The Financial Blog

*** WARNING! Before we start this post I should advise you that italics may contain sarcasm!  ***

In possibly the most ill advised move possible considering the current Northern Rock crisis, Abbey have decided that the best way to increase confidence in the mortgage market is to launch a mortgage for 125% of a properties sale price.

This instantly plunges your average house buyer into £25,000 debt as well as having a house mortgaged to the hilt, which could of course go down in value considering the slowing housing market. And should you miss a payment, it could be bye-bye house as it is all secured on the new home.

However Abbey are limiting the extra amount that you can receive with this scheme to £25,000, so if you were to buy a £200,000 house you would only be able to borrow an extra £25,000, or 12.5% of the homes sales price. Well I guess they are looking out for all us little people after all!

With only 96 days until Christmas, now is the time to start planning which credit card to use for your Christmas shopping. A little research and planning now could save you money come January.

Capital One cash back & travel insurance credit card – pays 4% cash back on all purchases for the first three months. Enough time to earn cash the maximum cash back on all your Christmas shopping! Click here to apply online now. You will also receive FREE annual family travel insurance if you pay for a holiday on the card, so if you’re planning a Christmas break this could be the card for you.

Transferring your balance?

If you’re still feeling the pinch of recent interest rate rises and need to switch your debt to another 0 per cent card here are some of the best around today;

Barclaycard offers 0 per cent on balance transfers for 14 months with a 2.5% fee of the amount transferred. Click here to apply online now. 14.9% Typical APR .

Next, Virgin has 0 per cent on offer for 15 months but their balance transfer fee is 2.98% of the amount transferred. Apply online – click here. 15.9% Typical APR.

Halifax One Special is again a fantastic offering of 0 per cent on balance transfers for 12 months, Typical APR is 15.9%. Click here to apply now. However this has a 3% balance transfer fee.

If you’re able to pay off your balance every month then cash back cards are probably the easiest way to get something back for all your spending.

So Northern Rock is falling down… or so the news would have you believe. Lets take a look at what’s happened so far:

14th September: Northern Rock get help from the Bank of England

Instantly customers get worried and so do shareholder with shares starting their 33% tumble. Queues begin to form outside Northern Rock branches of savers who are worried about their nest eggs.

17th September: Chancellor Alistair Darling guarantees Northern Rock savings

The queues haven’t got any smaller and so the Chancellor is forced to guarantee everyones savings with the Northern Rock to try to stop the bleeding, whether this will help any is yet to be seen. Huge queues are still reported outside Northern Rock branches this morning and an estimated 2 billion has been withdrawn so far.

Personally if I had savings with Northern Rock I would be taking them out as well, however I can’t help but think what might happen if Northern Rock were to go under.

My wife has a mortgage with Northern Rock, and we are in the process of selling that house so I’m not overly concerned, but I wonder what would happen if the bank did collapse on itself - would we get off scot free with the rest of the mortgage, or is their some small print somewhere that allows them to force the sale of the property to take back the money? Could the mortgage be purchased by another bank and taken over without our consent?

Also you have to wonder what would happen if you had an unsecured loan with them and they went bust - do you get to keep the money? If you are looking for a personal loan there may be worse ideas than applying with Northern Rock.

Even those the option of Northern Rock going under is a very real concern I can’t help but think that Northern Rock crashing is extremely far fetched and the bank will bounce back once more, as will those whose share prices have suffered off the back of this crisis. For those of a speculative/gambling nature a little investment in some of these cut price shares could be a shrewd move.

My wife and I recently applied online for a mortgage with The Cheshire building society because we thought it would be quick and fairly easy to do.

The online application was detailed and took about an hour to complete which was fine, the product was a competitive 3 year fixed rate with an £899 arrangement fee that could be added to the value of the loan. I think it was actually a market leading fixed rate at the time we applied. Towards the end of the application we verified that we would only like to be contacted by phone and post. The Cheshire verified they would be in contact with confirmation of our mortgage offer.

