With interest rates at their lowest level on record, it’s not easy to find any half decent savings deals on the savings market, and savers are finding it tough to get any modest returns.

Higher-rate tax payers have been hit hard as a result of the National Savings and Investment’s withdrawing its tax-free index-linked certificates, as it was previously offering the equivalent taxable gross return of 10% providing that the current Retail Prices Index (RPI) rate stayed at 5%, giving savers more than double the returns that any standard savings accounts can offer.

An NS&I spokesman recently made an appearance on BBC Radio 4′s Money Box programme, and he said it was unlikely that another issue of index-linked certificate would be launched this year. However he denied that NS&I had any plans for future issues to track the generally lower Consumer Prices Index (CPI) instead of the RPI.

The Bank of England base rate has remained at its record low of 0.5% for more than 16 months now – and one economic forecasting group said it expects the rate to stay at this level until 2014 – which means most savings accounts are now actually losing money in real terms based on RPI inflation.

Some shares offer high dividend yields and those looking to invest small amounts can protect their returns from income tax by making use of their stocks and shares ISA allowance. However, there is no guarantee that you will earn any returns from shares, so there are risks involved, as we all know that share prices can increase and decrease depending on business performance.

If you have a savings account, check that you are getting a competitive rate. You may have initially opened it with an attractive rate, but most savings accounts offer introductory bonus rates that are valid for 12 months. After this period the rate paid on your funds can be significantly lower, so it’s important to keep an eye on your account and keep it competitive.

Also, rates tend to fluctuate based on the Bank of England rate, so once this begins to rise you should keep a close eye on the savings market. If you find you could be earning more, switch account – it’s much easier than you may think and banks are set up to welcome new customers so it is in their best interest to make the switch-over as smooth as possible.

If you’re looking for the best interest rates around and you don’t mind the thought of locking your savings away, you might wish to consider fixed rate bonds. These savings accounts allow you to fix a rate for an extended period of time (usually between 1 and 5 years) while fixing the period of time you effectively lose access funds. Leaving your funds untouched not only allows you to earn some great returns, but also gives give you more of an incentive to leave your savings to grow, while protecting them from being eroded by inflation.

If you require access to your funds due to unforeseen circumstances you can withdraw funds, however you will lose some or all of the interest.

The highest paying bond in our tables is currently the ICICI fixed rate bond, currently offering 4.75% on all funds from £1000 with no maximum. However this account requires you to leave your funds untouched for a 5 year period, so if this sounds like a long time to you, you can opt for a shorter term with a lower rate.

Although the UK banking crisis has settled down now, you should still spread your savings around to ensure they are 100% protected – never invest more than £50,000 (the limit covered by the Financial Services Compensation Scheme) with a single provider or financial institution, and be sure to check multiple banks do not fall under the same financial umbrella, as you may find that your group chosen banks only offer a single protection allowance between them.

If you really want to be clever about it you would be better to work to a limit of around £48,000 as this will allow any interest you earn to also be covered if your bank were to fail.

In a perfect world no one would need credit. People would have enough time to earn and save the money required for buying things like a car or a house. Credit cards would only be used for the benefits they can provide such as cash back rewards and other bonuses, and we would never have to pay any interest. There would be no such thing as a credit history or credit report.

Unfortunately, this is not the case, and most people need to borrow money to make these large purchases. In order to qualify for the best interest rates the market has to offer, lenders reward people with the best credit history offering them access to these products. It doesn’t stop there, as you may be surprised to learn that some employers and landlords check your credit history before offering jobs and rented property. In today’s society, there are few ways of escaping the need for credit.

How your score is generated

Whether you’re looking to take out a loan, mortgage, overdraft, credit card, contract mobile phone, utility bills or even monthly car insurance, every type of lender ‘scores’ you to predict your likely behaviour, in order to build up a profile to indicate how financially attractive you are.

In many cases if you miss a periodic bill or make a payment after the agreed date, it will have a negative affect on your score.

