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.
A mortgage for 1%?
There’s a bit of a fight going on between the mortgage lenders at the moment, with one bank offering a two year fixed rate mortgage at a fraction over 1% (1.09%) interest. It’s only available if you have a deposit or equity of 40% of the property’s price and comes with a hefty fee, but – even if you don’t qualify for this deal – now could be a good time to remortgage. Here are my six tips to get the best deal.
1. Think about the mortgage deal you want. A headline grabbing short term fixed rate may not be right for you – you may be better off with a longer term fix (such as five years) or even a tracker mortgage.
2. Look at the overall cost. Some fixed rate mortgages charge fees of £1,500 to £2,000. If you’re opting for a two year deal, that could add an extra £1,000 a year to the cost of your mortgage.
3. Talk to a mortgage broker. You can easily find out what’s available by checking price comparison sites and mortgage brokers’ websites, but a mortgage broker can advise you about which bank or building society is more likely to lend to you. Some charge a fee but others are free to use.
4. Think about how much you want to borrow. Mortgage lenders work in ‘tiers’ and the more you want to borrow relative to the value of your property (called the ‘loan to value’) the higher the interest rate.
5. Get hold of a copy of your credit report! This isn’t a plug for Noddle – it’s good financial sense. If you’re applying for a mortgage your lender will check your credit file. Read your report to make sure there aren’t any nasties or errors.
6. Be wary about increasing your mortgage. If you’re trading up to a more expensive property, you’ll probably have to increase your mortgage. But think twice about doing this so you can add any personal loans or credit card debt to your mortgage. You may pay a lower interest rate, but you’ll repay the debt over a much longer period and increase the size of your mortgage. And, if you struggle to pay it, you could be at risk of repossession.
Cutting the costs of young driver insurance
Do you have a black box or ‘telematics’ insurance policy? If so, you’re in the minority! Research from a price comparison website shows that only 3% of British drivers has a telematics insurance policy and one in four have never heard of it.
Telematics or black box insurance normally involves having a small GPS device fitted to your car. It can record how you drive, your mileage and/or when you drive. The idea is that if you’re a good driver you’ll save money on your insurance – which means it’s most popular with young drivers who generally pay the highest premiums.
There are around a dozen different telematics insurers offering policies in the UK. Here’s my handy guide:
1. You can save up to 20% of the cost of your insurance with a telematics policy.
2. Most telematics devices are fitted to the car, although some work as a mobile phone app. There may be a separate charge for the device or it may be built into your premiums. Always check if there’s a charge for removing it if you decide you don’t want to stay with the same insurer.
3. Not all insurers take the same approach: some base premiums only on how you drive (acceleration, swerving and braking) while others price according to how many miles you drive or even whether it’s in the day or night.
4. Telematics insurers can reduce – or increase – your premium based on how you drive. Some do this every month, others quarterly and some only when you renew.
5. The telematics device will record information about anyone who uses your car. So if you have a partner or parent who’s not a very good driver, it could increase your premiums!
6. The data that’s collected can be used in the case of an accident insurance claim (to demonstrate who’s at fault) or to contact emergency services if you’ve been involved in an accident. It can be shared with other companies, but only with your permission.
Dealing with a legitimate financial firm. Are you sure?
The last few months have seen a rise in reports of rogues and con artists trying to entice people to part with their pension pot or invest in dodgy schemes. The advice is normally to put the phone down on cold callers and only to deal with legitimate firms. But how do you know you’re dealing with the real thing?
The financial regulator, the Financial Conduct Authority (FCA), regularly issues a string of warnings about so-called ‘clone’ firms – rogues who pretend to be from a genuine company. In some cases their websites look strikingly similar to the real thing.
So, to avoid becoming a victim of a scam, make sure you:
1. Ignore cold calls – even if the person on the phone says they’re from a company you deal with. They may not be.
2. Aren’t swayed by the cold caller quoting an FRN. It stands for ‘firm reference number’ and it’s the number that financial firms are given by the Financial Conduct Authority. Some fraudsters are quoting FRNs from genuine firms.
3. Check out the information on the FCA website (it’s fca.org.uk – search under ‘cloned firms’).
4. Don’t invest or transfer your money on the basis of an email or marketing letter out of the blue or a cold call. Even if it’s not a scam, the best decisions are rarely made under pressure.
Financial regrets? I’ve had a few…
If you’re the kind of person who thinks you’ll start saving ‘tomorrow’…don’t delay too long! Research shows that ‘not saving enough’ is the number one financial regret of people aged 40 to 70 with over one in three (36%) wishing they’d saved more.
The second most popular regret was ‘not saving enough into a pension’ which was cited by one in four. Fewer than one in 16 regretted buying a property that wasn’t ‘good value’, but double that number – more than one in eight – regretted getting married and subsequently divorcing. Hmm. Who says romance is dead?