Money Insider: Crumbs of comfort for savers after a miserable year

it's now well over three years since the banking crisis first took hold and TV news programmes caused widespread panic, showing hundreds of people queuing outside branches of Northern Rock to withdraw their cash.

A degree of calm and order may well have been restored across the banking industry since then, but the repercussions of the crisis are still there for all to see and have made it another miserable year for borrowers and, even more so, for savers.

Base rate appears to be welded in place at a record low 0.5 per cent, a level from which it hasn't budged since March 2009. Savers are still struggling to find a decent return, even in the fixed-rate savings market, where rates have continued to edge lower throughout 2010.

For mortgage borrowers it's been almost a case of two distinctly separate markets, one for the haves and one for the have-nots, based upon whether you have a 25 per cent or greater deposit at your disposal.

2010 has seen some excellent mortgage deals for those with only a 60 per cent LTV requirement, with five-year fixed rates as low as 3.89 per cent and £99 fee from First Direct.

Unfortunately, if you've only got a 10 per cent stake then the mortgage market will not be welcoming you with open arms. Increased reserve requirements for high LTV mortgages mean rates are much higher, even for those lucky enough to pass the ultra tough lending criteria.

We saw a radical shake-up of the political landscape this year and the new Coalition Government didn't waste any time in abolishing Child Trust Funds (CTFs) as part of the spending cuts, a move they said would save £520m. This was a hammer blow to the children's savings market, although the Treasury announced in October that a "junior" Individual Savings scheme will be introduced in the autumn of 2011. There is little detail available regarding this new tax-free savings initiative, but you can bet your bottom dollar there won't be any CTF-style state funding on offer from our cash-strapped government.

Looking forward to next year, activity in the housing and mortgage markets looks set to remain broadly flat, according to the Council of Mortgage Lenders. With public sector spending cuts hindering an already difficult jobs market, and many households making efforts to reduce levels of indebtedness, I think that demand for mortgages may stagnate for some time yet.

Interest rates are expected to remain flat in 2011, according to many industry experts, and if so it will mean that remortgaging volumes will remain subdued. First-time buyers are also expected to continue to find it difficult to enter the market, with the thought of finding even a 10 per cent deposit virtually a non-starter for many.

It's not all bad news, though: for example, there are a couple of changes within the credit card market that will offer greater protection to consumers. Media pressure eventually saw the Government and credit card providers agree upon a number of rule changes that will improve the position of credit card customers starting in 2011.

The most important rule change will affect the way plastic debts are paid off. Traditionally, the vast majority of credit card companies allocated monthly payments to the cheapest debt first, otherwise known as "negative payment hierarchy", a much criticised practice which proved a great money spinner for the card companies.

If you transferred a balance to a 0 per cent card but later spent on the same card, repayments would be used to clear the transferred interest-free balance, leaving interest to pile up on the purchases spend.

Come January 2011, card companies will have to settle the most expensive debt first, leading to a much fairer "positive payment hierarchy".

There will also be rule changes regarding the level of minimum payments. New customers will have to repay a minimum sum, comprising interest, fees and charges plus 1 per cent of their statement balance, to encourage repayment of debt more quickly. Some of the existing minimum repayment levels are so low that debts, particularly where interest rates are high, can take more than 10 years to repay.

A crumb of comfort for savers in 2011 is that the ISA tax-free allowance will increase by £480 per year with effect from 6 April. The rise, based upon RPI of 4.6 per cent in September 2010, means that even if you're only interested in cash-based tax-free savings, you'll still benefit, with your allowance rising from £5,100 to £5,340.

Until base rate rises the new year is unlikely to deliver much for savers to smile about in the way of better rates. We can only hope that new players such as Virgin Money and Tesco Bank eventually flex their muscles in the banking market and hit the high street with some innovative and competitive new offers.

Andrew Hagger is a money analyst at Moneynet.co.uk

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
sportColombian World Cup star completes £63m move to Spain
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Business Analyst (Agile, SDLC, software)

    £45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

    Finance Manager - Bank - Leeds - £300/day

    £250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

    Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

    £100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

    Michael Jamieson: Why weight of pressure rests easy on his shoulders

    The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn