Three point nine million

Three point nine million.

Is it the miles a London tube train runs before serious refurbishment?

Or the golden parachute a chief executive of a bank when shareholders have had enough after a few years of highly paid incompetence?

All reasonable guesses, although it's none of the above.

Instead, it's a recent count of pet insurance plans in the UK.

Nearly four million households spend a typical £250 a year on covering their animals against a number of perils, the most important being the cost of a serious visit to the vet.

Now compare that with people protection. Starting from a higher base, it's obvious human cover could not grow even five-fold over the same period.

I recently read that “only 56% of owners take out pet insurance”. I love that “only”.

If “only” 56% of people took out some sort of personal cover to look after themselves as well as they look after their pets ( the wellbeing of whom in fact is ultimately down to the health of the premium payer.)

Remember that 3.9 million? It's roughly 10 times the number of people who have taken the step to protect their income with what is known as Income Protection.

Assuming the self-employed are the natural income protection consumers as their ‘health is their wealth’ so to speak, that means just one in 10 are covered. In fact anyone who is self employed could need short term cash help for injuries preventing their work.

Ah, but I can hear you saying – too expensive.

Well there is another way of looking at premiums – they are cheaper than a payday loan or a visit to a pawnshop. These have mushroomed, taking up empty retail space far faster than even bookmakers, pound stores, chicken shacks and charity shops – as well as dominating a fair slice of online space.

Income protection at around £20 a month is a far sight cheaper route to £1,500 a month than borrowing at thousands of percent a year as well as being better for all concerned than selling or pawning the wedding ring.

And in case you are wondering whether I practice what I preach (?) – yes , I have had my income protected since I took out my first mortgage in 2002.

Want to find out a bit more?  Feel free to get in touch.

 

Bank of Ireland

Bank of Ireland is writing to 13,500 of its buy-to-let and residential customers on tracker mortgages to warn them of plans to more than double the base rate differential it charges them.

Around 7 per cent of Bank of Ireland UK mortgage customers will be affected by the changes to the interest rate differential, over 50 per cent of which are buy-to-let holders.

For buy-to-let borrowers, the rate will jump from Bank of England base rate plus 1.75 per cent to rate plus 4.49 per cent from 1 May.

For residential borrowers, the increase will be applied to in two separate stages. From 1 May, it will rise from base plus 1.75 per cent to base plus 2.49 per cent. From 1 October, it will then be subject to yet another increase, taking it to base plus 3.99 per cent.

A statement from the bank argues the increases reflect higher funding costs.

It says: “This change reflects the significant increase in the cost of funding these mortgages since 2008 and the need for banks to maintain greater levels of capital.”

One industry commentator remarked “This is a shocking move by Bank of Ireland. It shows a blatant disregard for the fortunes of its customers. It is all very well offering to waive redemption penalties for those who can move but, for those who cannot, it creates unnecessary issues and will surely breach boundaries of the FSA’s Treating Customers Fairly initiative.”

If you are concerned about this , please feel free to get in touch.

As always , thanks for your attention.

What's 1% between friends ?

Figures from housing charity Shelter have found that 56% of borrowers would struggle to keep up with their mortgage payments if interest rates rose by 1%.

More worryingly, 11% said they would be unable to pay monthly payments altogether.

Campbell Robb, Shelter's chief executive, said: “These shocking findings show that over half of mortgage holders are living on a knife edge and could be tipped into a spiral of debt if their mortgage payments went up. "

Despite the Bank of England interest rate remaining low, current pressures on banks mean that mortgage rates are rising it is a concern that many people won't have plans in place to manage increased costs.
 
Meanwhile, Santander will lift its standard variable rate from 4.24% to 4.74% tomorrow. The move, which the bank blames on a range of factors including higher wholesale costs, will add £26 a month to the average cost of a £100,000 mortgage.  

It is no surprise therefore , that despite the Base Rate remaining currently static, the popularity of fixed rates has been steadily climbing in recent months as mortgage holders endeavour to secure their position financially whilst rates are low.
 

If you are concerned about maintaining your mortgage in the event of a rate change and would like to consider alternatives, please feel free to get in touch.

Mortgage lender fees rocket 70%

Mortgage lender set up fees have soared 70.3% in the last four years, according to recent research.

The average fee a lender charges for a mortgage was £899 in March 2009 when base rate fell to 0.5% but is now £1,514.

The average fee for a two-year fixed mortgage is now £1,595 and the average fee for a five-year fix is £1,014.

The highest fee is an eye-watering £3,990 charged for a five-year fixed rate product.

There can be no logical reason why fees should have increased so much. In the space of just August and September alone, they have increased by an average of £42.

Mortgage administration costs cannot possibly have increased 70%. Dealing with lenders on a daily basis as I do, I can certainly vouch that their service delivery standard hasn’t improved on the back of it – on the contrary in some situations , it has in fact worsened, so why are fees so high?

