The consumer price index, the UK’s official measure of inflation, is at its lowest since records began in 1989. Falls in fuel and food prices have brought inflation to zero.
The index fell from 0.3 per cent in January to zero in February and is expected to fall still further over the coming months as the UK enters a period of deflation.
Experts had predicted a fall to 0.1 per cent rather than zero but the prolonged slump in fuel prices and a food price war between major supermarkets led to the lower rate. Fuel fell by 16.6 per cent during the past twelve months and food prices by 3.4 per cent, according to the Office for National Statistics.
Zero inflation brings a welcome boost to household incomes in real terms. Wages fell in real terms between 2009 and 2014 and were consistently outpaced by inflation. However, since late 2014 that trend has reversed, bringing more income into household budgets. Recent figures show that wage growth was at 1.8 per cent from November 2014 to January 2015.
Inflation was last close to the government’s target figure of 2 per cent in June of last year. Zero inflation means that the Bank of England is highly unlikely to raise interest rates in the near future.
George Osborne welcomed the report, saying that it was great news for family budgets.
Prices are expected to fall still further over the next few months as the slump in oil prices brings lower prices for petrol and heating. Costs to manufacturers and food producers will also fall. A weak euro means that imports are cheaper, which could also bring inflation down still further.
Whilst inflation has not been as low since comparable records were first kept in 1989, it is estimated that it might have been lower in 1960.
The chief economist of the Bank of England has said that UK interest rates are as likely to fall still further, from the current historic low of 0.5 per cent, as they are to rise.
Andy Haldane, member of the Bank’s Monetary Policy Committee, said that he couldn’t see a strong argument for either raising or lowering the rate.
Interest rates in the UK were lowered to 0.5 per cent in March 2009 and have remained at that level since.
Interest rates had been expected by experts to increase at some point later this year or early next year. The Bank hinted, however, in February of this year that it was prepared to cut rates still further if the economy needed extra stimulus.
Andy Haldane was speaking at a business lunch in Rutland and in a personal capacity rather than as a spokesman for the Monetary Policy Committee (MPC). During the lunch he said that if a computer program decided interest rates rather than the MPC, then interest rates would be reduced to zero per cent for twelve months or so.
Sterling suffered a sharp fall against the dollar following Mr Haldane’s comments. At one point, it fell by as much as 1.5 per cent although it has since recovered slightly.
During his speech, the MPC member said that the current low level of interest rates is due, in part, to continued low economic growth. Whilst the situation has improved slightly over the past two years, with growth being a little stronger than expected, inflation has failed to rise as much as the Bank forecast, particularly during the past twelve months. It is currently at an all-time low of 0.3 per cent.
The MPC believes that inflation will continue to remain close to zero in the short term, taking two years to rise to the government’s target figure of 2 per cent.
In his recent budget, Chancellor George Osborne unveiled a new ISA to help first time buyers, to be launched later this year.
Under the scheme, couples wishing to buy their first home will receive up to £6,000 which they can use as a deposit. They will have to save themselves in the new help to buy ISA and receive a boost to their funds from the government when they decide to buy. The boost or bonus they receive will be 25 per cent of what they have saved, up to £3,000 per individual. Thus, for every £1,000 saved, the government will add £250. The maximum amount that can be placed in the ISA is £12,000 and the bonuses are paid per Isa, rather than per property. In this way, a couple with two help to buy Isas can receive as much as £6,000. The ISAs will also pay interest.
Anyone over the age of 16 who has never owned a house before is eligible to save under the scheme. Savers must use the money from their ISAs for a home for themselves; they cannot use them for a buy to let property, even if they have not owned a property before. The value of properties that can be bought is capped at £250,000 outside London and at £450,000 in the capital.
Individuals can save up to £200 a month and so will need to save for five years if they wish to receive the maximum amount available from the government. Savers can open their account with a lump sum of £1,000, in which case it will take them four and a half years to save the maximum of £12,000.
Critics of the scheme warn that it will increase demand for homes but will not increase supply and that the £2 billion cost to the taxpayer should, instead, be spent on providing affordable housing.
Chancellor George Osborne has revealed the new design pound coin which will be introduced into circulation in 2017.
The new coin has twelve sides and is reminiscent of the threepenny bit, which also had 12 sides and was in use until 1971, when it was withdrawn from circulation following decimalisation.
The coin features the four symbols of the United Kingdom: the thistle, the rose, the leek and the shamrock. All four are seen emerging from a coronet on the new coin. It was designed by school boy, David Pearce, a teenager from the West Midlands, the winner of a competition run by the Royal Mint to find a suitable image for the coin.
