February 17th, 2019 | Andrew Hagger | News

17 Feb 2019 Alastair Douglas, CEO of credit experts TotallyMoney, comments on the high cost of solely making minimum credit card repayments, urging borrowers to adopt a simple fixed-payment strategy that could save them thousands.

“Paying a bit less each month on your card balance may seem like a great gesture from your credit card company — and might even leave some extra cash in your bank account. The overall cost of this strategy, though, is scary.

“Some people think that a bit less won’t make much difference, but they’re wrong.

“We asked consumers** how long they thought it would take to clear a £2,000 balance at an 18% APR, making just a 2% minimum repayment. Only 1 in 5 realised it would take over 20 years to clear, and 1 in 4 of those expected it to take less than half that time.”

Douglas added: “We understand not everyone can pay their balance in full. However, sticking to a fixed minimum repayment — rather than reducing the payment monthly — can make a huge difference and save a small fortune in interest charges.”

To help people better understand the minimum repayment trap TotallyMoney has created this embeddable interactive:

TotallyMoney recommends customers adopt a fixed monthly-repayment strategy, which can slash interest costs and the time it takes to clear the balance, as highlighted by the example below:

Fixed monthly repayments versus reducing monthly repayments

Customer A and Customer B both have a credit card balance of £5,000 charged at an interest rate of 19.9% APR and must pay a minimum of 3% of the balance or £10, whichever is greater.

Customer A pays the required £150 minimum in month 1 (3% of £5k), but then each month reduces their minimum payment as suggested by their credit card company, based on the outstanding balance. After month 12, the minimum repayment is £128.53; after 24 months, it’s £108.70; and after 36 months, it’s £91.88, and so on…

By carrying on paying a reduced minimum balance month after month, it will take 19 years and 2 months to clear the debt and cost £4,954 in interest.

Customer B also pays the £150 minimum in month one, but continues to pay £150 each month thereafter — even though their card company offers them the opportunity to make a smaller minimum repayment.

This is a simple and much smarter strategy and results in a balance that’s fully repaid in 3 years and 11 months at a much lower cost of £2,035 in interest — saving Customer B £2,919 in interest costs when compared with Customer A.

Douglas warned: “These figures are frightening enough, but customers offered even lower monthly minimum repayments and/or a higher interest rate will face even more extreme costs”.

Andrew Hagger, Personal Finance Expert from Moneycomms.co.uk said: “Card providers make maximum profit from borrowers who continually take up the option to pay the minimum statement balance, and more needs to be done to highlight this costly trap.

“Some people don’t appreciate how much they can save by simply sticking to the monthly repayment they managed to afford in month one. They end up being in debt longer than they need be — and at a huge cost.”

February 13th, 2019 | Andrew Hagger | News

12 Feb 2019 Peer-to-peer lending platform RateSetter’s ISA has exceeded expectations in its first year, having attracted £175m of subscriptions, and currently accounts for one-fifth of the platform’s £830m funds under management.

Almost one-quarter of RateSetter investors have opened an ISA with 16,500 people currently enjoying their returns tax-free within the ISA wrapper.

In contrast to all other mainstream investments which fell in value last year, investments with RateSetter continued to generate steady returns averaging an annualised 4.5% throughout 2018.

Mario Lupori, Chief Investments Officer at RateSetter, said:

“We have always been confident that investing with RateSetter delivers excellent value and that the tax-free ISA wrapper makes investing more attractive still – but we have been blown away by the popularity of the RateSetter ISA in its first year!

With even the best Cash ISAs barely matching inflation and the volatility of Stocks & Shares testing investors’ nerves, the healthy and steady performance of the RateSetter ISA makes it stand out. 2019 could be the year that we see the Innovative Finance ISA really take off.”

RateSetter launched its ISA in February 2018. The Innovative Finance ISA allows investments in peer-to-peer loans to be included in a tax-free ISA wrapper up to an investor’s £20,000 annual ISA allowance.

To date, every individual investor has received all the capital and interest that they expected thanks to the Provision Fund which spreads each investor’s risk across the whole loan portfolio and provides a buffer against poorly performing loans. The track record over the last eight years is impressive, but it is not a guarantee for the future and capital is at risk.

In total, more than 600,000 customers have used RateSetter to invest or borrow, making it the UK’s most popular peer-to-peer lender. RateSetter recently announced it had passed the milestone of originating more than £3 billion of loans since launch.

February 12th, 2019 | Andrew Hagger | News

11 Feb 2019 British holidaymakers are routinely turning up at airports without their passports causing holiday headaches before they have even seen an inflight menu.

