UK Savings and Investment and Banking Services Update

By: MoneyFacts

Michelle Slade, Personal Finance Analyst at Moneyfacts.co.uk – the money search engine, comments:

• A new look is not always better – Halifax One Card
• Overdraft Fees: Lloyds takes a stand
• The return of capped rates – Birmingham Midshires
• Fixed rate savings reach new highs
• Over 50s savings grow

A new look is not always better – Halifax One Card
“This is what the new card has to offer:
• 0% on balance transfers for nine months (fee of 3%), plus a further six month’s 0% on the anniversary of the card (fee of 3%)
• 13.9% APR.

“The new terms of this card place the Halifax deal in a competitive position, but it is by no way a market leader. Moneyfacts.co.uk best buy charts are nominated with 0% deals of 12 months or longer. The balance transfer fee of 3% is the highest on the market, and standard rates lower than 10% can still be found.

“The new feature of this card is the option to transfer a further balance on the anniversary of the card at 0% for six months, with a fee of 3%, a spending pattern which should not be encouraged.

“While paying off your existing balance transfer deal, you should not create another debt on a second card, which can then be ‘bailed’ out by a second balance transfer deal a year later. Credit cards should be used as a short term borrowing option, ideally to manage any cash flow mismatches, not as a longer term, hard core borrowing choice.”

Overdraft Fees: Lloyds takes a stand

“The shock news that Lloyds TSB became the first bank to win a claim over unfair bank charges will certainly cause a stir in the market. Until now consumers have been undefeated and confident that claiming back their bank charges will be an easy win. So it may now be a rather unsettling time for anyone planning to claim as perhaps this Lloyds case has set a precedent.

“While we would not disagree that these fees are priced at a level far in excess of the costs, they are only charged when a borrower acts outside the terms and conditions of their account, so it must be remembered that the consumer has a role to play too.

“The OFT should be praised for taking their investigation to a new level. While pricing should be reviewed it is equally important that the issues of transparency and consumer understanding are also fully addressed. Perhaps more focus should be placed on managing any early warning signs and establishing conversation between both parties as soon as possible.”

Julia Harris, Mortgage Analyst at Moneyfacts.co.uk – the money search engine, comments:

The return of capped rates – Birmingham Midshires
• Two year deal currently at 5.34% with a fee of £699, capped at 6.09%
• Three year deal currently at 5.40% with a fee of £1299, capped at 6.15%
• Products available via intermediaries only, and self cert options available

“A few weeks ago we reported that capped rate deals were on the way out, so it was a surprise to see these new products launched from Birmingham Midshires.

“The current pay rates are not uncompetitive to those available on tracker deals, but substantially lower rates can be found on discounted deals. For anyone looking for complete protection against rate rises, fixed deals at similar rates are still around.

“Perhaps this is a sign of uncertainty, offering protection against substantial rises in the future, but also allowing borrowers to benefit from any rate reductions. But with the caps set 0.75% above the pay rate, and if the current market expectations hold, it is unlikely in the short term that this will ever be hit.”

Rachel Thrussell, Head of savings at moneyfacts.co.uk – the money search engine, comments:

Fixed rate savings reach new highs
“Today sees the launch of two new fixed rate accounts from Bank of Cyprus UK and West Bromwich BS which push fixed rates to a new high which we have not seen for five years.
• Bank of Cyprus UK – one year UK bond pays 6.33% from £1
• West Bromwich BS – Ebond pays 6.30% to 31.5.08 from £1K
“While Halifax has increased the rate on its 1 year Fixed Rate Web Saver to 6.30% from £500.

“These are great rates, but with another rate rise still on the cards, there is perhaps still room for further growth. The gap between the best-fixed and variable rates is widening, bringing back the reward for forgoing immediate access to your savings.

“Fixed rate deals can be a great addition to any savings portfolio, but given the choice of just one savings account, it must always be a instant access account, and in the first instance a tax free option such as an ISA is ideal.

Over 50s savings grow
“This week sees the launch of two accounts designed for savers aged 50 or over.
• Coventry BS - Sixty Plus Bond – paying 5.90% Fixed to 31.5.08 from £1K available to those aged over 60
• Stroud & Swindon BS – Platinum 50 Saver paying 5.65% with 30 days’ notice from £5K, available to those aged over 50.

“It is great to see more options available for savers aged over 50, as providers try to cash in on this potentially affluent market offering competitively priced products, consumers opting for these specialist accounts should not assume they are getting the best deal available in the market as, although the rates may be competitive, better deals may be found in accounts open to all ages.”

www.moneyfacts.co.uk - The Money Search Engine

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.