It is possible that lenders are keen to push fees because they are pure income and they get the money at the start of the mortgage.

But don’t forget, paying a large fee doesn’t necessarily guarantee a better rate – it all comes down to loan size. For example a percentage based fee can work well on the smaller mortgage sums against a set fee structure, but for a larger loan it is the other way round.

If you are unsure, talk to someone like myself who can guide you as what is the best thing to do.

This one goes out to all the ladies..

Life insurance premiums for women will rise by up to 15% before the end of the year with implementation of the EU Gender Directive due on 21 December 2012.

So if you want to do something about it, the time to do so is rapidly running out.

Although life cover has been traditionally cheaper for women because on average they live longer than men, premium costs are likely to increase as both men and women will soon have to pay the same basic premiums.

To avoid this impending price hike, all new policies must have a start date of no later than 20 December 2012.

And to qualify for gender specific premiums applications must be underwritten and accepted with the premium and any exclusions clearly defined, although the premium doesn’t need to have been paid until 20 December 2012.

However, one word of warning, some insurers may start to change to gender neutral pricing before then

 When 20 December 2012 has passed it won’t be possible to secure gender specific premiums in the future as start dates cannot be back dated. So come 21 December, it will be too late.

It is also important not to leave things to the last minute - give the insurance company time to do its work.

Almost all life insurance goes through an underwriting process, for some this is almost instant but for others it can involve getting a standard report from your doctor which can take up to four weeks.

Given that there is likely to be a last minute rush and that there is no flexibility on the cut-off date applying early could be prudent.

Santander to increase its Standard Variable Rate by 0.50%

Santander UK intends to increase its Standard Variable Rate from 4.24% to 4.74% from 3 October 2012.

There will also be an increase in the lender's SVR cap margin – the maximum amount above the Bank of England base rate that it can charge – from 3.75% to 4.99% from 24 September.

Santander said its competitors increased their SVRs by similar amounts earlier this year, reflecting the same market dynamics. In the past few months Halifax, Co-operative Bank, Bank of Ireland and Yorkshire and Clydesdale Bank have increased their SVRs.

Santander's analysis shows that its SVR mortgage holders will see an average increase of £26 per month for a £100,000 mortgage.

Santander now joins the list of lenders to hike its SVR, despite the fact the Bank of England base rate has remained unchanged since March 2009.

A Santander customer on its SVR rate with a £150,000 25-year repayment mortgage will see their payments increase by £42.54 a month; a significant amount for the many households who will be impacted by this.

Anyone affected by this or who is concerned their mortgage lender may join the SVR-hiking pack should consider remortgaging onto another deal if possible.

Speak to an independent mortgage broker like myself , if you are unsure of the best option as they will explain what is available to you and help to make the best decision for your situation.

As always thanks for your attention.

FSA to instruct banks to charge for current accounts

The Financial Services Authority (FSA) is to instruct banks to charge for current accounts, according to a report by consumer group Which?.

Research found charges for going overdrawn for two days per month without permission range from £120 to £900 a year, leading to confusion for consumers.

Customers who stay in credit also lose out through punitive charges levelled on withdrawing money abroad.

A senior executive at the FSA told Which? regulatory intervention may be needed to curb the problems arising from supposedly free banking.

Which? chief executive Peter Vicary-Smith said –

“Hidden charges completely shatters the myth that banking is free. The suggestion that banks should increase charges to avoid more scandals defies logic and is a slap in the face for consumers who are being hit hard by one of the worst financial crises in recent times. It's a disgrace that the very people who bailed out the banks are being asked to pay more for the most basic accounts, while the industry continues to be rocked by scandals like PPI mis-selling, LIBOR rate-rigging and IT failures. Banks must be far more transparent about their fees and charges so that people can clearly see what they already pay."

Many European retail banks currently level a monthly charge instead of relying on cross-selling or high hidden charges for income.

Peter McNamara, former head of personal banking at Lloyds, told the Today programme if UK banks wished to operate a similar system they would need to charge between £4 to £5 per month but felt the idea of  suddenly enforcing or regulating some charges on accounts is an extraordinarily unattractive one.

John Howard, former chairman of the consumer panel at the FSA, said he was in favour of monthly charges for a number of reasons.

Customers do not know "what the real cost of providing that basic banking service is", he said. "Banks have to be honest with us about what it really costs to provide that bank account. Consumers are immensely angry with the banks about everything that's happened, and the typical reaction is why should we pay banks even more. But there are real concerns that the regulator is trying to address, that free banking is creating distortions in the marketplace.”

The current system may have created the climate that led to the mass mis-selling of payment protection insurance (PPI), because effectively it encouraged banks to cross sell products, and unfortunately we are all too aware of what the by-product of that environment was.