Money news, advice and predictions for savers and spenders.
By Jeremy Gates
Although its full impact may take months to sink in, the emergency Budget unveiled by the coalition Government will force most households to take a much tighter grip on their finances, and question where every pound, if not every penny, is actually going.
The drastic cutback of tax credits and freezing of benefits means couples earning more than £24,000 are set to lose handouts worth around £900 a year by 2012 - a serious fall in some households facing either a pay freeze, or even a big pay cut where jobs are lost.
According to a survey by uSwitch.com, personal worries are deepening as confidence in the national finances improves: some 33 million consumers (67% of the total) feel worse off after George Osborne's speech, but 42% feel more confident about the future of UK plc.
Ann Robinson, uSwitch.com director of consumer policy, says: "The good news is that consumers believe the Budget has been for the greater good.
"The bad news is that it has come at great individual cost. Consumers should look at combating the impact of the Budget by cutting back painlessly on household bills - and some of that extra £500 a year in VAT could be paid by ensuring you pay the lowest possible prices for basics."
Kevin Mountford, head of banking at personal finance website Moneysupermarket.com, reckons most of us could start planning obvious savings right away; getting the best deals on the standard financial products and utility bills, an average household could save an impressive £1,941 a year, he claims.
Saving money in many areas is often largely a matter of common sense, and taking a little extra care.
Top tips for saving money:
:: Shopping: To deflect the VAT jump on January 4 from 17.5% to 20%, says Annie Shaw at CashQuestions.com, stick to VAT-free items such as fresh, raw and frozen foods for thawing, and by avoiding too many takeaways.
Luxury items such as ice cream, chocolate biscuits and desserts will go up, so why not get a better diet?
Stock up on non-food items such as toothpaste and cleaning products, too, because they will get hit by the extra tax. Shaw says higher VAT means it could make sense to buy certain things, such as cars, clothing and electrical goods, second-hand and from small non-VAT-registered businesses, or from private dealers on auction sites.
:: Mortgages: If your deposit is large enough (25-30%) to provide some negotiating clout, the obvious choice is between lifetime trackers, with First Direct starting as low as 2.29% (base rate plus 1.79%) and a loan-to-value (LTV) limit of 65%, and five-year fixes - which should cost around 4%.
Ray Boulger, at leading brokers John Charcol, says: "Gilt yields fell in the wake of the Budget, which should mean cheaper fixed-rate loans and more deals soon around 4%."
Although both Britannia and Chelsea recently pulled 3.99% deals, Coventry BS's range of fixes includes a three-year deal at 4.20%, reduced from 4.25%, up to 70% LTV.
Other attractive deals include a two-year Yorkshire BS fix at 2.89%, and a five-year Co-op fix at 4.19%, with £999 fee - both with maximum LTV of 75%.
:: Overdrafts: Hammer down the cost of an overdraft - to keep the bank charges down, says Andrew Hagger at Moneynet.co.uk, it is important to know roughly how many days each month you are in the red.
Only then can you effectively compare charges on different accounts.
For anyone overdrawn for only three days each month, for example, Halifax charges a total of £5 - less £2 credited to each account each month. But on an account overdrawn for the entire month, Halifax charges would be steep, while Alliance & Leicester - with a maximum £5 charge - offers the cheapest deal.
Although Lloyds TSB is set to reduce unauthorised borrowing charges in December, customers using authorised overdrafts and paying a new £5 monthly charge may be footing part of the cost of this largesse.
:: Savings: Get the best return on your nest egg - fund manager Schroders is pencilling in May 2011 for the first base rate increase, with rates ending 2011 at 1.75%.
That means savers will be squeezed for the foreseeable future, so it's important to reboot ISAs when providers have quietly allowed the rates on older accounts to sink, and to keep money moving around with a target of perhaps 3% gross.
If rates are unlikely to change much in 2010/11, savers might as well lock money in for at least a year.
Santander's new one-year bond promises 3.01% on minimum £10,000 deposits. But the Post Office Growth Bond promises 3% on £500, and Aldermore 3.05% on a minimum £1,000.
On two-year bonds, the Post Office Growth Bond pays 3.7%, on £500, and ICICI Bank the same on a minimum £1,000. Tesco Bank's instant access account pays 2.65%, but that includes a bonus for the first 12 months.
Barclays' new two-year bond pays 3.70% gross on £50,000-plus and 3.3% gross on less than £50,000, with a minimum deposit of £500.
:: Utility bills: Mark Todd at energyhelpline.com says the average household energy bill of £1,150 could be cut to £883 by any consumer who bothers to track down a cheap online fix.
The cheapest fix of the lot - E.ON FixOnline NSC v8 - will be pulled any day now, but there is a good choice of fixes, some running until autumn 2011, in the £900-£925 range.
Todd says: "Like playing the stock market, now is the time to switch to a fixed tariff to reap the best benefits and cost savings.
"Those who rest on their laurels are very quickly going to find themselves unable to capitalise on these great opportunities to pick up a great low price tariff and lock in."
Enquires: call 0800 074 0745 or visit www.energyhelpline.com.
