Money news, advice and predictions for savers and spenders.
By Jeremy Gates
Two years into a credit crunch which started in autumn 2007, it's easy to get carried away by the euphoria created by the booming stock market and widespread talk that recession is over.
At household level, the situation is more serious, with accountants KPMG predicting personal insolvencies will hit a record 150,000-plus in 2009. Debt Relief Orders, enabling consumers with debts under £15,000 to escape bankruptcy, are 28% up on 2008 levels.
With widespread job losses yet to really start in the public sector, finances for many households will be strained for months, even years, to come.
Here's some tips for slashing your costs:
:: Cut energy bills
Households paying online and by direct debit now pay £284 per year less than those which get bills through the post and pay by other means - that's £978 against £1,262.
The gap could top £300 soon, reckons Mark Todd at energyhelpline.com.
"It is no accident that the gap is widening so fast," he says. "Many people are coming off capped rates at the same time, so the energy suppliers - six majors and smaller players - are swooping like vultures to grab as many as they can.
"On the surface, it doesn't look fair, but we are a competitive market now, so consumers must look out for themselves. Unless you are vigilant and shop around, you won't get a good deal. It's as simple - and brutal - as that."
Todd says consumers may need only an email address to get the best deals. For EDF's Online 5 account, they can sign up on the internet and then ask for paper bills.
Around 40% of consumers pay bills by direct debit, saving an average £98 per year. But price comparison website uSwitch fears that consumers are starting to shun direct debits, amid fears suppliers use them to boost profits - and Ofgem is promising tighter rules to protect consumer interests.
:: Save more with coupons
With profits at Morrisons surging 40% on a promise of good value, supermarkets chasing market share are expanding own brand lines, including Waitrose Essentials, Tesco's Discounter range and Sainsbury's 'switch and save' campaign.
But canny shoppers can go one better by using vouchers to cut prices of many goods and services.
Research by uSwitch.com says 73% of shoppers opt for supermarkets' own labels, while 74% use 'money-off' coupons on the weekly trolley dash. A fifth compare prices online before they shop.
There's been a massive switch to vouchers and coupons in the past year.
Around 70% of ABC1 consumers - professional and white-collar workers - admit to using money-off vouchers in the past six months, says consumer think-tank the Future Foundation.
Many in poorer-paid jobs miss out: only 62% of consumers in the C2DEF social groupings got the same deals.
"Culturally, there's been a major shift," says Brad Liebman, founder of voucher, sale and discount search engine BView.co.uk.
"Six months ago, I had no friends who admitted to using vouchers. Now they brag about it. Even friends with cushy jobs boast about savings they make."
Robin Goad, UK director at 'competitive intelligence' service Hitwise, says: "People look online to research a product, looking at where to find the best price, and finally doing a search to see if there is a voucher for it."
A Financial Times report claims websites for voucher hunters - including vouchercodes.co.uk, myvouchercodes.co.uk and everydaysale.co.uk - are booming.
BView launched a voucher search engine in April 2008 to promote local stores, while Duncan Jennings launched VoucherCodes.co.uk in August 2008.
He now has nearly 500,000 members, and claims to be adding 10,000-20,000 per week.
:: Make savings count
Although 14% of building societies have closed in the year since Lehman Brothers collapsed, Kevin Mountford of moneysupermarket.com claims that savers have not suffered adversely in the banking crisis.
"Although interest rates are down from 5.25% to 0.5%, because savings rates have decreased by a lesser degree (and indeed are starting to rise again) savers get a better margin above base rate than this time last year," he says.
"The average rate of the top-five easy-access accounts is now 3.15%. This may not sound impressive given that rates topped 6% this time last year, but it's 2.65% above base rate.
"And with inflation having plummeted over the past 12 months, savers needn't worry that the value of returns is eroded by rising prices.
"In September 2008, when the Retail Price Index was running at 5%, a standard-rate taxpayer needed a rate of 6.35% just to break even."
:: Try to pay off debt
Although personal debt levels fell last month for the first time in 16 years, Danny Cox of Hargreaves Lansdown says this should be only a start.
"Reduce spending and use money saved to reduce personal debt first (credit cards, overdrafts, store cards, loans) and then your mortgage," he advises.
"Hold a cash cushion to help meet unexpected bills or to cover expenditure if income reduces or falls.
"Over-50s should remember the ISA limit for this year rises from £3,600 to £5,100 from October 6, but unless they are very disciplined in financial matters they should use spare cash to pay down debt, instead of putting it into ISAs."
:: Hunt for the cheapest loans
Nationwide BS claims its market-leading rate of a typical 7.7% APR on £5,000-£14,999 loans compares well with rival supermarkets and High Street banks - although customers need a Nationwide FlexAccount, with minimum monthly turnover of £750, to qualify.
"If you need to borrow to buy a new car, or a better secondhand one, a personal loan can be the cheapest option," says Nationwide's Chris Rhodes.