George Osborne first announced his plans to introduce a new £1 coin in his 2014 budget because the current pound coin is relatively simple to counterfeit. It is estimated that as many as one in thirty pound coins is a forgery.
The coin will be made using cutting edge anti forgery technology to make it the most secure coin in the world, according to the Royal Mint. The three features that will help achieve this are: it utilises two different colours of metal, has twelve sides and incorporates a technology developed by the Royal Mint to foil counterfeiters, which has been adapted from bank notes and is being used for the first time in coins.
David Pearce, 15, said that he had spent a lot of time researching what symbols could represent all of the UK and could not believe that he had won.
George Osborne said that the new coin would have 12 sides in honour of the Queen because the threepenny bit was the first coin on which she appeared at the beginning of her reign. The new coin will be followed by a £5 note featuring Winston Churchill and a £10 note on which Jane Austen is depicted.
Many bank customers are unaware of the seven day service for switching bank accounts, says the Financial Conduct Authority, (FCA).
The FCA said that the service which enables customers to move their money to a different bank is not being sufficiently publicised and so is having a disappointing impact. It has called on banks to do more to raise awareness of the service through advertising campaigns.
The Current Account Switch Service was first introduced in September 2013 and enables customers to move their accounts from one bank to another in seven days rather than in the 18 to 30 days the process would previously take.
Since its introduction, 1.64 million people have moved their bank accounts. The peak came in November 2013 when 105,802 people switched. The figures for February 2015 were lower, at 91,615.
Christopher Woolard, the FCAs director of strategy and competition, said that banks should work harder to make the public aware of the tools that exist to make moving banks a relatively quick and simple process.
The FCA also said that customers would find the process less daunting if they could keep the same bank account numbers. Portable bank accounts are, in theory, feasible but there is no indication yet when they might become a reality.
The Current Account Switch Service works very well for those customers who use it, reported the FCA. The service is run by the Payments Council, which says that it has plans to make more improvements to it. It will be running advertising campaigns in order to raise the public*s awareness of the scheme and to increase their confidence in using it.
Five banks currently offer incentives of £150 to consumers who wish to move their bank accounts.
Property prices are continuing to fall in London, according to data released by the Royal Institute of Chartered Surveyors (RICS).
The data covered the period from December 2014 to February of this year, with more surveyors saying that prices had fallen rather than increased. The situation is reversed in the rest of the UK, however, where property values are continuing to rise, according to the RICS figures.
Prices have risen most steeply in Scotland and Northern Ireland but also accelerated in the south west and south east of England, where the lack of housing drove up values.
The fall in prices in the London area was the sixth consecutive drop recorded by the RICS.
Simon Rubinsohn, chief economist at the Institute, said that buyers believe that properties will become more and more out of reach. Respondents to a recent survey said that they think values will increase by as much as 30 per cent over the next five years.
Other surveys, by Halifax and Nationwide, have reported a fall in property prices across the whole of the UK in February of this year, compared with figures for the previous month.
Analysts are predicting that the value of property will rise more slowly in 2015 than they did last year. The general consensus among them is that the rate of growth will be between 3.5 and 4 per cent, roughly half that of last year, although the exact figure varies from lender to lender. Nationwide says that values rose by 7.2 per cent and Halifax report an increase of 8.5 per cent. The figures mask huge regional differences. According to Nationwide, London house values increased by 17.8 per cent in 2014 but by a mere 1.4 per cent in Wales.
Prime Minister David Cameron has pledged to retain universal benefits for all pensioners, regardless of their income, if his party wins the next general election to be held in May.
During the last election campaign of 2010, Cameron vowed that bus passes, winter fuel allowances and free television licences would continue to be issued to all pensioners. In a recent speech, he repeated that pledge, saying that there was ‘no question’ of means testing being introduced and that the commitment he made in 2010 will stand for as long as he is prime minister.
The Liberal Democrats and the Labour party have both announced that they will limit some of the benefits very well off pensioners can claim, should they win enough seats to form the next government. Universal benefits for pensioners also include free prescriptions and eye tests.
Pensioner benefits cost the taxpayer around £3 billion every year. Norman Smith, assistant political editor with the BBC, said that Cameron’s promise follows the recent announcement made by Chancellor George Osborne, that pensioner bonds were to be extended. Smith suggested that the Conservatives are targeting the older voter deliberately because they are more likely than younger people to vote in the general election.
