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Money for nothing in the 21st century? Overhaul your finances - with our help - and it can be done
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The Independent Online

You have probably broken most of your New Year resolutions by now. You have yet to kick the booze and chocolate or step inside a pair of running shoes. But you can still do one thing to improve your material wellbeing. A review of your spending on mortgage, insurance, credit cards and other financial services could save you hundreds or even thousands of pounds this year. It will only take a few hours to put your finances straight. All you need is a little willpower.

You have probably broken most of your New Year resolutions by now. You have yet to kick the booze and chocolate or step inside a pair of running shoes. But you can still do one thing to improve your material wellbeing. A review of your spending on mortgage, insurance, credit cards and other financial services could save you hundreds or even thousands of pounds this year. It will only take a few hours to put your finances straight. All you need is a little willpower.


Millions of people paying the standard variable rate of 7.25 per cent could slash their monthly payments by switching mortgage. Research from Direct Line suggests homeowners with variable-rate mortgages could save £2bn if they all switched to more competitive deals. Patrick Bunton, senior manager with London & Country Mortgages, says someone with an £80,000 mortgage on the standard variable rate could save £150 a month by switching to the best of the current mortgage crop, a discounted deal from Halifax, with a 2.25 per cent discount for two years. "You pay 4.99 per cent with no lock-in. That £150 monthly saving would be worth £3,600 over two years of the deal."

Not everybody should switch their mortgage. Those who need to borrow 90 per cent or more of the value of their property will struggle to get the best deals. And if you incur a redemption penalty by switching, it might be better to stay put. The rest of us should ring a few mortgage lenders and ask for sample rates. Don't just call the big banks and building societies: try direct lenders such as Mortgage Express, or ask a broker. Nor should you rely on the quoted APR to indicate how much you'll pay if you switch. Request an illustration from the lender.

Halifax Direct: 0800 203049. London & Country: 01225 408000. Mortgage Express: 0500 212584. Mortgage comparisons:


With interest rates at their lowest for a generation, savers are getting a dismal return from banks and building societies. If your deposit account is paying pitiful rates of 3 per cent or less you should switch to a postal, telephone or Internet savings account. Egg Savings pays 6 per cent while Legal & General Easy Access Tracker pays 6.26 per cent, both on minimum balances of £1,000. Couples can boost their returns further by putting savings in the name of whichever partner pays less tax, says Nick Fletcher, director with MGP Investment Management.

"On an account paying 6 per cent gross, a top-rate taxpayer will receive 3.6 per cent net, while the lower-rate taxpayer will receive 4.8 per cent net. Putting the money in their name will increase your returns by 33 per cent increase with no extra risk," he says. Of course there is the danger that your partner could run off with the money. "Younger couples might have to think a bit more carefully, but the benefits are larger and as long as you feel secure in your personal situation. It is worth doing."

Egg: Legal & General: 0500 111200. Savings account rates online:

Individual savings accounts (ISAs)

You still have until 5 April to use this financial year's tax-free ISA allowance, that lets you invest up to £7,000 in stocks and shares, and take the returns free of tax. Or you can invest £4,000 in the stock market and £3,000 in cash deposits. Once the deadline has passed, those tax benefits are lost for good.

You can save yourself up to £350 by buying your ISA through a discount broker. Stocks and shares ISAs come with charges which can eat up more than 5 per cent of your investment when you take out the fund. You pay if you buy via an adviser or direct from fund managers such as Jupiter, Newton and Perpetual. But go to a discount house such as Chelsea Financial Services, Financial Discounts Direct or MGP Direct and most of that money will be returned to you. "If you know what you are doing, don't need advice and understand the risks, then discount brokers are the way," says Fletcher.

Chelsea Financial Services: 0207-351 6022. Financial Discounts Direct: 01420 549090. MGP Direct: 0800-783 0768. Investment information online:;

Buildings and contents insurance

Many people stick with their mortgage lender when buying buildings and contents insurance. A simple option - but it can also be costly. David Cubbin, marketing manager with Ryan Insurance Group, says mortgage lenders make huge margins when selling insurance. "Most people never sit down and add up the cost of this insurance. We recently took on a new customer who was paying £270 a year through a high-street building society for its buildings and contents cover. We cut that annual payment to £148."

