. Choosing the right savings account for regular savings can make a big difference to the amount you make on your deposits, and consumers can quickly and easily compare the different savings accounts available, along with their interest rates and terms by going online. This is the easiest and most convenient way to see at a glance which of the UK’s savings accounts will best suit your needs and give you the best return on your deposits.

Choose credit cards over store cards this Christmas

If you are planning to spread the cost of Christmas and the New Year there are a number of options available to you. For many people, particularly those lured into shops when the January sales come around, the temptation to take out a store card is irresistible, with retail employees throwing what sounds like offers in to encourage the consumers to apply for the store card. However, consumers should think carefully about whether a store card is worth it before making a commitment and spending money on such cards.

A store card can only be used in one shop or a certain chain of stores, and is therefore of no use to you if you want to pay for other items in other shops and stores. Store cards also typically have very high interest rates, so even though you might be offered a small discount on your purchases for using the store card you will more than make up for this in terms of the interest that you will pay for the privilege of using the card. With stores cards you don’t get special offers such as interest free periods, so you will be stuck with paying interest on any balance that you have on the card.

A more sensible solution for those planning to splurge out in the January sales is to get hold of a good credit card in plenty of time – one that offers an interest free period on purchases giving you time to repay the balance without having to pay interest. Even if you end up with a credit card that does not offer an interest free period, or where the interest free period expires before the balance has been repaid, you will still pay a lower interest rate than most store cards charge, and you have the added advantage of being able to use the card in other stores.

There are some advantages to taking out a store card, such as discounts on certain lines and products, but in order to really benefit from this type of deal you need to be the type of consumer that pays off the full balance on the store card each month, thus avoiding the extortionate interest charges that will otherwise be incurred. 

Even more convenience for A&L customers

Following in the footsteps of HSBC and First Direct, the Alliance & Leicester has revealed plans to introduce a new method of banking that will offer consumers even more in the way of convenience and flexibility – mobile banking. Consumers in the UK that have accounts with major banks and building societies can already enjoy the convenience and ease of Internet banking in addition to using the facilities and amenities available at the local branch. It seems that mobile banking could be the next big step for many banking companies.

Through the use of the mobile banking service on offer from the Alliance and Leicester, consumers will be able to quickly and easily check on recent transactions that have been made, will be able to check their balances, and will even be able to top up their mobile phone credit directly from their bank accounts. In the future, according to officials from the Alliance & Leicester, consumers will also be able to make money transfers and pay bills from the account.

For those that want to take advantage of this mobile banking service, registration will be made easy and simple, and can be done via the Internet or via the mobile phone. One spokesperson from the bank stated: ‘There has not been much technical integration and all we need to do is verify the customer and their bank account details, so it has been straightforward.’

One research analyst says that over time consumers will become used to this updated method of banking, as it means that they will have one more valuable facility to help with the smooth-running of their finances and accounts. However, he added: ‘It is taking consumers a while to use their mobile phones for more than voice calls, and it is difficult for a bank to teach people to use them in another way.’

No Evidence That Interest Only Mortgages Are Taken Out Under Pressure

Amidst concerns that many people may be taking out interest only mortgages rather than capital and interest mortgages simply because of the rising cost of house buying and the problems with affordability, a recent report has been published and has indicated that this is not actually the case, and it is not pressures relating to the affordability of housing in the UK that is resulting in some borrowers opting for the interest only mortgage.

The research was carried out by the Council of Mortgage Lenders in the UK, and shows that those deciding to take an interest only mortgage opt for income multiples that are similar to or lower than those taken by borrowers that go for a capital and interest mortgage, also known as the repayment mortgage. The report also revealed that interest only mortgages are more likely to be taken out by home movers than by first time buyers, despite the fact that the latter group is most likely to suffer the effects of rising property prices.

According to the data, amongst those that find that the interest only mortgage is a viable option are the self employed, as the income for a self employed borrower may not always be steady, and by taking an interest only mortgage the borrower can repay the minimum amount each month thus cutting their monthly outgoings, but can make addition payments on the loan at times when there is a higher level of income available.

