September 3rd, 2015 | Andrew Hagger | News

An offset mortgage is a smart and tax efficient way to cut your mortgage costs, yet reports suggest that only around one in ten borrowers are currently taking advantage of this type of home loan.

It can be a big money saver for mortgage borrowers and makes even more sense in times like these when interest rates on savings accounts are at rock bottom. By simply combining your savings and mortgage balances it’s possible to save thousands of pounds in mortgage interest costs and at the same time reduce the term of your home loan.

Another key benefit, even more so for higher rate tax payers, is that there’s no tax to pay on your savings interest and the equivalent return is the same as your mortgage rate.

With interest rates on even the very best instant access and 1 year savings accounts struggling to break 1.5 per cent, for many people there’s far more to be gained by offsetting your nest egg against your mortgage balance which in many cases is being charged at upwards of 3 per cent.

A further plus point is that offsetting gives you flexibility, in that you always retain access to your entire savings balance in case you need to dip into it at a later date.

Although many standard mortgages will allow you to make limited over payments, unlike an offset mortgage, once you’ve committed to the overpayment you can’t get that money back at a later date.

A major reason for the poor take up is that consumers assume it’s a complex product and only suitable for those with large savings balances, but both of these assumptions are wide of the mark.

A further issue is that not all lenders offer the offset facility, and therefore some customers are missing out because they aren’t even given the option to take advantage of this breed of mortgage.

Along with Barclays and First Direct, Yorkshire Building Society is one of the main players in the offset market and unlike some rivals it allows offset to be used on its entire range of standard mortgage products with just a 0.2% loading on the rate.

Offset is available across a wide range of loan to values (LTV) with some of the top deals as follows – First Direct 3 year fixed at 2.79% and £950 fee to 65% LTV, Yorkshire Building Society 5 year fixed at 2.84% and £845 fee to 75% LTV and Barclays Lifetime Offset Tracker at 2.49% and £999 fee up to 75% LTV.

To give you a taste of the savings you can achieve with an offset and to prove that it is a viable option for those with fairly modest savings or those who intend to save on a regular basis, the following numbers highlight the positive impact this strategy can have on your finances.

For someone with savings of £7,500, offsetting this balance against a £100,000 mortgage at 3.00% would save interest charges of £7,753 and takes 1 year and 4 months off the term of a 25 year mortgage.

You don’t have to have a huge lump sum to benefit from offsetting, regular savings will work too.

For example, if you are able to put aside £200 per month into your savings account each month, then you’ll save £17,159 in mortgage interest charges, cut 3 years off the length of your 25 year mortgage plus you’ll end up with a savings balance of £52,800 when the mortgage is repaid.

September 2nd, 2015 | Andrew Hagger | News

As financial companies increasingly look to use social media to assess an individual’s suitability for products such as mortgages, loans and credit cards, research from Equifax reveals that 75% of consumers are unlikely to allow them access to this data.

The online survey, conducted by YouGov, found that 76% of consumers are against financial companies using the information they post on sites such as Twitter, Facebook, Instagram and LinkedIn to assess their application for a financial product. Over half said it would make them angry.

Despite consumers’ objections to the use of this information, only 35% of respondents would go as far as changing what they post online if it was being used to verify their identity or spending habits. 

Paul Birks, from Equifax, says: “While we are fast becoming social media ‘addicts’, the survey results show that people are against financial companies using social media to assess their suitability for products. This raises challenges as using this data can be a huge benefit for both companies and consumers, for example in helping fight fraud, and evaluating what people can afford to borrow.

“With fraud on the rise, companies are turning to social media as a useful tool to verify an applicant’s identity. The number of contacts and length of time an online profile has been established is a useful way to help judge whether an application is genuine or from a fraudster. A well-established, active social media presence is very hard to fake.”

“If companies go down this route they have to be transparent and educate consumers on how social media information could be used; consumers also need reassurance that, as with any personal data, privacy will be respected. Using social media information to assess an application could be particularly useful for people who don’t have a traditional borrowing history and therefore may have a ‘thin file’, such as a young person applying for their first loan.”

September 2nd, 2015 | Andrew Hagger | News

New data unveiled today shows that Britons are spending an average of 66 per cent of their monthly income on essential bills and expenses. The research commissioned by Scottish Friendly also reveals that four in 10 people believe they are not able to save any money on their monthly expenditures.