The mortgage application was approved only in principal from the details given online and a mortgage underwriter would be assigned to the application, fair enough.

A couple of days later my wife received a call from The Cheshire asking if we were going to make £100 payment ‘to secure the rate’ we’d been offered. When my wife asked what payment? She was told ‘we should have received an email’ – an email!? We had specifically requested no email correspondence on our application, because we don’t regularly check our personal email…Anyway here is the email;

The society will hold this online application for 7 calendar days from the date of this email. In order to secure your rate you will need to pay £100 of your arrangement fee.

If you haven’t yet paid your fee, please contact our dedicated fees collection line on 01625 421 614 between 9am and 5pm Monday to Friday.

Please ensure you have your card payment details ready before calling. We accept all major credit and debt cards except American Express.

In the event that you decide to change the product on this property, withdraw your application, or submit a new application on a different property the £100 which has been paid in respect of this application is not refundable or transferable and a new fee will be required.

2 days after submitting our application I called the customer service telephone number and was told that we would receive the mortgage offer in the post and we could then pay the £100. The email above wasn’t really saying we need to pay £100 ASAP, before we actually see our mortgage offer in writing, how much the repayments will be each month etc…Fine we can wait for the offer to arrive.

So approximately a week after our mortgage application was submitted my wife received a further 2 telephone calls from The Ceshire basically asking us to pay the £100 to ’secure the rate’ - on a mortgage offer we hadn’t even had in writing! How can we pay for something we haven’t got?

I’m not particulary bothered about the £100, after all in the grand scheme of a 23 year mortgage it’s hardly worth worrying about. What I do disagree with is paying for a ’service’ when;

1. We’ve had no confirmation that our application has been approved
2. On the mortgage application being approved we would hopefully have the privilege of The Cheshire confirming in writing our new monthly payments and interest rate
3. The £100 part payment of our arrangement fee was not refundable

I don’t think we’re expecting too much before we start handing over our money and giving our business to The Cheshire. Maybe I’m wrong??

UK drivers waste over £175 million by signing up to car showroom finance.

Consumers could lose almost £1000 each in interest payments should they opt for the car finance on offer at the dealership instead of financing the purchase via an unsecured personal loan.

Nearly a fifth of the UK’s cars will be sold in September, possibly because of the new ‘57’ registration plates. Surely an unsecured personal loan is a far better option?

The average interest rate from 3 well known car finance companies picked at random from a Google search for ‘car finance’ was over 25% Typical APR! Even taking into account a poor credit rating some of these companies charge over 28% Typical APR! Some of the best unsecured personal loans on the market today are;MoneyBack Bank – 6.3% Typical APR. Earn Moneyback if you take out personal loan protection. Fixed rate.

Alliance & Leicester – 6.5% Typical APR. Applying online takes 10 minutes and you could get a decision within 1 hour. Fixed rate. Apply online here.

Northern Rock – 6.4% Typical APR. No early redemption charge. No arrangement or administration fees. Fixed rate. Click here to apply online.

Abbey – 7.9% Typical APR. The early redemption charge is up to a maximum of 2 months’ interest. Fixed rate. No arrangement or administration fees. Click here & apply now.

Research out today from Confused.com has found that as many as one in four drivers could be at risk of invalidating their car insurance because they have failed to inform their insurer of motoring convictions or points on their license before renewing their policy.

96% of drivers are apparently aware that manipulating the truth about their car and driving history could invalidate any claim. Motorists seem willing to take a risk hoping they won’t be caught out.

The research found that a quarter of all car owners think it’s ok to be manipulative with the truth when looking for the cheapest car insurance.  However, this in itself could leave drivers high and dry when it comes to making a claim.

