Credit cards can save you from collapsing builders

Published Date: 09 November 2008
ABIG surge in the number of businesses and small traders that will go bankrupt this year should set warning lights flashing for consumers.

According to figures published on Friday, the numbers hit by personal insolvency have increased from 1,545 to 4,055. The picture is even worse for companies hit by financial problems: the numbers entering either into receivership or administration ADVERTISEMENTare up four-fold.

This should concern anyone planning a new kitchen, major building works or ordering furniture. Losing the price of a new plasma television would be extremely annoying, but being left without a roof on your house because your builder has gone bust mid-contract would be a disaster.

Self-defence shopping must be a priority. So how can you protect yourself? The most important precaution is to always pay by credit card where possible. Under section 75 of the Consumer Credit Act, if you fail to receive goods or services you have ordered and paid for, your bank must help you pursue your claim, and if unsuccessful compensate you for any loss, provided the item cost between £100 and £30,000.

However, where you have paid a deposit of less than £100 you can still claim redress from the card issuer, provided the total cost was for more than £100. So if you put £50 down on new curtains being run up for £500 by the local seamstress, who then goes bust, you can claim your £50 back.

But bear in mind that you must have made the purchase for your own use. If you pay for four theatre tickets at £30 each for an evening out with friends, and the show and company folds before the performance, the issuer is likely to resist reimbursement on the grounds that you could not possibly have sat in four seats simultaneously yourself. But your credit card provider will only come to your assistance if you have a contract with the retailer or other supplier. Emma Parker of the Financial Ombudsman Service explains: “If you are employing a plumber or electrician, then make sure you get something in writing. We have seen cases where the banks have challenged reimbursement because there was no contract between the customer and the tradesman, and the cardholder had nothing in writing. Even if it is just on a scrap of paper, get them to write something down.”

If you don’t have a credit card, or the retailer or tradesman won’t accept it, Visa debit cards offer a similar protection, provided you make a claim to your bank within 120 days of realising a deal has gone sour.

In fact, the Visa rules are more generous than the consumer credit law demands, in that there is no limit to compensation; a munificence which also extends to Visa credit cards.

Most shops will accept either credit or debit cards, so if you want to order something from one which does not, you need to think very carefully about the likelihood that you will ever receive the item you wish to purchase.

However, many tradesmen may not accept credit or Visa debit cards, in which case extreme care is needed.

Espe Fuentes, a solicitor at consumer group Which?, suggests still paying for anything you can by credit card and on no account parting with money in advance. She argues: “Rather than give your plumber the money to buy the boiler for you, buy it yourself on credit card.”

The difficulty with this approach is that tradesmen can often get discounts of around 20% compared with what the ordinary consumer pays. Fuentes says: “Then you have to weigh up what the discount is worth to you, compared with the risk of parting with your money.”

Insolvency practitioner Beverley Budsworth recommends being very wary of anyone putting you under pressure to pay before work is completed and advocates trusting your instincts to spot danger.

She says: “Anyone who puts you under pressure to put money upfront should set off warning bells. Why are they so desperate for the cash?”

She also suggests using firms which have a long track record: “Firms that have been established for many years will have ridden out booms and busts in the past. Newer firms may not have the experience or resources to ride out difficulties.”

Nick Wood, recovery practitioner at accountants Grant Thornton, warns: “Don’t pay a penny upfront if you can avoid it. Pay only on satisfactory completion of the work.”

If you are embarking on a major building project, he insists you must be ruthless in negotiating staged payments.

“Draw up a schedule of the work, and schedule in payments, but only after each stage has been completed to your satisfaction.”

He also suggests checking out firms on the Companies House register ( www.companieshouse.gov.uk). This holds reports and accounts filed by limited companies, and can be checked for adverse information. However, this may be of only limited help, as the most up to date information may not yet be filed, although it should flag up serious problems.

Unfortunately, although companies can use credit reference agencies to check us out, consumers cannot use the same system to assess a business they wish to deal with. However, the leading credit reference agency Experian said it was looking into this possible extension of its services in the current climate.

Finally, if you are having new windows fitted or major building work done, it is possible to take out insurance to cover work in progress or any guarantees subsequently issued. For example, Warranty Services ( www.qanw.co.uk) would charge £30 to protect you against a roofer going bust while carrying out repairs costing £5,000.

Warranty Services operations director Gary McGivern says: “The biggest seller involves double-glazing work where a 10-year guarantee is issued following satisfactory installation. If something goes wrong with the windows six years later, and the firm no longer exists, we will pick up the problem.”

However, it will only pay up if the claim meets its terms, so it is important to read the small print. For example, if a builder simply retires at state pension age, that may not be covered.

0% balance transfer deals begin to fade

Capital One has withdrawn its best-buy balance transfer credit card from the market, emphasising an on-going downward spiral in one of the industry's most popular sectors.

Although borrowers can turn to equally attractive offers from Barclaycard, First Direct and Virgin, Savvy credit card users hoping to transfer their debt from one card to another will find it increasingly difficult to do so in future.
Over the past year the overall number of 0% balance transfer deals has been cut back with 75% of firms now offering deals compared with 82% in October 2007. There were 103 such cards on the market a year ago, but only 87 remain today.

The introductory period of these cards has also been reduced: across the market the average introductory period has been reduced from 10.1 months to 9.5, according to price comparison website MoneyExpert.com.

In the past, many credit card users or so-called 'rate tarts' have used these extended 0% periods to transfer their existing debts at little cost. But with the number and length of these offers reduced, this is likely to become increasingly difficult.