Rent and mortgage repayments were found to be the biggest drain on budgets with an average across the UK of £438 spent per month. However, those in London shell out 32 per cent more than the national average spending £579 per month on accommodation. Nevertheless, only seven per cent of people surveyed believe they can save money on this expenditure.

Things are further compounded for people living in the capital, where they spend 27 per cent more on commuting to work, 40 per cent more on home insurance, 86 per cent more on car insurance and 13 per cent more on food than the national monthly averages.

However, despite so many thinking they may not be able to save on bills, it’s not for want of trying. Nearly three-quarters of people do regularly seek ways to save money on their essentials. Women are more likely than men to search out a better deal, with 77 per cent saying they do so, compared to 70 per cent of men.

The research also looked at how people would spend any extra savings made through shopping around on their bills. The findings revealed that 35 per cent of people would add any extra money into their savings, with this being a particularly strong sentiment in over 55s, where 40 per cent would put cash aside for a rainy day.

Calum Bennie, savings expert at Scottish Friendly, said: “Not surprisingly, most of our income is spent on essentials like the mortgage or rent, commuting, food and utility bills.  But it is concerning that even though people say they’d like to save money on their bills, so many feel they can’t.  By just taking a little bit of time out of the day, simple things like renegotiating with utility or media suppliers can save families’ considerable sums of money on household bills. ”

“Every penny counts. Both interest rates and inflation are expected to rise in the near future which will have a further impact on disposable incomes and our ability to save. Any extra money made through thrift and savvy shopping around now to help offset rising costs in future could really benefit families in the coming months.”

August 26th, 2015 | Andrew Hagger | News

Gocompare.com’s Car Insurance Auto-Renewal Survey shows that nearly 6 million motorists a year fall into the auto-renewal trap by simply allowing their car insurance to automatically renew without checking other quotes first.

September is traditionally one of the busiest months for car insurance renewals due to the high volume of new car sales. However, the new survey shows that many drivers are likely to fall in the auto-renewal trap.  Worryingly, 18% say they allowed their car insurer to automatically roll-over their policy for another year at their last renewal – without checking whether they were being offered a good deal.

The survey also revealed that on average, drivers have been with their current insurer for 3.3 years, but a 16% have stuck with the same provider for five years or more.  However, many of those surveyed don’t feel insurance companies reward them for their loyalty, 58% think that insurers offer a better deal to new customers than those who renew.

When asked why they allowed their car insurance to renew automatically 39% thought that because their provider was the cheapest last year, they would be good value this time around too.  Other reasons for sticking with the same provider included loyalty (24%), a good experience with a past claim (11%) while 5% said that they weren’t confident enough to switch, finding car insurance too confusing.

A spokesman for the company commented: “New registration plates are issued in March and September, making them the busiest months for car insurance quotes and renewals.  The car insurance market is fiercely competitive and insurers often offer better deals to new customers than for those renewing existing policies.

“So, our advice is simple – even if your current insurer offered the best deal last year, you shouldn’t automatically assume that they will when your policy comes up for renewal.  Use your renewal letter as a prompt to take action.  Look at your renewal notice as soon as it arrives.  Compare the price and cover against last year’s documents, consider any changes you might need to make to the cover and take a look at similar policies on a comparison site to see if you can make any savings.

August 25th, 2015 | Andrew Hagger | News

Stacks of foreign cash are gathering dust in Britain’s homes as holidaymakers estimate having an average of £55.25 in leftover foreign currency, accumulating to more than £663 million sitting at home.

New figures released today from Visa Europe reveal two in five Brits (39%) admit to keeping unused currency in the house. The research found that the average traveller estimates having £55.25 in foreign cash such as Dollars, Euros, Yen or Rupees at home. And one in six (16%) put their hands up to having at least £75 of leftover currency. This one-sixth of the population alone has accumulated a staggering £369 million in total.

Meanwhile, not spending all their holiday cash leads almost a third (30%) of British travellers getting caught up in ‘squanderlust’ – spending unused currency at the airport because they know they won’t be able to spend it at home.

