Savers have never had it so good, says Defaqto

April 17, 2008 | posted by Chloe Cottam in Banking, Insight, Press Release, Savings | comments (0) |

Historically, when base rates changed, savings rates followed suit, but in the current credit crunch, those with spare cash and prepared to move their money around can take advantage of the banks’ and building societies’ eagerness to attract retail funds.

Last time the Bank of England’s base rate was changed to 5.00% was 17 months ago in November 2006. Comparing the fixed rates available then and those available now shows massive differences. The highest available 6 month fixed rate bond is now paying over 1.50% more than 17 months ago on a £10,000 investment.

David Black, Principal Consultant  - Banking at Defaqto, said: “With many people thinking  that the base rate is likely to fall further this year some of the fixed rate products available now look outstanding value.”

Variable saving rates look set to be reduced, but with some of the newer entrants, such as Kaupthing Edge & Icesave saying that they will hold their rates for the time being, people could still maintain or better their current rates going forward if they are prepared to move their money around.

“It is clear that some financial institutions are making their decisions about fixed savings rates in the light of their own particular circumstances and are not being influenced too much by what is happening to the Bank of England base rate. While this is the case, savers can consider taking advantage of the situation by locking into some very attractive rates.  Remember though, that only balances of up to £35,000 with any one institution are covered by the Financial Services Compensation Scheme.”

Comparison of past and current fixed gross AER rates for

a £10,000 balance with Bank of England Base Rate at 5%

Term of Bond

HIGHEST

rate   November 2006

HIGHEST rate       now

Additional interest
6 month fixed rate bond

5.27%

6.86%

1.59%
1 year fixed rate bond

5.80%

6.92%

1.12%
2 year fixed rate bond

5.72%

6.60%

0.88%
3 year fixed rate bond

5.71%

6.70%

0.99%
4 month fixed rate bond

5.60%

6.00%

0.40%
5 year fixed rate bond

5.58%

6.00%

0.42%

 

 

 
Term of Bond

AVERAGE  rate      November 2006

AVERAGE rate      now

Additional interest
6 month fixed rate bond

4.78%

5.97%

1.19%
1 year fixed rate bond

5.03%

5.64%

0.61%
2 year fixed rate bond

4.97%

5.36%

0.39%
3 year fixed rate bond

5.06%

5.37%

0.31%
4 month fixed rate bond

5.11%

5.27%

0.16%
5 year fixed rate bond

4.63%

4.79%

0.16%

Highest fixed savings rates currently available

Provider Product

Open by:

Gross AER % for £10,000

Fixed Term
Icesave 6 Month Fixed Rate

I

6.86

6 months
Birmingham Midshires Direct 6 Month Fixed Rate

PT

6.82

6 months
Kaupthing Edge 6 Month Fixed Term

I

6.80

6 months

 

 

 
Saga 1 Year Fixed Rate Monthly

PT

6.92

1 year
Kaupthing Edge 12 Month Fixed Term

I

6.86

1 year
Heritable Bank 1 Year Fixed

P

6.80

1 year

 

 

 
Icesave 2 Year Fixed Rate

I

6.60

2 years
Alliance & Leicester 2 Year Fixed Rate

B

6.30

2 years
FirstSave 2 Year Fixed Rate

I

6.30

2 years
Cheshire Building Society 2 Year Fixed Rate Bond

BIPT

6.30

2 years

 

 

 
Kaupthing Edge 3 Year Fixed Term

I

6.70

3 years
Icesave 3 Year Fixed Rate

I

6.50

3 years
FirstSave 3 Year Fixed Rate

I

6.30

3 years
Yorkshire Bank 3 Year Term Bond

BI

6.25

3 years

 

 

 
Anglo Irish Bank - UK 4 Year Fixed Rate

P

6.00

4 years
Heritable Bank 4 Year Fixed Rate

IP

5.75

4 years
Bradford & Bingley 4 Year Fixed Rate

BP

5.60

4 years

 

 

 
Anglo Irish Bank - UK 5 Year Fixed Rate

P

6.00

5 years
Heritable Bank 5 Year Fixed Rate

IP

5.75

5 years
United Trust Bank Ltd 5 Year Fixed

P

5.50

5 years
Birmingham Midshires 10 Year Fixed Rate

T

6.00

10 years

B = branch  I = internet

T = telephone  P = post

-Ends-

For further information contact:

Defaqto Limited          

David Black or Luci Mylward

01844 295 454

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Defaqto comments on Base rate change

April 10, 2008 | posted by Chloe Cottam in Banking, Insight, Press Release | comments (0) |

Following The Monetary Policy Committee’s decision to reduce the Bank of England Base rate by 0.25% to 5.00%, 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. What remains to be seen is how much each individual lender will pass on of this cut to its variable rate borrowers. 