It will also cut back on the process known as 'stoozing'. This is a way of making money by borrowing large amounts of cash on 0% credit card deals and then deposited the funds in a high-interest savings account. As the borrowed funds do not attract interest and if you do not spend any of it before the end of the 0% deal, you get to keep the accumulated interest for yourself.

If a customer was able to find consecutive 0% deals, they could avoid interest and earn money from stoozing indefinitely. However this is becoming increasingly difficult also as card providers tighten their lending criteria.

Sean Gardner, director of MoneyExpert.com, said: 'These figures should send a clear message to borrowers that the credit card merry-go-round is grinding to a halt. In the coming months, it's going to become increasingly difficult to refinance your debt at 0% interest.

'This trend away from extended balance transfer periods underlies a shift in the industry which is increasingly cautious about the people it lends to and is far more interested in the profitability of its customers. A year ago there were dozens of cards with overall APRs of little more than 10%, but today the most competitive cards offer rates of 16% or more.'

The situation of borrowers is not helped by the fact that the rate on authorised overdrafts is increasing. The interest charges on overdrafts has increased by an average of 1.35% since June this year, according to Mr Gardner. The average authorised overdraft now charges 13.06% compared with 11.71% in June despite the Bank of England cutting rates by 2% over that time period.

The balance transfer offer from Capital One, which was near the top of the best-buy tables earlier this year, offered 0% on balances until December 1, 2009.

Virgin Money currently offers the longest 0% balance transfer deal at 16 months, followed by the 0% offer until February 1, 2009 from Egg. Two other great offers come from Barclaycard OnePulse and Tesco Personal Finance Bonus with transfer periods of 14 months.

Interest rates are slashed in Europe

By Chris Giles in London, Ralph Atkins in Frankfurt and,Krishna Guha in Washington

Published: November 7 2008 02:00 | Last updated: November 7 2008 02:00

Interest rates were slashed across Europe yesterday as the continent's central bankers decided the outlook for their economies had taken a decisive turn for the worse.

The Bank of England cut rates by 1.5 percentage points to 3 per cent, bringing the official rate to its lowest level in 53 years. The cut was three times bigger than any seen since the central bank's monetary policy committee was established in 1997.

The European Central Bank cut official borrowing costs by half a percentage point to 3.25 per cent and Jean-Claude Trichet, ECB president, said he would not "exclude" a further cut in December.

The Czech central bank also unveiled a much larger than expected three-quarter percentage point cut, while the Swiss National Bank said it was lowering interest rates.

Equity markets slumped amid fears that global weakness would hit corporate profits. The S&P 500 index fell 5.03 per cent, after losing 5.27 per cent on Wednesday. London's FTSE 100 index closed 5.7 per cent lower, while German and French equities both fell more than 6 per cent.

The International Monetary Fund published an emergency update of its forecasts, predicting the rich world's economies would shrink by 0.3 per cent next year, the first contraction since the second world war. Last month it projected 0.5 per cent growth.

The IMF recommended that the US, Europe and China raise public spending and cut taxes.

The number of Americans filing new claims for unemployment benefits remained more than 50 per cent higher than before the financial crisis hit in 2007 as the insured unemployment rate climbed to its highest level since February 1983.

Kevin Warsh, a Federal Reserve governor, said there were "notable signs of improvement" in credit markets, but added that financial markets "remain strained" and would remain so while financial sector business models were still in "substantial flux."

In what may be a signal that the flurry of policy interventions is drawing to a close, he said "a dose of patience" may be required. "New prescriptions, however well-intentioned, can prove unsettling to a patient who is searching to find his footing."

The Bank of England said its dramatic move was a response to tightening credit conditions; evidence of a "severe contraction" in the economy over coming months; and a dramatic extinction of inflationary pressure.

The size of the cut in UK interest rates appeared to have taken the ECB by surprise, but Mr Trichet played down differences in approach.

Euro, pound edge higher against dollar

FRANKFURT, Germany (AP) — The euro and the pound both edged higher against the dollar in trading Friday, a day after the Bank of England and European Central Bank cut interest rates for the second time in less than a month.

The ECB cut its key rate by half a percentage point to 3.25 percent shortly after the Bank of England lowered its key interest rate by a startling 1.5 percentage points to 3 percent.

In morning European trading, the 15-nation euro bought $1.2830, up from $1.2735 late Thursday in New York. The British pound slipped to $1.5784 from $1.5753. That reversed Thursday's declines in the wake of the rate cuts.

Lower interest rates can help prompt economic activity, but also typically drive investors away from a currency as they seek higher returns elsewhere.

In other trading Friday, the dollar dropped to 97.45 Japanese yen from 97.82 yen.

Euro Rises To Near Record High Against Pound

(RTTNews) - Extending Asian session's uptrend, the euro surged to near a record high against the pound during early European deals on Friday. Meanwhile, the euro reversed its early Asian session's loss against other major currencies. The euro thus recovered from a 1-week low against the yen and a 3-day low against the dollar and the franc.

The German and the French trade balance reports, which were released today likely influenced the European currency.

Germany's foreign trade balance showed a surplus of EUR15.0 billion in September, up from EUR10.6 billion surplus recorded in August, the Federal Statistical Office said today. That was higher than the expected surplus of EUR13.5 billion. In September 2007, the surplus amounted to EUR18.2 billion.