A spokesman for, Visa Europe said:“For those anxious to use every last Dollar or Dirham, a frenzied episode of ‘squanderlust’ frequently means unnecessary airport spending. Using a Visa card abroad is the smarter way to spend – it’s more convenient, it’s safe and you won’t return home with foreign currency which will never see the day of light again. Paying by card means you only use the money you want to spend and the cost of making card payments at the point-of-sale in foreign countries are often comparable to using a high street bureau de change before the trip.”

August 24th, 2015 | Andrew Hagger | News

Parents will collectively spend an eye-watering £2.9 billion preparing their kids for the new school year, according to new research by Santander Credit Cards.

With most schools across the country re-opening next week, the total cost of kitting out the nation’s school children with clothes, books, stationery and other necessities in preparation for the new term is equivalent to £236 per child.

To add to the financial strain, the cost of keeping under 18’s across the UK in school once term begins totals £628 million per week. This works out at approximately £52 per school child and includes everyday costs such as packed lunches, bus fares, school trips and after-school activities.

Parents with children at foundation or trust schools spend the most, an average of £375 in the run up to the school term plus an additional £93 per week. This is marginally more than the £371 upfront cost and £93 weekly cost shelled out by parents of children attending private school, without factoring in the private school fees. Parents of children at grammar schools spend £329 getting ready for term time and £76 on a weekly basis. Corresponding costs for community schools are £226 plus £49 per week and for academies, £262 plus £56 per week.

On a per child basis, school uniform (£40), school shoes (£31) and jackets and coats (£24) are the biggest outlays for parents in advance of school term time. And once the school term begins, the biggest regular outgoing (per child per week) is school trips (£10) followed by extra-curricular activities (£9), and packed lunches (£8).

A spokesman for Santander said: “Kitting out kids for the new school year can be an expensive business, as most parents know. There are ways parents can cut back on costs and make the ‘back to school’ shopping trip a little easier, for example by buying school uniforms, in the sales or using a cashback credit card.

August 20th, 2015 | Andrew Hagger | News

Many people will have put their savings in cash based NISAs to save paying tax on their interest but despite this benefit they will be dismayed with the level of returns currently on offer.

Unfortunately for savers the ISA market mirrors the dismal outlook for the savings market as a whole.

With rates at rock bottom and little sign of improvement maybe now’s the time to consider peer to peer lending, an alternative and more rewarding investment option.

The returns from peer to peer providers look more attractive than ever, with RateSetter for example offering 4.2% for a 1 year bond as I write this. Even if you deduct 20% tax, the net return is 3.36% AER and is in a different league from the best 1 year fixed rate ISAs from Shawbrook Bank and Virgin Money paying just 1.75% and 1.71% respectively.

In cold hard cash terms 1.75% interest on the maximum cash NISA allowance of £15,240 would give you a net annual return of £266.70 compared with a far healthier £512.06 net from the RateSetter 1 year bond option.

Zopa remains the biggest player in the peer to peer marketplace having lent more than £1 billion and is equally competitive with its rates. It currently boasts more than 59,000 lenders, not surprising when you see that at it advertises a 5.00% return over 5 years.

RateSetter is growing fast too and saw an inflow of more than £40 million in the last month alone.

It even offers a monthly access account paying 3.1% (at time of writing) – so if you’re a little nervous or unsure if this is right for you, you can dip your toe in the water and try it out with a minimum deposit of just £10.

Lending Works is another straightforward retail P2P provider currently offering 4.8% fixed for three years and an impressive 6.3% for a five year term.

If it’s the level of net interest earned that’s important to you then peer to peer wins hands down, plus you’re not restricted to a maximum annual allowance as with a NISA so if you wanted to save £20,000 or even £50,000 that’s an option.

One of the main concerns with people depositing their cash with peer-to-peer providers is that although the returns far outweigh those paid by the banks, they don’t offer the cast iron guarantee to savers that bank customers enjoy under the Financial Services Compensation Scheme.

As long as you fully appreciate and are comfortable with this, lower overheads of not having to run a nationwide network of branches, means you can obtain better returns on your cash in the peer-to-peer market.

Providers also have their own robust methods in place to depositors. RateSetter for example maintains a ‘provision fund’ with a balance of more than £15.3 million built up from borrower fees. The fund is used to reimburse lenders in the case of late payment or default.

This safety net has ensured since it started almost five years ago, every penny of capital and interest has been returned to every single Lender. Zopa also operates a similar model with its Safeguard feature whilst Lending Works utilises a reserve fund and a unique insurance scheme to protect lenders cash.

