There are some excellent savings rates on offer at the moment offering well above base rate, but both the Post Office and the Britannia Building Society are offering something a little different, presumably to calm the fears of investors spooked by stock market volatility. Both have Guaranteed Equity Bonds (GEBs) which allow you to benefit from rises in the market, while also guaranteeing you’ll get all your money back at the end of the investment term, even if markets fall.

There are downsides to this - you’re not going to get absolute top rates of interest for example. The Post Office’s Five-year Saver account splits your cash in two, with half earning 5.75 per cent gross interest over the five-year term, and the rest earning 50 per cent of any increase in the FTSE 100 over the term. Should the FTSE fall, you get your original investment back plus the interest you earned on the other half. The account is open until 4 October, with £500 the minimum investment.

Britannia’s Guaranteed Capital Bond is another five-year deal aiming to offer ‘a buffer against the effects of inflation’. It does this by giving you either 50 per cent of growth in the FTSE 100 or any percentage growth in the Retail Price Index, whichever is the greater. See www.britannia.co.uk for more.

Call it weltschmertz, call it morbid curiosity, but the propertysnake.co.uk website is horribly fascinating for us observers of the UK property market. Like watching a car crash in slow motion one knows one should turn away … but the eyes are irresistibly drawn back. The site does one thing only - charts individual price falls on properties in your (and every other) area of the UK. Prices are given, then percentage falls, then the stages of price fall (£50,000 in May another £30,000 in June and so on), with the highest percentage fallers at the top (currently there are properties nudging 50% falls). You can sort by biggest fall, area, most expensive to cheapest and so on.

Propertysnake is a staggeringly simple website, with a great deal of computing power behind it, and is made possible by the powerful database accessing abilities and fast data transfer speeds of the modern internet. It’s also made possible by the critical mass of properties on the agents’ sites these days (and also on the aggregated sites, such as rightmove.co.uk and findaproperty.co.uk). Propertysnake can hit those sites and, courtesy of the database, spot changes, calculate and rank. Unsurprisingly, it’s not proved a big hit with estate agents, and Propertysnake has been threatened with legal action, which is why many of the properties onsite no longer have photos. But for getting the ‘feel’ of price movements in an area, it’s unbeatable. Also note that Propertysnake lists changes in asking prices, not prices achieved. For that you’ll have to go to the Land Registry Figures.

For those optimists calling the bottom of this particular asset price slide, we’d caution there’s a lot more pain yet. I spoke to an estate agent this week who, yet again, told me this ‘credit crunch thing’ was nonsense dreamed up by pessimist journalists. If I were a fortune teller, I might point out that the stock markets generally give a good six month lead on the financial health of the economy - with the FTSE 100 dropping below 5300 on 11 July, to its lowest close in nearly three years, I’d guess that there’s more pain to come for the economy, and thus the UK housing market. Keep watching that propertysnake!

Tag: Propertysnake.co.uk, credit crunch, UK house prices

More on property investment.

A former Bank of England majordomo has warned that Britons will be going back to the seventies, and we’re not talking T-Rex albums and the upcoming Sweeney movie. Willem Buiter, one of Gordon Brown’s first appointees to the Bank, said Britons face a “painful couple of years”, and urged the Monetary Policy Committee to raise rates twice to cap inflation.

We ARE talking rising prices, contracting demand, unaffordable property AND mortgages. Most of all, we’re talking really expensive fuel. We all know about the horror of UK petrol prices: the climb in the oil price shows no signs of slowing yet (although it does show all the signs of an over inflated commodity price bubble). We also have ever mounting gas prices, a function of under supply, increased demand, and speculation by investors looking for a haven, any haven, for their cash.

As one who did his homework by candlelight during Ted Heath’s fuel crisis and 3-day week, I feel I’ve pretty much seen the worst (at least by cossetted UK standards), but even though the lights will certainly stay on, there’s no doubting how painful it will be for a generation or two used to the NICE decade and ever increasing, low cost supplies of everything. Britons living standards will fall … but it’s not just about forgoing that new iPod or changing your car. It’s a lot more basic and bloody than that.

First of all, the official inflation figures may not be as ‘fixed’ as some of the more headbanging conspiracists would have it, but they certainly don’t reflect the reality for those Britons on lower wages. Official figures already factor out interest on mortgages, but they also gloss over the fact that inflation is much higher on certain goods (petrol, butter, bread and other basic consumables) and that these basics make up a much bigger proportion of the shopping basket of those at the economic bottom. A professional earning £80,000 a year can absorb the extra on their groceries and the rest … it means less for luxuries. But a one-parent family struggling to do the budgeting on a few pounds a day will find their safety net whipped away. Inflation disproportionately targets the poor. Britons living standards will fall … but those with the lowest living standards will suffer a greater fall.

