Sunday 30 October 2011

Small Businesses win 40 per cent of appeals on loans from high street banks

Forty per cent of small businesses that complained about being refused by the big five High Street banks after applying for a loan have had their claims upheld.
The number of successes is bound to fuel criticism that in many cases the banks have been too quick to turn down loan applications from businesses.
The British Bankers’ Association, which was instrumental in setting up the system, said the figures showed that banks had responded to the concerns of small businesses.
Bank signs in the City of London
Fighting back: About 900 firms have made complaints under the appeals system
About 900 companies have made complaints under the appeals system launched last spring by the Business Finance Taskforce.
Although the taskforce was  created by the banks themselves, the appeals process is overseen by an independent arbiter, Professor Russel Griggs.
He previously led the CBI’s SME Council and was on the board of the Small Business Finance Forum, which ensures that the appeals  process is fair.
Griggs, who also sits on the Revenue’s administrative burdens adviser board, will publish a report into the appeals process next April. But he told Financial Mail that about  40 per cent of appeals had led to the borrowing company getting a better offer from its bank.
 

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He described the results as ‘extremely encouraging’.
The figures were announced just days after Sir Mervyn King, Governor of the Bank of England, clashed with the Treasury Select Committee after MPs suggested that poor  policy decisions by the Bank were to blame for low levels of lending  to small businesses. 
Earlier this month, the Bank announced that it would inject a  further £75 billion into the banking system through its policy of quantitative easing. King admitted that this might not lead directly to more lending to small businesses.
Griggs said it was important to encourage firms to appeal if they thought they had been treated unfairly. 
‘The reality is that retraining is needed on both sides,’ he said. ‘The banks are taking this on board and businesses also need to realise that we are in a different space from a few years ago.’
Phil McCabe, of the Forum of Private Business, welcomed the ‘relatively high’ success rate of the scheme so far.
‘This is a very valuable tool for businesses that feel aggrieved over a bank’s lending decision,’ he said. ‘It should help to address the understandable cynicism of some business owners.’






From Mail Online 

Property demand reaches four year high

Demand for UK property has increased for a second consecutive month in September, reaching levels not seen in over four years.

Woman looking in estate agent's window
Demand for property has reached a four year high 
Demand for houses in the UK is at a four year high, as enquiries from house-hunters return to September 2007 levels.
The number of enquiries made last month rose to 308 per average branch according to the National Association of Estate Agents (NAEA), compared to 304 the previous month.
The NAEA housing report revealed that the number of houses available for sale also increased in September to an average of 72 per branch, compared to 65 for the month before.
The percentage of sales to first time home owners increased by two percentage points to 22pc – perhaps as a result of more affordable first time buyer mortgage deals.
Wendy Evans-Scott, President of the NAEA said she was encouraged by the number of enquiries increasing, but warned that sellers should be realistic when pricing their properties to ensure a sale in what she described as still a very "cautious" market.
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Ms Evans-Scott said: "The number of first time buyers on the market has increased slightly over the course of the month, however our agents are reporting widespread regional variation. Lending still remains a real barrier to home ownership for this part of the market."


By The Telegraph 

Friday 28 October 2011

Why your Christmas debts could last until 2023

Consumers could end up paying for Christmas 2011 far into 2023 by making only the minimum repayments on their credit card.

credit cards - Why your Christmas debts could last until 2023
Clearing a balance can take years if you make only the minimum repayment each month 
With just two months to go until Christmas, many people may be tempted to fund this year's festive spending on their credit card.
However, figures from Moneysupermarket.com show that consumers with a balance of £500 on a card with an average APR of 18.12pc could take 11 years and eight months to clear their debt if they make only the minimum repayment of 2.5pc each month – forking out an extra £477 in interest payments in the process.
Kevin Mountford, head of banking at moneysupermarket, said: "It's no surprise that a number of people will dread funding Christmas this year, with the rising cost of living, and energy, fuel and food costs all squeezing people's wallets over the past 12 months. The festive period is an expensive time of year and many may be thinking about using their flexible friend to tide them over this season."
According to figures from the Bank of England, consumers have racked up a £57bn bill from credit cards but increased competition in the market will give many borrowers time. For instance, credit cards from Tesco Clubcard and M&S Money are interest-free for 15 months on purchases.
For those consumers able to pay off their balance in full each every month, a cashback or rewards card could be a good option as it gives them rewards each time they spend.

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The American Express Platinum Cashback credit card, for instance, offers up to 2.5pc cashback for the first three months up to a maximum of £100, followed by an ongoing cashback rate of 1.25pc.
A balance transfer war has broken out and some card providers allow people to transfer existing debts and pay 0pc for up to 22 months, subject to a small handling fee. Once this period is up you need to repay the debt or transfer it again – otherwise you risk paying a high interest rate.
However, shoppers should avoid using a interest-free balance transfer card for their shopping as these cards are designed for transferring existing debt and, despite many having zero per cent offers for purchases, these offers last only for a few months before purchases accrue interest at the standard rate.
The best cards for balance transfers are Halifax's Balance Transfer MasterCard and Barclaycard Platinum Extended BT Visa, which both charge 0pc for 22 months.
"Setting up a direct debit for credit card repayments is essential - consumers should avoid missing payments at all costs, as this would lose them their promotional offer," said Mr Mountford.
"The decision to use a credit card shouldn't be taken lightly and careful budgeting is essential to ensure people can pay off their Christmas debt quickly, and within the next 12 months, or, as our findings show, they could be left paying for Christmas 2011 for many years to come."