“Prior to this cut the average Standard Variable Rate was 7.21%. Last time the base rate was at 5.00% (between 9th November 2006 and 10th January 2007) the average Standard Variable Rate was 6.80%” 

-Ends-   

Notes to Editors: 

1 Dependent on the content of the release 

For further information contact: 

Defaqto Limited          

David Black, Chris Johnston or Luci Mylward

01844 295 454  

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Borrowers suffer triple whammy with tracker mortgages, says Defaqto

April 8, 2008 | posted by Chloe Cottam in Banking, Insight, Mortgages, Press Release | comments (1) |

In the days before the credit crunch, people took out mortgages that tracked the Bank Base Rate because they thought the rate would drop in the future. The loading above BBR was generally stable in the region of 0.5% to 0.75%, depending on the length of the tracker term.In today’s increasingly difficult conditions, all this has changed. Not only has the number of available BBR tracker mortgages dropped by almost a quarter since July 2007, the higher loadings on the BBR have, on average, has more than negated the half percent decrease in BBR since then.

For two year trackers, the period with the most plans on offer, the average loading above BBR increased from 0.49% to 1.17% over the eight months since July 2007, an increase of 139%,  while the BBR rate fell from 5.75% to 5.25% over the same period.

It’s a similar picture for three year trackers with an average loading increase from 0.52% to 1.14%, an increase of nearly 120%. For the other main mortgage term products, there have been increases, even if they have not been quite as swingeing.

For the consumer the pain doesn’t stop there. Not only has the number of mortgages on offer decreased while loading percentages have increased, but application fees have seen huge uplifts since July. Fees for a typical 2 year mortgage have gone up from £688 in July 2007 to £1,005 currently, a 46% increase. This gets worse at the tracker term increases, rising to a massive 139% for term trackers.

David Black, Principal Consultant - Banking at Defaqto said: “With banks and building societies trying to repair their balance sheets in an atmosphere of financial mayhem, it is hardly surprising it is the poor consumer who is caught in the middle and is having to pay more for less choice. It is almost as though we are going back to the days when lenders felt they are doing you a favour by offering you a mortgage.”

-Ends-

Bank Base Rate

Tracker Mortgages

July 07

April 08

% Increase/  Decrease
1 year

 

 
Number

7

3

-57.1
Average % Loading

0.48%

1.19%

147.9
Average Fee

£505

£486

-3.8

 

 

 
2 year

 

 

 
Number

265

159

-40.0
Average % Loading

0.49%

1.17%

138.7
Average Fee

£688

£1,005

46.1

 

 

 
3 year

 

 

 
Number

75

74

-1.3
Average % Loading

0.52%

1.14%

119.2
Average Fee

£606

£1,016

67.7

 

 

 
5 year

 

 

 
Number

29

17

-41.4
Average % Loading

0.72%

1.04%

45.0
Average Fee

£444

£789

77.7

 

 

 
Term

 

 

 
Number

215

199

-7.4%
Average % Loading

0.75%

1.15%

53.3
Average Fee

£442

£1,060

139.8

 

 

 
All

 

 

 
Number

591

452

-23.5
Average % Loading

0.6%

1.16%

93.3
Average Fee

£573

£1,013

76.8

For further information contact:

Defaqto Limited 

David Black,Chris Johnston or Luci Mylward

01844 295 454

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Thinking the unthinkable

March 25, 2008 | posted by Chris Johnston in Banking, Insight, Investment, Savings | comments (0) |

