The Financial Blog

Egg, the online bank have launched a new 3 year fixed rate mortgage with a rate of 5.39 per cent. At the end of the fixed rate period the interest rate reverts to Egg’s standard variable rate of 6.7 per cent and you can offset any savings you have against the mortgage.

The rate is available from 1st February 2008 and there is an arrangement fee of £499, there are no early repayment charges after the fixed rate period ends.

• Rate of 5.39% fixed for three years thereafter changing to Egg’s standard variable rate, currently 6.79%, for the remaining term of the mortgage
• The overall cost for comparison is 6.7% APR
• Early repayment charges -  

3% of the amount repaid during the first 12 months following completion.
2% of the amount repaid during the second 12 months following completion. 
1% of the amount repaid during the third 12 months following completion. 

Head of Lending and Insurance at Egg, Stephen Bright, said:  “This mortgage is aimed at customers who want the security of knowing exactly how much their monthly payment will be, and get it fixed at a great rate.  In today’s climate with increasing energy prices and economic uncertainty, people want to manage their finances more effectively and budget for the longer term.”

Repossessions will more than double to 45,000 from 17,000 in 2006. More than 1 million people’s mortgages are at risk because they cannot afford to make repayments as the UK’s debt mountain increases.

According to the Financial Services Authority (FSA) people will struggle to meet their mortgage repayments but also other debts like credit cards and loans. The FSA predicts that 1.04 million mortgages which equates to a third of all mortgages approved between 2005 and 2007 are a ‘cause for concern’ because the people taking the mortgages had two out of three risk factors. These ‘risks’ are high LTV’s (loan to value), high loan to income ratios and people taking out their mortgage for more than 25 years.

The FSA has also warned that people face a £210 per month rise in their mortgage payments if coming out of a fixed rate period.

A report published last week by the Royal Institution of Chartered Surveyors revealed that there will be nearly 45,000 repossessions this year, an astonishing 123 people loosing their homes every day.

Research conducted by Liverpool Victoria in conjunction with its financial advisers has revealed their concearns of troubled times ahead.

• Nine out of ten or 87 per cent financial advisers think that markets will remain turbulent over the next few months.
• Only 31 per cent think that equity markets will increase rather than decreae of the next year.
• As a result of this 36 per cent of advisers are telling their clients not to make any further investments in equity-based markets.
• 44 per cent of financial advisers think the housing market will drop in the next six months.

Head of Pensions at Liverpool Victoria, Ray Chinn, said “The FSA has already hinted that there could be tough times ahead over the coming year, as the true effects of the global credit crisis strengthens.  With this in mind it is not surprising that so many financial advisers believe the next few months will be unstable, and that equity markets may take a downturn.  It is important to remember however that financial advisers play a vital role in building people’s retirement portfolios through both good and bad times. Moreover, it is also vitally important that advisers have access to products that are relevant to the needs of today’s at and post retirement clients, offering a real range of investment options to suit different economic conditions.”

Managing Director of Liverpool Victoria, Steven Daniels, added “Historically, investment markets have always encountered periods of turbulence on their long-term upward path, and we agree that market volatility is likely to continue in the coming months. Nonetheless, the economic outlook – the main cause of current concerns – should improve as expected interest rate cuts come through. For clients holding long-term investment products, and assuming that their financial circumstances and goals have not changed - we don’t see the current period of volatility as a cause for concern. For those considering establishing or increasing their exposure to long-term investments, current market conditions may represent a good buying opportunity.”

I thought I’d update the best credit card deals in the market today. Bear in mind you won’t necessarily be accepted for a credit card just because you apply, lenders are now tightening their lending criteria and so getting your application approved will depend on your personal financial circumstances and of course, your credit rating.

If you know what you’re looking for when it comes to credit cards, here are some of the best credit cards in the UK today;

Balance transfer credit cards

Egg Card
0% on balance transfers until 01/04/2009
0% on purchases until 01/04/2008
3% balance transfer fee
16.9% typical APR (variable)
APPLY >

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Purchase credit cards

Capital One Platinum
0% on balance transfers until 01/11/2008
0% on purchases until 01/11/2008
1.7% balance transfer fee
9.9% typical APR (variable)
APPLY >

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Balance transfers and purchases credit cards

Halifax One Online Special
0% on balance transfers and purchases for 12 months
3% balance transfer fee
15.9% typical APR (variable)
APPLY >

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Loyalty and Rewards credit cards

MBNA Platinum Rewards
1 point for every £1 you spend
0% on balance transfers for 12 months
0% on purchases for 3 months
3% balance transfer fee
15.9% typical APR (variable
APPLY >

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Low credit score credit cards

Barclaycard Initial
27.9% typical APR (variable)
56 days interest free period.
APPLY >

Mortgage lending in December was again low according to figures recently released from the BBA (British Bankers Association). Mortgage lending was reported to be weak and approvals were low.