Labour MP, Rachel Reeves, Shadow Work and Pensions Secretary, said that far from championing the pensioner, Cameron has let them down by failing to do anything about high fuel costs and ‘rip off’ pension charges during this parliament. The Labour party, she said, will stop winter fuel payments for the wealthiest five per cent of pensioners and reverse the tax cut for millionaires, recently brought in by the coalition government.
The pound is at its highest value against the euro for seven years, reaching € 1.40 for the first time since the end of 2007.
This means that Britons who holiday in Europe this summer will see their money go 15 per cent further than it did last year.
The rise follows recent news that the European Central Bank has started its programme of buying government bonds, as well as fears that Greece will leave the Eurozone.
Last summer, £1 was equal to € 1.2, which meant that for every £, UK holiday makers received € 1.18. £600 bought € 707. This year, holiday makers will receive € 822 for the same amount.
Jeremy Cook, head of currency strategy and chief economist at World First, foreign exchange traders, said that the euro is being ‘hammered’ because of the European Central Bank’s bond buying scheme, concerns regarding Greece’s future within the Eurozone and negative bank deposit interest rates.
European creditors have called on Greece to agree to a list of reforms before they are prepared to release loans. However, Dutch finance minister, Jeroen Dijsselbloem, has said that there has been very little progress made and that Greece is wasting time by refusing to seriously consider engaging in a programme of reforms.
The president of the European Central Bank, Mario Draghi, said that the bank intends to continue buying government bonds at least until the second half of next year, 2016.
The European Central Bank has a remit of keeping inflation at or below 2 per cent but it is currently close to deflation or negative inflation. Mr Draghi was optimistic, however, saying that spending by consumers was expected to improve during 2015, as the bond buying programme took effect. He also said that he expected demand for European exports to rise as the weak euro made prices more competitive.
Average household incomes have returned to the level they were at before the economic crisis of 2007 – 2008, according to recent figures from the Institute of Fiscal Studies, (IFS).
However, incomes for adults of working age have not yet returned to their pre-economic crisis peak once inflation has been taken into account. Adults over the age of 60 do have higher incomes, says the IFS report, largely because pensioners have not been subject to cuts in their benefits.
The IFS report concludes that living standards have been slower to improve than after any other recession, due to the weak growth of incomes. Benefit cuts and tax increases, as well as the government’s continued efforts to reduce the deficit, have also impacted negatively on average incomes.
IFS director, Paul Johnson, has said that he finds it ‘astonishing’ that average incomes are still no higher than they were before the economic crisis of 2007 – 2008 and that for households consisting only of working age adults, they are a little lower.
The reason for incomes of the over 60s rising more than those of working age adults is that state pensions have been ‘triple locked.’ This means that they rise in line with earning, inflation, or 2.5 per cent, whichever is the highest. Consequently, pensions have risen steadily.
The IFS says in its report that average incomes have not yet recovered to their earlier levels because of the UK’s poor productivity performances, with workers failing to increase output. Consequently, meaningful wage rises have not been affordable.
A senior economist with IFS, Robert Joyce, said that government policies which increase productivity and so boost wages will be of greater benefit to households than tax cuts and rises in benefits.
Chancellor George Osborne welcomed the IFS findings, saying that they pointed to a ‘milestone’ on the road to economic recovery.
When applying for any type of credit or finance, usually one of the main deciding factors as to whether you would be granted that is your credit score. There is an abundance of information on the internet all about credit scores and how they are worked out, and how much effect they actually have on people’s daily lives.
So what exactly is a credit score, and why is it so important?
When you apply for any kind of credit, most lenders will need some form of assurance that you are in a position to repay the money they have lent you, including any interest. To help them assess this, they collect information and calculate a credit score. Generally, the higher the score, the lower the risk it is for them to give you credit.
Evolution Money took it upon themselves to research and collate all the important pieces of information when it came to credit scores, and arranged them in a colourful and easy to read infographic.
About the Infographic
The infographic attempts to explain the journey of a credit rating, in terms of where credit scores come from, how they are used and by whom, and what needs to be kept in mind when discussing credit scores.
It also looks at what are the factors that have the most effect on credit ratings, and what are the potential ways that a credit score can be improved.
You can view the original Infographic here:
For a typical loan of £30,000.00 over 120 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £598.34.
Including a Product Fee of £2,400.00 (8% of the loan amount) and a Lending Fee of £807.00, the total amount repayable is £71,800.20.
Annual Interest Rates ranging from 11.88% to 29.38% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
