Carpetbaggers looking for windfalls?

The Catholic with a single branch in London and only eight staff is planning to merge into the Chelsea, one of the largest remaining mutual lenders.

This is a reflection of the difficult trading environment and increased financial regulations which small organisations are struggling to keep up with.

Experts predict this will be the first of a few merger deals to take place as other small societies look at their costs. It’s not just the smaller societies that are under pressure, even larger societies such as the Cheshire and Derbyshire may be open to merger offers after being hit by specialist lending problems and not moving with the times.

The Catholic was set up 50 years ago and specialised with offering loans to single women. These sector minnows usually only have a few hundred borrowers and a few thousand savers.
It is expected the existing customers with the Catholic will be offered cash bonuses for agreeing to the merger – likely to be £100 or £200.

But it is too late to open an account now and get this windfall. Only customers with an account as at 31st May 2008 will be eligible. It is also common practise that only members of the small society in a merger are given a payout.

The prospect of further mergers is likely to see a new round of account opening , known as “carpetbagging”, as people speculate which societies may be in line for a merger.

Savers can become members of most societies with a deposit of just £100 but some may have restrictions such as only accepting local residents. Most also require savers to sign away any rights to windfalls resulting from demutualisation for the first 5 years, but this sign away does not apply to merger bonuses.

Shopper’s big spending spree in May

Retail sales jumped by a whopping 3.5% from April – the biggest rise for more than 20 years.

Experts believe it is due to the long awaited warm weather which finally arrived. It was the hottest May since records began and saw sales in beachwear, barbeques and garden furniture soar.
Summer t-shirts, dresses and sandals were big sellers. Computer games and consoles, especially Wii Sports shot of the shelves. IPods and flat screen TV’s were also big sellers.

Statisticians were very surprised by the results and had to double check their findings. Economists were said to be staggered by the reports as this surge in spending what not as the market expected.

Food was up by 3.3%, clothes by 9.2% and household goods by 2.6%.

However the Government has stressed this is not the start of the retail recovery. With inflation on the increase and house prices on the fall there will be less for consumers to spend and we will all have to tighten our belts.

Inflation could rise above 4% by the end of the year

The Governor of the Bank of England has said that UK inflation could rise above 4% this year – mainly caused by the rising costs of food and energy prices.

The Consumer Prices Index (CPI) rose by 3.3% in May which is up from 3% in April – the fastest rate since the CPI measure began in 1997.

The largest contributor to consumer inflation is the higher price we are paying for our food; mainly meat products and vegetables and non alcoholic drinks. Closely followed by higher energy bills (up 10%), the cost of foreign holidays and the cost of books and stationery is also up.

If prices continue to rise we are likely to see inflation going over 4% in the second half of the year. Experts predict inflation will peak towards the end of the year and gradually fall throughout next year.

The Bank of England is unlikely to cut interest rates until the uncertainty over inflation is more stable.

The Government are advising people over high wage increases, saying anything near or over the rate of inflation will damage people in the long run.

Missed payments, late payment charges, we don’t know, do we care?

A recent survey carried about by CreditExpert.co.uk has revealed that the majority of us don’t really have much of a clue what’s going on when it comes to our finances.

One in ten of us admits to having no idea how much debt we are in whilst one in five of us admits to only planning our finances once every six months or less. More alarming perhaps, is that a whopping 74% of us don’t actually know how much we owe.

Managing Director of CreditExpert.co.uk, Jim Hodgkins said “it’s alarming to see that while almost the entire UK population think they are on top of their finances, many aren’t. Keeping track of your commitments and planning for the future are always important and in addition to checking bank and credit card statements, you also need to regularly check that your credit report is accurate and up to date”.

He added “this research provides a worrying insight into people’s perceptions of their finances. It is clear that many of us are not as familiar with our finances as we believe”.

Not only are missed payments recorded on your credit report and will affect your future credit applications, but you may face a penalty imposed on you by the lender or bank if you have failed to plan accordingly.

Alan Stubbs, a student customer of high street bank Halifax complained: “I forgot about a direct debit the other week and I ended up with a £28 charge on my account because I didn’t have the money in the bank to cover it”. He continued “but that took me over my overdraft so I got an extra £15 charge for interest”. That’s a total of £43 charges for being unaware of a financial commitment. Asked whether this was the first time he had been charged in this way, Mr Stubbs replied “Nah, it happens all the time”.

It makes no sense at all the pay charges on a bill you are going to pay anyway. With a little bit of time and effort; checking your credit report, reading through your bank/credit card/loan statements and knowing when your payments are due, you can avoid any charges, penalties or black marks next to your name.

New mortgages lowest since 1993

The BBA (British Bankers Association) has announced that only 58,000 mortgages were approved in April – this is 8% fewer than in March this year and down a whopping 39.4% on April 2007.

There has however been a small rise in people who are remortgaging their properties. This is due to the number of borrowers coming to the end of their current fixed rate deals and looking for a new and better deal.

Unfortunately most borrowers do not look around for a better deal, tending to stick with the same lender even when their repayments are going up.

At this time of the credit crunch when the mortgage market is changing all the time it is wise for borrows to look around for the best deals.

Tempted to withdraw cash on your credit card? DON’T!

As the credit crunch continues, credit card companies are heavily promoting cash withdrawals from your credit card but they do not make it clear how expensive this will be.

If you withdraw cash on your credit card you could be charged an interest rate in excess of 24% and also a withdrawal fee.

Even if you are someone who pays off your balance every month you will still be charged interest. This is because the interest starts to accrue from the day you withdraw the cash.