The French Customs announced that the country's trade deficit widened to EUR 6.25 billion in September. Economists were looking for a deficit of EUR 5 billion. In August, France had recorded a deficit of EUR 5.4 billion. Exports totaled EUR 34.29 billion in September, while imports were worth EUR 40.54 billion.

Yesterday, the European Central Bank slashed its key interest by 50 basis points to support the 15-nation economy, which is on the verge of a recession. The Governing Council lowered the key-lending rate, which is the minimum bid rate on the main refinancing operations, by 50 basis points to 3.25%, as expected. The interest rate on the marginal lending facility was reduced to 3.75% and the interest rate on the deposit facility was cut to 2.75%. Economists foresee further rate cuts by mid 2009.

Following the rate cut announcement, the European Central Bank President Jean-Claude Trichet struck an uncharacteristically dovish pose in Frankfurt, suggesting that dropping commodity prices and diminishing demand will lead to price stability for the Euro area in 2009.

"The outlook for price stability has improved further," stated Trichet. "Price, costs, and wage pressures in Euro area should continue to moderate."

Tesco boss Sir Terry Leahy 'pressured Bank to cut interest rates'

By Matthew Moore
Last Updated: 11:18AM GMT 08 Nov 2008

Sir Terry Leahy held private meetings with members of the Monetary Police Committee including Mervyn King, the Bank's governor, to urge them to take decisive action to boost consumer confidence.

Britain's retailers fear that crucial pre-Christmas trading will suffer as Britons tighten their wallets amid predictions of an imminent recession.

Sir Terry Leahy, who sits on Gordon Brown's committee of business leaders, is one of the most influential chief executives in Britain.

The Guardian newspaper reported that he discussed the country's economic plight at a breakfast meeting with Mr King on Threadneedle Street in the City, and also met MPC economist David Blanchflower who had been one of strongest advocates for steep rate cuts.

Tesco is the country's biggest supermarket, taking £1 of every £8 spent on the high street. It announced six-month profits of £1.44bn a month ago, up 11pc, but is facing stiff competition from cut-price retailers like Lidl and Aldo as the financial crisis hits consumers' wallets.

In September Sir Terry publicly called for lending rates to come down, saying: "Inflation has passed its peak ... and that will leave room for interest rate cuts which I think will be welcomed."

A Tesco spokesman refused to confirm or deny the reports of Sir Terry's meetings, but Lucy Neville-Rolfe, the supermarket's director of legal affairs, said: "The MPC did a very brave thing." She added: "Our concern is to make sure the banks pass the rate cut on."

Yesterday Halifax, Nationwide, Royal Bank of Scotland and NatWest, and Scottish Widows all said they would be reducing their standard variable rate by 1.5 per cent, in line with the Bank's shock reduction on Wednesday, which slashed the base rate to a 53 year low of 3 per cent.

HBOS board rejects bank duo's bid

An attempted boardroom takeover of HBOS by two former bank chief executives has been unanimously rejected by HBOS's board, its chairman has said.

Sir Peter Burt, formerly of the Bank of Scotland, and Sir George Mathewson, ex-head of the Royal Bank of Scotland, say they should be appointed to lead HBOS.

They want the bank to stay independent and intend to canvas shareholders.

But HBOS said their plan offered no value to its shareholders and a deal with Lloyds TSB was on track.

In a letter to the two men, HBOS chairman Lord Stevenson of Coddenham said his board saw "no basis for future discussion".

He was responding to an earlier letter in which Sir Peter and Sir George had called for his immediate resignation, as well as that of HBOS chief executive, Andy Hornby.

It's a fantastic deal for Lloyds but it's not a good deal for anybody else

Sir Peter Burt, former chief executive of the Bank of Scotland

They said they would take over temporarily as chairman and chief executive, come up with a plan to keep the bank independent and end the proposed £12bn Lloyds TSB takeover.

The letter-writers said by keeping HBOS independent they could protect jobs and bring benefits to customers and shareholders.

A rebuff from the HBOS's boardroom followed, yet Sir Peter and Sir George say they still intend to call an extraordinary general meeting for HBOS shareholders to find out their views.

They say HBOS no longer needs to be rescued by Lloyds TSB, because the government and Bank of England have offered vital funds.

Sir Peter, who is credited with creating HBOS, said Lloyds TSB was no safe haven for HBOS.

It's impossible to ignore the very formidable obstacles faced by Sir Peter Burt and Sir George Mathewson

BBC Business Editor Robert Peston


Read Robert Peston's blog
Text of the Burt-Mathewson letter
HBOS statement in full

"The black horse has got two broken legs," he said, referring to the company's symbol. "It's a fantastic deal for Lloyds but it's not a good deal for anybody else."

He added: "Why would the government want to push through a merger which the Office of Fair Trading has said is against the public interest; jobs will be lost north and south of the border; it is anti-competitive; it is not good for staff; it is not good for customers; and it is not good for shareholders?"

But HBOS insisted a "well-developed deal" with Lloyds TSB was on track and provided certainty to its shareholders and real financial benefits.

Deal 'on course'

Shane O'Riordain, head of communications at HBOS, said the plan from Sir Peter and Sir George did not offer shareholders anything - no cash, no value nor any certainty.

"All they are simply saying is they would come in and run the company instead," he added.

"Together with Lloyds TSB we will be a stronger group, a group in a better position to access funding and, after all, funding is the lifeblood of any bank."



Members of the public give their views
The Treasury said the merger with Lloyds TSB was still on course, but if it did not go ahead, the government would have to look again at any taxpayer support.

