Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
Ordered something that didn’t arrive?
Scammers are defrauding more people through ‘phantom goods’ scams – where you order something online but it never arrives. Citizens Advice says it’s seen a rise in the number of calls it’s received about these scams – up by almost 20%.
On average, people are being defrauded of more than £1,000 – money that they don’t always get back. Under the current rules, if you pay for something by bank transfer (an online or phone payment), you have no legal right to get the money back from your bank if it turns out there’s been a fraud.
It’s still worth contacting your bank if you think you’ve been scammed, because they may be able to claw the money back from the fraudster’s account. But often the fraudsters empty their bank account as soon as the money’s transferred.
Here are my tips to avoid becoming a victim of phantom goods fraud:
- If you’re buying through social media (e.g. Instagram or Facebook), don’t assume that the seller is genuine – even if they’ve had good feedback. Fake accounts are easy to set up, because fraudsters know you’re more likely to feel relaxed about trusting someone you don’t know on social media.
- Do your own research into the seller. It’s not foolproof but it should reduce the risks.
- Trust your gut instinct. If it doesn’t feel right, don’t part with any money.
- Try and pay by credit card if you can – although lots of private sellers won’t take card payments.
Smartphones replacing bank branches
When was the last time you went to your bank branch? Does your bank even have any branches? With the high street banks closing branches, more of us using mobile banking and cash machines now able to do far more than just dispense cash, the number of people visiting their local branch is falling.
One company predicts that we’ll only be going to a bank branch four times a year by 2022. Cynics could say that we’re using bank branches less because banks are closing them, but there’s no doubt that many people prefer to bank using their mobile and, even if there’s a branch nearby, rarely go into it.
First time buyers paying record prices
Research from the Halifax shows that first time buyers are paying £207,000, on average, to buy a property (and over £400,000 to buy in London).
Last year almost half of all those who get a mortgage to buy a property are first time buyers. In 2007, that figure was just over a third. But prices for first time buyers are high and have risen by over 50% in the last five years – more than the amount average prices have risen by.
First time buyers are, on average, putting down a deposit of 16%, or £33,000. But, they’re taking out longer mortgages to pay for their home. Over half of all first time buyer mortgages were for between 25 and 35 years (the standard term is 25 years).
SAVVY TIP: Just because you take out a mortgage for 30 or 35 years doesn’t mean you can’t pay it off faster if you have money to spare. Most mortgages let you make over-payments, although there may be a limit on the amount you can overpay, especially if you’re on a fixed rate mortgage deal.
Here are my tips for getting on the property ladder if you’re a first time buyer:
- Be flexible about where and what you buy. Draw up a list of what you need to have and what’s nice to have. The more flexible you can be, the easier it will be to find a property.
- Butter up local estate agents! If you turn up for viewings you’ve arranged (some buyers don’t) and give them honest feedback about properties you’ve seen, they’ll be more likely to contact you when a new property comes onto the market. If you can visit their offices or Skype them, even better – it will help them remember you.
- Get your finances sorted before you start viewing. Get hold of a copy of your credit report six months before you want to buy. That way if there are any nasties on it, like missed payments, you can add an explanation (it’s called a notice of correction) or get any mistakes corrected. Talk to a mortgage broker or use an online one to find out what deals you’d qualify for and how much you’d be able to borrow.
- Ignore the décor! If the property’s just been redecorated and is pristine throughout, you’ll pay for that – even if you change it a few months later. If it’s not to your taste, don’t be put off as you can always repaint it. Kitchen cabinet door handles can be changed and doors replaced or painted – and none of this need cost you much.
- Don’t scrimp on surveys. If you’re buying something other than a new build home or one that’s been built in the last 30 years, I’d get a full buildings survey. This will tell you what condition the property’s in and what – if anything – is wrong with it. It’s useful to help you haggle on the price. It can cost £500 or more, but it’s worth every penny. Never rely on the mortgage lender’s valuation alone. It’s nowhere near detailed enough to find out what state the property is in.
- Get a good solicitor! You’ll need to use a solicitor for the conveyancing (the legal process of buying the property). I’ve been lucky in that whenever I’ve bought, the solicitors I’ve used have kept me informed. But I know not all are so good at communication, which can be frustrating if you don’t know what’s going on. If you’re buying a leasehold flat or house (where you buy the right to live in the property for a number of years, but don’t own the building), make sure they explain the lease to you. This is your contract with the freeholder and if you break it, it could be expensive.
Have a pension or ISA? You could be paying too much
You may not feel like an investor, but if you have a pension or a stocks and shares ISA, you are. But, do you know what you’re paying for your investments? The answer is almost certainly ‘no’, and that’s because the asset management industry doesn’t make it easy for you to find out.
Last week the financial regulator, the Financial Conduct Authority, said that companies that manage investments for people should give them an all-in-one price so they know what they’re paying. At the moment, there’s normally an annual management charge (AMC), which covers the cost of managing your investments. But there are other charges as well, such as performance and one-off fees.
Then there are fees that are harder to predict in advance, such as dealing charges (costs involved in buying and selling investments, including stamp duty). If you buy your investments through a fund platform, which is basically a supermarket for investments, you’ll have to pay a platform charge as well. And if you take advice from an independent financial adviser, you’ll have to pay for their time. This could be an hourly rate, or it could be a percentage of the amount you invest.
Sounds expensive, huh? Well, in absolute terms, it doesn’t add up to much – it could be a 1% or 2% a year. But if your fund is only generating a return of 3% or 4% a year, you’re losing a lot to charges. And the FCA said that it found no link between funds that charge a lot and those that perform well.
So, if you have a pension that you’ve taken out with a pension company or through an adviser, or you have stocks and shares ISAs, go online or dig out the paperwork and find out what you’re being charged. If you can’t work it out, ask the firm or your adviser to explain.