A new study from Sainsbury’s Bank Travel Insurance reveals that 1.4 million holidaymakers have forgotten their crucial travel documents before leaving the UK. In fact Britons admit they are more likely to check their holiday destination weather than their passport the week before they travel (64% vs 52%). Sainsbury’s Bank is urging holidaymakers to make sure they have all the relevant documents before they leave home as travel insurance policies do not typically cover forgotten passports.

A further 2.7 million people have seen dream trips turn to disaster by missing flights at the start of their holiday. With the study finding 2.3 million(4) people also go away without travel insurance, holidaymakers need to spend time planning ahead to ensure their getaways get off to a flying start.

Holiday hazards lead to people feeling stressed (47%) and upset (31%) and one in 10 (11%) admitted they felt like they had ruined their holiday.

Preparation is key to minimising stress at the security gate. More than a third (36%) of people do as much online preparation as possible and prepare everything in advance (32%). And nearly one in 10 (8%) holidaymakers turn to calming activities such as meditation to combat travel trauma.

Karen Hogg, Head of Insurance at Sainsbury’s Bank, said: “Holidays should mean a break from the stress of everyday life. Making sure you have all of your travel documents in place, and with you when you leave the house is as important as having good quality travel insurance in place. It’s worth noting that insurers are unlikely to cover you if you’ve left your passport at home.

“With recent issues such as flight disruption at airports and adverse weather conditions in parts of Europe, you may want to ensure that your travel insurance policy provides disruption cover, particularly if you have connecting flights. We offer a range of insurance policies to cover different travel needs.”

Students are guilty of leaving planning to the last minute and are most likely to miss flights and leave their travel documents behind (10%). Families typically make it to their destination stress-free but are more likely to leave valuables such as medicine and jewellery at home (8%).

Sainsbury’s Bank offers five top tips on travel preparation

1. Schedule a diary reminder: Write on your wall calendar or put in a diary reminder in your phone to check all travel documents at least a couple of weeks before you travel.
2. Locate your passport: It’s easy to put your passport in a ‘safe place’ and forget where it is. Don’t get caught and check your passport before you pack your suitcase. Don’t forget many countries need a visa such as an ESTA if you’re going to the States and you will need to have at least six months remaining on your passport for many countries. If your passport is damaged you may also be refused travel.
3. Check cover for travel disruption: Check your travel insurance policy covers for any unforeseen changes to your holiday plans, such as being unable to get home due to poor weather.
4. Consider weather woes and more: Make sure you leave in plenty of time to get to the airport, especially in adverse weather conditions. You should also check if your travel insurance policy covers you missing a flight as a result. If you’re heading to the slopes this year, check your travel insurance has winter sports cover and also covers weather delays, road closures and lift passes.
5. Create a checklist: Holidays can be stress-free with a good checklist. Create a to-do list at least a week before you travel so you don’t leave anything you need behind.

February 8th, 2019 | Andrew Hagger | News

08 Feb 2019 While Valentine’s Day is a day full of romance and encourages us to do something special with our loved ones, it’s important we don’t blow our budgets on one day and remember the real reason for the celebration.  It’s very easy to overspend, but  being smart about the impact this has on our wallets is key – and that doesn’t mean you and your special someone miss out on the day – here are some useful tips from the Foresters Friendly Society

St Valentine didn’t intend to break the bank

There is nothing wrong with you both spending the evening in with an M&S meal deal in the comfort of your own home. If you’re feeling a bit more adventurous, head to your local farmer’s market to pick up ingredients and make your other half’s favourite meal from scratch.

Buy a gift but shop around first!

From online discount codes to cashback sites and price-comparison sites, there are plenty of ways to get the lowest price tag. Don’t forget to check out if there are any pitfalls, it is easy to get stung if you’re unaware of hidden charges or long-term subscriptions.

Try something new

Why not use Valentine’s to do something different? According to our members, dining out, visiting the theatre and participating in quiz nights were the top 3 favourite pastimes.

There’s something for everyone

Whether you choose to spend Valentine’s with friends, your family or even your beloved pet -there’s more than enough love to go around! If you want to keep the cost down, consider splitting travel costs, meals and additional expenses so you’re not having to fork out amounts typically costed for couples. 

Consider your loved ones

With love in the air, it may be a good time to consider your loved one’s futures. Whether saving for a dream holiday together, your first dream home or even your child’s future, setting up an ISA could help you get one step closer to a big financial milestone and enable you to keep topping it up for the following months.

