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How to Get Rich Investing in Stocks by Riding the Electron Wave

An Update on UK Savings Accounts, Mortgages and Store Cards

Personal_Finance / UK Banking Apr 27, 2007 - 12:36 PM GMT

By: MoneyFacts

Personal_Finance

Rachel Thrussell, Head of Savings at Moneyfacts.co.uk – the money search engine, comments:

Too many poor paying accounts

Moneyfacts.co.uk savings survey – key findings
• Average no notice / instant access savings rate is 3.65% (£5K)
• Average notice savings rate is 3.795% (£5K)
• 25% of no notice accounts pay rates below 3.10%, the CPI figure, while a staggering 69% pay less than 4.80% - RPI.
• 17% of no notice accounts pay rates equal to or greater than 5.25% - Bank Base Rate


“The fact that almost 70% of accounts pay a rate less than the RPI is quite staggering, especially when you take into account that these are gross rates. So for your net returns to keep pace of inflation you would need to achieve a gross rates in the region of 6% - an almost impossible feat unless you opt for fixed rate products!

“If you are getting a poor rate from your existing provider, it does not pay to be loyal. With 17% of accounts paying 5.25% of above, switching providers could mean a much healthier return on your savings. Why should you allow providers to boost their profits by letting them to pay you measly returns on your savings?

“Even if you choose to stay with the same provider, check out the deals they have on offer, as it is usual to find at least one decent paying account within their range.”

Cash ISAs starting to disappear
• Britannia Fixed Rate ISA paying 5.85% withdrawn on Tuesday
• Alliance & Leicester Premier ISA paying 8.10% to be withdrawn on 30.4.07

“If past years are to go on, the best paying ISA rates won’t stay around for long. Last year the winner of the Moneyfacts.co.uk ISA survey, Alliance & Leicester, withdrew its ISA on 12 April, just six days after the start of the new tax year.

“While this year providers have not been so fast to withdraw their products, the news that Britannia has withdrawn its Fixed Rate ISA and that Alliance and Leicester’s deal will finish next week is perhaps a sign that more will be following shortly.

“If you are considering opening an ISA this year, its perhaps best to act sooner rather than later as within the next month many of the best deals are sure to vanish. Not only may you miss out on the best rates, you are also missing out on tax-free interest.

Don’t be lulled by short term gains
• Tesco offers 1,000 clubcard points for new customers of its Instant Access Account

“While this may sound an attractive offer for any keen clubcard savers, it is only a short term gain. The rates available on the savings account are by no means the lowest on the market at 4.10%, but far better rates are easily found. Getting a better rate of return on your savings could soon outweigh the financial benefit of 1,000 extra clubcard points – the equivalent of £10.”

Julia Harris, Mortgage Analyst at Moneyfacts.co.uk – the money search engine, comments:

New 10 year fixed from Leeds BS – 5.54% (£849 fee)
“Long term fixed rates have been growing in popularity, with 145 products available offering terms up to 30 years."

“The new 10 year deal from Leeds is far from the best rate available: – Woolwich offers a 5.28% fixed for 10 years with a fee of £595."

“Leeds also offers a fee free deal at 6.14%, but this should be taken with extreme care. While opting for a higher rate to offset paying an upfront fee may be economical over short term deals, for any longer term deal this can prove a costly choice."

“Taking the Leeds example, based on a repayment mortgage of £130K over 25 years, the total cost of the 5.54% product with the £849 fee over the ten-year fixed period would be £97,020. Compare this to the total cost of the fee free deal at 6.14%, which equates to £101,850, an extra £4830 in interest."

“So what was originally a fee of £849, turns into more than £4,800 over 10 years. Surely it would be better to add the fee to the loan and opt for the lower rate.”

Fixed rates still rising
“Its been another week of rising rates, with a further 11 providers have increased rates by as much as 0.64%."

“Here are some examples of rate changes we've seen

Britannia BS
5.54% 3 -year fixed increased to 5.79% (£399 fee)
5.69% 3 -year fixed increased to 5.94% (no fee)

Portman BS
5.12% 2 -year fixed increased to 5.29% (£999 fee)
5.34% 2 -year fixed increased to 5.49% (£499 fee)

Alliance & Leicester
4.99% 2 -year fixed increased to 5.29% (£999 fee)
5.29% 3 -year fixed increased to 5.59% (£599 fee)

“While there have been some quite substantial increases, many lenders have opted for smaller rises in the region of 0.15%.”

Store Cards

Michelle Slade, Personal Finance Analyst at Moneyfacts.co.uk – the money search engine, comments:

Store card rates still exorbitant

The Competition Commission recommendations to the store card industry to consider 25% APR as a high rate of interest seems to have been ignored by the vast majority of providers.

“Research from moneyfacts.co.uk has found only 11 store cards offer rates below the 25% APR threshold, while almost 70% charge rates of between 25% and 29.9% APR."

“Not only have rates not fallen, some providers are still raising rates. The latest examples include:
• GE Capital Bank rates up 1.9% pm to 2.21% pm to 29.9% APR
• John Lewis rates up 1.4% to 16.9% APR

“The Competition Commission must take further action to protect consumers from these exorbitant rates. Don’t get lulled into signing for a card unless you are going to make a substantial discount on your initial purchase and repay your balance in full."

“The Competition Commission must take further action to protect consumers from these exorbitant rates. Don’t get lulled into signing for a card unless you are going to make a substantial discount on your initial purchase and repay your balance in full."

By Rachel Thrussell,
http://www.Moneyfacts.co.uk


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