It would be the second price rise for British Gas customers in five months.  British Gas raised its prices in January this year in response to a hike in the cost of buying gas in the wholesale markets.  Despite losing 100,000 customers since this initial price rise, Centrica, the owner of British Gas, has announced it may have to take action in order to rebuild ‘reasonable margins’*. 

The 15 % price rise in January added £130 per year to the average British Gas energy bill in January.  Any further increase in prices may drive many of the 15.9 million British Gas customers, many of whom are already struggling with rising living costs and increased mortgage costs, to British Gas competitors if the further price rise goes ahead.

Low income households and the elderly are likely to be the worst affected by any further price rises.  According to a recent report by Age Concern, 5.5 million households, including all pensioners and families on basic benefits, could find themselves living in fuel poverty by the end of the year.  Fuel poverty is the term used to describe households where more than 10% of income is spent on keeping the home heated. 

Age Concern estimates that if energy tariffs continue to rise, without intervention from the government, by the end of the year ‘the average bill for 65-74 year-olds would soar to £1,262, a huge 19% of the income of a single pensioner on basic benefits and 12.5% of a couple’; and ‘families would have to pay a whopping average bill of £1340, 14% of the income of a lone-parent family and 12% for a couple family receiving basic benefits’.

Consumers who are worried about the impact a further energy price rise will have on their finances should utilise impartial energy comparison websites in order to find the most competitive tariff available in their area. 

TotallyMoney.com offers a free energy comparison and switch tool, allowing you to view the cheapest tariffs available and switch easily and safely. 

*timesonline.co.uk data

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

Many homeowners, particularly first time buyers, have borrowed 100% or more of their home’s value when taking out a mortgage over the past few years.  As property prices have started to show signs of a downturn as a result of the credit crunch, many homeowners are expected to find that their mortgage amount is suddenly greater than the value of their home. 

This is not going to affect the majority of homeowners in the long term.  Being in negative equity is not a problem of itself; the problem arises when homeowners look to sell or refinance.  With 1.4 million borrowers due to come to the end of their fixed-rate mortgages this year, many will find that they are unable to remortgage because 100% mortgages are now incredibly scarce as lenders look to minimise risky borrowing and boost profits.  This will leave them facing steep repayment increases as their mortgages revert to their lender’s standard variable interest rate, with no option to find a better interest rate elsewhere. 

If you have borrowed 100% or more of your property’s value and will come to the end of your fixed rate or discount rate period without having built up enough equity to remortgage for less than 95% of the property’s value, keep the following tips in mind:

• Prepare for higher repayments early on.  Look at your budget and minimise outgoings as much as possible.  Try to increase your income if possible. 

• Start saving on the side so that you have some reserves to draw on when your monthly repayments rise.  Consider an ISA to maximise interest rates on your savings.

• Use any overpayment facilities available to you during the fixed rate or discount rate introductory period.  If you are able to build up a reserve of overpayments you are often able to take a payment break later on, which may help when your repayments rise.

• If you want to sell your home, consider increasing the value of your home by renovating or extending.  Even if you don’t actually carry out the extensions yourself, going through the hassle of being granted the appropriate planning permission can add value to the property. 

• Ride it out – just keep paying your mortgage and wait for better times.  House prices are cyclical; the same thing happened in the early 1990s, followed by a massive boom.

• Your mortgage repayment is the most important bill you pay each month, even before credit cards and other loans.  If you are in difficulties with your finances, seek professional advice, but make your mortgage repayments your absolute priority.  Speak to your lender as soon as possible if you find you are unable to meet your repayments.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

Yesterday the Bank of England unveiled a £50 billion scheme designed to restore confidence into the ailing mortgage market.  The plan, announced by the Chancellor, Alistair Darling, will allow banks to swap mortgage-backed assets for government bonds that banks can use as collateral to raise money.  The government hopes that this will cut the cost of borrowing between banks, effectively lowering borrowing costs to consumers in the mortgage market. 

However, how effective this measure may prove to be is somewhat uncertain at this early stage, and has so far received an ‘underwhelming’ response from the City. 