And it’s a vicious circle for the economy too. This ‘deflationary inflation’ will see spending curtailed (we cannot but spend less when we have the same wage but goods cost more) and this will hit UK companies producing services or (decreasingly so these days) goods. Britons living standards will fall then, but that will impact on the wider economy. And if UK companies are taking less in through the tills, they will start to lay people off … so expect a spike in unemployment. The one bright-ish spark is that with a weak pound and a strong euro, fewer off us will be holidaying abroad or buying imported goods, so we’ll be buying more home-produced products and services. It’s a feeble glimmer, and it doesn’t help UK’s huge electrical stores, which largely turn over cheap imported white goods and other consumer durables. Belt tightening time then … see our tips on surviving in a downturn.

Tags: Inflation, Recession, Saving Money

Related posts: Tips

There’s an old Chinese curse along the lines of ‘may you live in interesting times’, the argument being, of course, that after our brief flaming teenage years of partying much too hard, driving too fast and embracing risk, most of us want good, solid, tedious certitude in our lives.  Steadily rising house prices, enough inflation to fuel growth, and the gradual erosion of our personal and mortgage debt … that will do nicely. For the journalist though, exciting times are precisely what are required, and they don’t get much more interesting and dangerous than the dying days of Gordon Brown’s premiership. House price collapse, inflation picking up to a trot, the credit crunch, the soaring price of commodities … and a general confusion about where to put our cash for safety let alone growth - financial journalists have rarely had so much to write about or been so much on the front pages.

But amid all the noise about negative equity (in which a quarter of a million Britons now find themselves according to the weekend papers, and with four times that at risk) and the inability to get credit, an interesting little announcement from the British Bankers’ Association lurks buried. The BBA reported that the amounts being deposited by savers in April 2008 set a monthly record. The credit crunch may have reined in the Britons’ thirst for credit, if only by default, but it would seem we have actively rediscovered the savings habit that the more prudent among us thought was gone forever. A piece in this Sunday’s Observer nodded approvingly to Germany. Long derided as boring and slow growth, because of Germans’ reluctance to incur debt (largely assumed to be a race memory from the days of hyper inflation in the 1920s), Germany now sees itself set fair to grow and with no massive weight of personal debt holding it back. ‘When Britons want something they borrow, when Germans want it, they save’ was the quote. So Germans have only recently taken to the credit card, and in much smaller numbers than the Brits.

If the British are borrowing less and saving more, then it’s a welcome return to sanity, though the figures are unlikely to make much of a dent in the repos and bankruptcies that are sure to come in the next few years. More to the point is that we may have learned a lesson. Japan is another country with low debt and no housing bubble, but coming from a very different place than the Germans. The Japanese are just crawling from the wreckage of their own super-inflated economy, which crashed so spectacularly in the last decade of the last century. Property prices there have fallen by up to 80 per cent. The Japanese economy is now starting to grow, steadily, and with most of the toxins purged from its system. Two different countries, at two different stages of the cycle, both with prudence hard learned from inflation and collapse … Could Britain learn their lesson?

I would always have advised anyone looking for a mortgage deal to go through a broker. They may have deals they want to push, and have fees to be paid (if not directly by you then certainly indirectly as it’s always the end user who ends up paying somehow) but these costs were always far outweighed by the benefits. Among these are the fact that many of the lowest mortgage rates where only available to dealers, not to retail customers. And when you factor in the time and hassle involved in your searching through hundreds of deals yourself (and the unlikelihood of your actually finding the best deal yourself, think needles and haystacks) then it simply made sense to use a broker. But a couple of things this week have confirmed that the best mortgage deals are no longer through brokers.

The Financial Services Authority (FSA) announced in late May that ‘the deals brokers can access are often significantly more expensive than those available direct from lenders’, and there are some good reasons for this. Firstly of course there is less money and fewer mortgage products on the market - so it’s not so hard for the banks to market their new product, and to make it stand out from an increasingly sparse crowd of competitors. Also, the banks and building societies are no longer climbing over each other to punt their products to the competition (in fact many institutions are positively discouraging us from taking out mortgages with them), so there’s not much point in paying a middle man to hook you in. In short, there aren’t enough mortgage funds to satisfy demand, so it’s a seller’s rather than buyer’s market (albeit a market the sellers dislike intensely).

