Your Money: Mortgage rise waits in wings

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The Independent Online
THE MORTGAGE rise by the Cheltenham & Gloucester Building Society turned out to be a seven-day wonder.

It cost borrowers with a pounds 50,000 mortgage less than pounds 2 for the temporary rise from 10.75 to 10.99 per cent. But it cost savers heading for the National Savings First Option Bond pounds 5 in lost interest for every pounds 1,000 invested - or pounds 250 on a pounds 50,000 investment - as National Savings hurriedly cut the rate when faced with the blame for rising mortgage rates.

The flurry has hardly diminished the threat of higher interest rates. Other mortgage lenders were on the brink of following the Cheltenham & Gloucester, but now it has put its rate back down again, it is more difficult for them to justify a rise.

The margin between mortgage and investment rates is slim and many lenders are itching for an excuse to raise mortgage rates.

At least there is hardly any new business to upset, and existing borrowers who still have jobs are just about getting by.

New figures from the Council of Mortgage Lenders due out next week are expected to show that the number of families whose homes are being repossessed is at last beginning to slow down. It rose from 36,000 in the first half of last year to 39,000 in the second half.

But since the great mortgage rescue publicity stunt just before Christmas, when the lenders wrested direct payment of mortgage interest from social security in return for easing up on repossessions, the numbers have begun to fall. They are expected to be around 35,000 for the first half of this year and around 30,000 in the second half.

This represents a lot of human suffering, but at least the tide seems to have turned.

The number of home owners seriously behind with their mortgage payments is rising because of the lenders' forbearance on arrears. But at least they are reporting a drop in the number falling behind with payments for the first time.

THE INLAND Revenue has been sending out a random scatter of green forms to savers who have registered to have their interest paid without tax being taken off.

The point of the form is to establish whether the saver is really entitled to gross interest by checking the details of their income from all sources.

But it looks rather like a questionnaire and is not clearly an important document. Should you throw it in the bin, you will be in danger of losing the right to have interest paid gross. There will be a reminder when the 30- day deadline expires, after which the consequence of failing to fill in the form will be a 25 per cent cut in your interest payments.

It would be fairer if the Inland Revenue had been up- front about the intent of the form at the outset.

The Revenue says 14 million people have registered for gross interest, and a further 8 million have claimed refunds when they finally woke up to the fact that they were paying tax needlessly on their savings.

But that still leaves around 8 million people who are probably entitled to gross interest and have yet to claim it by filling in Form R85. As a result, millions of pounds have been donated to the taxman.

Anyone with income under pounds 3,445 in this tax year need not pay tax. Even people with slightly higher incomes may be entitled to some of their interest tax-free. So it is worth finding out if you are near these margins.

Otherwise, a quarter of your interest will be donated to the Government.

THE COLLAPSE of coach company Land Travel, which has left around 2,500 British holidaymakers stranded abroad, brings home the lesson that we should always check whether the travel companies we use have some sort of bonding - through ABTA or IATA, for instance.

Grant Thornton, the liquidator, was taking emergency measures to get people home, but there is no chance of any compensation for ruined or lost holidays.

Some of the holidaymakers had paid pounds 130.50 for a six- night trip to Paris, including a visit to Euro Disney, with children paying just pounds 65.

This was too cheap to be travelling in comfort. Those people who knew the risks in taking up this bargain deal with a company offering no bonding might just reflect that the gamble didn't come off.

While others should repeat the mantra: If it looks too good to be true, it probably is.

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