Top money stories - 15th - 20th October 2007

Top Tip:

Many of us find ourselves waiting at train stations on a regular basis. Often we end up paying out some of our hard-earned cash on expensive food and drink items. While it is normally in our best interest to wait until we can get somewhere cheaper, this is not always possible. Now there is a discount card that gives 20% off at pretty much every food and drink outlet at railway stations across the UK; the BiTE card. It can be ordered for free online at www.bitecard.co.uk.

The financial week that was...

Monday 15th October

Home Information Packs warp housing market - Last week we brought you the news that Home Information Packs were being reported as an important factor in causing the recent housing market instability. This week, Rightmove.co.uk’s findings confirmed that the controversial Home Information Packs (HIPs) are distorting the housing market. House prices rose 2.7% in the month to Oct 6, reversing the previous month’s 2.6% fall.
HIPs cost sellers approximately £400 to produce. On September 10th, HIPs became mandatory for three-bedroom properties. The additional cost and hassle of having to produce a HIP led to many more three-bedroom houses being placed on the market than usual in order to avoid paying for a HIP.

It’s tough to get a mortgage – MoneyExpert.com’s research revealed that more than 738,000 mortgage applicants have been turned down in the last six months. This indicates that it is now more difficult to get a mortgage as lenders tighten their conditions. Young adults, those aged 25 to 34, the research suggests, are experiencing the highest rates of rejection. In a lending environment such as this, there is a temptation to overinflate your salary when applying for a mortgage. Resist this temptation. Taking on a mortgage that you cannot afford can have serious consequences. Make sure that you understand the different types of mortgages available by looking at the Types of Mortgages section of MoneyBasics.

Economic growth expected to slow – A survey of over sixty economist’s forecasts has led to the expectation that the economy will slow from 2.9% this year to 2.1% in 2008.

Tuesday 16th October

2.8 million households switched electricity or gas in the first seven months of the year – Ofgem, the UK energy watchdog, reported that many more people are now switching electricity and gas suppliers. They claim that those who have been not switched before or are on pre-payment meters are in a position to gain the most from switching.
Alistair Buchanan, Ofgem’s CEO, said that customers who are using pre-payment meters “can reap savings on average of £100 if they have never switched supplier.” Whether you have switched supplier recently or not, it is advisable to check regularly for the best energy deal. Why not put in it your diary to compare the prices of energy suppliers every 3 months?

Wednesday 17th October

Interest Rates convincingly kept at 5.75% - The minutes of the Monetary Policy Committee (MPC) meeting earlier this month showed that eight of the nine members of the MPC voted to keep interest rates the same. While some economists had called for interest rates to be cut because of the effects of the recent credit crunch, inflation worries brought about by recent rises in food and oil prices led to interest rates being kept constant.

IMF predicts slowdown in housing market similar to the USA – The International Monetary Fund (IMF) points to the fact that house price growth has far exceeded income growth as a key driver in the expected market cooling. But the UK and other European markets are in a better state than the USA because they have a much smaller exposure to the sub-prime mortgage market.

1 million households use credit cards to pay mortgages or rent – Shelter, a homelessness charity, stated that the rise in interest rates and the credit crunch led to over one million households using their credit card to pay rent or mortgages. Many of these will be people simply using the card as a convenient way to pay but this is a worrying indicator that many people are finding their money stretched. Whilst using a credit card can seem like a viable option when you have to pay for your rent, if you are unable to meet, at the very least, the minimum repayments on your credit card, then will find yourself paying substantial interest charges. Most credit cards charge interest between 15% and 18%. Don’t borrow off your credit card if you know that you are not going to be able to pay off the debt very soon after. Check out the MoneyBasics Credit Card section for more info on credit cards.

Thursday 18th October

Insurance fraud on the rise – Just under 10%, one in eleven, insurance claims are fraudulent according to the Association of British Insurers (ABI). The majority of these claims are for household insurance, particularly self-inflicted damage to carpets. The net result is that honest customers are being charged an extra £40 a year. Thankfully, the insurance industry is fighting back and those who commit insurance fraud are now “more likely to be caught than ever before” according to Nick Starling, the ABI’s director of general insurance and health.

Many Brits prefer property to savings accounts – 53% of respondents, in a survey for the BBC, believe that owning property is safer than cash. This survey was undertaken post-Northern Rock crisis and thus reflects a general feeling that the banking system is not as safe as we once thought. The reality is that the banking system is extremely safe. Wherever you put your money, there is always going to be some degree of risk associated with it, property prices fluctuate too of course. However, the banking system remains as secure as it always was and a savings account is much safer than keeping your money at home in a cupboard under the stairs!