The bottom line is that as the best mortgage deals are no longer through brokers, you should do your own research on a new mortgage, and it’s much easier to search the whole market with the paucity of products on offer. By all means consult your broker too, for a benchmark comparison. But don’t be at all surprised if he can’t meet your go-direct deal.

For more on mortgages, property and investments, see our archive of features and tips.

But times change, and the Financial Services Authority

The news on petrol prices doesn’t get any better for UK drivers, making it more important than ever to shop around, something we’re not really used to doing, rather responding to the fuel gauge than anticipating where we’re going to buy. Buy as I’ve written before it’s well worth putting a little research into finding cheaper petrol, and there is a plethora of vanilla-simple, Web 2.0-style websites out there pointing you in the direction of your nearest and cheapest filling station.

An AA survey published on 20 May confirmed what most of us might have suspected. That diesel prices in May 2008 saw their “biggest monthly increase in a decade”, with the average price of diesel rising 6.76p, up to more than 124p a litre, in just a month. It’s a staggering price rise and closely tailed by petrol, which is up 4.49p to 112.55p over the same period. Interestingly, the AA also found out that 16% of drivers were deciding to use their cars less - though whether that intention translates into practice is arguable. Petrol is priciest in London, and cheapest in Humberside and Yorkshire, though there isn’t much in it. Anyone on the trail of cheaper petrol certainly shouldn’t be driving hundreds of miles for it.

So what can the beleaguered motorist do? Well our favourite sites include Petrolprices.com and Whatgas, which uses Google maps rather well to orientate users. Intriguingly too, we’ve come across a site called Petroldirect, which promises to save you money by shipping fuel direct to your door. Now I haven’t tried this, and at first glimpse the logistics seem … challenging shall we say, though the fuel is delivered in poly cans rather than a fuel tanker fetching up on your drive! So I’m intrigued to hear from anyone who’s given them a pop in their quest for finding cheaper petrol. Check out our previous posts on Petrol Prices in the UK and Fuel Prices in Europe.

When Bank of England Governor Mervyn King referred to the end of ‘the NICE decade’ this week he was referring to more than just the good times being behind us. ‘Nice’ is one of those handy little acronyms economists coin … in this case referring to the period of ‘non-inflationary, constant expansion‘ that has been the norm under Labour (and which to Gordon Brown’s chagrin no doubt promptly ended as soon as Prudence got the keys to Number 10.

NICE … non-inflationary consistent expansion … it’s the Holy Grail of economic policy, as growth invariably goes hand in hand with inflation. Growth means more demand for raw materials, for services, for goods – all good stuff but increased demand means prices can and will rise. The only way to combat that is to increase supply, which is good again for suppliers and the economy as a whole. Oversupply, of course, means prices fall neatly back – supply equals demand and we have equilibrium. Basic economics, but oh so hard to maintain … and of course nobody is actually running the economy, that’s the ‘invisible hand’ of millions of individual companies and purchases working together to somehow keep things in stasis.

In practise of course, with a growing economy, supply never quite chokes off prices, and burgeoning economies tend to have inflation – bad for central planning and bad for our savings (though very useful for eroding our debts!). Yet for a decade Gordon Brown pulled off the ‘nice’ trick. That, alas, was due more to an avalanche of cheap imported goods and the swiftly diminishing price of the technological baubles we lBrits ove to spend our cash on (often liberated from our homes through equity release). Computers, TVs, DVDs, iPods and the rest were all swiftly maturing technologies, dropping swiftly in price as production increased and economies of scale (and new cheaper manufacturing processes kicked in). But DVD players, cars and Plasma tellies just aren’t going to get that much cheaper. And that leaves us with a big debt. Irony of ironies, we’ve used the inflation of our house prices to fund purchases of cut price goods. Now deflation hits the housing market and the spending party is most definitely over.

Read more about the end of the Nice times at ‘What does stagflation mean?’

One of the best current credit card deals comes from Ulsterbank personal finance services. The Northern Irish bank, which these days is under the umbrella of the rather beleaguered Royal Bank of Scotland group, is offering 0% on balance transfers and purchases for the first six months on its Visa and MasterCard products. Thereafter, interest reverts to the usurious norm of the banks – 19.9% APR being its standard variable rate. Nothing unusual about that, but as ever you must ensure that you switch to another product before your interest free period ends.