The government has already spent £17bn of taxpayers' money bailing out HBOS.

BBC business editor Robert Peston said he sensed the Treasury was not keen on putting more taxpayers' money into HBOS.

He said the chancellor, Alistair Darling, had already made it clear he was not enthusiastic about HBOS operating as a stand-alone business and Gordon Brown was not likely to abandon his backing for the Lloyds takeover.

First Minister Alex Salmond said of Sir Peter and Sir George: "They are the two outstanding figures in the Scottish financial sector over the last generation, and therefore their views command great respect."

The Scottish National Party has been highly critical of the takeover. There are 17,000 jobs at stake in Scotland and it has become a highly-charged political issue.

Mr Salmond emphasised all propositions on the future of HBOS should be considered in terms of the best interests of Scottish jobs, business, personal customers and the wider Scottish economy.

HBOS & Lloyds - Are your savings safe?

Turmoil inthe financial markets; naturally makes consumers worry about the safety of their savings but unless they have more than £35K with a savings provider then there is no need to fret.

The Financial Services Compensation Scheme, covers 100% of the first £35K, per person, per deposit taking institution. Therefore, if you ensure that you don't have more than this limit with any one provider, if in the unlikely event the worst should happen, you will get all your money back.

As each individual person is covered if a couple have up to £70K in a joint account, then in the event of a bank failure they can both claim separately up to the £35K limit to get back all their savings.

However, savers need to be vigilant as if the institutions are registered under one banking licence, they will only be covered once.

For example Bank of Scotland, Halifax, Birmingham Midshires, Intelligent Finance and SAGA are all covered under the Bank of Scotland banking licence. This means that if you had £35,000 with each of them, should they all have problems repaying your money, you would only receive £35,000 back from the Financial Services Compensation Scheme, not £175,000. However, the Sainsbury Bank brand which is part of the HBOS group has a separate licence.

The situation varies from institution to institution. NatWest, Royal Bank of Scotland, Tesco Personal Finance, Ulster Bank and Coutts & Co are all part of the same group, but all have separate licences. Thus, if your money was with each of them, you would receive up to the full £35,000 back from each company.

In order to find out if the institutions where you savings are held are covered separately the best thing to do is to either log on to the FSA's website and check if the firm is authorised. Alternatively, you could contact the FSA's consumer website www.moneymadeclear.fsa.gov.uk or call their helpline on 0845 606 1234.

If you are planning on opening a new account with an institution, make sure you know which institutions your existing savings are with. Then when you contact the new institution, check with them that they are not part of the same group and covered by the same banking licence.

Credit Cards for Bad Credit

Even if you have bad credit, there are still agencies that will issue you a card. These companies have significantly lower expectations on your credit history, and also report to credit agencies like Experian and Transunion on a monthly basis which can help you rebuild a positive credit rating.

The following are the top 3 cards for bad credit.

Continental Finance Gold MasterCard
Get a second chance with rates as low as 9.75% APR*! If you have been turned down recently because of your credit score.

Continental Finance MasterCard
Get a second chance if you have less than perfect credit. If you have been turned down for credit recently because of your credit score.

Orchard Bank Platinum MasterCard
The Orchard Bank Platinum MasterCard is a great platinum card. There are periodic credit line increases if you pay off your balance in full every month. In addition, this card reports to the top 3 credit bureaus monthly to help you boost your credit score.

Mortgages things to watch out for

Things to Watch Out For
There are a number of important things to watch out for when comparing or buying your mortgage. Here’s the guide to these:

Headline-grabbing interest rates

If it’s too good to be true then it probably is. Remember, mortgage lenders want to make money, so wont give something away for nothing. Watch out for hidden catches and other strings attached

Don’t just look at the interest rate. Look at all of the associated fees too. This will help you work out the true cost of the mortgage. There are a whole range of fees which you may have to pay, for different things:

House Buying Process Fees

Legal / conveyance fees
Conveyancing is the legal process for transferring the title to property. You’ll probably need to pay a solicitor or conveyancer for this, although you can do it yourself if you know what you’re doing. If you’re buying and selling a house, you have to pay for both deals. The solicitor usually also deals with any stamp duty that is payable.

Survey Fees
You should always consider whether to have your own survey done, which will highlight any shortcomings in the new property, like damp or dry-rot in the roof. The price of the survey could save you a fortune on unforeseen repairs in the future.

The seller of the property in England or Wales must provide a Home Information Pack. This may contain a Home Condition report, which is effectively a survey report. This may save you time and money as a buyer.

Brokers’ fees
If you are arranging a mortgage through a broker, they may also charge you a fee for their service either before or after you mortgage application has been completed. All brokers are required by law to show you how much commission they will earn from the lender in a Key Facts document, so make sure you get this up front. The mortgage broker business is extremely competitive, so get some quotes from a variety of brokers before you sign on the dotted line

Up Front Lenders Fees

Valuation fees
A lender has to be sure that their mortgage offer is based on a sound property. For this they will require a valuation of the property, which will usually be paid for by you. The cost depends on what type of valuation they do, which can vary from a simple drive-past to a full survey.

Arrangement fee
Most mortgage lenders charge an arrangement fee (also called an application fee or completion fee) when you take out a mortgage. Some mortgage lenders will let you add the cost of this to the mortgage. The fee depends on the mortgage lender and the mortgage offer

Booking Fee
Usually with a fixed rate mortgage there will be a fee for the lender ‘booking’ the funds they use to lend to you. This is usually non-refundable if you withdraw your application.