Debra Williams, Confused.com Managing Director said: “Insurers take a dim view of people who don’t update them immediately should their circumstances change.  Changes in job title or annual mileage may seem insignificant to most drivers, but this can significantly affect your premiums.  If you are caught lying about your details, your insurer can reduce your pay out and may even refuse to pay at all.

“If you move address, receive points for a driving conviction or have an accident, even if that is only a minor knock or ding, you need to notify your insurer immediately.  Don’t risk waiting until your policy is up for renewal, as if you need to make a claim and a previous incident has not been reported, you could find that your policy isn’t worth the paper it’s written on.

”Debra continued: “In the worst case scenario you could land yourself in hot water with the police and get a record for fraud, making it difficult and considerably more expensive to get cover in the future.”

The average balance transfer fee on a credit card has increased from 2.1 per cent to 2.67 per cent from September 2006 to 2007.  

The increase comes directly after the Office of Fair Trading told credit card companies to limit default charges to £12, in September 2006.

I suppose this is an inevitable consequence when any company’s fees are restricted on one hand, they can quite easily add on ‘additional’ or ‘new’ charges.

Luckily there are still relatively low balance transfer fees on some credit cards like the Capital One Platinum MasterCard, which charges a 1.7 per cent fee on balance transfers, 9.94 Typical APR on purchases. Apply online here today.

Lloyds TSB is the first bank to announce it will cut the charges from £30 a day if customers go over their authorised overdraft amount, to £15 a month and then a sliding scale of £6 to £20 per day based on the size of overdraft. Charges for bouncing a cheque or standing order will be reduced from £35 to £20. I’m sure you’ll agree, all good news for Lloyds TSB customers, and hopefully other banks will follow suit by reducing their charges. 

Marc Gander of the CAG (the Consumer Action Group) who have been leading the customer revolt against bank charges, said the revised charges were still extreme; “I think they are still well over the top, on the basis that the real cost of sending a letter or bouncing a cheque is about £2.00; the mark-up is still very high.” Let’s face it; banks aren’t going to let customers borrow unauthorised amounts of money whenever they feel like without a fee. I think it’s about finding a sensible and fair means of charging. At least Lloyds TSB have taken the first steps here.

Unsurprisingly one of the biggest costs to motorists, car insurance, has risen in cost by 4.2% over the last 12 months according to the newly released Sainsbury’s Bank Car Insurance Index. This means the average customer can expect to pay out £486.43 per year now.

However this gets worse for males - who have an average car insurance premium of £518.46. Conversely due to the baffling belief in the insurance industry that males are more dangerous drivers, women can expect to pay £442.28.

But it could be worse you could be a driver under 25 with a whopping average insurance premium £1,253.71 - a rise of 11.2% in just a year. Those between the ages of 25 and 40 saw a 5.81% rise to an average of £609.56.

With this information in mind you would be forgiven for thinking that there was never a better time to ditch the car and hike to work, but thankfully by comparing the market you can shave huge amounts from your renewal quote - remember never take the first offer and shop around!

Barclaycard launches it’s new ‘3 in 1’ credit card - OnePulse. The card gives Londoners the chance to use the new credit card in 3 ways;

1. Use the card as an Oyster card. Either pre-load a pay as you go or a Travelcard or BusPass. The Oyster functionality is separate from the customers credit card account, but sits on the same card.
2. Credit card. Use the Barclaycard OnePulse as a normal credit card offering 14.9% Typical APR, variable. For the first 6 months there is an introductory offer of 0% on purchases.
3. Cashless. This allows customers to make purchases of £10 or under more quickly with a touch of their card against a reader rather than entering a PIN. This reduces the need for people to carry cash.

Barclaycard OnePulse cardholders will be able to use the cashless functionality at most retailers as OneTouch technology goes live in London over the next few months.  Retailers already signed up to the new technology include Books Etc, Chop’d, Coffee Republic, EAT, Krispy Kreme, Threshers and YO! Sushi.If you live in London and would like to apply for this card visit http://www.barclaycard-onepulse.co.uk today.