By The Telegraph 

Financial Services Authority target packaged account sales


Banks and building societies are coming under fire from the Financial Services Authority (FSA) over concerns that fee-based current accounts are being mis-sold to millions of customers.

Financial Services Authority target packaged account sales 
The FSA has proposed new rules to ensure customers are eligible to claim on insurance cover before sold a packaged bank account, which can cost up to £300 a year.
Packaged accounts are current accounts that charge a monthly fee but come with extras such as free roadside recovery cover and ID theft protection.
It is estimated that one in five of the UK adult population now has one of these accounts. However, research from consumer group Which? has found that a third of consumers do not use the extras for which they are paying, wasting between £240m and £320m a year.
Under the proposals the banks and building societies selling insurance as part of a packaged account must check customer eligibility to claim when purchasing as well as provide an annual statement to review suitability. Sales advisers will be required to establish whether each policy is suitable for the customer and notify them if not.
Sheila Nicoll director of policy at the FSA, said: “We want to make sure that packaged accounts are only being sold to customers who have actively decided it is the right product for them.”

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The FSA is also investigating how to improve price transparency of this type of account. The regulator highlighted that it can be difficult for customers to compare and contrast the costs with stand-alone insurance products or other bank accounts.
The number of packaged current accounts available to consumers has doubled in the last five years
According to statisticians Defaqto, there are now more packaged accounts available than free in-credit accounts. Further, the average monthly fee for a packaged account now ranges between £6.50 to £40.
Richard Lloyd, executive director at Which?, said: “People should only have a packaged account if they’re absolutely certain that it will be cheaper for them and they’ll use all of the benefits offered. Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare.”


By the Telegraph 

Tuesday 25 October 2011

How to save £20,000 on your mortgage



How? By switching a small part of your debt to a cheap personal loan.

For sale signs - How to save £20,000 on your mortgage
Lenders should let you use a personal loan to boost a deposit. 'But you need some skin in the game,’ said one expert 
Home owners can save hundreds of pounds a year by switching some of their mortgage borrowing to cheap personal loans – and reduce their overall debt by thousands of pounds at the same time.
Personal loan rates have been falling – the cheapest is now 6.3pc – as lenders engage in a price war. Some mortgages actually cost more than these cheap personal loans. But even if you are not paying such a high rate on your current mortgage, you could still save by transferring some of your debt to a personal loan.
This is how it works. If you want to remortgage or buy a home, you take out a personal loan for, say, 10pc of the property price, which means your mortgage will be a smaller proportion of the cost of your home. This will often qualify you for a better rate, as mortgage interest rates are very sensitive to what lenders call the “loan-to-value” (LTV) – your home loan amount as a percentage of the purchase price.
Imagine you want a lifetime tracker mortgage on a £300,000 property and have a 10pc (£30,000) deposit or equity. If you borrowed all £270,000 on a mortgage, your LTV would be 90pc. The best lifetime tracker at 90pc LTV, according to John Charcol, the mortgage broker, is from the HSBC and costs 4.59pc.But if you took out a personal loan of £15,000, you would need a mortgage of just £255,000, which is an LTV of 85pc. The best lifetime tracker at 85pc, which comes from First Direct, charges 3.69pc – 0.9 of a percentage point less than the HSBC mortgage.