Higher Lending Charges
This is an insurance premium that protects the lender if you are unable to pay back the mortgage. Charges range between 7 and 12% over and above the mortgage threshold (this is typically anything above 75% of the total mortgage amount). You can filter these out in the mortgage best buys. If you can avoid them then do. That’s because if you fail to keep up with your mortgage payments and your home is repossessed, you’ll still be liable to pay any shortfall once it is sold

Other fees
Early Repayment Fees

If you have a fixed rate mortgage or discounted rate mortgage, you may have to pay an early repayment (or redemption penalty) if you pay back your mortgage early or switch lenders before your deal has expired. You can filter this out in the mortgage best buys.

Extended tie-ins
Extended (or overhanging) tie-ins are early repayment fees that apply even after your deal period ends. They may force you to stay with the lender for a longer period of time than you want to, and should be avoided if possible.

choosing a mortgage

Getting a mortgage is the biggest financial commitment most of us will ever make, and one of the biggest potential areas to save money.

These top tips will arm you with a good basic understanding of how mortgages work and what sort of deals are available, which will help make sure you get the right mortgage to suit your needs.

Repayment or interest-only? It’s important to consider how you’ll repay the mortgage and to understand whether a repayment or interest-only mortgage is right for you. A repayment mortgage means that your monthly mortgage repayments go to repay both the capital borrowed and the interest charged, meaning you’ll have paid off the mortgage by the end of the term.

With an interest-only mortgage, your monthly mortgage repayments only pay the interest charged on the capital borrowed, meaning that you’ll still owe the amount you borrowed at the end of the term, unless you take out a separate repayment vehicle, such as an endowment policy or an ISA. Interest-only mortgages can appear to be cheaper in terms of the monthly repayment amount, but you must factor in the additional monthly cost of your repayment vehicle.

Interest-only mortgages can be more tax efficient if you’re using an ISA based investment as your repayment vehicle. It’s important that you understand the risks involved as the value of your repayment vehicle could end up being lower than the capital you borrowed. Read our guide to mortgages for more information.


Fixed or variable interest rate? With a fixed rate mortgage your monthly payments are fixed for a set period of time, usually between 2 and 5 years. Fixed rate mortgages are good if you want the security of knowing what your monthly payments will be for a set period of time, especially during uncertain economic times or in a climate when interest rates are rising. You do have to pay for this privilege though, as upfront fees and early redemption charges are common with fixed rate mortgages. Take a look at our current best buy fixed rate mortgages to compare the latest deals on offer.

With variable rate mortgages you pay the mortgage lenders’ standard variable rate or a rate that is linked to Bank of England base rate, so your payments can go up or down in line with market conditions. For some variable rate mortgages, the fees charged aren’t as high as for fixed rate mortgages. Variable rate mortgages are good if you don’t need the security of knowing what your monthly repayments will be and during a climate where interest rates are declining. Take a look at our current best buy variable rate mortgages to compare the latest deals on offer.


What about a discounted variable rate? With a discounted variable rate mortgage the mortgage lender gives you a discount off the variable rate for a set period of time, usually of between 2 to 5 years. Your monthly repayments can still go up or down in line with the market, but you can benefit from any decline in mortgage rates, which you wouldn’t be able to with a fixed rate mortgage. Discounted variable rate mortgages are cheaper than variable rate mortgages, but do charge arrangement fees. Take a look at the current best buy discounted variable rate mortgages to compare the latest deals on offer.


What’s a tracker mortgage? Tracker mortgages are variable rate mortgages that are linked to either the Bank of England base rate or the LIBOR rate. As with variable rate mortgages your monthly mortgage payment can go up or down in line with market conditions. With a tracker mortgage you are guaranteed to benefit from any interest rate reductions (albeit after a certain time) which you are not with a variable rate or discounted variable rate mortgage.


What are flexible or lifestyle mortgages? Flexible or lifestyle mortgages are really features on a fixed or variable mortgage that let you make extra payments or take payment holidays. Making extra payments on your mortgage can save you money by reducing the overall amount of interest you’ll pay, but your money will be tied up in your property, meaning you won’t be able to access it quickly in the event that you need to. Payment holidays offer great flexibility (e.g. you don’t want to pay the mortgage for a couple of months due to the arrival of a new baby), but you still incur interest thus increasing the total amount you have to pay back. Some mortgages only let you take payment holidays if you’ve made previous overpayments or after making a set number of repayments.


What about current account or offset mortgages? Current account and offset mortgages are fixed or variable rate mortgages that are linked to your current account and/or savings account. They work on the basis that the money in your current account and/or savings account is used to offset the interest paid on the mortgage debt. For example, if you had a mortgage of £100,000 and savings of £20,000, the interest you would be charged on your mortgage would be on £80,000. You don’t get paid any interest on the money in your current account or savings account, but these types of mortgages can be good for people paying the higher rate of tax on their savings. You can also access your savings more easily than if you had made extra payments on your mortgage. It’s important that you compare the mortgage rates and fees (or ‘true cost’) for current account and offset mortgages against other types of mortgages to make sure that any benefit in paying less interest isn’t eroded because you’re paying a higher interest rate than you could have got with a fixed rate mortgage for example. Take a look at our best buy offset mortgages to compare the latest deals.


Can I get cashback? Cashback mortgages offer a lump sum when the mortgage is taken out, which can come in handy when paying all the costs of moving home. Cashback mortgages usually have a lock-in period where you’ll be charged an early redemption penalty if you re-mortgage to another lender before the end of the lock-in period. It’s also important to compare the rates and charges against other mortgages so that you know what the overall or ‘true’ cost of the mortgage is.