Although the Chancellor hopes the move will ease lending conditions for borrowers, particularly first time buyers, the Council of Mortgage Lenders released a statement of response, stating that ‘the recent trend of mortgage products being removed and mortgage prices increasing for new customers will be affected more by how LIBOR [the rate at which banks lend to each other] responds to the announcement’; suggesting that the move in itself will be unhelpful unless banks begin to reveal the extent of their losses to one another to ease the uncertainty within the markets.  Unless this occurs, and the rate at which banks lend to each other does fall, the Council of Mortgage lenders believes that the improved liquidity brought by the cash injection is ‘unlikely to reverse the trend to higher mortgage costs we have seen in recent weeks’.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

A report from the TDX Group, which provides detailed debt-collection information to lenders, claims that about one millions consumers are struggling with ‘problem debt’, at an average of around £25,000 each.  Almost 600,000 of these are expected to be forced into last-resort options such as IVAs and bankruptcy during 2008 as they will be unable to obtain credit to refinance their unsecured borrowings as they have done in the past.

As the credit crunch tightens lending conditions across the UK, banks are becoming more and more unwilling to take on high-risk borrowers.  This means that the methods of debt management that have become popular in the last few years in the UK, such as ‘rate tarting’ with credit cards in order to constantly chase the best rate and avoid paying interest charges, may become a thing of the past. 

Many households are already struggling with rising living costs and increased financial strain as mortgage lenders refuse to pass on recent interest rate drops.  And the problems are only set to continue.  An estimated 1.4 million homeowners will come to the end of their fixed-rate mortgages this year and face sharp repayment increases as banks increase their lending margins in attempts to protect themselves from the global financial turmoil.  In addition to this, 3 million households will see their mortgage repayments rise during 2008 by an average of £150 per month*, despite the fact that the Bank of England has dropped the base rate three times in the past 5 months. 

It is estimated that home repossessions will rise by up to 50% this year to 45,000* as borrowers find themselves unable to keep their head above water and keep up with their financial commitments. 

Timesonline.co.uk data.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

The main effect of this is that many consumers are seeing their disposable income shrink, which is putting pressure on the economy as they adjust their behaviour to reflect this. This issue is being compounded by the credit crunch, which has seen lenders tighten their belts with regards to consumer credit; lenders are staying as far away as possible from high-risk lending, and fewer loan, mortgage and credit card applications are being accepted as a result. Those that are being accepted may find that they are unable to obtain headline interest rates as lending criteria are tightened; even good credit customers are being penalised as banks offload low profit credit card customers in an effort to boost profits. Consumers with mortgages, or personal debts in the forms secured or unsecured loans may have found that the Bank of England interest rates cuts over the past few months have not eased the strain on their finances, as many lenders are failing to pass on the rate cuts to consumers. Many financial groups that saw large chunks of their capital disappear virtually overnight as a result of the US sub prime mortgage lending crisis are attempting to rebuild their balance sheets, and increasing their margins on consumer lending is a fast way to increase profits as the BoE interest rate falls, and compensate for higher lending costs among the banks themselves.

The outlook may seem unrelentingly grim, but don’t lose heart! There is still a great deal of competition between lenders and suppliers as they vie for the customers who are looking for a better deal, so there are still savings to be made for those consumers who are proactive enough to vote with their feet. If your utility bills are rising or you are finding it difficult to obtain credit at an affordable interest rate, don’t just accept it without doing your research; there is nearly always going to be a better deal available elsewhere, and finding it does not have to be a difficult and time consuming task.

If you are interested in finding a better deal elsewhere, on loans, credit cards or even mortgages, use an independent online comparison site to compare deals – see ours here; if you make an application that is declined, or is offered at higher interest rate than you wanted, pick up the phone and ask for a better deal. You may be surprised by the result, as quite often a lender will drop the interest rate or turn a decline into an acceptance, particularly if mistakes have been made during the application process.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

High-risk borrowers who have a history of missed or late payments are being targeted as lenders crack down on high risk lending – an expected result of increased caution on the behalf of lenders due to the credit crunch. However, cautious borrowers with good credit ratings also being penalised as lenders look to maximise profits; a trend likely to continue if lenders begin sharing information on these types of customers.