Banks use a number of pieces of information when coming to a decision as to whether they will lend to you, including data held by three companies known as ‘credit reference agencies’: Experian, Equifax and Callcredit.

If you have no experience with credit, you are unlikely to have a credit history, which can work against you when looking to borrow. This is because lenders want to know that you can be trusted when giving you credit, which is usually done by using your previous track record.

Building a good score

There are several ways to both improve and repair your credit score, so if you suffer from poor credit history then help is at hand.

Opening a bank account and/or savings account is your first step.

Begin using a credit card. While this is sometimes dangerous advice, using a credit card and paying the balance in full each month for at least six months gives you a head start in your credit history.

First-time credit card holders are unlikely to qualify for the best credit card deals, so you may find it easier to be accepted if you apply for cards with higher than average rates, such as the Vanquis card. Don’t be put off by these high rates, as you won’t have to pay them if you stick to the plan, and several rejected credit card applications can have a bad effect on your credit score, so keep it simple.

The most important factor when building a good credit card is to always pay your bills on time. Start using your card to pay for some of the things you would have paid for using cash or a bank card, while putting the money aside to cover the bill at the end of the month. If your credit card balance is cleared each month without fail, you won’t have to pay a penny for using the card, and you will be building up a valuable score.

If you are unable to pay off the balance in full every month, always pay at least the minimum repayment. Even if you’re struggling, don’t default or miss payments, as doing this once or twice can cause problems that haunt you for years. The same applies to your mortgage payments.
If you are have difficulties with your payment plan, the best thing you can do is speak to your lender. You may be able to change your repayment schedule rather than defaulting and could help you to avoid a County Court Judgement (CCJ) being filed against you.

The easiest and most effective method for ensuring your credit cards are paid on time, set up a monthly Direct Debit.

Keep an eye on your score

Check your credit reports periodically. If possible, it’s worth checking all three agencies, as there’s no harm in doing so and will only cost you the price of the report. checking your file doesn’t add a ‘credit search’ that a lender can see, so it won’t have an impact on your score. Make sure you check each entry in your report as there could be an error that might be causing problems. It’s a good idea to repeat your check-up every year to 18 months, and always do one in good time before making any important applications.

If you don’t like the idea of paying to see your credit report, you can get access to a simplified version for free by signing up to a monthly trials. This does require you to set up a Direct Debit or regular credit card payment, but you have the option to close your account before this period expires.

If you find an entry on your file that you disagree with, you can request it to be changed by writing to the agency. These amendments can be refused, but you are entitled to add your own comments as a ‘notice of correction’. This is likely to make future credit applications take longer, but can help in your quest for being accepted for the better deals.

If you do feel something doesn’t look right, make sure you’re concise, explanatory and factual when detailing the error, and avoid writing something too wordy.

While there is no an exact science to improving your credit score, there are a number of things you can do to sway lenders’ attitudes towards you.

Sign up to the electoral roll.

If you’re not on the roll, you’re unlikely to obtain any credit, so this is a must. You needn’t wait for the annual reminder, you can sign up at any time using the About my vote website.

For anyone that is not eligible to vote (foreign nationals, etc), it is worth sending each of the credit reference agencies proof of residency and request that a note is added to verify this.

Space out your applications.

Making too many applications in a short space of time can have a bad effect on your score, as each time you apply, credit searches are triggered. You should therefore space out applications, not only for credit but also for things like car insurance, mobile phones and other similar contracts.

Moving house will also disrupt your score, so make any important applications before you move. Your score will also be better when you’re earning a salary, so if you’re planning to take time off, go on maternity leave or suspect potential redundancy, make any applications beforehand.

Joint finances can effect your score

If you marrying or are living with someone that has a bad credit score it shouldn’t impact your finances, providing the third-party data doesn’t appear on your file.

However, if you’re ‘financially linked’ to someone on any product who has a bad score, such as a mortgage or a joint bank account, it can have an impact. Simply opening a joint bills account for flat sharers can mean you’re co-scored.

If one partner has a bad credit history, keep your finances separate where possible and the other should maintain their good score.

