Money Insider: Turbulent ride looks as if it is far from over

 

Whether you're an individual bank customer, running a small business or part of a FTSE-listed company, from a financial perspective 2012 has been another year to forget.

Almost five years on from the banking crisis, the UK population is still paying a heavy price for the decade-long credit binge that started in the early nineties.

In a year when unemployment remained stubbornly high, inflation wreaked havoc with savers' income and fuel, food and energy costs have continued to spiral, it's no wonder people have had to curb their spending, thus putting a number of high-profile retailers out of business.

On the personal finance front it's been a mixed bag, with selected borrowers enjoying some very low interest rates at the expense of savers, who have for the fourth year in a row struggled to find a decent return.

Although Base Rate remained rooted at 0.50 per cent, the appetite from banks and building societies for retail savings balances meant interest rates remained fairly stable for the first nine months of the year, until without warning, the side-effects of a new government initiative saw the bottom fall out of the savings market.

In August the Government offered lenders the chance to borrow funds cheaply via the Funding for Lending scheme, and while this has delivered lower mortgage rates, it has proved a nightmare for savers, who have seen rates fall like a stone during the latter part of 2012.

Back at the start of the year it was possible to obtain 3.60 per cent on a one-year fixed rate savings bond and 4.80 per cent if you were prepared to lock your cash away for five years. Now the best rates have slumped to a mere 2.50 per cent and 3.50 per cent.

On a more positive note, if you were in the market for an unsecured loan in 2012, you may have been one of the lucky ones to have benefited from some of the lowest rates seen in almost six years. If you had a good credit record and were looking to borrow £7,500 plus, competition among lenders meant you were able to borrow at a rate as low as 5.4 per cent APR.

It remained a different story if you wanted to borrow a sum of £5,000 or less, with the average rate for a loan of this size topping 16 per cent APR, and in some cases the cost was within a whisker of 30 per cent APR.

Savers and some borrowers were increasingly frustrated and disillusioned with the poor value rates on offer from banks and building societies, so it was no surprise that business was brisk among the peer-to-peer providers. With savers able to earn double the rate on offer on the high street and smaller loans being offered at half those being charged by the banks, 2012 was the year that peer to peer came to the fore.

Zopa, RateSetter and Funding Circle have delivered over £370m of business to date, and the Government announced plans to regulate the peer-to-peer sector from 2014. Hopefully this will turn out to be a positive move that will enable it to become an even bigger thorn in the side of traditional financial institutions.

Talking of newcomers to the market, 2012 saw Tesco Bank finally launch a range of competitive mortgage products and M&S Bank open a number of branches within M&S stores.

There were some interesting new product initiatives, including the Partnership mortgage from Castle Trust and the emergence of Amigo Loans. It's innovative financial products such as these that we need to see more of, as the tired, bland one-size-fits-all model just doesn't work any more.

For the financial services industry, it's been another year to forget when it comes to negative publicity, payouts and fines.

The major computer problems at RBS in June and the sale of unsuitable and complex products to small businesses were serious issues in their own right, but they almost paled into insignificance when the manipulation of inter-bank lending rates came to light.

Payday lenders have rightly been singled out for criticism due to astronomical lending rates and in some cases some dubious collection practices. Although some consumers have a damaged credit history, there's absolutely no justification to be charging them interest rates of 4,000 per cent plus.

With the Government's relentless austerity drive set to cause more misery on the jobs front and the uncertainty surrounding the eurozone crisis giving continuing cause for concern, the turbulent ride on the economic roller-coaster looks as though it's far from over.

Andrew Hagger is an independent personal finance analyst at moneycomms.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

    Ashdown Group: Graduate Developer (Trainee) - City, London

    £25000 per annum + benefits: Ashdown Group: A large financial services company...

    Ashdown Group: Marketing Assistant - Financial Services Sector - London

    £20400 per annum: Ashdown Group: An established and highly reputable organisat...

    Recruitment Genius: Financial Services Graduate Training Scheme

    £20000 - £100000 per annum: Recruitment Genius: We are a successful and establ...

    Day In a Page

    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory
    Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

    Cook not the only one to be caught in The Oval mindwarp

    Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
    Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

    Can Benitez get the best out of Bale?

    Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
    Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

    Beijing witnesses new stage in the Jess and Kat rivalry

    The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
    Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

    Jeremy Corbyn interview: A shrewd operator desperate for power

    His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
    Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

    Isis executes Palmyra antiquities chief

    Robert Fisk on the defender of the ancient city's past who was killed for protecting its future
    Berlusconi's world of sleaze: The astonishing lifestyle once enjoyed by Italy's former PM

    Berlusconi's world of sleaze

    The astonishing lifestyle once enjoyed by Italy's former PM
    Disney plans galactic domination with endless Star Wars spin-offs

    Disney plans galactic domination with endless Star Wars spin-offs

    Films and theme parks are just the beginning. Disney believes its control of the now decades-old franchise can bring in merchandise and marketing millions for years to come
    Could the golden age of the gaming arcade ever be revived in the era of the Xbox?

    Could gaming arcades be revived?

    The days when coin-ops were the only way to play the latest video games are gone. But a small band of enthusiasts are keeping the button-pushing dream alive
    Edinburgh Fringe 2015: The 'tampon tax' has inspired a new wave of female comedians to reclaim period jokes

    Heard the one about menstruation?

    Yes, if you have been at the Fringe, where period pieces are taking centre stage