February 7th, 2019 | Andrew Hagger | News

07 Feb 2019 As everyone feels the January pinch on finances, new research from Charter Savings Bank¹ reveals many will be relying on family and friends to tide them over. Its nationwide study found that one in four (25%) adults have borrowed from their loved ones in the past year.

The handouts from family and friends are not trivial – the average amount borrowed adds up to £1,093 in the past year. And the money is not always repaid – just 54% of those who borrow cash say they always pay it back.

A quarter (25%) of those who rely on others’ generosity try to pay it back most of the time and 10% say they occasionally pay it back, but 4% admit they never pay it back. Women are better than men at paying cash back – 58% say they always repay family handouts, compared with 49% of men.

Partners and spouses are the most likely to be asked for a loan – 22% of those who borrow say they ask their partner or spouse for cash at least once a month. Around 65% of those who borrow from their partner ask them for cash at least a couple of times a year.

Over a third (36%) of those who ask for money from friends and family borrow from their parents at least twice a year – and it is 18-34-year-olds who are most likely to borrow from them, with 11% saying they ask for money at least once a month.

The study found regional differences in the amount of savings borrowed from our nearest and dearest. Those in the South East are the most likely to borrow money – averaging £1,873 borrowed each year, with those in the East of England least likely to – averaging just £445 borrowed each year.

The research found that of all adults who have asked for money from family at some point – 30% have asked parents and 14% have asked partners or spouses, while a further 8% have asked friends.

Paul Whitlock, Executive Director, Charter Savings Bank, said: “The rising cost of living and squeezed family incomes, particularly at this time of year, can mean that many are increasingly leaning on friends and family to come to their financial rescue. 

“In many cases our loved ones are happy to help-out financially, but that can come at a cost, particularly if the recipient isn’t able to pay it back.

“There are many different ways to save; even setting aside what may seem like an insignificant amount each month will see your savings pot grow. Starting a regular savings habit at the beginning of the year will set you in good stead to reach your savings goals for 2019 and leave you less reliant on raiding the savings of others.”

February 5th, 2019 | Andrew Hagger | News

04 Feb 2019 The ‘squeezed middle’ are spending £3.7bn on life insurance before having their policies cancelled by providers because they have fallen into financial difficulties, according to research by Co-op Insurance.

According to the findings, the average 30-60 year old in the UK had paid out £2,050 before their insurance was cancelled after holding policies for 8 years and 4 months paying £20.50 per month.

Only 48% of the ‘squeezed middle’ hold life insurance in the UK. Of those who have life insurance, nearly a third (31%) say they have struggled to pay for their life cover and, of these, two thirds (67%) have missed direct debit payments. This has led to over four fifths (87%) finding themselves in arrears.

78% of life insurance policyholders who found themselves in arrears had their policies cancelled by their insurer either automatically after the first missed payment or after a period of time.

Despite this, 87% of the ‘squeezed middle’ who have found themselves in financial difficulties have missed their own life insurance payments to pay relatives’ bills.

Over a quarter (27%) of the UK adults aged 30-60 with dependents are actually supporting their parents financially, with 78% supporting their children. Parents are depending on the children for the most money every month, an average of £235 whilst dependent children receive £177. Those who support both pay out an average of £186 per month.

Nearly half (49%) of UK adults aged 30-60 feel this is unfair and 80% want to see insurers doing more to help people who end up in arrears after paying for policies for often a prolonged period. Nearly two thirds (63%) think people should be treated on an individual basis and 58% want to see extended payment holiday periods.

Co-op Insurance has re-entered the life market and launched Co-op Life Cover alongside its partner Royal London which will offer a solution designed by Co-op Members, not widely offered in the market, to policyholders who may at times have periods of financial difficulty.

The product offers a level term, decreasing term or family income benefit and:

·         Includes the option to take two six month payment holidays throughout the lifetime of the policy after a 12 month qualifying period, allowing their policy to remain in force

·         Customers can also opt to reduce their cover level rather than pay back any shortfall at the end of the payment holiday window

Charles Offord, Director of Co-op Insurance, said: “There is a clear life insurance gap in the UK, especially for those who are foregoing payments or not taking out cover to support relatives with their day to day finances.

“It just isn’t right that billions of pounds in premiums are being paid by customers on time, every month, for their policies to be cancelled when finances are stretched. At the Co-op we are keen to fill this gap and appreciate that sometimes finances can be stretched and people have to prioritise what gets paid, and what doesn’t.

