Monday 22 February 2010
To Save or not to Save?
The accepted wisdom has always been that you should save money no matter what circumstances you find yourself in. The fact is, it’s not always good to save and it very much depends on your personal circumstances.
If you have no debt (except your mortgage) and find yourself with spare cash at the end of every month then you have a choice, you can spend or save. With savings rates at the level they are at the moment you may be wiser to overpay your mortgage than to save money in a savings account. If this describes you, then decide what level of liquid funds you need to have at hand and then find out how much you can overpay your mortgage by. Depending on your mortgage provider this may be somewhere between £0 and 100%.
The situation is completely different if you are carrying any debts i.e. loans, credit card balance, etc. The difference between the interest charged on debts and the interest gained by saving is now so pronounced that you should seriously think about using any savings you have to pay off your outstanding debts.
Any interest you have gained from your savings is being wiped out by the interest you are paying on your debts. The sooner the debts are paid off the better off you will be and you can start saving again but this time you would be safe in the knowledge that you are actually gaining from putting your money away.
Where many people become confused on this is when they think not saving means having no money in reserve that they can use if they need to. Savings should only become savings if you do not intend using them in the next 6 months. Everybody needs a little bit of ready cash now and again for unforeseen expenses.
If this is all completely alien to you because you never have any money and you are always in debt then you need to take more drastic action. If you require any more information about debt you should log onto the Citizens Advice Bureau website.
The Best Best Buys website has a number of financial product guides to help you get a greater understanding of how Mortgages, Loans, Credit Cards and Savings Accounts work.
Tuesday 16 February 2010
Building Societies Raise Their Standard Variable Rates
In recent weeks there has been a lot of press coverage regarding building societies raising their Standard Variable Rates (SVR). This is the rate of interest that they charge their mortgage borrowers when they come off any deal that they may have had, it is also sometimes referred to as the "Revert to Rate".
A total of 12 building societies have either raised their SVR or announced that they will be increasing it in the last two weeks. They include, Skipton Building Society, Kent Relience Building Society, Norwich & Peterborough Building Society, Mansfield Building Society, Marsden Building Society and the Cambridge Building Society. This is by no means the full list and it is expected that those who haven't announced it yet will so soon.
The reason they have all had to make this decision is that they are no longer making money from savers. Only last month the Building Society Association released figures to show that in 2009, £7.6billion less was deposited with building societies.
Historically building societies have used the funds they attract from savers to fund their mortgage lending but because the Bank of England Base Rate is so low the savings rates that they are offering are not attracting savers.
This leaves homeowners that currently have a mortgage with a building society that is on the institutions SVR in a tricky situation. If they do not have enough equity in their property it is unlikely that they will be able to access the best mortgages as the mortgage best buy tables at present show that institutions are looking for customers with between a 30 and 40% deposit.
In the last 18 months lenders SVR's have looked like a relatively attractive proposition as many lenders have been unwilling to lend and the number of available mortgages in the market has remained quite low. However there has been an increasing number of mortgage products coming onto the market in the last two or three months. A sure sign that financial institutions are more willing to lend.
The only thing that remains to be improved is the loan to value ratios (LTV) that banks and buliding societies are willing to lend at. Newcastle Building Society released a range of products at the end of last year that not only had a high LTV of 80% but the rates meant they were featured in many mortgage best buy tables.
In this weeks mortgage best buy tables, the Leek Building Society is offering a Discounted Variable Rate Mortgage with an LTV of 85% and an incredibly low fee. Leek Building Society are only a small society and they will not be able to offer this product for long but hopefully it is an indication that institutions are beginning to be more realistic with the LTV's on their mortgages.
So if you have a lot of equity in your property and you are sitting on a building society's SVR it may well be time to move. If you have less equity but are in the same situation you can find deals if you look but hopefully in the coming months more appropriate mortgage products will become more widely available in the mortgage best buy tables.
A total of 12 building societies have either raised their SVR or announced that they will be increasing it in the last two weeks. They include, Skipton Building Society, Kent Relience Building Society, Norwich & Peterborough Building Society, Mansfield Building Society, Marsden Building Society and the Cambridge Building Society. This is by no means the full list and it is expected that those who haven't announced it yet will so soon.
The reason they have all had to make this decision is that they are no longer making money from savers. Only last month the Building Society Association released figures to show that in 2009, £7.6billion less was deposited with building societies.
Historically building societies have used the funds they attract from savers to fund their mortgage lending but because the Bank of England Base Rate is so low the savings rates that they are offering are not attracting savers.
This leaves homeowners that currently have a mortgage with a building society that is on the institutions SVR in a tricky situation. If they do not have enough equity in their property it is unlikely that they will be able to access the best mortgages as the mortgage best buy tables at present show that institutions are looking for customers with between a 30 and 40% deposit.
In the last 18 months lenders SVR's have looked like a relatively attractive proposition as many lenders have been unwilling to lend and the number of available mortgages in the market has remained quite low. However there has been an increasing number of mortgage products coming onto the market in the last two or three months. A sure sign that financial institutions are more willing to lend.
The only thing that remains to be improved is the loan to value ratios (LTV) that banks and buliding societies are willing to lend at. Newcastle Building Society released a range of products at the end of last year that not only had a high LTV of 80% but the rates meant they were featured in many mortgage best buy tables.
In this weeks mortgage best buy tables, the Leek Building Society is offering a Discounted Variable Rate Mortgage with an LTV of 85% and an incredibly low fee. Leek Building Society are only a small society and they will not be able to offer this product for long but hopefully it is an indication that institutions are beginning to be more realistic with the LTV's on their mortgages.
So if you have a lot of equity in your property and you are sitting on a building society's SVR it may well be time to move. If you have less equity but are in the same situation you can find deals if you look but hopefully in the coming months more appropriate mortgage products will become more widely available in the mortgage best buy tables.
Monday 8 February 2010
Aleksandr the Meerkat doesn't know about personal finance either
He’s may well be cute, he may well be cuddly, you can become his friend on Facebook or follow him on Twitter but as far as personal finance is concerned Aleksandr the Meerkat from the Compare the Market adverts is talking out of his furry little earhole.
If you take a look at the Compare the Market website you will find that in their Credit Card section they are promoting other financial products ahead of the best in the market. One can only assume it is for monetary gain. If it’s not it is because they don’t know what they are talking about. Either way the consumer visiting their website is being shown products that aren’t the best at the top of their charts.
For example in their Balance Transfer chart, Compare the Market place the best deal in the market, the Virgin MasterCard in fourth position and in their 0% on Purchases chart the best product in the market the Tesco Clubcard Visa does not feature at all.
Compare the Market get their financial data from Love Money (formerly The Motley Fool) in the form of a “White Label”. If you care to take a look at Love Money you will find that the same misleading information is displayed on their consumer finance website.
A “White Label” is when another website in this case Love Money, allow a company, in this case Compare the Market to produce their own version of the their website using their logo and corporate branding.
There are two ways the finances can work in a deal like this, either Compare the Market paid an annual fee to replicate Love Money in this way or Compare the Market get a cut of the money made by Love Money through the deals they have set up with the providers of financial products.
Malcolm Murphy the Business Development Manager at The Best Best Buys said, “This is fairly typical of the industry. That is why www.thebestbestbuys.com was set up. We compare and contrast the best buy tables that appear on the internet and in the press so as consumers don’t have to. There are very few financial comparison websites that truly have the best interests of the consumer at heart.”
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