Why are 8 out of 10 savers losing money in the UK?

Certain people believe that the low interest rates throughout 2009 have helped consumers put their extra cash into savings and it’s true to say that people with existing mortgages before the recession hit, now have a more disposable income, but what is the reality on savings in the UK?

With the inflation increase to 1.5% from 1.1% we should all be making more money on our savings but, in reality, we’re losing more.  Why? 

Well, when you stash your extra cash in what you believe to be a good savings account, the money you make is not just based on the interest rate.

You need to factor in inflation and then deduct the tax you owe before you can conclude a profit.  The higher inflation, the less your extra cash will be worth to you later on and the higher the interest rate would need to be to counteract this and compensate you, the saver.

After years and years of consistently deflated savings rates the majority of savings accounts are costing us money and, if you are a high rate tax payer, that will be even more than you anticipate, even factoring in those two criteria!

What can you do about it?  Shop around for other safer savings investments like property to let.

 
After all, property can only go up as “they don’t make land anymore” as one of my mortgage advisors told me!

What do the FSA reforms mean to me?

The Financial Services Authority (FSA) is the statutory regulator for the financial service industry in the UK.  Originally the FSA was given four specific, and equal, objectives by Parliament. These are: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers and fighting financial crime.

With the upheaval in the global economy the FSA has had to set out proposals for major reform in the UK especially in the mortgage market.

The belief is that lenders were too lenient about checking whether or not consumers could repay their debt whilst still having cash in hand and savings to shield them from unforseen circumstances and, as has been proven throughout 2007 to date many didn’t.

Now the FSA has introduced a proposal that will hopefully protect against consumers over extending their home loans and mortgages by ensuring that lenders use a more interventionist style of regulation.  What this means to the average consumer is:

- The lender will be held responsible for assessing a consumers ability to repay the loan

- Self certified mortgages will be banned

- Banning charges on arrears to ensure that no one profits from consumers in arrears

-  Ensuring that mortgage advisors are accountable to the FSA

-  Banning financial products that are sold containing ‘toxic combinations’ of terms that will put the consumer at risk

-  Requesting that the FSA are also allowed to extend these rulings to ‘buy to let’ and all other lending secured on a home i.e. where your house is used as security

Consumer concern is that this will inhibit their ability to secure a mortgage without large deposits and furthermore will deny them access to further loans using their homes as security and, as the banks tighten up their lending policies, the consumer is further feeling the pinch.

The good thing is that the FSA is doing this to prevent further consumer abuse and assist in regulating the financial services industry to encourage consumer confidence and assist in building a more sound economy.

The FSA are actively seeking views from the consumer on how they feel about the proposal and what else can be proposed to prevent similar situations developing.

I’m selling, do I really need a HIP?

As of the 6th April 2009 your property cannot be marketed until a Home Information Pack (HIP) is in place. The aim is to make the home buying and selling process easier and more transparent for consumers offering more information that should incur less wasted costs and delays.

For consumers, selling and buying property is a difficult process and one which is felt is made more so by the government’s introduction of Home Information Packs (HIPs) which puts more regulations – and penalties – on sellers than ever before. HIPs are an extension of the legal process of selling your home and it is important that you are looked after by professionals who understand all the requirements.

If, as a private seller, you market your home without a HIP, there is a £200 penalty.

Ask yourself these simple questions to find out if you need one before marketing your property:

• Is the property used or intended to be used as a residence?
• Is the property in England and Wales?
• Is the property to be sold without any tenant of the whole property?

If you answered NO to any of these questions, you do not need a HIP

If you answered YES to all of these questions answer the following:

Was your property put on the market before the relevant commencement date;actively marketed in the run up to the relevant commencement date and intended to be sold before the relevant commencement date? (See underneath for dates)

The relevant commencement dates are:

• 1 August 2007 for four or more bedrooms;
• 10 September 2007 for three or more bedrooms; and
• 14 December 2007 fro all other residential properties.

If you answered YES to ALL of these questions you do not need a HIP

If you answered NO to any of these questions answer the following:

Are you selling:

• non-residential property that is, and will continue after sale to be, used for non-residential purposes?
• Land ancillary to a dwelling house?
• A holiday home that you are not allowed to live in all year round?
• A property that has a mixture of business and residential use that you are selling as one unit such as a shop with a flat over it?
• A property that has can be used for business and residential such as a live/work unit?
• A number of properties that you are selling as one lot?
• A property that is unoccupied and unsafe for occupation?
• A property that is for demolition and redevelopment of the resulting site and has the appropriate planning consent for such demolition and redevelopment

If you answered YES to ANY of these questions you might not need a HIP but conditions are attached to these exceptions so you need to take advice before committing yourself.

If you answered NO to ALL of these questions you will need a HIP to market your home but the need for a HIP should not delay the start of marketing provided that you request the preparation of the HIP before your agent starts the marketing.

The required contents of the HIP are:

• Evidence of the Legal Title.
• Local Authority and Drainage Searches.
• An Index and a Sale Statement.
• If the property is Leasehold, a copy of the lease.
• An Energy Performance Certificate (EPC) which will guide buyers as to the home’s energy efficiency rating.
• Property Information Questionnaire (as from 6th April 2009)
• It should be noted that not all Home Information Packs are the same.

Our advice is to choose a solicitor that considers delivery of the HIP as part of the conveyancing process so that you ensure you have a fully compliant HIP that is valued by your estate agent and the buyer’s attorney.