“All too often, life insurance is seen as the least important payment, when really nothing could be further from the truth if something bad happens. This is why we have created up to six month payment holidays, alongside our partner Royal London, to help policyholders out in their time of need. We’ll also allow customers to reduce their insured amount rather than pay back any shortfalls to further lessen the financial pressure.”

January 30th, 2019 | Andrew Hagger | News

30 Jan 2019 An increasing number of borrowers are choosing five-year fixed rate mortgages as Brexit uncertainty prompts people to seek peace of mind when it comes to their home loan, according to Yorkshire Building Society.

The Yorkshire reported a 44%^[ rise in the number of borrowers choosing the longer-term mortgage rate last month (December 2018) compared to December 2017, which it says could be a result of the looming deadline for the UK to leave the EU.

Janice Barber, Mortgage Manager at Yorkshire Building Society, said: “While homebuyers’ reluctance to purchase a house during these uncertain times is cooling the housing market, borrowers are rushing to secure new deals that will see them through Brexit and beyond. We’re seeing a significant rise in the number of people taking advantage of competitive longer-term fixed rate deals.”

Yorkshire Building Society responded to demand for longer-term fixes last year by launching seven-year and ten-year fixed rate mortgages.

“Five-year fixes, as well as our seven and ten-year fixed rate mortgages, are proving popular as people look for the security of knowing what their monthly repayments will be for a number of years,” Janice added.

The Yorkshire lets would-be borrowers reserve a mortgage deal up to six months in advance^[, meaning those with a home loan due to mature in the coming months can take advantage of today’s deals and secure a rate for the near future should they wish.

Janice said: “Our findings show homeowners clearly value the stability longer-term fixed rate mortgages offer, and may indicate that borrowers are expecting rates to rise.

“Borrowers looking to remortgage this side of summer could start the remortgage process now should they want to take advantage of competitive low rates and get peace of mind that their home loan is arranged regardless of any Brexit outcome.”

January 29th, 2019 | Andrew Hagger | News

29 Jan 2019 The latest first time buyer mortgage deal from Lloyds Bank isn’t a stand alone 100% mortgage, but is supported by a 10% deposit in a separate 3-year fixed rate savings account from a family member.

The mortgage rate is fixed for three years at a competitive
rate of 2.99% – and thankfully from a cash strapped FTB perspective there’s no
product fee payable.

To allow the bank to grant the 100% mortgage a family member
must deposit 10% of the purchase price in a separate savings account.

The savings account is fixed for 3 years and pays a market
leading rate of 2.5% and as long as the mortgage repayments have been made on
time and are up to date at the end of the 3 year term, then the savings balance
is returned to the family member(s).

There are some points
the borrower needs to be aware of as follows:

The mortgage can’t be used for new build properties.

Maximum mortgage is £500k

Either the borrower or family member must open a Club Lloyds
current account before the mortgage is taken out – this account requires the
customer to pay in at least £1500 per month – if not there is a £3 monthly fee
payable.

With the uncertainty of Brexit looming large it’s difficult
to know what will happen the house prices in the next three years. If house
prices stay frozen at their current level, then after 3 years of repayments (on
a 30-year mortgage) the borrower will be left needing a 93.5% LTV mortgage come
2022.

You would hope that Lloyds Bank would provide a follow-on product for such customers with such a high LTV and not leave them trapped and with no other option of moving on to Lloyds Bank Standard Variable Rate which is currently 4.24% and could well be higher if rates rise in the next 36 months.

Verdict

Andrew Hagger, Personal Finance Expert from Moneycomms said: “More needs to be done to help borrowers get on to the housing ladder so it’s good that a high street bank is being creative and offering a different way of buying.”

“Lloyds isn’t the first bank to offer such a scheme as Barclays has been offering its Family Springboard mortgage option for a number of years now.”

Whether would be borrowers or family members will be prepared to open a Lloyds Bank current account to get this mortgage or whether they see it as a step too far remains to be seen.

The family members will like the fact that they can help their children with their first home purchase knowing that they will get it back after 3 years. However, they should be aware that if repayments are not maintained then the bank won’t release the funds back on the third anniversary.

If all repayments are up to date but in three years’ time the borrower is in negative equity because of a fall in house prices, the family member will have their 10% savings stake returned.

“Although Lloyds will lend 100% the applicants will sill need to prove they can meet the bank’s affordability criteria.”

January 29th, 2019 | Andrew Hagger | News

29 Jan 2019 New research released today reveals that over a third (37%) of Britons don’t feel on top of their personal or professional finances.