Customers with good credit ratings are traditionally relatively low-profit; including those who either use their credit cards rarely, do not regularly carry forward a balance, or who rate-hop in order to chase the best interest rate deals. Credit card users who fall into this category are already seeing an increase of charges as providers attempt to squeeze profits from them, such as annual penalties for non-use of the card, and increased handling fees for balance transfers. Egg has taken this one step further by cancelling the credit cards of many of its low-profit customers. The next stage will possibly see lenders alerting each other to these customers’ habits via the sharing of ‘behavioural data’, which will enable lenders to predetermine the expected profitability of potential customers, and deny credit to low-yield applicants.

What does this mean?
Most obviously, it means that consumers who rate-tart in order to avoid interest-charges by taking advantage of zero interest offers on credit cards and balance transfer deals may find that their access to such offers dries up as lenders recognise these patterns and clamp down on low-profit behaviour. It also suggests that eventually, consumers who have a credit card but use it rarely may have to accept that they are hit with an annual penalty fee. Furthermore, it may radicalise the financial habits of many consumers who use a credit card as a budgeting tool or cash-flow regulator and repay their balance in full every month; credit card usage may become highly unattractive - or inaccessible - to these consumers.

What is the best course of action?
If you suspect that your credit card usage habits may mark you out to lenders as unprofitable, you should be sure to apply for credit prudently rather than jumping from interest-free offer to interest-free offer, as lenders will increasingly take this into consideration when processing your application. You should cancel any unnecessary credit cards, as the amount of unused credit available to you is taken into consideration by lenders, and a large number of credit cards may have an adverse affect on your eligibility. You may find it makes sense to consider a card that offers a permanent low interest rate rather than needing to frequently switch in order to avoid reverting to the high standard APR at the end of the introductory offer. A good buy at the moment is the Barclaycard Simplicity Credit Card, which offers the low typical APR of 6.8% for the life of the card on all purchases and balance transfers.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

Today’s decision should move to buoy consumer confidence, and will be welcome news for homeowners with mortgages linked directly to the Base Rate.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

Egg, owned by Citibank, claims the move was in order to offload ‘high-risk’ customers, which, in light of the heightened strain on lenders as a result of the credit crunch, appears to be a responsible action. Banks throughout the UK are tightening their belts when it comes to unsecured lending in general, and customers with a poor credit history are sure to be the first to be affected where their access to credit is concerned, whether it be in the form of credit cards, loans or mortgages. However, reports have surfaced that many customers with good credit profiles, having never missed any repayments, have also had their Egg cards cancelled. This has prompted speculation that Citibank has moved to reduce the number of risky borrowers on their books, while dumping low-profit customers at the same time.

Over the past 12 months there has been increasing pressure on credit card users who manage their finances carefully and as a result do not pay interest charges. Many consumers are taking advantage of the influx of credit cards offering interest-free balance transfers and lengthy interest-free periods on new purchases that have flooded the market in the last 24 months as providers have fought for increased market share. However, with more and more customers avoiding interest charges altogether, credit card providers have been finding other ways to increase profitability – a trend started by Lloyds TSB last year, when they introduced a ‘no-use’ charge in the form of a £35 annual penalty for customers who were not using their credit cards.

Similar attempts to squeeze profit from their low-profit customers include providers increasing rates and fees on their products. Most notable is that these rate increases don’t apply to the headline purchase rates or balance transfer rates that are the most common way to compare credit cards, but are hidden away below the fold. To list a few, a large number of lenders have increased interest rates on cash withdrawals by half a percent or more; many have increased foreign usage loading by up to a quarter of a percent; as well as increased annual fees and raised handling fees on balance transfers. In fact, according to research by moneyfacts.co.uk, in the last five months over 125 credit card providers have increased their charges in this way.

Egg is clearly taking this trend to the next level by cancelling the credit of low-profit customers altogether, and the question now being tackled by analysts is whether other lenders will follow suite. If so, more and more consumers will be pushed onto secured forms of borrowing such as secured loans, which is good news for lenders, but not such good news for customers who don’t wish to borrow at the risk of losing their home. The best advice for customers who find themselves in this position is to vote with their feet; one of the best cards on the market at the moment is the Capital One Platinum MasterCard, which offers the competitive APR of 9.9% with competitive introductory offers. When looking for a new card be sure to not just compare cards by their headline rates; check all the associated fees and charges and do your sums to make sure your credit card is working for you, not just your provider.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

#1: My credit rating is already ruined
If you have a history of missed loan repayments, late credit card payments or have defaulted on your mortgage, you may think that the damage to your credit rating is already done, and is too late to fix. However, it’s never too late to turn things around and become a prime credit candidate, as your credit record lasts for only six years. With some planning and good decisions you can gradually improve your relationship with financial institutions and increase your credit rating. See the full article for more in-depth information.