"Packages offered by dealers can look attractive, but a special offer of 0% finance for the first year can move into a higher rate for the rest of the term and prove more expensive in the long run."
:: Use credit-card reward schemes
Research from Sainsbury's Credit Cards says the number of deals with reward schemes is down to 67%, from 78% a year ago - and 46% of cardholders don't bother to reclaim rewards anyway.
Sainsbury's reckons the average reward earned each year is £79.33, but four Nectar points on every £1 spent at its stores amounts to a 2% cashback.
Nectar points can be claimed from many suppliers, including energy firms- often on money which would have been spent anyway.
:: Rent, don't buy
In August, rentals of DIY equipment surged 35%, gardening equipment 28%, and motorhomes 54%, according to online rental marketplace erento.co.uk.
As the number of rubbish skips in the street rises, erento claims that rising demand for power drills (from £10 per day), wallpaper strippers (£12), tree pruners (£8), hedge-trimmers (£12) and lead blowers (£10). You can be a 'white van man' for £45 per day.
:: Find a pawnbroker
Turning valuable goods into cash is a last resort, and a lively battle is on the cards between national chains such as Albemarle & Bond.
Online pawnbroker Borro.com says its average advance is £950, against the £150 it claims an average High Street shop offers - partly because it is ready to lend against watches.
Borro.com also lends against diamonds, jewellery, art and even prestige motor vehicles.
Its founder Paul Aitken claims his average interest rate - 4.5% per month - is low for the sector. His London shop in Chancery Lane, he says, is full of City types - who presumably missed the latest bonuses.
Poundnotes
:: With the Bank of England's rate unchanged at 0.5% and likely to stay that way into 2010, Ray Boulger at leading mortgage broker John Charcol says tracker and discount-rate mortgages continue to look a better bet for any borrowers who don't need or want the security offered by fixed-rate deals.
However, the moment may come when they want to switch to a fix, so new borrowers should either get a tracker or discounted-rate loan with no - or a low - early repayment charge, or one with 'a droplock option' to make the switch as painless as possible.
John Charcol enquiries: 0800 718191 and www.charcol.co.uk.
:: Drivers who keep to the same car insurer on renewal (one in five of the total) might waste £141 per year and maybe £9.4 billion in all, claims website moneysupermarket.com.
Its head of motor insurance Steve Sweeney says motorists in North Ireland are most likely to stay faithful to the same insurer, staying an average 3.2 years, followed by South West, East Anglia and North East (all 2.9 years).
"Even if you think a quote can't be beaten, it takes only minutes to make sure you really do have the best-value policy," he says.
:: There are plenty of decent new accounts to tempt lump-sum savers: Barnsley BS has two new fixed-rate e-bonds, both paying 4% gross over two and four years on minimum £100 deposits, with a slightly lower return if paid as monthly interest, and this may be a limited issue.
Meanwhile, Sainsbury's Finance has a new online savings account paying 3% gross (variable) on balances from £1,000, with a limit of three withdrawals in year one. Go above that limit and the rate crashes to 0.5%.
Nationwide offers a one-year fixed-rate bond paying 3.25% gross for £10,000-plus, and an e-bond paying 3.25% gross on £10,000-plus - or 3% gross on balances below £10,000.
:: Although they are propped up with billions of pounds of taxpayers' cash, High Street banks are tempting smaller investors again, claims execution-only broker TD Waterhouse, which says Royal Bank of Scotland was the most popular stock with Lloyds Banking Group close behind.
However, Bill Mott at PSigma Income Fund says the 'bull run' in mining stocks will end soon, while nobody really has a clue to the actual value of bombed-out banks. He holds shares only in HSBC, among banks, but has nearly 18% of his fund in oil and gas (BP, Royal Dutch Shell, and BG).
Mott particularly likes pharmaceutical firms such as GlaxoSmithKline and AstraZeneca because of their huge potential in emerging markets.
He has slashed the number of holdings in his fund from 125 to 84, and predicts that the current 'anaemic 'recovery will see many more shocks for shares in the short term.
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
West Bromwich BS www.westbrom.co.uk 5.45% (F) E Bond 32 31/07/14 £5,000 Yly
Aldermore 01372 736700 5.40% (F) Fixed Rate Bond Five Year Bond (P) £10,000 Qly
First Save www.firstsave.co.uk 3.25% 90 Day Notice 90 Days £5,000 Yly
Nottingham BS 0845 155 6330 3.15% Postal Access 50 50 Day (P) £1,000 Yly
Chelsea BS 0800 678 3885 3.10% Call Direct 120 120 Days £1 Yly
:: Top-five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 1.99% discounted for two years 60% £1,199 Yes
First Direct (Rem) 0845 610 0100 3.14% variable for term 75% £699 Yes
Co-operative Bank 0800 633 5286 3.24% to 30/09/12 75% £995 Yes
ING Direct (UK) 0845 603 8888 3.29% for term 75% £595 Yes
Leek United BS 01538 380047 3.59% to 30/11/11 75% £799 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).
