The Financial Blog

A new peice of research from Halifax found that only 37 per cent of students have a credit card and the average credit card balance amongst students is only £220.

I was very surprised to hear this but it seems as though students are amongst the most savvy of us all when it comes to getting the best out of your personal finances. I say this because students are using their heads by getting student loans and making use of their overdrafts rather than using a credit card to fund themselves whilst at university.

If you think about it this makes complete sense! The average interest rate on a credit card is around 16 per cent while overdrafts and loans are much lower; I’d say these average out at around 6 - 8 per cent depending on the type of current account you have and your credit rating when it comes to getting a loan.

Boys seem to spend less on their credit cards than the girls; the average student credit card balances amount to £173 for the boys compare to £255 for the girls…

Halifax say that students really on seem to use credit cards if they need to, for example making online purchases is best with a credit card, so this could explain the minimal balances seen amongst students today. A spokesman for the National Union of Students said that students should beware when it comes to credit cards - “Credit cards fall into the amber category. They can be used for buying things online, but when credit cards are used to basic living expenses, people should seek help.”

I’ve just spotted the story below on Sky News; Price comparison sites slammed in Which? report

This is interesting because I’ve always found comparison web sites to be very useful and I’d recomend them to anyone looking for a better deal on a credit card, loan, mortgage, motor or home insurance. You only have to look at the various products you can compare on a site like Moneysupermarket.com to see it must be worthwhile using.

So, I’m quite surprised at the lastest report from Which? - It would make absolute sense to me that you have to check a few comparison sites when comparing products just to make sure there isn’t a better deal at one rather than another. If you were shopping in the high street for a pair of trainers you’d check a few sports shops to make sure you get the best price - I know I always do; sometimes, using my fantasitc trainers comparison, the price can very by about £10! You’ll always find the most fashionable looking shops charging the highest prices… Anyway, here’s the Which? comparison site story;

Sites like moneysupermarket.com, gocompare.com and confused.com have established themselves as the first port of call for many people shopping for everything from travel insurance to mortgages.

The sites take a few details from the user and come up with comparisons of products across the market, indicating which is cheapest.

But when consumer group Which? surveyed the sites and compared the findings with each other, it found large variations.

A typical search for home contents insurance on Gocompare.com, Confused.com and Moneysupermarket.com brought up quotes from from £51 on Gocompare.com to £71 on Confused.com.

There was a similar variation for standard credit card rates, with Moneysupermarket.com offering the cheapest deal of 6.8% APR, while Gocompare.com offered a best rate of 12.9% APR.

The research found that in the case of a Bradford & Bingley home contents policy, the cover could be bought for £68 on the group’s own website, while it cost £72 through Moneysupermarket.com, £83 on Confused.com and £100 on Gocompare.com.

Martyn Hocking, editor of Which? Money, said: “You need to use two or three comparison sites and check directly with providers to get the best quote, and remember that cheapest isn’t always best - it’s a false economy if you don’t get enough cover for your needs or have to pay a huge excess if you claim.”

Hayley Parsons, chief executive officer of Gocompare.com, said: “This research is nearly two months out of date and since then we’ve added even more insurers and products to our service and will be adding still more in the very near future.”

Stuart Glendinning, managing director of Moneysupermarket.com, said: “Our customer promise makes it clear that our aim is to compare more providers than any other site, to list every provider (and make clear which ones we don’t list and why), that the price you see is the price you pay and that you won’t get cheaper by going direct.”

Carlton Hood, chief executive of Confused.com, said: “The questions we ask are designed to offer customers ‘real’ prices and not estimates - something which we pride ourselves on.”

It was quite interesting to read that Aldi, Lidl and Netto supermarket sales have increased to their best ever levels in recent weeks as UK consumers seem to be searching for the best deals on everything from food to fuel and finances.

Figures also show that people are starting to turn away from what I would describe as the ‘top-end’ grocery shops, so places like Marks and Spencer, Sainsbury’s and possibly even Tesco these days! - all these supermarkets saw a downturn in market share for the last 12 weeks.

Perhaps this is the latest sign that people are willing to make cut backs even on their food budgets. I know that shopping for a family of 4’s weekly food has increased considerably over the last 6 to 8 months;

I’ve swapped the family’s weekly shop to Asda from Sainsbury’s. Without sitting down and writing out a full price by price comparison I can’t say for definate if it has made a difference. At a ‘guesstimate’ I’d say we’re saving upto £20 each time we do a big food shop. Most of the time maybe we save £10 - but when you shop sometimes twice a week you could end up saving £60 to £100 a month, which is all good news at the moment!

The latest figures from the Council of Mortgage Lenders (CML) reveal that total mortgage lending was down by 27 per cent in July this year, compared to 2007. There was some good news with a 5 per cent monthly increase from June to July this year.

Bob Pannell of the CML said: “While there was a small month-on-month increase in activity, it represented a notable decline from a year ago.”

“This continues the weaker picture seen in June and points towards the more subdued levels of lending we are likely to see in the second half of 2008.”

According to the latest reports housing sales have dropped by 50 per cent this year, which is further backed-up by CML figures saying so far in 2008 only 29 per cent of mortgages have been for new house purchases. Every other mortgage has been provided for people looking to remortgage, to find a better deal, or remortgage to raise more cash against the value of their property - a very risky strategy given the current house price slump, which could easily end up as a negative equity situation if people borrow too heavily.

Mortgages are getting more competitive but only for people who can afford to pay a 25 or 30 per cent deposit, so in other words don’t look to borrow more than 70 or 75 per cent of the property value and you should be able to find a good mortgage deal.

Minutes from the Bank of England’s Monetary Policy Committee meeting were released today and they reveal the committee are split on their decision to keep interest rates on hold this month.

7 members of the Commitee voted for interest rates to remain at the current 5 per cent rate, 1 member voted for a rate increase and another member voted for a rate cut. Here are the notes of the meeting;

“Most members of the committee judged the current stance of monetary policy was broadly appropriate and that Bank Rate should be maintained at five per cent this month.

“Inflation was likely to move further above the target in the coming months. The outlook for activity growth had continued to worsen, but some build up in the margin of spare capacity was likely to be necessary to ensure that inflation returned to the target in the medium term.”

They said that cutting rates would help improve the economic downturn seen over recent months, which could also be seen as a signal that perhaps the committee are more concearned with this than tackling inflation at the moment.

The Bank of England’s Monetary Policy Committee are stuck between inflationary increases, which are usually combated with increased interest rates, and the increasing likelyhood of recession which is usually kept at bay with interest rate cuts to stimulate the economy…

So, perhaps the idea is that inflation will increase towards to the end of the year but then tail off as we move into 2009, but hopefully not a recession??