As competition within the retail banking sector increases with the growth of challenger banks, Equifax research reveals that receiving the best rates is by far the biggest incentive for consumers looking to switch banks.

In an online survey conducted by YouGov, 42% of people cited better deals and rates as a reason they would switch bank accounts; 28% said that incentives like a cash bonus or new smartphone would prompt them to change and 24% flagged better customer service as a priority. More convenient branch locations are a deciding factor for 21% of people but only 14% would be swayed by better technology and security. 26% of people said that nothing would prompt them to change provider.

The research also showed that only 13% of respondents are aware of the government’s midata initiative, which allows consumers to easily compare current account offers based on their recent banking history. Only 1% have actually used midata.

Consumers’ focus remains on the traditional aspects of a bank account such as returns on savings or low interest rates for loans. A lack of awareness of comparison tools however means that consumers may struggle to determine the best financial deals for them, making them less likely to change provider.

 

A new report from The Co-operative Insurance claims that around one hundred thousand parents are currently ‘fronting’ motor insurance for their children

One in ten of parents of young drivers in the UK currently aged 17-25 have admitted to fronting their son’s and daughter’s motor insurance policy at some point, for an average time of two years. Of those that have admitted to fronting, over a third at 99,600 of parents are currently fronting their child’s motor insurance*.

According to the DVLA, there are currently 2.9million drivers aged 17-25 on the roads with either a full or provisional driving licence.

‘Fronting’ is a type of insurance fraud whereby parents say that they are the main driver of a car when, in reality, most or all of the driving is done by their child. Whilst well meaning, 62% of parents are fronting to save their children money, the implications of fronting can be serious and in some cases it could make it extremely difficult for drivers to obtain insurance later if they are found to have fronted.

Seven out of ten of those parents fronting have children with full driving licenses, though figures show that over a quarter (27%) of parents are fronting insurance for their children who only have provisional driving licenses.

New drivers can have their licence revoked if they gain more than 6 points on their driving licence within two years of passing their test and, whilst well meaning, parents could be unwittingly putting their children at risk of this as in the worst case scenario they could be found to be driving without insurance – which comes with a maximum penalty of 6 points.

The findings have revealed that parents are willing to ‘front’, despite the fact that the majority are aware that it is illegal. Though, despite this, 94% of parents believe they would be covered if they had to claim on their motor insurance.

Dads are more relaxed than Mums when it comes to fronting motor insurance with 10% of Dads willing to admit to it in comparison to 8% of Mums. More parents of children aged 17-19 are fronting than any other, followed by parents of 20-22 year olds then 23-25 year olds.

There have been increasing rumblings that we may see interest rates rise before the year is out whilst others are pointing to early 2016, either way it’ll be the first upward move in interest rates since July 2007.

The increases are likely to be in small steps of 0.25% every few months but whether you are a borrower or a saver it will increasingly have an impact on your finances.

Many people will have forgotten what sort of impact this could have on their finances, so here are a few pointers just to give you an idea of what may be around the corner for you.

Mortgage borrowers who don’t have the safety net of a fixed rate deal will be the ones fearing a rate rise the most, with the extra cost dependent on both the amount borrowed and the term of the mortgage.
For example someone with a £250,000 home loan over 20 years will pay an extra £128 per month if rates were to increase by 1% whereas a borrower with £350,000 outstanding will have to find an additional £179 per month from the household budget.
For those with credit card borrowing again the level of extra interest will depend on how much you owe, but for a £1,500 balance with your rate being increased from 18.9% to 19.9% you’ll pay £1.24 extra per month but if you have £7,000 on your plastic the same 1% increase will cost £5.83 per month more.
If you’re a saver a 1% hike will give you an extra £120 per annum (after 20% tax) on a £15,000 savings pot – UK savers will be yearning for that sort of hike and more after enduring a savings drought for what must seem like an eternity.

 

 

 

Reviewing and planning your financial future with a financial adviser is time well spent if you’re looking to get the most out of your money and to be able to look forward to a comfortable retirement.

For many people the biggest obstacle is a lack of time during the working day, so heading into town to see a financial adviser just isn’t feasible.

However we’re starting to see greater use of new technology enabling you to discuss your future financial plans via a video link in the comfort and convenience of your own home.

Yorkshire Building Society has just launched an innovative new service in conjunction with Legal &General, who already offer investments through its branch network.

Its customers will now have the opportunity to get advice in the comfort of their own home via a secure video link.

It’s simple to set up and can be accessed through a laptop or tablet and allows the advisor to show documents on the screen whilst discussing investment options with the customer.

Time is an increasingly precious commodity and we need to see greater use of technology to help people plan their future finances at a time and place that works for them.

It’s been well documented that households with a poor credit rating can pay hundreds of pounds more per year for finance and utilities payments than consumers with healthy credit scores.