Many lenders make buying their buildings and contents insurance a condition of their best mortgage deals. The Government is planning to outlaw this type of deal, and if you are offered one, think carefully.

The extra cost is the equivalent of at least 0.25 per cent on top of your mortgage rate. If your buildings and contents insurance is tied to a special mortgage rate, switch when the deal expires. "After the tie-in is over you should move your insurance to take advantage of the better rates," Cubbin says.

An insurance broker should help you find a better deal, or make some telephone calls yourself.

Direct Line: 0208-686 8877. Ryan Insurance Group: 01473 343340

Motor insurance

This is perhaps the greatest insurance cost for most people, particularly those with expensive cars or living in high-crime areas. It is also getting more expensive. Some insurers increased premiums by up to 30 per cent last year. You can cut premiums by paying a larger excess on your policy, adding a car alarm or immobiliser, limiting the number of named drivers and avoiding added extras such as cover abroad if you are unlikely to take your car outside the UK.

Fierce competition means it pays to shop around. A quick call to a direct lender such as Direct Line or Touchline could indicate whether you are paying too much. Some drivers could save hundreds of pounds on their premiums.

Direct Line: 0181-686 2468. Touchline: 01705 200101

Travel insurance

Buying insurance through the travel agent that supplied your holiday is expensive. High street agents offering cut-price holidays make their profits by selling expensive insurance to customers who can't be bothered shopping around. Specialist lenders such as Club Direct and Columbus Direct can cut the cost of insurance for a fortnight in Europe from around £40 per person on the high street to just £20. A family could easily save £80 on their holiday.

Annual "multi-trip" travel insurance policies can save money for those expecting to travel abroad several times this year. David Cubbin says a family of four can get annual cover for Europe from £50, and worldwide from £90. "A family came in recently after being quoted £165 for two weeks' insurance in Florida. When we told them we could cover them for the whole year worldwide for £90, they were flabbergasted."

There are other ways of cutting costs. "You will also get a healthy discount if you exclude personal possessions from your travel policy where these are already covered by your household contents insurance."

Club Direct: 01243 787838. Columbus Direct: 0207 375 0011

Life insurance

Unlike most things, life insurance has actually fallen in price in recent years, due to increased competition among providers and growing life expectancy. Term assurance policies, that pay out if you die within a set time, usually 25 years, are par- ticularly cheap, says Shrewsbury-based financial adviser Philippa Gee. "If you took one out some years ago you could find premiums have fallen by quite a large amount, so you should review your policy. Try a company like Scottish Widows, which is consistently competitive, then shop around."

A non-smoking man of 30 would pay about £13 a month for £100,000 cover on a level 25-year term. His premiums at 40 on a 10-year term would be around £17. A woman would pay about £10 and £12 at these ages.

As you get older, your children leave home and your mortgage shrinks, you may need cover for a smaller amount. You can also cut the sum you need to insure if your employer pays death-in-service benefits.

Most people with a whole-of-life policy, which, as its name suggests, covers you for the rest of your life not just a set term, should stick with their provider, Gee says. You could lose out on your investment by switching.

CGU Life: 0500 100200. Philippa Gee: 01743 236982. Scottish Widows: 0345 678910. Life insurance quotes:

Credit cards

Credit cards are an expensive way of borrowing money, even in times of low interest. Some charge as much as 20 per cent, enormous compared to mortgage standard variable rates of 7.25 per cent. Storecards are even more costly. John Lewis charges 16 per cent APR, Marks & Spencer 25.70 per cent and Habitat 29 per cent.

Switching to a cheaper card is straightforward and you may be able to transfer your balance to the new, lower APR. Gee says the most competitive is currently Egg, with an APR of 9.9 per cent and no annual fee.

Some cards attract customers with competitive initial rates, but you should check that these have remained. "Beware those offering initial 6 per cent deals. It might sound fantastic but will only last for three to six months and you could be highly penalised after that. Don't be taken in by the initial glitter."

If you have a large amount owing on your credit card you should consider taking out a personal loan as a lower APR to clear your card. Sainsbury's Bank charges 8.9 per cent on loans above £10,000, although this rises the less you borrow to 15.5 per cent for £2,000. Alliance & Leicester charges 8.9 per cent on loans of £12,500 or above.

Egg: Alliance & Leicester: 0990 626262. Sainsbury's Bank: 0800-096 0541

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