Thursday, 26 September 2013

Payouts for 22,000 Clydesdale borrowers

More than 22,000 people with mortgages from Clydesdale and Yorkshire Banks are to be compensated for having too much taken in monthly payments.

The refunds will average £970 but range up to £18,000, the financial watchdog the FCA has said.

The FCA is also imposing a fine of £8.9m on Clydesdale, which includes the Yorkshire Bank brand and is owned by National Australia Bank, for treating customers unfairly when trying to put right their own error.

Clydesdale had installed a new computer system which undercharged borrowers for four years until the mistake was discovered in 2009.

The bank then adjusted payments to make up for the missing money, without telling 22,000 customers with shortfalls that they might not be obliged to to pay it back.

A further 20,500 who paid too much, some of whom paid off their mortgages early, may be able to claim compensation as well.

Clydesdale said the compensation and fine would cost it £42m.

The bank has apologised for episode and said 14,000 of the customers will receive full redress within 48 hours, in many cases reducing the amount they owe.

Monday, 23 September 2013

235,000 risking Child Benefit fine

235,000 Child Benefit claimants on higher incomes need to register with HMRC by midnight on 5th October or face fines.

After that they will need to fill in self-assessment tax returns, to be returned on paper by the end of October or by 31st January 2014 if submitted online.

HMRC says that 1.1m were caught by the new policy of removing Child Benefit progressively, through a tax charge, from those on between £50,000 and £60,000 a year and completely from those on over £60,000.

405,000 have simply opted out of the benefit. Others are already caught up in the self-assessment process or have recently registered.

But 235,000 have only 11 days to register or risk fines ranging up to 100% of the extra tax they owe. As Radio 4's Moneybox highlighted over the weekend, the fines could be many hundreds of pounds, in theory.

Child Benefit is paid at the rate of £20.30 a week for the first child and £13.40 for each subsequent one, so a family with two children receives £1,752 a year.

In reality, HMRC is only likely to impose 100% fines on deliberate tax-dodgers.

And there is a way to redeem yourself, even if you fail to register by the 5th October deadline.

If you still pay the extra tax due, through the self-assessment system, the penalty is likely to be offset against your tax - in other words, it reduces to zero.

Here's the government website which tells you how to register. It's a simple process - the tax forms come later.

Unpaid interns

If you're fizzing with fury about being taken on as an intern when you believe you should be paid a proper wage, here is the official write-up of the rules:

Rights for interns

What is a worker?

What is an employee?

Beware mortgages with built-in increases

Beware of mortgages which look cheap now but get expensive later.

That's the danger in the current splurge of so-called cheap mortgages which could bite back once interest rates and house prices jump higher.

For example, the Post Office is pushing "Another great mortgage rate" today which is 1.98% fixed for two years then a more daunting 4.49%. The later rate is variable, so it's likely to go higher.

And this is only for those who can muster a 25% deposit.

I've got nothing against the Post Office. It is good to see them in the mortgage market and there are worse rates out there - this is, in fact, one of the lowest of its type.

However the next two to three years are a slam dunk as far as interest rates are concerned. Mark Carney at the Bank of England says he wants to keep his base rate down at 0.5% until 2016.

Even if he fails, rates are going to be low for a while.

So the first point is that you need to think about the period after that. A mortgage, after all, is usually a 25 year commitment and most people aren't canny enough to switch providers at the drop of a hat.

There are five year fixed rates, for instance, which are well below 4.49%.

And -- second point -- you should think very carefully about how much you are borrowing at what could turn out to be significantly higher interest rates in the years to come.

Monday, 16 September 2013

Bank switching boom

People are doing 15 times as many internet searches for switching bank accounts than they were last year.

This intriguing information comes from Experian Hitwise - and suggests that the publicity around the new Current Account Switch Service is already having an impact.

1.       UK Internet searches for switching bank accounts have increased by 160% month-on-month comparing July 2013 with August 2013.

2.       Year-on-year there were 15 times more searches for switching bank accounts in August 2013 than in August 2012.

3.       Of all searches for switching bank accounts made in August 2013, 11% resulted in a click to news website.

4.       1 in 5 search clicks went to a price comparison site from a search for switching bank accounts in August 2013.

Experian adds that applying for a new bank account can have implications for your credit rating.

It's worth considering that the bank might not want you!

Thursday, 12 September 2013

Be vigilant on house prices says Carney

The governor of the Bank of England has told MPs how he might react if the recovery in the housing market turns into an unsustainable boom.

Asked in the Treasury Select Committee what could be done if house prices got out of hand Mark Carney said "we do need to be vigilant" and he would start with "more intensive supervision of mortgage lending".

Banks would have to make sure that there were appropriate limits on how much housebuyers could borrow in relation to their incomes or the value of the homes.

"There would be guidance to do with loan to income and loan to value," he said, though these would only have the force of recommendations.

And he warned that banks could be forced to set aside more capital to discourage them from reckless lending.

"You can extend all the way to sectoral capital requirement, additional capital required that banks would have to hold for mortgage lending," he said.

Today saw further evidence of a housing market revival, as lenders reported that lending to first time buyers was up 41 per cent compared with last year.

However, Mr Carney commented that the recovery needed to be put in context because activity was still at "two thirds or three quarters of pre-crisis levels".

"There are big pockets of the country where there has not been any meaningful recovery," he added.

Will low unemployment trigger higher interest rates?

So this is an interesting point arising from the evidence Mark Carney is giving to the Treasury Select Committee. If unemployment drops to his threshold of 7%, does that automatically mean interest rates will be pushed up by the Bank's Monetary Policy Committee?

Perhaps not.

Because he's told them: "The 7 per cent threshold is a staging post. When we get there we have to evaluate what has happened to productivity, what are the broader labour market indicators."

On the one hand the Bank is saying it will take 3 years to get down to 7%. On the other, City econimiosts are saying the threshold might be reached in just a year or two.

But the MPC does have to move as soon as the threshold is reached. Carney has reiterated that 7% is the point at which the " MPC will consider tightening".

Carney stick with low interest rates

The governor the Bank of England, Mark Carney, has stuck firmly to the Bank's new policy of keeping interest rates low until unemployment falls to 7 per cent. He was answering questions from MPs in the Treasury Select Committee.

In an approach known as forward guidance, the Bank's Monetary Policy Committee has made it clear the rates will be kept down at the historic low of half of one per cent until the unemployment threshold is reached, most likely for three years.

He acknowledged there were forecasts in the financial markets that interest rates might end up being raised later next year or in 2015, saying "On average the view of the market is that the threshold will be achieved sooner."

But he gave no signal that the bank was changing its stance, adding "What's important is that this about the conditions when the MPC will consider tightening. That is summarised by the the 7 per cent threshold."

Challenged on the plight of savers, still destined to put up with paltry interest rates for a long time to come, he said he had "tremendous sympathy for them".

He said "They've done the right thing, they've set money aside."

"With growth will come higher interest rates for those savers. Our job is to make sure this economy reaches escape velocity and can sustain higher interest rates."