Many companies are also sending their customers blank cheques – with their names already printed on them. This is to entice you to fill in your own amounts and pay them into your bank account – very tempting if you are short of cash. What the credit card company does not tell you is that these cheques are treated the same as a cash withdrawal. Therefore you will be charged a fee and the extortionate interest rate. There is usually a fee of 3% of the amount of each cheque presented and the interest rate will be in excess of 24%.

Nowhere on the covering letter is the interest rate mentioned, just a note asking the borrower to refer to their statement for the interest rate charged.

Using a credit card sensibly is a good way of managing your finances and there are some very good deals out there – however, using them for cash withdrawals or funding your bank account in a great big no no !

Not many people benefit from the credit crunch; the pawnbrokers do

You would be excused for thinking that while the nation is hit by the credit crunch, everyone in the country is struggling. A fair assumption it may be, but an incorrect one it is.

While hard working Mr and Mrs Smith are struggling to pay their bills each month, their mortgage payments continue to creep up and finding money becomes harder and harder. Enter the pawnbroker. More and more of us are turning to the pawn shops as a method of supplementing our incomes.

For years credit has been freely available and we have accepted it without a second thought. We have taken out loans to buy TVs, DVD players, jewellery, games and other goods with value that we simply would not be able to buy today. So it makes sense that in times of hardship, we turn these goods into cash and short of selling them, pawning them is the next best thing.

Another industry which is booming at present is that of pay day loans but if you consider the cost of borrowing on these, you will see pawning your stuff can be a lot cheaper. Most pay day loan firms charge in the region of £20 for every £100 borrowed. In contrast, you could easily find a pawnbroker who would offer you a loan against your goods for somewhere in the region 8% or £8 for every £100 borrowed. Talking of pawn broking as a means to raise funds, Chris Tapp, director of debt charity Credit Action said “If you need a small amount of cash for a short time, like if your boiler breaks down, it can be a decent option”.

As with all credit, you should think seriously before entering into any agreement and if you cannot afford to buy the goods back in the short term, this probably isn’t for you as the fees will continue to build each month and the debt can escalate.

Before pawning, consider the alternatives. It is still an expensive way to borrow and if you find yourself pawning things on a regular basis, you need to find a more workable solution to your financial situation because it can be a vicious cycle that gets harder and harder to break.

OFT to act on bank charges, but not until July at the earliest

Millions of UK customers have been charged up to £40 a time for going over their overdraft. Is this charge fair? Personally, I think not, but I am not the law. Everyone bar the banks seem to think the charge imposed is too high and it is thanks to the pressure from thousands of consumers which brought the banks to their knees. Finally, after months of dragging their heels, they agreed to a High Court test case which would be carried out in two parts.

Last month saw the initial hearing in which Mr Justice Andrew Smith said the OFT had a legal right to investigate whether or not the charges levied by banks were fair. He also said that if the OFC considered the charges to be unfair that it should look at how the banks can compensate their customers. At the same time, he also gave the banks the right to appeal that decision.

Since the decision last month, the OFC have been unable to reach a decision on the case leaving hundreds of thousands people with court claims still unheard having no idea when things will change.

“We are facing a lot of litigants who have not had their claims struck out and who should be in a position to pursue their claim” Mr Justice Smith said, “ How long should we hold up the county court litigation? Are we talking months, years or weeks?”

The banking sector reportedly makes about £3.5 billion from charges levied onto customers and you can bet they don’t want to lose this income.

The judge has indicated he would like things wrapped up quickly which is seen as a positive move for consumers by Chris Warner, a lawyer for the consumers’ association Which? But he went on to warn “the banks are appealing and it will be some time before a judgement is issued in that hearing and so consumers are still some way away from getting their money back”.

It is unclear at this time when the OFC will report it’s findings but yesterday it gave a planned timescale of mid/late July to releases their initial findings. The banks have agreed with the regulator that if no agreement on what is a “fair charge” is reached by Christmas this year, the decision will be made my the courts.

Until then any case brought before a county court will remain on hold.

Rates are rising, this time its Credit Cards

If you have a credit card, chances are you have seen your interest rate rise recently. The average interest rates for purchases have risen over the last two years from 14.9% to 16.4%.

Borrowing on a credit card has always been considered an expensive way to borrow and as the banks try desperately to claw back the money they leant out, many hard up families will feel the burden of these rate hikes. Of course, the banks will always tell you borrowing on a credit card should be considered for the short term only and if you pay your balance each and every month you won’t notice any difference. This is all well and good but this is the real world and we cant all do that. The banks are not the only ones who are feeling the pinch of our recent economic downturn. Instead of reaching out a hand to fellow sufferers they just want more of your money. Once again it will be those that are already struggling that will be hit the worst, if you can only just afford to make the minimum payment, your debt is growing.

On top of that, the interest rates for cash advances have rocketed in this period from 18.1% to a massive 24.3%. And if that wasn’t enough the fee for taking a cash advance will most likely have increased too. Previously the majority charged a 2% fee with a minimum of £2, nowadays however the majority charge 3%, with a minimum of £3.

Retail spending down again as house prices plummet at record speed

If you’re starting to think the economy couldn’t get any worse I have some bad news for you, it is getting worse every day. For the second month in a row, retail spending is down and house prices across the country dropped at a rate greater than at any other time in the last 30 years.

The Royal Institute of Chartered Surveyors (RICS) has warned of further drops in house prices claiming the shortage of houses on the market is slowing down the drop in house prices. If the economy problems cause people to sell their homes out of necessity, much larger drops would be probable. A reduction of 10% in house prices by the end of the year is not unlikely.

Will a cut in interest rates help lesser then impact of this so called global credit crunch? Most economists believe the Bank of England will cut rates next month. I guess we can only sit tight and wait and see.

Reports: The Guardian, The Independent, Reuters

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