Specialist credit card provider Aqua showed last year that families with a lower credit score typically can only access a month by month broadband contract (avoiding the need for a credit check) resulting in an average annual charge of £175, expensive when you consider that those with good scores pay only £60.

If you’ve never looked at your record, try taking a quick look at a new service from ClearScore.com where you can obtain a copy of your credit score and details for free.

This will enable you to check exactly what information is registered against your name as for all you know the details may be incomplete or incorrect and thus making it more difficult and more expensive to obtain credit than it should.

Your credit report contains details of your balances, limits and payment history.

It will also list any late or missed payments on your existing loans and credit cards as well as previous borrowing you’ve had during the last six years.

Your record will also shows details of any bankruptcies and county court judgements as well as the amount you currently owe on your credit agreements together with details of searches and new applications made.

It’s also worth trying to dispel some of the myths surrounding credit reports and CRA’s.

Ensure you are registered on the electoral role otherwise you won’t appear as being listed at your address if a lender makes a credit search.

Third party information, including members of your family who live, or have lived with you does not appear on your credit file as long as you don’t share any joint financial commitments.

Other people who have lived at your address previously will not affect your credit score.

If you’re looking for a few tips on how to improve your credit rating, consider the following.

Close credit card accounts that you’re no longer using. Even though your balance may be zero, any prospective lenders will take into account any existing credit limits you have available to you when assessing applications for new finance.

Having no record of managing credit can count against you so it’s worth having a credit card and using it a few times each year – if you repay the statement balance in full and on time it won’t cost you a penny, but demonstrates that you are capable of managing credit and will reflect positively on your file.

More than eight in ten people (83 per cent) are unaware that the protection provided for savings by the Financial Services Compensation Scheme (FSCS) will fall by £10,000 to £75,000 on 1 January 2016, according to research from peer-to-peer lender RateSetter.

The FSCS, launched in 2011, guarantees the safety of savings kept in banks and building societies up to a limit of €100,000, to match the guarantee offered in the EU, and the UK limit is falling following the decline in the value of the euro relative to the pound. RateSetter’s research shows that the public awareness of the level of protection provided by the FSCS is declining and many people overestimate its ability to protect them.

Nearly four in ten people (37%) said they did not know what level of protection the FSCS provides – a significant increase from a quarter of people (26%) who said this nine months ago.  A third (34%) believe that rules around the FSCS are confusing.

One in six people (16%) mistakenly believe that the FSCS protects their money against the pressures of inflation and nearly one in ten (8%) thought the FSCS currently provides protection for more than £85,000.

“With the reduction in the FSCS limit just 100 days away, the clock is ticking.  Anyone in the fortunate position of having more than £75,000 in savings will want to use this time to take a good look at whether their money is appropriately allocated”, commented Rhydian Lewis, CEO at RateSetter. “For many people, that might mean splitting savings between different banks and building societies.  But some investors have told us that lower FSCS protection will prompt them to seek a better return on money above the new limit – and perhaps this is one of the reasons why we’re seeing increasing levels of investment in peer-to-peer platforms such as RateSetter.”

Interest in peer-to-peer lending has continued to grow in the two months since the change to the FSCS limit was announced: the number of people investing on RateSetter’s platform has increased by 7%, and the average account size has increased by 3%, to £20,530.

Pensioners in the UK pay a total of more than £17.5 billion in income tax every year, according to new analysis by Prudential.

The insurer’s analysis of the most recently available ONS data on income and tax shows that in the 2012-13 tax year, over-65s paid an average of £3,258 each in tax. Collectively this accounts for 11 per cent of the £157 billion total income tax paid for the tax year.

The figures do however confirm that the amount of tax you pay falls after turning 65 – the average tax bill for over-65s in the UK is £2,300 lower than that for under-65s.

The Prudential analysis also shows that the distribution of income tax paid by over-65s across the country is skewed heavily towards London. In the capital, the average amount of income tax paid by over-65s was £8,386 – more than £5,000 higher than the UK pensioner average of £3,258.

Stan Russell, retirement income expert at Prudential, said: “These figures show that just because someone has retired from work doesn’t mean they have retired from paying tax, so taking into account the impact on retirement income is an important part of planning for a comfortable retirement. Discussing your retirement aspirations with a professional financial adviser is an important step for many towards achieving the best possible disposable income in retirement.

“For most of us, saving as much as possible as early as possible in our working lives remains the best way to help secure a comfortable retirement.”

Santander, the stand out performer when it comes to current account switching this week announced an increase in the 123 current account monthly fee from £2 to £5 with effect from January 2016.

The cashback returns on utilities payments and in credit interest rates have not been changed, however the increased fee takes some of the shine off this deal, particularly for those customers with smaller credit balances.

For someone with a smaller balance it could be a game changer – if you have a £3,000 balance you’ll earn £90 per year (£72 after 20% tax), but will be paying out £60 in fees – thus giving you just £1 per month benefit.