 With commentators now beginning to openly discuss the possibility of a collapse of another bank or financial institution, it is perhaps timely to consider what compensation  arrangements are in place for depositors and investors should this happen. For savers, there are only two homes for your money that are 100% safe and these are Northern Rock and National Savings and Investments as these are both owned by the government. For everything else, there are limits to the amount of compensation that is available. Compensation payments are managed under the Financial Services Compensation Scheme (FSCS),  and limits vary for deposits, investments. and insurance claims. Only institutions regulated by the FSA are eligible to be covered by the scheme, which only has £4bn per year to use for this purpose. Claims totalling in excess of £4bn would trigger meetings between the FCSC, the FSA and the Treasury to work out a solution.  As things stand currently, £35,000 of deposits per person per financial institution are covered and this doubles for accounts in joint names. For investment the figure is £48,000 with 100% for the first £30,000 and 90% for the remainder. But  the FSCS will only pay compensation up to the limit of £35,000 per person, per authorised institution. This means that a parent institution could be the authorised entity and depositors will only be eligible for one pay-out, even if they have other accounts in the parent’s subsidiaries.  So, it may be wise to spread your savings and investments across different authorised entities, but you will have to do your own research to find out who owns whom, which companies are authorised under a group registration and which are registered individually.

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PPI - The hard sell continues

March 4, 2008 | posted by Brian Brown in Banking, Insight, Insurance, Personal Loans | comments (0) |

Lenders have been at great pains to point out to the FSA and the Competition Commission that the granting of an unsecured loan is no longer dependent on whether the customer takes Payment Protection Insurance or not.

Yet my own experience shows that lenders haven’t given up on the hard sell yet!  I am in the unenviable position of wanting to convert part of my garage into a study/playroom, but not having the readies to pay for it.  So like all sensible people I had to take out a personal loan to fund this.  I’m good for the cash, so I knew that getting a cheap loan wouldn’t be a problem.

On Sunday morning I searched online for the best deal, from a major bank, then applied on the Web.  Fantastic, job done, sorted.  Roll on the builders.

However a couple of hours later I got a text message asking me to call the bank in question regarding my application, so I gave them a ring (on an 0845 number too, so not a free call!). (more…)

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Earn as you spend on credit cards

February 26, 2008 | posted by Luci Mylward in Banking, Credit Cards, Insight, Press Release | comments (0) |

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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Defaqto comments on CML lending figures for January

February 20, 2008 | posted by Luci Mylward in Banking, Mortgages, Press Release | comments (0) |

The CML in its comment on January’s gross lending figures suggests that it was business as normal. However, it did concede that the coming months were likely to see lower gross lending volumes in the coming months.

We now await the actual composition of the lending figures. Ten years ago, the proportion of loans for house purchase was 79% of all lending; by 2007 this had fallen to 43%, with remortgaging and the buy-to-let category being the major beneficiaries of this reduction1.

David Black, Principal Consultant - Banking at Defaqto commented: “With credit harder to obtain, the housing market in the doldrums and moving costs a major consideration, don’t be surprised if the only sector of the market that is likely to show any sign of life for the next few months is remortgaging.  Those lenders with access to funds may be looking for other niche areas to bolster their lending”.

-Ends

   1CML Gross mortgage lending by type of advance, February 2008

                                                                              

For further information contact:

Defaqto Limited
David Black, Chris Johnston or Luci Mylward
01844 295 454

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Providers may widen margins at customers’ expense - Defaqto’s David Black comments on base rate change

February 7, 2008 | posted by Luci Mylward in Banking, Credit Cards, Insight, Mortgages, Personal Loans, Press Release, Savings | comments (0) |

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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Defaqto announces new star rating procedure

February 1, 2008 | posted by Luci Mylward in Banking, Insight, Insurance, Investment, Pensions, Press Release, Protection | comments (0) |

Defaqto today announced the introduction of a new procedure for star rating personal financial products. Over the past seven years Defaqto has been producing star ratings for a wide range of financial products.  During this time, the process was based on products being scored for their quality against a set of product criteria using Defaqto’s unique Product DNA1 process which is built into the Aequos database. Depending on the scores achieved, products were located in one of five star categories, with Five Stars being the top rating and One Star the lowest rating.To get into the Five Star category, a product had to be scored within the top 10 per cent of all products. For Four Stars, products had to be the next 15 percent of products, for Three Stars in the next 25 percent and so on.