The director of the Council of Mortgage Lenders, Michael Coogan, stated: “The view that interest-only mortgages are being used as a dangerous short cut around affordability barriers is not borne out by our research. But we do need to understand as much as we can about why borrowers choose them, and what they do after they have taken out their loan. We are therefore pleased that the Financial Services Authority has been undertaking consumer research, and look forward to reading their findings when they are published next month.”

Nationwide puts an end to ’same mortgage’ deal promise to its existing customers

Despite the fact that the UK’s fourth largest mortgage lender has run a very public and prolonged promotional campaign based around its promise of giving exactly the same deal to its existing mortgage customers as it does to first-time buyers, come 1 December the Nationwide’s existing 1.2 million mortgage customers will no longer be given such treatment.

In what many are seeing as incredible marketing blunder, the Nationwide has announced that with effect from the 1 December it will no longer continue to treat its existing UK mortgage customers the same as it does new ones.  Henceforth, existing mortgage customers who want to re-mortgage, switch to a better deal, or borrow against the equity in their homes will be faced with higher interest rates than customers looking to buy new homes.

Unlike its main rivals, the Nationwide has long prided itself on the fact that it will not discriminate against existing customers, but with the new rates coming into effect from 1 December, Nationwide customers wishing to re-mortgage, switch to better deals, or simply borrow more on their equity will now face the prospect of two-tier interest rates that range from 4.73% for house purchases to 5.88% for re-mortgages.

In its defence, the Nationwide are claiming that the change to their policy is in-line with the UK home lending market’s trend of offering “slightly better rates” for home-movers.  This may be so, but for a UK home mortgage lender that has built such a public image around its promise of offering the same service to both existing customers and new customers, Ray Boulger, senior technical manager at Charcol, the mortgage broker, says, “There’s no way you can legitimately claim you’re offering the same deals for everybody if your existing customers don’t have access to the cheaper purchase rates.”

If it is any consolation, existing Nationwide customers will be entitled to receive a £100 discount off the reservation fee if the decide to switch from one Nationwide home mortgage product to another, or if they elect to increase the amount of their UK mortgage loan.  Nationwide also agreed to waive its re-mortgage administration fee of £99 for existing customers who re-mortgage.

Nonetheless, as Melaine Bien, associate director of Savills Private Finance comments, although the changes allow Nationwide to “become more competitive with its pricing when attracting first-time buyers,” the promise that no-one would receive preferential treatment at the Nationwide “no loner stands”.

Homeowners cautioned over the true cost of unsecured personal loans for home improvements

The latest figures released by the British Bankers’ Association (BBA) show that 198,242 mortgages, totaling £21.8 billion were approved in the UK in October, a six percent increase on September’s figures and an eight percent increase on the figures year-on-year.  At £144,200, the average UK residential property mortgage also saw a slight increase during the month.

Nonetheless, while, “the secured lending market undoubtedly remains robust,” according to David Dooks, director of statistics at the BBA, “after discount price growth, lending volumes are not dissimilar to the same time last year” – indicating that the recent base rates increases by the Bank of England mat be having some effect on the demand for UK property borrowing.  A factor echoed by Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, who foresees a slowdown in the UK property borrowing during the course of the next year once the full impact of those Bank of England rate increases filters through and the true higher cost of borrowing starts to be felt.

In the meantime,  a recent report by Money Expert is warning that an increasing number of UK homeowners are now opting to take-out unsecured personal loans to finance their home improvement projects over more cost effective ways of this type of borrowing. 

While this may, itself, not be too alarming, Money Expert’s findings also indicate that UK homeowners are not fully aware of how much their unsecured personal loan borrowing is costing them in extra interest payments.  In some cases, interest repayments on a four year £10,000 unsecured personal loan taken-out for home improvement projects can vary by as much as £2,500 – or 25%.

Sean Garden, chief executive of Money Expert, therefore warns, “Personal loans can vary in price dramatically – you could end up paying back as much as a quarter of the amount you borrowed in extra repayments unless you research the market carefully.”

As such, if you are one of the many new homeowners who have recently been approved a UK home mortgage loan and are now looking to undertaken some DIY home improvements on your new home, make sure you look around and research the many different types of UK unsecured personal loans available in the market to make sure that you get an unsecured loan that meets your needs without breaking the bank in extra interest payments.