See story on Hubpages

Lloyds TSB banking customers have been told they can qualify for a discount on their mortgages.

Anyone with a Lloyds TSB mortgage that is willing to open a Lloyd TSB current account will now be offered a reduction on their mortgage rates, it has been revealed.

This new offer is available to anyone that banks with Lloyds and holds a Lloyds TSB mortgage, on the condition that they deposit £1,000 or more into their account each month.

The reduction of 0.2% is offered to eligible customers, meaning a 3.99% fixed-rate mortgage will be reduced to 3.79%.

Stephen Noakes, Head of Mortgages at the firm, said: “Rewarding our current account customers by helping to reduce the costs of their mortgage payments is just one of the ways Lloyds TSB will continue to deliver the best value mortgages.”

He recognised that consumers seek flexibility from their financial products, which Lloyds TSB is striving to provide.

The company released its business barometer this month, which indicated that firms remain cautious, but UK confidence is on the up on the whole.

According to the Council of Mortgage Lenders (CML), mortgage lending hiked to £11.5bn last month, a 24% rise from February.

The figure also reflected a 3% rise compared to March 2009, when the market reached its nadir in the wake of the credit crunch.

The CML said that despite this rise in activity, the property market was still relatively subdued, pointing out that total mortgage lending in the first quarter of 2010 was still significantly lower than in the last quarter of 2009.

“Despite the increase in activity late last year and a subsequent fall early this year – due to the end of the stamp duty holiday – the underlying position looks to have barely changed,” said CML economist Paul Samter.

“But with the gradually improving economic backdrop and interest rates still low, we continue to expect a gentle improvement in market conditions later in the year,” he added.

The CML added that from next year, lenders would need to find around £300bn in order to repay money borrowed from the government through emergency support schemes.

As a result, it said, the mortgage market would continue to be restricted.

In the last couple of years, savers have been given a wake-up call warning them that even though their money is in the bank, it doesn’t necessarily meant it’s safe. Now i’m not talking about the risk of your money being stolen in a bank robbery…something far less obvious – banks failing.

The scare surfaced after Lehman Brothers – a global financial services firm, declared itself bankrupt in 2008 marking the largest bankruptcy in U.S. History.

Concerns were again raised after Icesave – an online savings brand owned and operated by Landsbanki, collapsed affecting hundreds of thousands of customers and businesses. In the UK, Icesave’s marketing slogan was “clear difference”, offering its customers three types of savings accounts: an instant access savings account, a cash ISA, and a range of fixed rate bonds, paying interest rates of more than 6%. This was enough to attract over 300,000 accounts in the UK alone. Read the rest of this entry »

Are you still searching for the best isa rates but haven’t chosen a fund for your 2009- 2010 individual savings account (Isa)? Unsure about stocks and shares Isas? Worried you have less than two weeks, but you haven’t had a chance to scour the market to see what’s available? By comparing the current best is rates 2010 will be your best year yet!

●Step 1: decide on the level of risk you’re willing to take

If the current financial, economic and political climates has left you feeling uncertain, cautious, or nauseous (or all together), then attend to your symptoms with a Cautious Managed fund. This can help to offer relief from the pain of volatility – or at least, that’s what it says on the tin. M&G’s Cautious Multi Asset Fund claim to be able to help you “participate in rising asset markets while preserving capital as much as possible” – and since it was launched 3 years ago it has delivered 14.5%, outstripping the IMA Cautious Managed sector by 16.6%. The secret ingredient, known as an “active fund manager”, can “respond to the actual correlation of assets” and, in a 3-year clinical trial, minor discomfort to a 16.5% fall, peak to trough, while other leading brands lost 23%. Read the rest of this entry »

When you ask yourself the question “how much mortgage can I borrow”, the answer is dependent on your individual financial circumstances and not the amount which the lender is ready to offer you. You must remember that it’s not wise to go for the biggest loan that is offered to you but you must rather attempt to become qualified for a loan that is favorable for your budget and requirements. Read the rest of this entry »

While the Bank of England base rate remains a the lowest level ever recorded – at 0.5%, most savings accounts offered by banks and building societies pay derisory rates of interest.