Compare the ‘true cost’ of your mortgage. Don’t just compare different mortgage deals based on the interest rate or monthly repayment amount. It’s important to compare all fees as these can easily wipe out any benefits of a lower interest rate. It’s important to compare all fees such as arrangement fees, early redemption penalties, higher lending charges, as well as any freebies such as free valuation or legal fees. Read our guide to mortgages or glossary of terms for a more detailed explanation of mortgage fees.


Use a financial price comparison site that’s ‘whole of market’. It’s always a good idea to use a financial price comparison site to compare all the different mortgage deals before you speak to a mortgage lender or broker. However, make sure that you use a comparison site that’s ‘whole of market’, meaning they let you compare all mortgage products on the market, not just the ones that they earn commission from. Moneyfacts.co.uk is one of the few financial comparison sites that include all products, not just the ones that pay us commission, and our best buys for mortgages are a good place to start to arm yourself with a good understanding of the latest deals on offer to help you make informed decisions.


Don’t be scared to use a mortgage broker. Mortgage brokers can help get the right mortgage to suit your needs and sometimes have access to ‘exclusive’ deals that you can’t get elsewhere. But, if you use a broker it’s good to go armed with a good understanding of the latest deals, and make sure that you choose a broker that’s ‘whole of market’ and not just restricted to a small panel of lenders.

If you use a broker, think about whether you want to pay them a fee for their service (which is usually no more than £400, payable on completion) or whether you’re happy for them to take commission from the lender instead, which us usually between 0.25% - 0.50% of the mortgage value. If the broker is whole of market then they must give you the best advice and not just recommend mortgages where they receive the highest commission.

Top 10 tips when choosing a mortgage

Buying a house is one of the most expensive purchases that we make in our lifetime; so choosing the right mortgage is crucial. With over 10,000 different mortgages out there, it can be quite daunting.

Here is ten top tips for helping you choose a mortgage

1) Shop around
Mortgage advisors will be able to help you look at your own financial circumstances and tailor you with a suitable product. But before you book an appointment, search for a mortgage with the help of our Mortgage Best buys to give you a much better idea of what sort of rate and mortgage deal you should be aiming at.

2) Percentage fees
When choosing a mortgage, you should always look at the percentage fees attached to the product. Some of the lowest rates available today will come with percentage fees of up to 2.5%. This means that a mortgage of £150,000 you could have to pay £3,750. With such high fees you need to calculate exactly how much you will be paying.


3) How will you pay?
Think about how you plan to pay all of the associated costs with the mortgage. Some mortgage lenders will ask for the set-up fees upfront, whilst others will add them into the cost of your loan. You therefore need to decide what is the most suitable for your circumstances.

4) Tie-ins
Many mortgage deals will tie you in for an agreed amount of time, which means that if you exit the deal early you will be hit with a redemption penalty. Make sure you are aware of how long you are tied in for, and think about how your circumstances may change over the period. Early redemption penalties can be very high, and you don’t want to incur any more charges than you have to.

5) Exit fees
Once your mortgage deal ends, you need to check to see what fees you will be charged if you want to change to another lender. Some lenders will fix the exit fee at the outset, but unfortunately most can still charge what they want.

6) Flexibility
Depending on your circumstances, you may suit a mortgage that allows you to overpay, underpay or take payment holidays. You can then fit your mortgage payments to suit your needs.

7) Higher lending charge
If you want to borrow a high percentage of the property’s value, then you need to be aware of higher lending charges. These are often payable on mortgages with over 90% loan to value, and can be as high as 12%! As you can see, doing your homework first can literally save you thousands.

8) Incentives
Some mortgage products will include incentives such as a free valuation, free legal fees, a cash rebate or free insurance for a set time. However, it’s important that these freebies do not fool you, as they are often worked into the total cost of your deal. Calculate how much these incentives will affect the overall costs – because what you see is not often what you get.

9) Affordability
It's crucial that you work out how much you want to borrow, and how much you can physically afford. Remember that you will have to pay council tax, utility bills and insurances, not to mention the TV licence! Under no circumstances should you agree to a loan that you will not be able to or struggle to repay.

Our budget planner can help you do this.

10) Ease of Application
Last but not least, when you have found the right mortgage for you, make sure you look at the application form before signing on the dotted line. Beware that some online applications take a long time to complete, so pick which method you feel most comfortable with - after all, you may be tied to the mortgage for a long time.

Get Out of Debt - Top Ten Tips

Looking to get out of debt? Feeling overwhelmed by all the letters from your bank, the spiralling cost of interest and ever–increasing repayment demands? If you are one of the many thousands currently trying to get out of debt, Moneyfacts.co.uk has ten top tips to help get you get out of debt and get your finances back in order…

Don’t ignore the situation
Facing up to having a debt problem and making a commitment to get out of debt is probably one of the smartest things you’ll ever do.
Write down exactly how much you owe to whom – get it all off your chest!
Add in the monthly repayments and then work out how much you need to pay each month for essentials such as the mortgage, utility bills and food.
What you’ve got left after paying for essentials will be how much you can afford to pay off each month on your remaining debts.