Bank claims that most consumers won’t be affected by new charges

Following its recent announcement to start charging UK customer a ten pounds monthly fee if they did not meet certain criteria, the First Direct Internet bank, a subsidiary of the HSBC Bank, has been defending its decision. The bank has been receiving calls from many angry customers who want to know why they are going to be charged a fee for using the bank’s services. The bank currently has around 1.3 million consumers, but some experts have warned that First Direct may lose a lot of its custom as a result of the new fee.

The new charge introduced by First Direct is due to come into force in February of 2007, and current account holders that do not pay in or maintain a balance of at least one and a half thousand pounds in their current account each month could find themselves being charged. Exceptions to the new charge are those customers that also have other financial products with First Direct, such as a mortgage, credit card, savings account, or loan.

One spokesperson from First Direct stated that he did not think that the bank would lose custom as a result of the new charges, and stated that most consumers that banked with First Direct would not even be affected by the new charges. He stated: “Around 85 per cent of our customers will still pay nothing after these charges are introduced. The only people affected will be those with just a current account, if they do not keep a balance of £1,500 or more. “

He also added: It’s possible that not a single one of our customers will pay the charges. We’ve got a great number of customers who’ve got accounts with us they don’t particularly use. We’re just asking those customers to bring more banking to First Direct to make us their first choice.”

Will other banks follow First Direct and charge fees on current accounts?

Following the shock announcement recently made by officials from First Direct Bank, a subsidiary of HSBC, that it intends to start charging customers that do not pay a certain amount into their current accounts each month, many are now wondering whether other banks and building societies will follow suits, bringing to an end the era of free banking for consumers in the UK.

First Direct made the announcement last week, shocking experts and customers by stating that a ten-pound monthly fee would be charged to current accounts that did not have at least fifteen hundred pounds in. It has now been revealed that Nationwide may also be looking into charging bank account holders in the same way at some point in the future, with one executive from Nationwide allegedly stating: “I don’t think we can rule out charging for current accounts totally although we have no immediate plans to introduce such charges at the moment.”

Halifax, on the other hand, have promised that it will not be introducing any such charges on current accounts, and is in fact planning to open three new branches in the UK, as it is thought that many existing First Direct costumers will now be eager to find alternative banking solutions in order to protest against and avoid the new charges being introduced by First Direct.

One official from the Halifax stated: “Halifax is committed to free banking, and we would hope that other banks and building societies share this commitment.” Sadly it looks as though First Direct do not share any such commitment, and the impressive reputation and customer base that this Internet bank has built up over recent years is likely to take a tumble over the forthcoming months, with consumers desperate to get their accounts switched to a non-charging bank or building society.

Interest Rate Rise Could Mean Nearly £300M More To Pay For Homeowners

A recent study carried out in relation to the recent interest rate rise enforced by the Bank of England has shown that mortgage payers in the UK could be paying nearly three hundred million pounds more collectively in monthly repayments on their mortgages. The interest rate hike was recently announced, after Bank of England officials increased it from 4.75% to 5%.

The figures with regards to the monthly rise in total mortgage repayments came from an analysis carried out by Egg. Officials from Egg have advised consumers to start shopping around for a better deal on their mortgages in order to try and save money on the amount that they will otherwise have to pay out as a result of the interest rate increase. Those on a variable rate mortgage could find that the 0.25% rise in the base rate could make a significant difference to their monthly outgoing based on the value of their mortgage.

According to the report from Egg, those with variable rate mortgages in the UK will each pay an average of around £35.92 more each month as a result of the interest rate increase. With over eight million mortgage payers currently on a variable rate, this could mean a rise of around £292 million per month on total mortgage repayments.

Officials state that by doing a little research and shopping around for a more competitive mortgage deal consumers could cut back on the financial impact that the interest rate rise has on their monthly outgoings. There are a number of deals available on the market at the moment, and some consumers may prefer to opt for a fixed rate mortgage to avoid further financial implications in the event that the interest rate rises again early next years, as predicted by some financial experts.