Star ratings for different product groups were produced over the course of a year for inclusion in the publication of the relevant Defaqto Insight market report.

During 2007 Defaqto underwent a review of its rating procedures and decided that in future it will produce all star ratings on the same day - 1st February - and that these ratings will apply for the 12 months to the end of the following January. As well as the revised schedule, the methodology for deciding on product ratings has been improved by Defaqto’s product experts, from being a relative comparison to becoming a set of absolute ‘bars’. As part of the new rating, Defaqto has stipulated that before a product can be rated as Five Stars it must provide some level of cover or benefit in a number of key areas.

These changes will give product providers distinct advantages over the current system:

  • Getting a Five Star product rating will no longer depend on how many other Five Star rated products exist.
  • Providers will know that if their products meet or exceed the top bar for quality, they will be rated Five Stars.
  •  Providers licensed to use Defaqto’s star rating logo will be able to use the logo more effectively, knowing it relates to the current year and the first month of the next year.
  • Providers can develop products over the course of a year knowing in advance the criteria used to score product quality and what the star rating boundaries are.

The research methodology together with the features and benefits used by Defaqto in calculating each product’s scores, as well as the boundaries for each star rating, are produced within the relevant Star Rating Report 20082 publication.

Commenting on the change, Brian Brown, Head of Insight at Defaqto said: “We  believe that these changes will bring greater certainty to providers both in terms of the development and marketing of their products as well as enhanced confidence in the star ratings themselves among consumers.”

                          

-Ends-

Notes to Editors

1 Product DNA - Product Data Numerical Analysis

2 Reports for the different product areas entitled ‘Star Rating Reports 2008′ are on sale priced £850 plus VAT each for a PDF version with discounts available for subsequent purchases . For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

For further information contact:

Defaqto Limited 

Brian Brown, Chris Johnston or Luci Mylward

01844 295 454

Star Rating Reports 2008

Number of Features or Benefit Criteria Scored

Features or Benefit  Criteria Essential for Five Star Rating
Home Insurance

 

 
Buildings

23

9
Contents

40

12
Motor

 

 
Comprehensive

44

8
Motorcycle

29

5
Travel

 

 
Annual Travel

29

12
Single Trip

27

12
Gap Year

29

8
Long Stay Travel

29

8
Payment Protection

 

 
Personal Loan PPI

24

7
Credit Card PPI

24

9
Mortgage PPI

24

7
Pet

 

 
Cat

24

5
Dog

26

6
Critical Illness

 

 
Stand Alone CIC

23

0
Level Term CIC

24

0
Decreasing Term CIC

24

0
Income Protection

 

 
Income Protection

16

0
Offshore Bonds

 

 
Guided Architecture

21

0
Portfolio Bonds

21

0
Onshore Bonds

 

 
UK Unit Linked Bonds

18

0
Sipps

Features, Benefits / Costs

Features, Benefits / Costs
SIPPs

19 / 8

0
  

 

 
Current Accounts

34 / 43

3 / 0

 

 
   Credit Cards

 

 
Credit Cards

19 / 27

0 / 1
Offset & Current Account  Mortgages

 

 
Offset & Current Account Mortgages

45  / 24

3 / 1
Equity Release

 

 
Lifetime Mortgages

53 / 27

1 / 1*

 1* - One cost feature the product must not have to achieve Five Star N.B. Where no essential criteria is listed this is because it is included in the standard criteria

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Don’t say you weren’t warned! The FSA lays it on the line

January 30, 2008 | posted by Brian Brown in Banking, Insight, Insurance, Investment, Pensions, Protection | comments (0) |

The FSA has today published its Financial Risks Outlook 2008 report (PDF Download), which sets out the FSA view on the UK financial markets, and where it sees potential risks.

Not only does this report provide an excellent summary of where the world economy and the UK within it appears to be at present, it also discusses the FSA’s priority risks for this year.

It’s not a light read - 70 pages of quite detailed content - but there is an extensive section titled “Industry Focus” which sets out the FSA’s thoughts on what it sees as risks in each financial area.  And some of it makes for quite worrying reading for those involved in financial services.

Leaving aside the massive problems with consumer lending the report also includes some pearls which should guide industry leaders in their future dealings with the FSA, and clearly states where the potholes are.  Non-subtle pointers include: (more…)

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