Prioritise your debts
You need to tackle your most pressing debts first – these are the ones that carry the harshest penalties for default. For example missing your mortgage payements could lead to your home being repossessed.
The severity of missing repayments on the debt should help you work out which ones need to be settled first after paying for your monthly essentials.
Lower on your list of priorities should be credit and store cards, bank overdrafts and hire purchase, but that doesn’t mean you can just ignore them.

It’s good to talk
If you can’t afford to make repayments for all your debts, don’t worry! – It’s not the end of the world. Get in touch with your creditors and explain your situation.
You won’t be the only customer having problems with making repayments and many lenders have dedicated teams to help arrange a personal repayment plan for you.
Remember – lenders will often be open to negotiation, as they prefer to get some smaller regular payments from you rather than nothing at all.

Save money, make money!
Cut back on non–essentials and you’ll be amazed at how much you can save. For example, supermarket own brand products are far cheaper than the more well known brands. Do you really want to waste your money on expensive toilet cleaner?
Keep a spending diary for one month and you’ll be surprised on how much money you waste – magazines, take–away food, cigarettes and alcohol are the usual culprits!
Around 15p out of every £1 we spend on food in the UK is thrown away. Planning meals, using a shopping list and doing a weekly food shop will save you a fortune.
Review all the direct debits coming out of your bank account and cancel the luxuries you can afford to do without – are Sky Sports and Sky Movies really worth it?
Review your home and car insurance, energy suppliers, home phone and broadband suppliers. You could save yourself £100s.

Make sure you’re claiming all the tax benefits you’re entitled to – child tax credit and working tax credit can be worth quite a bit extra each month.
You could also try earning some more money as well. Could you take a part–time job in the evening or weekend, or could you do some extra overtime at work?
Don’t forget selling unwanted stuff on eBay or reclaiming bank charges could help you bring in some much–needed extra cash!

Cut up your store cards
Store cards are very expensive ways of borrowing money and are best avoided if you don’t repay your balance in full each month.
Rates on some of these cards are nearly 30% APR!
Cut them up and try to transfer your balance on to a 0% balance transfer credit card – it could save you £100’s in interest charges.
Check out the latest Moneyfacts.co.uk best buys to compare credit cards.

Use cash!
It’s very easy to fall into the trap of spending on your plastic and forgetting about it.

Studies have shown that paying with cash has a greater psychological impact and makes you think harder about what you’re actually spending your money on.
Try and set a maximum budget each week and stick to it.
Try to avoid pay day spending binges – by all means treat yourself every now and again, but less expensive treats as a reward for sticking to your budget work best!
Take out less cash from the ATM than you usually do – studies have shown that people tend to spend whatever’s in their wallet – this will help you waste less cash each week.

Pay more than the minimum
Only paying the minimum each month means that the debt is spread over many years resulting in you paying more interest.
Paying back more than the minimum repayment on your credit card each month will knock off £100’s from this interest bill and mean that your repay the debt a lot sooner.

Always make sure you make repayments on time – credit card companies levy some pretty hefty fees if you’re late with your payment.
Unsecured personal loans are a cheaper way of borrowing compared to credit cards, so you could save £100’s in interest by consolidating credit card balances into a loan.
Check out the latest Moneyfacts.co.uk best buys for unsecured personal loans.

Switch your credit card
If you don’t clear your credit card balance each month, transferring it to a 0% balance transfer credit card will save you £100’s in interest.
But, don’t use your 0% balance transfer credit card for purchases – your monthly payments go towards paying off the cheapest debt first (e.g. the balance you transferred at 0%) meaning you’ll be paying high rates of interest on the purchases you’ve made.

If you need to have a credit card for purchases, then get different one for purchases and preferably one that gives you cash back.
Check out the latest Moneyfacts.co.uk best buys for low interest credit cards and reward credit cards.

Review your mortgage
Just because you have got into financial difficulties doesn’t mean that you aren’t eligible to switch to a cheaper mortgage to reduce your monthly outgoings.
If you have equity in your home you could also re–mortgage to increase your borrowing and use that extra money to pay off your credit cards, store cards or overdraft.

Mortgages are generally cheaper forms of borrowing compared to credit cards or unsecured personal loans, meaning you can save £100’s in interest.
Check out the latest Moneyfacts.co.uk best buys for the leading mortgage rates.

There is free advice available
The National Consumer Credit Counselling Service is a registered charity dedicated to providing free and confidential debt counselling.
The Citizens’ Advice Bureau also offers free, independent and confidential advice.
The National debtline (0808 808 4000), gives free and confidential advice, and will also send you a free information pack to help you begin to tackle your debt.

Don’t give up!

It takes time and a bit of willpower to get out of debt. You did not get into this position overnight and it will take some time to get your finances back on an even keel. By managing your finances more carefully and sticking to a budget, you are on the road to a more positive financial future and a lot less sleepless nights. Good luck!

What is a Cashback or Rewards Credit Card?

A cashback credit card gives you money back on each retail purchase transaction you make, usually up to an annual limit. The amount of cash you get back may be tiered depending on the amount you spend, the more you spend the greater the cashback amount. There may be special introductory offers up to 5% cashback in the first few months.
A rewards credit card gives you a loyalty bonus for each purchase, and maybe at the time you take your card out. The rewards can be in the form of loyalty points or air miles.

Who are they suitable for?

If you pay off your credit balance each month a cashback or rewards credit card may be for you, because you won't be concerned about the interest rate on the account.
Take a look at our cashback credit cards best buys or rewards credit card best buys for the best deals around. For the full list of cashback or rewards (loyalty schemes) credit cards go through the credit card product search.
What should you look out for?

