Top money stories - 25th August - 2nd September 2007

Top Tip:

The holidays are almost over and its 'Back to School' for many this week. Did you know that according to a report by Liverpool Victoria, parents typically spend £165,668 raising a child to the age of 21 - that's a huge £7,889 per year. Have a look at our ' Starting a Family' section for tips on saving for education and teaching children about money.

 The financial week that was:

A few weeks ago, we reported how the UK had fallen out of love with saving. New research from the Post Office reported by the BBC on Tuesday confirmed this trend with one in four people saying that they do not save any money at all. A quarter of those did not save because they had too many debts to pay and a fifth just spent it all. Our budget calculator can help you keep track of your spending and with the savings tab you can project how much you could save by making a few changes.

Mortgages were also in the news this week. The British Banking Association's report on Tuesday showed that house purchase approvals in July were down by 1% on the same month the previous year but gross mortgage lending was up reflecting higher levels of re-mortgaging. This suggests a push as people seek to find cheaper mortgage rates as their fixed rates finish and the threat of further interest rate increases looms. Stories this week continued to focus on the sub-prime lenders and several mortgage companies were reported to be tightening their lending criteria. A mortgage is probably the biggest financial commitment that any of us make and it pays to understand the true costs and risks of buying or re-mortgaging a house. Our mortgages section runs through some of the things to consider when taking out a mortgage and our mortgage calculator can help you work out how much to borrow.

Hidden costs for consumers were revealed by Which Money on Wednesday. Since the Office of Fair Trading limited the amount that credit card companies can charge in penalty fees last year, a whole host of other charges have sprung up. These include annual fees, low usage fees, even charges for not telling your credit card company you've moved house! Some companies have also lowered their minimum payments, so those that only make the minimum payment each month will pay more interest. Always keep track of any changes to the terms of your credit card and pay as much off each month as you can. Did you know that if you made only the minimum payments on a credit card balance of £1000, it would take you around 13 years to pay it off?

Finally, statistics out on Sunday 2nd September show that repossessions in the UK are at their highest level for 7 years and are predicted to rise further in the coming months. This has given rise to a new type of scheme offering a way to clear your mortgage debt and stay in your home – the rent back scheme. Under these schemes a company buys your property off you and then rents it back to you so you can stay in your home. Sounds pretty good on the surface but the reality is rather less rosy.

Normally the price paid for the property is well under market rate and the rental agreement afterwards can be prone to substantial increases in cost, often to unaffordable levels. So don’t be sucked in by these types of deals without getting independent advice and talking to your mortgage lender first. And if it is looks to good to be true, then it almost certainly is!

Prepared for Moneybasics by Liz Man