As long as providers keep rates competitive and bad debt levels under control, there’s no doubt in my mind that P2P will become an even bigger thorn in the side of the high street banks, particularly when it enters the ISA market in April 2016.

August 20th, 2015 | Andrew Hagger | News

Hitachi Personal Finance is the latest lender to reduce its loan rates as experts predict interest rates may rise in response to rising inflation.

The lender has cut its headline APR to 3.8% from 4.7% on loans from £10,001 to £15,000, and to 3.8% for loans between £7,500 and £10,000 over two to five years.

The move, from August 24 guarantees customers no set up fees or hidden extras, and no charges if they make overpayments or settle their loan early.

Hitachi Personal Finance recently announced it had applied industry leading levels of flexibility across its range of loans. Once accepted, borrowers can alter the length of their loan, to make the monthly payments more affordable.

If borrowers take a loan over the maximum term available (usually 60 months) they would be able to reduce their payments by almost £500 a year on a loan of £2,500, and £1,800 a year on a £25,000 loan by flexing their term.

The UK inflation rate (CPI) rose to 0.1% in July, heating up the debate over when the Bank of England will start raising interest rates which have been at 0.5% since March 2009.

Experts are saying it is now a case of when interest rates will rise, rather than if, meaning the cost of borrowing will inevitably rise.

Gerald Grimes, managing director of Hitachi Personal Finance, said that the latest rate cut comes at the right time for borrowers.
“Customers can get their spending plans in place now before the predicted rise in interest rates happen,” he said.

August 20th, 2015 | Andrew Hagger | News

More than one in five (21 per cent) pensioners have gone back to work since they reached the State Pension age, or are planning to do so in the future, according to new research from Prudential.

The rise of the retired jobseeker, along with the growing trend for a period of pre-tirement as previously identified by Prudential, shows how the modern retirement reality continues to shift further from the traditional norm of giving up work for good on a set date.

The most common motivation for pensioners heading back into the jobs market is a desire to keep mentally active (61 per cent), although the need to boost retirement income (56 per cent) is also driving retirees back to work.

Voluntary work is the choice of around one in six (16 per cent) retirees who are back at work or plan to return in the future – underlining the point that it is not always financial reasons that drive pensioners to seek employment. Even those who are earning are likely to take a pay cut – more than half say their post retirement wages will be lower than their previous income in employment.

Meanwhile, nearly one in 20 working past State Pension age are earning more than they did before, while one in 12 are setting up their own companies.

Stan Russell, retirement income expert at Prudential, said: “Although it’s striking to see how many retirees are choosing to return to work, it’s not optional for some people. While many say that working in older age is a good way of staying active, there are others who are forced to go back to work to make ends meet.

“Of course, there are real financial benefits from going back to work, such as earning extra cash and deferring taking the State Pension or income from private savings. However, for people who are hoping to give up work completely when they retire, saving as much as possible as early as possible in their working life remains the best way to secure the most comfortable retirement.

August 14th, 2015 | Andrew Hagger | News

Insurance guru Adam Powell from Policy Expert recommends that before you fork out for any specialist student insurance – check your parents’ home contents insurance policy.

Your possessions may already be covered under their policy, so you might not need to buy any additional cover. If you normally live with your parents outside of term time, your possessions could be covered under ‘contents away from the home’ within their existing policy.

There will probably be a maximum limit for each individual item that’s covered, which is normally around £1,500 – but could be less.

Powell warns that there may also be caveats around specific items such as an expensive laptop and certain circumstances (e.g. communal areas) – so make sure you check the policy wording carefully.

Some insurers might specify that belongings are kept in a locked room and may only cover a claim if there’s evidence of forced entry.

If a high-value item goes missing outside your accommodation e.g. from a coffee shop or library, you probably won’t be covered under your parents’ home insurance. For more comprehensive cover, your parents may need to add personal possessions insurance onto their existing policy.

You can buy stand-alone Home Insurance for Students – but this often works out as a more expensive way of doing things.

Your student accommodation might already have a basic level of contents insurance in place. Around 80 universities have this core cover – so it’s worth checking if yours is one of them. Normally, this will only be a basic level of insurance, so make sure you know exactly what’s included.