Look for how the cashback amount is calculated. Its always a percentage of your spend but the tiers of spend will be different so think about how much you normally spend each month to work out how to maximise your cashback.
You'll usually only earn cashback or rewards when you spend on your card, but not on cash withdrawals or balance transfers.
So you can understand the ins and outs of credit cards, Moneyfacts.co.uk has put together guides on things to watch out for and the key factors to consider when purchasing a card.

If a cashback credit card or rewards credit card isn't for you, we've got guides and best buy tables for 0% balance transfer credit cards, donation credit cards, retail purchase credit cards and overseas usage credit cards.

What to do next
Take a look at the latest credit cards best buys to check the latest rates and deals on offer.

10 bad financial habits you really ought to break

Most of us have got bad habits - it's part of being human. But with the price of everything from crude oil to a loaf of bread rocketing skywards, poor money management shouldn't be one of them.

Check through these common financial faults to see which ones you recognise - and what you can do to clean up your act.

1. Living beyond your means
If your pay is never quite enough and you have to borrow to make ends meet, you are already on the slippery slope to financial difficulties. The first step to sorting yourself out is to stop thinking of budgeting as a frightening word. List all your income and outgoings to give yourself a clear picture of your spending and then look for ways to cut back. Ask yourself if you really need so many glossy magazines each month or that expensive satellite TV subscription and shop around for cheaper deals.

2. Too many credit cards
Do you accumulate credit cards like boys collecting toys? If so, you could be doing serious damage to your finances. Introductory offers may be seductive but before you know it your debts can pile up and you could be struggling. Try to pay off the balance on credit cards with the highest interest rates. You also need to learn to say no - and mean it.

3. Living for today
We've all done it - blown that money we were putting aside for a boring necessity on something a bit more exciting. But spending everything you earn and not putting anything by for tomorrow is a recipe for disaster. Even saving a small amount will give you greater financial security and help you through an emergency, such as a boiler breaking down, car repairs or losing your job.

4. Letting your finances slide
It's one thing not knowing exactly how much you have in the bank but quite another to be unaware of how much debt you've accumulated and how you are coping with it. Checking your credit report is a good way to check on commitments. This is your personal credit history and lists borrowing, from credit cards and loans to your mortgage, along with your repayment record. Lenders will probably view it when you apply to them, so it needs to be up-to-date and accurate.

5. Burying your head in the sand
Thinking your money troubles will sort themselves out is a classic sign of denial - and doesn't work. If you're having trouble making repayments on a loan, credit card or mortgage, talk to your lender as soon as you can. You may be able to arrange a payment holiday or another way to lower your monthly payments. There are also many sources of free, independent advice, such as Citizens Advice, the Consumer Credit Counselling Service and National Debtline.

6. Missing payments
It's easy to forget a monthly repayment, especially if there are unexpected bills to pay. Unfortunately, you will not only be wasting your hard-earned cash on late payment fees but you could also jeopardise your credit history. Lenders are less likely to offer you the best deals if your payment record is patchy. You may also experience an immediate and painful hike in your interest rate if a payment is more than 30 days late.

7. Failing to plan for retirement
It may not seem a priority now but retirement is going to come sooner or later and you need to prepare. The earlier you start a pension, the better - and you will have longer to build your fund. Talk to an independent financial advisor about the best options and don't forget to review your plan regularly.

8. Not being credit card savvy
You may think you're being clever by using low or zero per cent balance transfer rates but you'll only come out on top if you pay off your balance before the introductory deal expires. Look for extra income to clear your debt, find ways to cut back on your spending or think about using a low-interest loan to reduce the burden of repayments.

9. Putting your identity at risk
Every time you throw a bank or credit card statement in the bin or give personal details to cold callers, you are laying yourself open to identity fraud - and criminals using your data to borrow money and run up bills in your name. Always destroy documents showing your personal details before throwing them away, especially if they include financial information. Another precaution is to check your credit report regularly for suspicious entries - it's so effective that it's recommended by the Home Office.

10. Forgetting to reward yourself for good behaviour
Cutting out all of life's little pleasures will almost certainly lead to failure when it comes to beating your bad habits, so don't be too hard on yourself and make sure you have a treat now and then. That way, you're les likely to go on a financial binge.

Balance Transfer Credit Card

As prices continue to rise, many more consumers are seeing their credit card bills increase. Even if you’re not one of the people who is having to use your credit card just to get by each month, the likelihood is that you have been hit by an increase of some sort from your card provider.

If you now find yourself with a debt on your card and you want to cut down your monthly repayments, the best option is a balance transfer.

The majority of the cards on the market come with a 0% balance transfer deal for a period of between three and fifteen months. Alternatively, if you don’t want to keep switching cards and can’t pay off the debt during the term of the introductory deal a life of balance transfer card may be more suitable.

The average purchase rate today stands at 17.09% APR. If you switch a £3K debt from this card to the Citibank iTunes Rewards MasterCard, you would save £2,516 in additional interest.

There are a couple of things to bear in mind when selecting a balance transfer card.

Unless you live in Northern Ireland, you will have to pay a balance transfer fee on 0% cards. This can be up to 3% of the amount of debt you transfer.

Don’t use the card to make additional purchases. Most credit cards repay the cheapest debt first, meaning that any new debt will stay on the card longer, accruing interest.

In recent months we have seen a number of credit cards extending the length of their balance transfer deals. At a time when every penny counts, shop around and you could make some superb savings for yourself, rather than lining the pockets of card providers.”