The survey of 1,550 British workers, commissioned by award-winning cloud accounting software provider FreeAgent, found that 22% of respondents said that they resent having to spend time on household and life admin tasks, including paying bills, waiting in customer service call centre queues and filing their annual tax return. 
 

On average, respondents said they spend 3.6 hours per month paying bills, 2.7 hours per month waiting in queues at call centres for customer service enquiries, and 5.4 hours filing their annual tax return.  

Of the 39% of respondents that have filed a tax return at some point, 79% said they found the self assessment process stressful. FreeAgent found that the top five reasons respondents found the tax return process stressful were:

• Worried about getting the information wrong and getting into trouble (43%)
• Worried about calculating it wrong, and ending up paying too much tax (38%)
• Found the submission process confusing (33%)
• Records not kept up to date, so had to use some guesswork (19%)
• Didn’t receive helpful advice around how to file a tax return (17%)

In addition, 30% of total respondents said that they would feel worried about submitting a tax return, if they had to do so in the future.

Ed Molyneux, CEO and co-founder of award-winning cloud accounting software provider FreeAgent, said: “Every year, hundreds of thousands of people across the UK end up incurring fines for failing to file their tax return on time. Yet, in many cases, these penalties are entirely avoidable provided that people check the tax implications of what they have earned throughout the year and start their Self Assessment in advance of the filing deadline.”

“To avoid the stress of filing tax returns, find an accounting system or bookkeeping method that you can use to stay on top of your finances throughout the year. That way, all of your financial information should be readily accessible. Make sure you include your tax return alongside any other income you’ve earned throughout the year.”

January 25th, 2019 | Andrew Hagger | News

24 Jan 2019 At least a quarter (24%) of Brits will have an account with a digital-only bank within the next five years, according to new research from personal finance comparison website finder.com.

A further 21 percent said they would consider a digital-only bank once they have more information, meaning that almost half of Brits (46%) could end up getting an account within five years.

One year on since Open Banking launched in the UK, almost one in ten (9%) adults say they have already opened an account with a digital challenger bank, equalling 4.5 million Brits.

Over the next five years, 16 percent of the population intend to open an account with a digital-only bank, meaning that almost 13 million people (24%) will have at least one fully digital account by the end of 2023.

The top reason for those who have, or intend to go digital with their banking is that they feel doing everything online is more convenient (33%). A third (31%) of people believe they will get better rates than with traditional banks, while 28 percent want to transfer money more easily.

Despite the quick uptake of digital banking in a short amount of time, finder.com‘s research shows that as well as some educational challenges and issues around awareness, digital banking simply may not be for everyone. The majority of adults in the UK (53%) have no plans to open an account within the next five years, while one in five Brits (20%) don’t know what a digital-only bank is.

Perhaps surprisingly, the main reason for those who don’t intend to open an account with a digital bank is that they feel their current bank has treated them well (61%). Half of us (49%) also like to have the option of speaking to someone in person, while more than one in five (22%) think it would be too much hassle to switch accounts and direct debits.

The region with the lowest uptake so far is the East Midlands, where only five percent of people have a digital-only bank account. In contrast to this, Londoners are almost three times as likely to have one (14%), and they are also the most likely to get an account within the next five years with a quarter (26%) planning to do so.  East Anglians are the least likely to move away from traditional banks (12%) over the next five years.

Despite the uptake of digital banking being very similar across genders so far, a fifth (21%) of men intend to get a digital-only bank account in the next five years, which is significantly more than women (12%).

Younger generations are the most likely to have already gone digital, with one in eight (12%) Millennials having done so, compared to six percent of baby boomers and just two percent of the silent generation (born before 1945).

To see the full research of digital-only banking adoption and intentions, including age, regional and gender breakdowns, visit: https://www.finder.com/uk/digital-bank-adoption

Speaking about the findings, Jon Ostler, CEO at finder.com said: “When you consider how long the banking industry went without any real technological advances or change to the status quo, the speed that digital challenger banks have established themselves has been very impressive. When done right, digital banking can offer customers the speed, convenience and transparency that is becoming increasingly important for consumers in most sectors.

“However, our research also showed that a lot of Brits still aren’t interested in taking all of their finances online. Open banking, for example, is only a year old and some people may not be comfortable with having their data shared between companies yet – the problems that large banks have had with ‘digitalising’ their services also doesn’t help the image of online banking.

“It will be fascinating to see how the sector evolves over the next few years, and if it can cope with the increasing consumer demand that we expect to see.”