There’s a higher fee in the pipeline for Santander 123 credit card holders too with the fee increasing from £2 per month to £3 per month also from next January.

If you’re considering an alternative in credit bank account then it may be worth a look at Tesco Bank.

The Supermarket bank also pays 3% on balances up to £3,000 and whilst it doesn’t offer rewards on utilities payments like Santander, there’s no monthly fee plus it has just dropped both the £750 minimum funding limit and £5 charge that was levied if you paid in a smaller monthly sum.

This week saw further evidence that credit card companies are battling harder than ever to take advantage of what is currently a buoyant credit card market.

The surge in competition has ratcheted up a level in recent weeks, further evidenced by two new stand-out credit card offers.

Virgin Money launched a table topping limited offer of 37 months interest free on balance transfers as it seeks to grab a slice of the frenzied activity in this sector of the market. The deal comes with a one off balance transfer fee of 2.79%, but you’ll need to get your skates on if you’re interested as the card is only available until 30th September.

To put the size of the 0% switching market into perspective, there was just over 6 million balance transfers totalling more than £13.4 billion carried out in the 12 months to the end of July 2015. If each transfer was subject to an average balance transfer fee of 2.75% that’s £368 million straight into the coffers for the credit card lenders

The other new card launch that caught my attention this week was the ‘Everyday Plus’ card from MBNA.

It’s an impressive all round credit card for those who are looking for a long term piece of plastic for their wallet rather than constantly switching and ditching cards every few months.

Everyday Plus offers a competitive low rate of 7.4% APR, no fees for balance transfers, money transfers or cash withdrawals and no fees for using the card for transactions overseas.

The low rate makes it less of a financial burden if you decide to roll a balance over from time to time – for example a £2000 balance carried over for 1 month would cost £12.57 in interest charges compared with £32.10 on a card at a market average rate of 18.9%APR.

This card will prove stiff competition for the Halifax Clarity credit card which is also free to use overseas but earlier this year Halifax hiked the interest rate from 12.9% APR to 18.9% APR for new customers.

I’m sure there will be a reaction from rival companies to these latest best buys, particularly as consumers have rediscovered their appetite to borrow on plastic.

Increased confidence on the back of the UK economic recovery has seen the total sum outstanding on credit cards at the end of July rise to £41.36 billion (Source- BBA) up by £3.4 billion in the last 12 months and I’m sure it’ll continue to grow throughout the remainder of 2015.

With many experts predicting an interest rate rise in early to mid-2016 there has been increased focus on consumers currently on a variable rate mortgage and the potential cost implications they face.

The last time there was an increase in base rate was back in July 2007 so there are thousands of borrowers out there who have yet to experience the consequences of a mortgage market where rates start to climb.

A report from Equifax this week revealed that 78 per cent of homeowners on a variable rate home loan aren’t budgeting for the possibility of higher repayments despite eight out of ten of those affected believing there will be an interest rate rise within the coming 12 months.

In isolation this statistic may not be as scary as it first seems as factors such as the size of mortgage balance and whether the household budget has sufficient slack to absorb increased monthly mortgage repayments need to be taken into account.

What is more worrying is that the same survey highlighted that almost three in ten at risk of a rate rise weren’t aware how much extra they would have to find each month if their home loan rate increased by 0.50%.

As with most personal financial products half the battle is appreciating the ‘what if’ scenarios and for mortgage borrowers knowing what a rate rise will cost them is one of the most important.

If you know what the financial impact is likely to be, you will be in a better position to deal with it. For example you may not be overly worried as you have a healthy surplus in your household finances, but if things are already quite tight and there’s little spare cash left at the end of the month then it may be worth considering switching to a fixed rate mortgage to protect yourself from higher monthly costs.

If you decide to opt for a new fixed rate mortgage you’ll find there is a mind boggling array of products to choose from. Some offer low rates but with high product fees whereas others advertise higher rates with no fees. It’s worthwhile getting an independent mortgage broker to crunch the numbers to see which works out cheapest in your situation.

To put the potential increases into perspective, a borrower with a £130,000 mortgage balance with a 20 year term at a rate of 3 per cent would see their repayments increase by £33 per month if their mortgage rate went up by 0.50%. Similarly a borrower with £250,000 owing over 20 years at the same interest rate would see monthly payments increase from £1386 to £1450 per month, an extra £64 per month to find.

When those questioned by Experian were asked what action they would take to ensure the mortgage standing order was paid each month, 27% said they would cut back on food shopping whilst four in ten said they would cut back on going out and a third would reduce their spend on holidays.

The good thing is that the first rate rise is still potentially six to nine months away so there’s time to prepare.

So if you’re one of those many mortgage customers currently on a variable rate deal, have a quick word with your lender to check what the impact of a rate rise will mean for your circumstances – at least you’ll know what to expect and can plan accordingly.