:: Credit Cards: The balance transfer market is steadily improving, with the Nationwide BS Gold (launched June 22) promising a 0% balance transfer for 15 months and a typical APR of 16.9%.
Nationwide also promises a positive order of payments which means, for example, that it repays cash advances (charged at higher rates) before non-promotional purchases (charged at lower rates), and both are paid off ahead of e-balance transfer offers (charged at 0%).
Nationwide claims that by paying off the most expensive debts and those debts with the shortest 0% offers first, customers could save up to £225 in interest repayments in the first year.
Moneysupermarket.com reckons that making a £2,000 balance transfer from a card charging 18.52% APR to Barclaycard offering 0% for 15 months could save £265.71 in interest.
Besides the new Nationwide Gold, Moneynet.co.uk also tips the Yorkshire/Clydesdale Bank (0% for 16 months). Best introductory deals on new purchases include 0% for 12 months from Tesco Bank, Sainsbury's Finance and Virgin Money.
:: Petrol: Try to cut the cost of motoring by tracking down the cheapest petrol in your locality at the website www.petrolprices.com.
:: Cash boost: Look out for ideas to boost your income - according to uSwitch.com, more than half the mums (52%) returning to work do so because of debt and financial considerations, compared with only 22% who want to continue their career.
There may be other ways to boost income - if you have a spare room at home, the 'rent a room' scheme allows you to take in a lodger paying up to £4,250 tax free.
Another unexpected source of cash might be to get some of your goods valued at the website www.valuemystuffnow.com.
Since the start of the World Cup it has reported a 200% rise in requests from people checking out the value of their football memorabilia - ranging from programmes to signed shirts and boots.
:: Lunches: Although shops make some of the best sandwiches, Andrew Hagger says that anyone who prepares a packed lunch at home twice a week is likely to save around £500 a year.
If Britain really is returning to the 1970s, as some gloomy prophets predict, that looks like a useful saving.
Poundnotes
:: Intrepid savers seeking a decent return on cash might appreciate six best buy, fixed-rate, fixed-term savings accounts freshly launched by Conister Bank, the Isle of Man's only independent bank.
Available to new and existing customers, the accounts promise a fixed-rate of return for periods between six months (AER 2.95%) and five years (AER 5.05%) on minimum £10,000 deposits.
Money in Conister Bank, which celebrates its 75th anniversary this year, is protected by the Isle of Man depositors' compensation scheme.
Information: To find out more, call 01624 694694 or visit www.conisterbank.co.im.
:: Festival goers at Glastonbury and other major outdoor events this summer should keep credit and debit cards separate from the rest of their documents to cut the risk of ID fraud, says Neil Munroe, external affairs director at Equifax.
He says they definitely shouldn't take things such as passports, unless they plan to jet off immediately afterwards.
He adds: "The reality is that ID fraudsters only need three items of personal information to steal an individual's identity and start ordering goods or services in their name, so it is important that festival-goers don't make life too easy for the criminal fraternity."
Information: For full details, visit www.equifax.co.uk.
:: Despite the rage of President Obama, oil giant BP remains the favourite share to buy among small investors, says execution-only broker TD Waterhouse.
In the list of top buys, BP is followed by Kea Petroleum, Lloyds Banking Group, Royal Bank of Scotland, Barclays and Centrica.
But many investors are worried by the president too: BP is also the most heavily sold stock, with Taylor Wimpey, Rio Tinto and mining giant Xstrata also among the 10 shares investors are keenest to dump.
Information: For full details, visit: www.tdwaterhouse.co.uk.
:: After the emergency Budget, what are safe stocks for small investors? Jonathan Jackson, head of equities at Killik & Co, likes Tesco, National Grid and Imperial Tobacco, because all can "pass through inflation to the end-consumer".
Among managed funds, he tips Veritas Global Income, M&G Global Basics and Lazard Emerging Markets. Also, the cautious might settle for Artemis Strategic Assets and Trojan Fund, according to Jackson.
:: High five savers
Phone No Rate Account Period Deposit Interest paid
ICICI Bank www.hisave.co.uk 5.00% (F) HiSAVE Fixed Rate Five Year Bond £1,000 Yly
Aldermore 0845 604 2678 4.56% (F) Fixed Rate Account Five Year Bond £1,000 Yly
AA www.theAA.com 4.55% Internet Fixed Rate Five Year Bond £1 Yly
Close Savings 0207 392 1772 3.15% Premium Gold 180 Day 180 days (B) £10,000 Qly
Alliance & Leic www.alliance-leicester.co.uk 2.81% Online Saver Issue 7 None £1,000 Yly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
First Direct 0845 610 0100 2.29% variable for term 65% £99 Yes
ING Direct (UK) 0845 603 8888 2.55% disc to 31/08/12 70% None Yes
Yorkshire BS 0845 120 0874 2.89% to 31/07/12 75% £995 Yes
Loughboro BS 01509 610707 2.99% for three years 75% £799 Yes
Hinckley & Rugby BS 0800 774 499 3.39% for term 75% £795 Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