David Dooks, BBA statistics director, said “Mortgage lending weakened notably in the second half of 2007 as the credit crunch impacted on banks’ ability to lend. At the same time, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income. The combination of these factors is resulting in the marked market slowdown and weakness in house prices we are now seeing. Reports of high street sales over the Christmas period were mixed, but our figures show consumer borrowing to have been muted in December.”

It was really as expected with regards to mortgage lending figures in December, not traditionally the strongest month of the year. However, with mortgage approvals remaining low it looks like a weaker future for the months to come.

Even though mortgage rates are starting to creep in at just under the 5 per cent mark, lenders seem to be tightening their criteria when it comes to approving mortgage applications.

So make sure you seek independent financial advice from a ‘whole of market’ mortgage broker if you looking to re-mortgage soon.

Here are more reductions in fixed rate mortgages, this time from Alliance and Leicester. The new offers are available via branches and mortgage brokers, I’ve also checked out the Alliance and Leicester website where you can see the full product information, click here to go to Alliance and Leicester

Here are the basic product details;

Two Year Fixed Rate - 4.99% (new product)

• Fixed until 31 March 2010 then Standard Variable Rate (currently 7.69%) 
• 2% arrangement fee 
• Customers can borrow up to 90% of the property value 
• Maximum loan - £1 million 
• 10% overpayment facility

Three and Five Year Fixed Rates - 5.79% (previously 5.99%)

• 5.79%fixed until 31 March 2011 or 31 March 2013, then Standard Variable Rate 
• Customers can borrow up to 90% of the property value 
• Product fee - £599 
• Maximum loan - £1 million 
• 10% overpayment facility    

It seems like mortgage rates are starting to drop again. First Direct have reduced their 2 year fixed rate mortgage to 4.75 per cent, anything under 5 per cent is very good at the moment. But you shouldn’t take this as advice get professional advice from a ‘whole of market’ mortgage broker and let them find the best mortgage for your individual circumstances.

The First Direct 2 year fixed rate at 4.75 per cent has a huge application fee of £1,498. I can never understand the reason behind charging such a non descriptive ‘application fee’, ‘booking fee’ is another commonly used phrase. Why do mortgage companies need to charge a fee for doing their job!? They provide mortgages and make very decent profit from the interest they charge so why should they charge a one off made up fee? These fees are often added to the mortgage amount so people end up borrowing even more than they first intended in order to get a good interest rate.

I understand there must be some kind of administrational cost to a mortgage company when underwriting a mortgage but this cost can and should, in my opinion, be factored into the headline interest rate. This way customers won’t be stung with huge fees when they take out a mortgage.

The outcome of the OFT court case against 8 UK banks, looking into unfair charges, could be the catalyst to some of the biggest changes ever seen in UK banking. It could spell the end of ‘free’ banking for everyone.

If the banks loose this case they will have to repay billions of pounds in compensation, so how will they re-claim this money? By charging everyone a fee either annually or monthly for the ‘privilage’ of having a current account! The banks will find other ways to make money from customers and you can bet that a raft of other fees and charges will be introduced if they loose this case.

Any compensation money the banks have to pay back to customers will simply be passed back to new and existing customers in the form of fee based current accounts. Is it such a bad thing if the banks win this case!?

Mobile phone users don’t know how many texts or minutes they use each month

A recent study by comparison website Moneysupermarket.com has revealed that Brits waste over £8 billion on additional texts and minutes in the following ways;

• 50 per cent of mobile phone users in the UK don’t know how many texts or minutes they use every month.
• 20 per cent of mobile phone users in the UK, more often than not, get a bigger phone bill than they were expecting.

This rakes in an astonishing £8.45 billion per year for the British mobile phone industry alone and it’s simply because people are on the wrong mobile phone tariff!

On average we use 23 voice minutes and 23 texts over our inclusive allowances each month. Basically it costs us around £130 each per year. I must admit I was running my mobile phone bill up every month like this, typically I would spend £5 to £10 over every month. It wasn’t ever really a lot of minutes or texts that I would over use but the mobile phone companes charge a higher rate per minute and per text if you go over your monthly inclusive allowance. Then you realise when your bills arrive.

I played around with my tariff, it was a Vodafone SIM card so I could change the tariff and pricing structure online after the first 3 months. This seemed to keep the bills lower but I’d usually end up going over the inclusive mintues and texts anyway.

Now I use o2 Simplicity. You buy a SIM card and pay a set fee per month for a set amount of minutes and texts. I’m paying £25 per month and get 600 voice minutes and 1000 texts. The good thing with o2 Simplicity is that you’re not tied into an 18 month contract. If I decide I don’t like my deal all I have to do is give 1 month written notice and o2 cancel the SIM card, easy!

Tescos home insurance is offering new home insurance customers a £75 discount on Hotpoint appliances if you order from Tesco Direct, and you must be a Tesco Clubcard holder. The discount offer is available until 6th February 2008.

If you decide to buy Tesco home insurance online or over the phone then you need to quote ‘hotpoint75’.

This is a straight forward discount offer by the looks of it and a good way of saving money on appliances if you need a new washing machine, fridge or whatever! Take a look at Tesco Direct here to see what Hotpoint appliances they stock.