The general concensus is that the Monetary Policy Committee won’t change the Bank of England Repo rate (base rate) in their meeting taking place this week. Expectations are that the rate is currently on a downward path although inflationary pressures may temper the MPC’s willingness to reduce further and faster.
There are clear economic worries too and suggestions that the US economy is in recession may lead to similar revelations over here in due course.
From a financial point of view the fallout from the US sub-prime credit crisis has meant that banks are generally unwilling to lend to each other and are finding it both more difficult and more expensive to raise wholesale funds.
This gives us an unusual situation.
If you’re a saver the best deposit rates are significantly out of kilter with the base rate. Ordinarily you’d expect to be doing well if you could find a savings rate that was equal to - or just below - the bank base rate. Now, however, you can beat the base rate by over 1% with certain cash ISAs or savings accounts. This is happening for two distinct reasons: firstly general eagerness to raise retail funds and secondly new entrants (typically foreign bank subsidiaries) who have to offer best buy status accounts to obtain sufficient customers through the resultant publicity.
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Defaqto’s Star Ratings for 2008 have been more widely adopted by providers than ever before. The ratings, which have become the most authoritative and impartial guide to product quality available, cover products in the banking, protection, investment, pension and general insurance areasIn January Defaqto undertook the huge task of analysing the quality of just under 2,200 products in 24 separate product areas from 550 different suppliers. Defaqto used a set of quality criteria to assess each product in each particular area. From this analysis Defaqto was able to score each product and then assign it a Star Rating. The ratings ranged from five stars down to one star.
In total Defaqto assigned 252 Five Star ratings, 360 Four Stars, 571 Three Stars, 498 Two Stars and 511 One Star.
Defaqto licenses companies to use the rating in their promotional material and so far this year, Defaqto has licensed the use of 140 Five Star Ratings.
Brian Brown, Head of Insight at Defaqto said: “A Five Star rating enables companies to demonstrate to consumers that their products have reached the highest tier of quality. The rating, with its associated logo, is becoming a well-known statement of product quality in the market as more and more companies adopt it into their marketing plans.
“With the ever-growing emphasis on product cost, product quality has been in danger of being excluded from the purchase decision. A Five Star Rating helps to address this imbalance by identifying for consumers products which have been independently assessed for quality.”
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Main Star Rated Product Groups
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| Credit Cards |
Current Accounts |
Home Insurance |
Motor Insurance |
| Pet Insurance |
Travel Insurance |
Payment Protection |
SIPPs |
| Offshore Bonds |
Onshore Bonds |
Critical Illness |
Income Protection |
-Ends
For further information contact:
Defaqto Limited
Brian Brown, Chris Johnston or Luci Mylward
01844 295 454
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While credit cards have encountered considerable negative publicity recently with reports of accounts being closed and credit limits be reduced, there are still some worthwhile incentives being offered, and for those with good credit ratings who repay their entire balances each month, they are worth considering.
David Black, Principal Consultant - Banking at Defaqto said: “There are a variety of reward based credit card schemes and these include points schemes, air miles and cashbacks. Some of them can be very difficult to compare and, certainly in the case of cashbacks, it’s worth reviewing what’s available on a regular basis, as the best offers often gain that position by virtue of a short-term introductory enhanced rate.
“It’s possible to use different cards for different types of spend to take advantage of the enhanced returns marketed by some credit cards. For motorists, the Shell card is currently a clear market leader.
“If you are unlikely to repay the entire balance every month you should concentrate on the interest charged rather than the rewards offered.” (more…)
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With so much press comment around about cancelling Payment Protection Insurance (PPI) we are often asked where customers who do want cover can go online to purchase standalone PPI or Income Protection Insurance (IPI).
These policies are used to protect the customer in case they are unable to make loan or mortgage repayments following unemployment or sickness.
Anyone buying PPI cover must be sure they read all the information and questions asked by the insurer to make sure they are eligible to buy the policy, and make sure they understand any exclusions which might apply to claims (such as restrictions on backache or mental illness claims, or for pre-existing medical conditions).