At the end of 2009 the average branch based instant access savings account paid a measly 0.17%, which a notice account wasn’t paying much more than 0.33%.

However, if you look at the top 10 savings accounts in the Which4U comparison tables, you will notice that the best rates are offered on fixed rate bonds, so if you’re willing to lock your money away for a fixed period of time, you could be earning up to 4.75%.

How do they work?

A fixed rate savings bond is a bank account that allows you to earn high interest rates in return for agreeing to leave your money without making any withdrawals until the agreed term is reached.

Returns on the investment are limited to the interest paid on the account, which can be calculated before the bond is opened, providing a predictable income.

Fixed bonds differ from standard deposit accounts as the interest rate is guaranteed to remain the same throughout the fixed period. The terms differ, with rates to reflect the term, but they usually last from between 6 months and anything up to around five years.

The interest accumulated every year is added onto the balance and paid on maturity.

It is generally possible to access your funds in an emergency, but doing so would result in the account being charged with a loss of interest.

Banks and building societies offer more attractive rates of interest on this type of investment because it gives them the ability to gain access to secure long term deposits.

Currently, the best five year fixed rate bond pays a rate of 4.75% (Nationwide bond) per annum compared to the best instant access accounts offering 2.80% (Halifax).

You could argue that rates will change over the next 5 years, so you need to consider this when making a decision on the term, as you could find that you are earning less than the current instant access accounts are paying.

Should you consider them?

Savers should consider a number of factors before deciding whether they should invest into a bond and the term they choose.

When will you need the money?

Avoid being drawn in by an attractive rate without fist making sure that you can do without the money until the bond matures.

The cost of borrowing money is usually greater than the return you will get from the bond, so this is a no no.

Are interest rates likely to go up during the term?

This can be a difficult call. The answer is simple, people can make predictions to the direction of interest rates, but no one knows for sure.

But considering how long the Bank of England base rate has stayed at 0.5% (since March 2009) and the fact that some economists believe it will remain this low for another 12 months, savers can be more comfortable with getting good rates for just one or two years, giving them the flexibility to reinvest again in a few years time.

What do you give up to qualify for a better interest rate?

For the better return, savers do give something up – the access to their savings for a set period and access now to the interest earned.

So for savers who need an income now these products may not be suitable.

There is also the possibility of losing the chance to use the money more profitably, perhaps by investing in other assets such as equities, or paying off a mortgage.

Investment bonds

Investment bonds are fundamentally different and involve investment not saving.

The policies are typically sold by life assurance companies which allow you to invest in a variety of funds (either investment trusts or unit trusts) managed by professional investment managers.

Bonds are usually used for long term capital growth but can also be used as a means to generate income.

Investment bonds tend to invest in a wider range of assets than savings bonds, including UK and overseas equities, commercial property, fixed interest securities, and cash- like investments.

In most investment bonds, investors can choose the amount in which they wish to invest into and can change the weighting of their investments several times a year.

Taxation

For tax purposes, investment bonds act as life assurance policies, therefore subjecting them to tax on the returns gained.

More and more couples are entering the same vicious circle of mortgage. What once was a dream, soon after the wedding became a nightmare. I am pretty sure that you too recognize the situation as being a specific event in your life. Civilized people agree to live under the same roof, but when the time comes to set priorities, each defends his\her own ideas. At this point the two parties (future customer & bank representative) are ready to meet and close the deal.

Read the rest of this entry »

It is commonsense that more and more people have unpaid and accumulated financial obligations that lead into people finding themselves in debt. As a consequence, creditors frequently call them in order to pay up. But similarly, we can talk nowadays about more and more complaints regarding abuses coming from the collections agencies. This is because people who are in debt are vulnerable, they are between wind and water, and they generally do not know how to handle abusive debt collectors. So for those who are annoyed with harassing debt collector calls, who feel pressured or even threatened, there are some useful tactics to keep in mind!

Read the rest of this entry »