The mattress is not a safe place for your savings

May 8th, 2008

A survey from Newcastle Building Society and publicised by the BBC has showed that the banking crisis has led to scared savers shunning banks and simply keeping their cash at home.

Although still not a major part of the market the dramatic increase, about 11% of those surveyed thought their home was the best place for their savings, up from 4% a year earlier, demonstrates that a real fear has taken hold of some customers.

Newcastle Building Society said the survey was a “stark sign of the times.

With some attractive savings products available, you might think people are barmy to stash their cash at home. Unfortunately, some savers now have an exaggerated view that investing their money with a building society or bank can be a risky business, which is not the case.”

Under the Financial Services Compensation Scheme, savers get back the first £35,000 of their money should their bank or building society go out of business.

Only 57% believed the safest place for their money was in a bank or building society, compared to 74% a year earlier. The findings were based on figures from YouGov, which questioned 2,000 individuals in April.

The idea of people hoarding wads of cash at home, traditionally under the mattress, harks back to the dark days of the Great Depression and would have seemed unthinkable as little as a year ago.

The significance for this change is debatable. The percentage growth of people keeping their savings at home is impressive but the total percentage of the market is still small. Because this number is so small there will be no major significance for the banks in terms of threatening their liquidity. The primary significance, therefore, must be for those people choosing to trust their mattress over the banks.

Despite the economic turmoil money is still safer in banks, both because it is protected if the bank collapses and also because the odds of your being burgled are higher than those of your bank collapsing. By trying to keep their money safe people are in fact putting it at serious risk.

Posted in Personal Loans | No Comments »

Ken or Boris? The winner could be in trouble

May 2nd, 2008

The results of the London Mayoral race are due to be announced in a few hours and while everyone is interested to see who will win (I will put my neck on the line and predict Boris), more practical people are beginning to point to the difficult job the mayor will have running London over the next months/years. The most important (because it is the most expensive) is the Crossrail project which is currently estimated to cost £16bn. Responsibility for the management and delivery of this huge scheme rests with the mayor. Scrutiny of how it is progressing and how costs are being controlled will be intense. Only slightly smaller, but equally momentous, is the £9.3bn cost of the 2012 Olympics, the countdown to which begins in earnest in August. The mayor will be a figurehead for the Games in the crucial preparatory phase. The mayor will be held accountable for ensuring that London’s much-criticised transport network can cope with the unprecedented demands put on it by the event. He will also be expected to help guarantee the dream of a large and sustainable legacy from 2012, boosting everything from employment opportunities to sporting facilities. Then there is the much smaller but politically potent sum of £252m, the amount paid by drivers in congestion charge payments last year. Whoever wins the election, this topic will be hotly debated in the months to come. In addition to the real pressures of 2012 and Crossrail, the economic environment is far less favourable now and this could mean problems for the new incumbent. As an economic powerhouse and global brand name, London has been a unreserved success in the past 20 years. Its growth has been so dynamic that it now accounts for about a fifth of the UK’s total GDP and 15% of all its jobs. The City has been the cornerstone of this growth, with more than half a million jobs being created in financial services since the mid 1990s. London has eclipsed New York as the preferred destination for companies wishing to raise capital by listing their shares. The City now generates annual export earnings of £24bn. But London’s pre-eminence as an international financial capital, with more than 30% of its jobs depending on banking and business services, makes it particularly vulnerable to the current global credit crunch. Some estimates have put likely City job losses in the next 18 months as high as 20,000, although the ultimate figure may be much lower than this. One thing is certain, despite being described as the most “powerful” directly-elected official in the land, the new mayor will find that his honeymoon period is even shorter than normal this time around.

Posted in Personal Loans | No Comments »

Lenders put on the squeeze but there are still deals to be found

May 2nd, 2008

While loans have been becoming harder to come by a new set of figures shows that even if you manage to get one you will be paying much more than before for the privilege as banks and building societies move to protect their profits in the face of the crunch.

The trend has become even more marked in the last fortnight, with a host of lenders pushing up selected rates. These include Barclaycard’s rise of 0.5 per cent, Lombard Direct increasing by one per cent and NatWest by 2.5 per cent.

The trend was originally confined to mortgages but has recently moved to encompass personal loans too. Black Horse has increased rates for those looking for smaller loans by as much as 11.0% points, adding £52.68 in additional interest on a £1,000 loan paid over one year.

But hope is not lost, there are still some bargains for those prepared to put in the time and effort. Despite the hikes, there are still some good deals available to those who shop around. Moneyback Bank, Britannia BS, Yorkshire Bank and Clydesdale Bank have all reduced selected rates since the beginning of the year.

Anyone looking to take out a £5,000 loan with Yorkshire Bank or Clydesdale Bank will have seen rates reduced by as much as 7.0%.

It is worth bearing in mind that smaller loans cost more in interest. Black Horse for example now charges 27.9% on a £1,000 loan over one year, but only 16.9% on a £7,500 loan over five years.

Another tip is to avoid Payment Protection Insurance (PPI) from the loan provider. PPI has been subject to an investigation by the Financial Services Authority, the City regulator, following complaints that the policies were mis-sold and people were unable to claim because of caveats in the policies.

The cover also has one of the poorest payout records in the industry: only 20% compared with 80% for car insurance, for example. Independent firms offering PPI such as Britishinsurance.com and Paymentcare.co.uk are up to 50% or more cheaper.

So once again the lesson is to shop around first before making any decisions about personal finance. My personal feeling is that PPI is a total waste of money but some people still disagree. This also goes to show that despite the constant harping on about the credit crunch there are still good deals on personal finance out there for those committed enough to look for them.

Posted in Personal Loans | No Comments »

Newer Entries »