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This makes a big difference to the repayments. Borrowing £270,000 at 4.59pc over 25 years would cost £1,531 a month, according to Ray Boulger of John Charcol. A home loan of £255,000 at 3.69pc would be £1,316 a month.
You have to add the repayments on the personal loan to this amount, of course. Consumers can borrow £15,000 for 10 years on an unsecured personal loan at a rate of 6.4pc (personal loans always charge fixed rates). The monthly repayments on this loan would be £168. The total cost of borrowing £270,000 via a £15,000 personal loan and a £255,000 mortgage is therefore £1,484 – a saving of £47 a month, or £564 a year.
Using a personal loan can also save money if you want the certainty of a fixed-rate mortgage. Using the same example of a £300,000 property and a 10pc deposit, the best five-year fix at 90pc LTV comes from the Post Office and charges 4.99pc, meaning a monthly cost of £1,595. Borrowing £15,000 on a personal loan would qualify you for an 85pc LTV mortgage; the best five-year fix here is Yorkshire Building Society’s deal at 4.24pc. This is an improvement of 0.75 of a percentage point and the monthly cost is £1,395.
Add the cost of the personal loan and the total monthly repayment comes to £1,563, which is £32 a month or £384 a year cheaper than borrowing the whole sum with a mortgage.
Better still is the effect on your total debt when the personal loan is paid off. Assuming that you can fix for the second five years at the same rate as for the first five, your outstanding debt if you borrowed the whole £270,000 on a mortgage would be £198,800 after 10 years, Mr Boulger calculated. But the remaining debt if you used a mortgage plus personal loan would be just £183,000.
So, after 10 years, the benefit of using the personal loan is £15,800 off the outstanding debt and £3,840 less in monthly repayments – a combined sum of £19,640.
Clearly, using personal loans makes sense on paper. But would you actually qualify for the loans and mortgages you would need to make it work in practice?
“Many mortgage lenders won’t mind you using a personal loan as part of your deposit, although a few will,” Mr Boulger said. “However, you must be honest about it from the start. Lenders will see any loan applications on your credit file and some recheck just before they release the money, so you wouldn’t avoid detection by getting the mortgage approved first.”
It is also important to have saved up at least some of the deposit yourself, Mr Boulger said. “Lenders are very keen for you to have some skin in the game – at least 5pc of the purchase price should be from your own money.”
Personal loan providers, meanwhile, should not object, Mr Boulger said. He pointed out that lenders might increase rates at the £15,000 level, so check the rate you are offered at £14,999 as well. You will need a top-notch credit history to qualify for the best personal loan rates and the cheapest mortgage deals.
“The best personal loan will depend on the amount borrowed,” Michelle Slade of Moneyfacts said. “A lender may be competitive in one tier, but not necessarily in another.” David Black of Defaqto, the data provider, said: “The keenest rates for unsecured loans tend to be for between £7,500 and £15,000. It is difficult to get an unsecured loan above £25,000.”
There’s yet another advantage to using a personal loan for some of your borrowing: the early repayment charges (ERCs) are normally much lower. Borrowers with the Post Office mortgage mentioned above, for example, will pay 5pc of the original amount borrowed if they pay the loan off early; the cost of redeeming a personal loan early, by contrast, is normally just one month’s interest.


By The Telegraph

Friday 7 October 2011

Why it can take 22 years to pay off your credit card


David Cameron this afternoon said households were paying off their personal debts to help Britain recover from what is "no normal recession", but for those who opt for the minimum repayment, it could be 2033 before they clear their balances.

Credit cards
Credit card debts take decades to clear 
The Prime Minister told delegates at the Conservative Party conference today that the country has been suffering from a debt crisis and "that's why households are paying down their credit card and store card bills".
It certainly makes sense to pay down your debts if you are in a position to do so. Figures from Moneynet.co.uk have revealed that should consumers with a credit card balance of £2,000, who repay just the bare minimum amount each month, 22 years to clear the balance of just £2,000 – paying an extra £2,275 in interest in doing so.
If a borrower with a £2,000 debt makes monthly repayments of £50 it will still take in four year and 11 months to pay down the debt, at an interest cost of £939.
It would take 28 years and three months to repay a £5,000 card debt repaying the minimum each month. You would pay £5,912 in interest.
According to figures from the Bank of England, consumers have racked up a £57bn bill from credit cards but increased competition in the market will give many borrowers time.

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A balance transfer war has broken out and some card providers allow people to transfer existing debts and pay 0pc for up to 22 months, subject to a small handling fee. Once this period is up you need to repay the debt or transfer it again – otherwise you risk paying a high interest rate.
Michelle Slade at Moneyfacts said that assuming you can pay the debt off within the introductory period, moving the debt to a interest-free balance transfer card is a useful option. "If customers do this then they have to be disciplined and repay as much as possible each month. If they don't, then the interest could soon start stacking up again one the introductory deal ends."
The best long-term interest-free deals come from Barclaycard Platinum, which charges 0pc for 22 months with a 2.90pc balance transfer fee. Similarly, Halifax's BT MasterCard, is also interest free for 22 months, but charges a 3.5pc fee on transfers while Virgin Money has an interest-free period of 20 months and charges a fee of 2.99pc.
Personal loans are also a good method for debt consolidation as they offer a structured repayment plan. With this option, borrowers know exactly what they will have to repay each month and when they will be debt free – assuming they do not take out further borrowing.
Since the start of the year the personal loan market has been highly competitive, particularly on the £7,500 to £15,000 tier. The increased competitiveness has seen rates on some tiers tumble back to the levels saw before the credit crisis.
Depending on the size of your loan, rates may vary. If you are looking for a loan of £2,500, the best rate comes from the Post Office and charges 14.9pc. Sainsbury's Finance charges 7.9pc for a loan of £5,000 while HSBC, Marks & Spencer Money and Nationwide Building Society all charge 6.4pc APR for a £10,000 advance.
Andrew Hagger, spokesman from Moneynet.co.uk, highlighted that those who go down this route should ensure they close down the credit card accounts that are being repaid with the new loan – otherwise they start spending on them again and fall further into debt.
However, Ms Slade, pointed out that lenders are very strict about who they will offer a personal loan and those without a good credit record are unlikely to be accepted.
She said: "Lenders will look at how much existing debt someone has and may not offer a loan if its is already too high. A debt consolidation loan is only likely to be offered to someone with a small amount of debt, who has not had any previous repayment problems. Anyone else is likely to be declined by traditional lenders."