Ulsterbank personal finance also offers a Gold Card which, like most gold and platinum credit cards in our opinion, offers the customer little extra apart from the spurious kudos of having a gold coloured piece of plastic rather than a red, black or garishly patterned piece of plastic. The yearly interest rate is somewhat lower at 16.9%, but as you aren’t going to be daft enough to pay interest on your credit card anyway, that shouldn’t concern you. It DOES offer free travel insurance and free extended warranties on certain products, though you’d have to cost out the saving very carefully against some of the very good travel insurance deals already out there to check it was actually paying for itself.

Ensure you aren’t getting ripped off on your credit card. Read our piece on zero percent credit cards and low APR credit cards and make sure you’re getting the best possible deal.

So where DO we go for the best interest rate on savings accounts just now? The decision by the Bank of England to hold interest rates unchanged at 5% this week comes as no great surprise, but it won’t gladden the hearts of those (particularly older people) who have low or no mortgages but a lot of their money held on deposit. They are looking for a return on that money, but the best interest rates on savings aren’t nearly as compelling as they were – and with inflation on the rise, effectively eroding those savings, it’s hardly an incentive to save rather than spend.

The oddity of this oddest of years, of course, is that the Bank of England Base Rate is increasingly at odds with other interest rates in the market: this because of the credit crunch, the resultant reluctance of banks to lend money to each other. This in turn means they have less to lend to us in the form of mortgages and loans, so the price of those goes up – that’s why interest on your variable rate mortgage hasn’t followed the base rate downwards.

But this should be good news when it comes to the best interest rates on savings accounts right? Especially as the banks try to encourage us to save money (therefore giving them more of the scarce stuff to play with). Well up to a point. You will find some very good savings accounts just now, check the best interest rate on savings accounts for more, including a very good 6.5% instant access deal from the Birmingham Midshires Building Society. But be very wary – banks are notorious for enticing us in with a good savings rate, the ‘headline rate’ and then quietly shelving it later on. Let’s not sulk about this, banks are businesses which don’t make anything – they have no function other than to turn small sums of money into bigger sums of money. What YOU must do is keep an eye on your account, and switch when the rate is cut. And if you’re going to leave your money on deposit for a while, go for a cash ISA – for higher rate taxpayers at least they have significant advantages. See How Do ISAs Work for more.

The British love affair with credit and their plastic cards may be coming to an end and, like many relationships painfully terminated by one party, it isn’t going to be very nice for the other partner. We’ve become comfortably used to zero percent credit cards and low APR credit cards over the last few years – with credit card rates (at least some of them) being driven down over the last decade or so as customers militated against the punishingly high rates that were standard in the early and mid nineties. Those were the days when lenders could get away with only quoting the monthly rate, bamboozling us with ‘APR’ and headline interest rate … basically anything but telling us that we were paying 25% a month, compounded on our sliver of plastic.

Truth to be told, it’s not THAT much better now, but at least it’s been possible to seek out low APR credit cards, with a slew of information on the internet and very good sites such as moneysavingexpert.com shaking their readers and demanding they go and find the best deal. There were always, of course, less savvy or less credit worthy borrowers subsidising such deals. One of the great injustices of financial life (though when was fairness ever a player in the money business) is that the poorer you are, the more you pay for credit. So, if you’re the owner of a shiny corporate business credit card, then not only are you not paying for credit … but your employer has negotiated a great deal whereby they are paying very little. But we’re not here to debate whether it’s fair that the possessor of a Coutts Credit Card is paying less interest per month than the eye wateringly 39.9% on the Vanquis Credit Card (a card offering credit to those with poor credit histories … now there’s a good idea), the party is over for all of us. moneyexpert.com this week reported that the credit card companies have turned down some three and a quarter million applications for credit cards in the last six months. Another 161,000 of us have had our cards cancelled.

Now you can try and repair your credit history, but the real issue is that the lending parameters have tightened. Their just isn’t much credit about. And if you’ve become used to living beyond your means (bluntly, that’s everyone who doesn’t pay off their balance in full each month) then the ‘no’ letter from Royal Bank of Scotland credit cards, Egg credit cards or whoever, isn’t just about putting off purchases. It’s about cutting your spending now. Not easy. And if you were one of the many who thought you were being financially savvy by ‘stoozing’ and using zero interest credit cards to constantly switch your debt from one card to another – maybe six months on the Accucard credit card then flop the debt over to the Ulster Bank business credit card and so on – then this is rather like a game of musical chairs when you suddenly realise there’s nowhere to sit.

There isn’t really a way round it, and it may be time for us to discover the relative benefits of debit and credit cards … and start only spending what we have in our bank accounts. Read more about credit card balance transfers and how to construct a monthly budget.