Some titbits of advice

June 28th, 2008

Moneysupermarket.com have been at it again and come out with some thought provoking research figures. Their latest findings suggest that 20% of British adults would find it difficult to find £100 at short notice. 33% would have to turn to their savings when faced with a household emergency.

These shocking statistics have been used to explain the rise in short term loans, the most extortionate of which, payday loans, have featured on this site more than once.

Even consumers with the healthiest of incomes can get caught out occasionally, but there are cheaper ways to get hold of cash in a hurry and any of them are preferable to turning to disreputable and shameful companies that will, in effect, rob you blind.

As long as you do not ask too often, your nearest and dearest should be happy to help you out of a tight spot without charging hefty fees or a penny in interest. Informal borrowing is the most common way that people get hold of cash quickly, and if your relatives are nice enough it should not cost you anything except your pride. You must make sure you do pay these loans back however or you could soon be very lonely.

One of the easiest ways to borrow money is simply to extend the overdraft on your current account, provided that your bank will let you. If you ask only for a temporary extension and demonstrate that you can get back into the black quickly it should not be a problem.

Credit cards are generally an expensive way to take out cash, but the fees and interest can make even cheap personal loans seem more expensive. The Co-operative Bank’s Amnesty International fixed-rate credit card charges a 2.5 per cent fee, or a minimum of £3, for cash withdrawals, so a £200 withdrawal would cost £5. The interest then charged on the withdrawal is far lower than most credit cards, at 11.9 per cent.

However, be careful before using your existing card to get hold of cash. Most credit cards charge interest of between 25 per cent and 30 per cent on money withdrawn at an ATM, as well as a fee of at least 2.5 per cent.

If you have lots of belongings lying around that you no longer use auctioning them on popular sites such as ebay or selling them on gumtree can be a good way of getting some extra cash and freeing up some space. This may not raise thousands of pounds instantly but it can help.

Finally, the most important way of relieving pressure on your finances is not to increase the money coming in, but to simply reduce the amount of money going out. Spend less, especially on luxuries and the need for short term personal loans or even auctioning your belongings should evaporate.

Being sensible with your personal finances means not just shopping around for cheap loans but controlling your spending so that you live within your means. This sounds obvious but isn’t, and it sounds easy but isn’t. But try.

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Energy prices will keep on rising

June 25th, 2008

The leaders of Britain’s big energy companies recently appeared before a committee of MP’s and admitted that energy prices will be going up again in the near future and quite probably they will be going up considerably.

The comments came at a meeting of the business and enterprise select committee where MP’s were asking the bosses to defend the big increases in gas and electricity prices facing households and businesses in the UK.

Finance industry sources have suggested households could pay £400 more a year on average for gas and electricity. The wholesale gas price is closely linked to the price of oil, which itself hit a record high of just under $140 a barrel this month.

It was suggested that the energy market is in effect “rigged” by long-term contracts for the supply of gas and electricity involving the big European energy producers, who are accused of excluding any competition that might drive prices down.

The industry executives surprised some of the MPs by arguing that they needed more financial incentive to invest in building new power stations. Despite the record high prices of oil, gas and electricity, Andrew Duff, the chief executive of Npower said: ‘We are in a very difficult transition phase where the forward returns barely cover the cost of the investment.’

MPs also pressed energy chiefs on the extra help being given to low-income and disadvantaged households to help them with the impact of rising bills. The watchdog Ofgem, which is conducting its own inquiry into the market, outlined plans last month to share data on people on low incomes with energy companies to help people pay their fuel bills.

The government estimates that 2.5 million households are in fuel poverty, defined as when more than 10% of household income is spent on fuel bills, but another watchdog, Energywatch, says the figure is more than four million.

A 40% rise in average fuel bills would be far higher than expected and would put more pressure on homeowners already struggling with higher food and fuel costs. However, some analysts believe the increases will be closer to 25%. Add to this that payments for mortgages and homewoner loans have increased substantially.

It is thought that any price announcements are most likely to come in August, when energy bills are not at the forefront of people’s minds. But there is a great reluctance in the industry to be the first to reveal a big rise, so the rises may be unveiled in stages.

There is little doubt that energy companies are facing a global rise in prices that they are simply passing on to their customers. It will be interesting to see if the savings are passed on as quickly if the energy prices begin to come down again.

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some surprising sales statistics shock the city

June 20th, 2008

Economists were shocked yesterday when it was revealed that despite gloomy economic forecasts and signs that growth is slowing rapidly, retail figures for last month recorded a record growth of 3.5%. This may not sound much but is the strongest monthly growth since 1986.

Some analysts have even questioned the figures. ‘The figures are on a completely different plane compared to what markets were expecting. Some questions were raised over the accuracy of the figures because they were so out of kilter when compared with other reports.’

Even the Bank of England has questioned the statistical office reports, and after last month’s retail sales figures release said that it was giving more weight to other indicators of High Street activity, which were showing more of a slowdown.

Even bearing this in mind May’s retail figures make for surprising reading. Food sales rose 3.3% as people bought salads and stocked up for barbecues, while clothing sales jumped 9.2% as shoppers sought out new summer outfits. This years pleasant weather compared with a year ago has been sighted as one reason for this.

Inflation, it seems, has become policymakers’ biggest worry and not the state of the UK economy. One analyst said, ‘today’s very strong set of retail sales numbers suggests that, despite all the doom and gloom, the UK consumer continues to shop, Unfortunately this ‘shop till we drop’ attitude will sow the seeds of its own demise. The risk of rate rises followed by a recession has just gone up.’

The fear is that even if the surge in consumer spending can be attributed to a spell of warm weather in May, high food and fuel prices will force the Bank of England to raise interest rates at a time when the UK economy is already slowing.

Household energy bills could increase by as much as 40% this winter. That could mean households paying £400 more a year on average for their gas and electricity. An increase on that scale would be far more than analysts have predicted in recent months.

So far from being a beacon of hope it would seem that the retail figures point to the return of inflation. Unfortunately, as the Bank of England fights that inflation it could tip us into a recession in order to avoid a damaging period of stagflation. The Monetary Policy Committee has some tough decisions ahead.

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