It’s been an extraordinary week in the financial world, with predictions of world economic meltdown and the vanishing of major players from the word’s money markets and from the High Street. What concerns the man in the street, however, is the safety of his bank account, pension plan and mortgage. Will the cost of his insurance or his loan be affected? The general consensus from the experts is that although the money is safe, prices will inevitably rise.
In a letter to the Times this morning, a group of business leaders demand a ‘new direction’ for the economy from the government, suggesting less regulation and a more tightly controlled approach to public spending might have prepared the UK better for the current crisis. The group write, ‘The lesson of recent years is clear. Economies must carefully manage public spending and reduce unnecessary budget deficits.’ They go on to say, ‘It is time for a new direction which ensures that in future Britain is better prepared for economic downturns and better placed to compete in a global economy.’
New mortgages are expected to cost borrowers more as a result of the financial chaos. Expert Ray Boulger, from mortgage brokers John Charcol, says, ‘Expect a raft of increases, probably of around 0.2 percentage points in the cost of fixed rate mortgages next week and smaller rises in tracker rates.’ This news comes at the same time as new figures showing lending for new mortgages has fallen to its lowest level for three years.
Meanwhile, a study for the Daily Mail suggests that customers of the new ‘super-bank’ to be created from the merging of Lloyds-TSB with the Halifax could be up to £405 a year worse off. The study, which was carried out by Moneyfacts.co.uk shows that Lloyds-TSB on the whole offers a raft of poorer value financial products than the Halifax and it is feared that it could shift customers to dearer deals.
With unemployment soaring and the uncertainty over financial institutions, it would be expected that insurance and financial protection policies would rise straight to the top of consumers’ shopping lists. However, a survey on behalf of American Express has shown that three out of ten people are prepared to jettison their mortgage protection schemes because of strains on their personal budgets.
‘The credit crunch has brought personal budgets into sharp focus,’ says Roger Edwards from insurer Bright Grey. ‘However, this shouldn’t detract from the importance of being protected if the worst happens and you lose your job or are too ill to work. In fact in times of economic uncertainty, protection insurance is one thing which can ease people’s concerns about the future.’ Less than half of the working population currently has any form of life insurance, credit card insurance, critical illness, health insurance or income protection cover. Some have no insurance in any form whatsoever.
For the older segments of the population struggling with the soaring cost of living comes a stark warning from consumer group Which?, who warn that home equity release should be considered carefully. Co-author of the ‘Care Options in Retirement Guide’ for Which? says, ‘Equity release might seem like the solution for any pensioner struggling to make ends meet this winter.’ Equity release schemes provide an income whilst enabling the borrower to stay in their own home. However, Spiers adds, ‘If your circumstances change you might not have enough money remaining to fun alternative accommodation, and money received through equity release may seriously alter the amount of benefits you are able to collect.’ He concludes ‘Anyone considering equity release should do so cautiously – and only after exhausting other options.’