The following companies all sell cover on a stand-alone basis:
Standalone Mortgage Payment Protection
Provider
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Web Address
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Phone
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Cost *
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Ant Insurance
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020 8972 557
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£2.36
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British Insurance
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08450 175 178
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£3.25
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Churchill
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0800 404 770
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£4.00
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Post Office Ltd
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0800 633 967
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£4.50
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Web Money
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0845 155 1931
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£3.50
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Standalone Income Protection/Payment Protection
Provider
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Web Address
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Phone
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Cost *
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Ant Insurance
|
|
020 8972 9557
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£2.50
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iprotect
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|
01962 877 818
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£2.64
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British Insurance
|
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08450 175 178
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£4.05
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Hitachi Capital
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0870 850 8116
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£4.25
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Paymentcare Ltd
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0870 428 4088
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£4.40
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Pinnacle Insurance
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08000 350 292
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£2.69
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Web Money
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0845 155 1930
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£4.44
|
|
* Cost is cost per £100 of cover for a 35 year old man, with 12 months benefit. Note that premiums vary markedly and this is in part because differing policies offer different features and benefits.
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Following The Monetary Policy Committee’s decision to reduce the Bank of England Base rate by 0.25% to 5.25%, Defaqto’s Principal Consultant - Banking, David Black comments:”This 0.25% cut by the Monetary Policy Committee was widely anticipated and comes as no surprise. I will watch with interest to see whether the full cut is passed on to both savers and borrowers but I suspect that some providers may use the opportunity to widen their margins at customers’ expense.
“Prior to this cut the average Standard Variable Rate is currently 7.55%. Last time the bank base rate was at 5.25% (between 11th January and 9th May 2007) the average Standard Variable Rate was 7.05%.”
Ends
For further information contact:
Defaqto Limited
David Black, Chris Johnston or Luci Mylward
01844 295 454
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It is interesting to learn that Alistair Darling is establishing a procedure should another Northern Rock style crisis occur, but is this really the answer? Surely the most important measure is to ensure that no bank gets into the same situation. The problem arose because Northern Rock decided they could make money by lending to people that could not afford such a high level of debt and without a sufficient margin in the security offered.
Naturally we do not want to return to the boom and bust style of life but there are lessons to be learned or remembered from those times. I admit that I now qualify for a bus pass and life has moved on in the past thirty years but none of us can just march on without balancing the books. (more…)
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In recent times the credit card industry has done little to encourage customer loyalty, preferring instead to pursue new customers with a wide range of enticing introductory deals, such as 0% balance transfers, 0% purchase or enhanced introductory cash backs.Meanwhile, existing customers were largely ignored and, unsurprisingly, the credit worthy ones decided to take advantage of these deals and switched cards on a fairly regular basis.
Against this backdrop Capital One has announced an initiative which is a genuine attempt to engender loyalty within its current customer base, as well as an initiative designed to win new customers.
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Consumers are being rewarded for disloyalty by credit card companies restricting best offers to new customers, says Defaqto’s in its latest report “Credit Cards in the UK”.
Despite the introduction of some ‘anniversary’ offers for existing customers, such as those offered by the Egg Card and the Post Office’s Two in One Credit Card, consumers are still able to get better deals by switching to a new card.
The average duration for an introductory 0% offer lasts 9.5 months for balance transfers and 5.6 months for purchases, whereas existing customer 0% anniversary offers are typically 5 or 6 months for balance transfers, so it is not difficult to see that consumers can be better off by applying for a new card.
David Black , Principal Consultant Banking, and author of the report, says: “There is a clear incentive for the creditworthy to review and change their credit card on a regular basis. The credit card industry is geared to routinely rewarding customer disloyalty for the creditworthy and there seems to be little evidence of this changing.”
Some market leading credit cards are offering 15 months 0% interest free credit: Virgin’s Credit Card for balance transfers and Halifax’s Purchase Card for purchases.
Cash back credit cards tell pretty much the same story, with the best ones invariably limited to an introductory period. Cash back rates of 6% (Shell MasterCard from Citi: on Shell fuel purchases for 3 months but paid as a discount on future fuel purchases), 5% (Amex Platinum: on spend up to £4,000 in the first three months; and Abbey Credit Card: on £1,000 of supermarket spend before 31 st January 2008), and 4% (Capital One Cash Back with World: for first three months) are some of the best available.
Black adds: “One area where credit card loyalty can be engendered is a rich reward scheme partnership with a national retailer or service provider whereby discounts are earned towards future high value purchases.”
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