Mortgage borrowers vulnerable to higher rates

Bank of England Financial Stability Report's "significant" worries about UK borrowers:

"A significant cohort of UK borrowers could experience financial difficulties if interest rates were to rise during a period of subdued income growth.

"...households accounting for 9% of mortgage debt would need to take some kind of action — such as cut essential spending, earn more income (for example, by working longer hours), or change mortgage — in order to afford their debt payments if interest rates were to rise by just 1 percentage point...

"This would rise to 20% of mortgage debt if interest rates were to rise by 2 percentage points. Provided borrowers are able to take actions in order to afford their debt payments, then this may not lead to significantly higher losses for banks.

"The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), with other Bank staff, should provide an assessment to the FPC (Financial Policy Committee) of the vulnerability of borrowers and financial institutions to sharp upward movements in long-term interest rates and credit spreads in the current low interest rate environment. They should each report back to the FPC in September 2013."

2.5% for lending to Mr Osborne

Interesting that the current ructions in the markets mean that investors can earn 2.5% by lending their money to the government.

That compares to 1.76% for the best easy access savings accounts. One of those is the government's National Savings, ironically.

The best easy access Individual Savings Accounts are about the same.

Accounts where you have to give several months' notice pay 2%.

Tying your money up for 5 years, you can achieve the dizzy heights of a 2.9% return.

So lending to the government by buying what we call Gilts (they're government bonds or IOUs), might be getting more attractive if you've got £1,000 or more to stash away.

Gilts are virtually risk free, because they depend on the solvency of the state EXCEPT for one thing.

You're guaranteed to get the underlying amount of the loan back at the end of the term, but the price can fluctuate along the way - because Gilts like other bonds are traded in the financial markets.

The 2.5% is for 10 year Gilts, though you're not committed for 10 years.

You can buy or sell via brokers or from the Bank of England's Debt Management Office which has lots of other info.

Savings rates cut in half

Interest rates for savers have plummeted since the Bank of England started to channel cheap money to banks and building societies last August through the government's Funding for Lending Scheme.

The point was to cut the price of mortgages and that seems to be working (boosting lending to small businesses has been a bit more of a problem).

But the Bank of England's latest figures show that the average Individual Savings Account (ISA) is paying just 0.69%, half the level of last summer.

The ones with first-year bonuses have dropped to 1.4% from 2.6%.

Normal savings accounts (not tax free ISAs) haven't dropped so much, but they tend to pay lower interest rates anyway.

Banks just don't need to attract your savings. They can get their funds elsewhere.

Pay is higher but it buys less

Pay's gone up much less than prices, as well all know.

Today's figure of £447 as the average weekly regular pay, compares with £392 six years ago, in 2007, before the financial crisis.

14% more.

In comparison, prices measures by the Retail Prices Index or RPI are up 21.5%.

No corp tax flowing from Thames Water

Another company pays no corporation tax. This time it's Thames Water during the 2012-13 tax year.

Here are the numbers:

Turnover £1.8bn
Operating profits £549m (that's after business costs)
Pre-tax profit £149m
Corporation tax: Nil

Thames Water's explanation is that it has invested nearly £1bn in new water infrastructure and there are tax breaks for investment.

In exchange for spending money on new pipes and drains, they can defer paying tax until future years.

But it's also important is that it has huge borrowings, incurring £405m in interest during the year.

Like every other business, Thames can lop of the cost of interest from its operating profit to calculate its taxable profit.

It's net debt is a colossal £8.4bn.

Bank agree to axe fees

The financial watchdog, the FCA, is making banks take full account of the money customers pay into their accounts each day, even if it arrives after direct debits and standing orders have been paid out.

Previously banks made £200m a year from penalty fees on items which were unpaid because there were insufficient funds in the account.

The FCA decided this was unfair on customers because regular deductions, such as direct debits, tend to be removed first thing in the morning.

Now 7 of the biggest banks - including Barclays, HSBC and RBS -- have agreed to operate a retry system in the afternoon, probably between 3pm and 4pm, which takes accounts of new credits, salary payments and cheques which have cleared during the day.

Lloyds Banking Group has also signed up, but says as yet it's unable to retry all payments in the afternoon.

Until its systems are updated, any Lloyds customer who incurs a late payment charge because money hasn't been properly credited will be able to claim a refund.

Stop the card and PIN thieves

Tips for evading the cash machine con merchants.

What they often do is look over your shoulder, usually the left shoulder, to see you tapping in your PIN - that's why it's called shoulder-surfing.

Then they dodge round to your right hand side and distract you when the machine gives you back your card. And they take it.

Distraction techniques include: shoving a leaflet in front you and above the card slot, engaging you in a spurious conversation, telling you that you've dropped something.

So what can you do?

1. Shield your PIN, with your other hand or with something you can hold.

2. Make a habit of using cash machines inside branches. They're safer.

3. Choose a more difficult PIN, one that is hard to take in at a glance.

4. It still has to be easy to remember - so you never feel the need to write it down.

5. Consider including numbers in the bottom right-hand corner of the keypad, such as 6,8 and 9, because they're harder to see if a thief is looking over your left shoulder.

6. If people are hanging around the cash machine, go and find another one.