#2: I’m saving instead of paying off my credit cards
You may believe that if you are saving for a particular expensive purchase or event, such as a car, holiday or wedding, there is little point in over-repaying credit card debts at the same time. This could not be further from the truth; racking up interest charges on a credit card will negate the interest earned on any savings. A clever shuffling around of your finances can help you to stay in control and keep your money working to your best advantage. See the full article for more in-depth information.

#3: I don’t understand financial matters, so I trust my bank manager’s advice
If you find financial matters too dull for words, or don’t understand the jargon, you may think that relying on your bank manager’s advice is a safer way to manage your finances than muddling through yourself. Actually, you may be much better off by taking matters into your own hands, as your bank manager may not have your money’s best interests at heart. Independent financial comparison services are a good place to begin in order to get yourself a better deal. See the full article for more in-depth information.

#4: I’m too young to worry about the future
The sooner you start taking a serious interest in your finances, the better. Whatever your financial situation, understanding the basics and planning for the future is important. Getting into good habits at an earlier stage of life can mean avoiding a lifetime of financial stress. This way, by the time you really need to start making serious financial decisions, you can avoid the common mistakes that lead to serious problems later on. See the full article for more in-depth information.

#5: I don’t have time to plan and budget properly
Having a good relationship with your finances requires a certain amount of time and planning. Setting out a budget and learning to manage your incomings and outgoings properly is a good place to start, no matter what your income. You may be surprised at where your money goes each month, and gaining an awareness of this can make a big difference to your finances, especially when considering major financial decisions such as loans and mortgages. See the full article for more in-depth information.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.

UK consumers each rack up an average of between £350 and £450 on Christmas expenses each year. When this is added to your regular monthly credit card spending, your January bill may induce fits of sweating, shaking, voluntary amnesia, or worse. To try to stave off some of the more severe feelings of self-hatred today, I’ve put together a short action plan to help with the financial aspect of your January blues.

Work out a budget
If you went ahead and spent on your regular credit card in the lead up to Christmas, and didn’t take advantage of a card that offered interest-free purchases as an introductory deal (naughty), you probably have between 2-4 weeks to pay the balance in full before you get charged any interest. You should firstly have a look at your finances and decide if there is any way you can budget this in order to avoid interest charges, even if it means dipping into your savings now and repaying them later. Even if your debts are relatively small, there’s no point in paying interest charges if it is in any way avoidable.

Shift your debts
If this is not possible, shift those debts elsewhere. Many credit card providers offer interest-free balance transfer cards in order to attract new business. They will let you transfer your existing balance for a fee, and offer a set period of between 3-18 months where no interest will be charged on the balance, allowing you to repay the debt over time without penalty. One good option at the moment is the Barclaycard Platinum credit card, which offers interest-free balance transfers for 14 months for a 2.5% handling fee.

Long-term planning
This should earn you some breathing space from the interest charges, but don’t stop there. To get the most out of your new credit card, you should use it for balance transfers alone, and not for new purchases, as the deal on interest-free purchases will more than likely be less than appealing. Instead, open up another credit card that specialises in offering a good deal on new purchases. The best card for you will depend on the type of deal you are looking for; some of the best include interest-free purchases for up to around 15 months, along with a range of other benefits, such as cashback, rewards, or air miles. A good option is the Capital One Platinum Card, which is currently offering interest-free on new purchases until November 2008, followed by the low APR of 9.9%.

Following this plan should help sort out your January finances. Unfortunately I can’t do anything about getting you into the gym, but at least your wallet will be a little bit happier.

Please note: This website, and the articles and information within it are based on journalistic research. It does not and should not be construed to constitute financial advice. Any information should be considered in regard to specific circumstances. All tips are followed at your own risk and should be followed up with your own research.  For more please refer to our terms and conditions of use.