Even if tomorrow’s inflation figures show the first fall in inflation since September, Britons should still expect the annual rise in prices to remain high for the next four years, says the Ernst & Young Item Club.

The Office of National Statistics (ONS) is expected to reveal a small dip in inflation tomorrow, from 2.8% to 2.6%, as lower petrol and beer duties reduce some pressure on the rising cost of living.

But Britons should make no mistake that prices will rise far above wages “for the foreseeable future”, said Ernst & Young, which estimates that high inflation has cost the economy £10 billion since 2010.

Inflation has exerted a “corrosive impact on the UK economy”, said the Item Club's report, which also predicted that it would remain above its 2% target until at least 2017.

This rather sharply contests the latest Bank of England forecast, which predicts a return to target in just two years.

Inbound Bank of England Governor, Mark Carney, who replaces Sir Mervyn King this year, faces the unenviable task of trying to encourage economic growth while keeping a lid on prices.

Martin Weale, an external member of the Bank of England’s Monetary Policy Committee, has said that allowing inflation to rise unchecked would damage the Bank’s credibility to keep inflation under control.

Speaking to the British-American Business Council, Dr Weale said: "we are very conscious that policy affects output as well as inflation and that periods of below-normal output have very substantial costs association with them.

"Failure to damp sufficiently any new shock pushing up on inflation would result in inflation expectations becoming more entrenched.

"That, in my view, limits the scope we have to support demand at the current juncture."

Sustained high inflation spells bad news for savers in a depleted market. A few thought on why it remains important for savers to pursue the best products on the market can be found here.

Keith McDonald
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The UK’s consumer price inflation rate fell further than expected, to 2.4% in April, according to the Office of National Statistics (ONS).

The fall to 2.4%, from 2.8% in March, represented the first fall since September 2012, as lower petrol prices and air fares offset rising food prices.

The price of diesel fell by up to 4p per litre at the pumps in a welcome boost for hard-pressed motorists, who have been repeatedly squeezed by below-inflation wage rises.

The retail prices index measure of inflation fell to 2.9% from 3.3% in March.

Concerns remain about the rise in food prices, which have risen by 40% in six years. The persistent cold weather in early 2013 is thought to have dented supply.

Today’s figures somewhat embarrass the latest Ernst & Young Item Club report, which declared that inflation would not fall below 2.5% until at least 2016.

However Azad Zangana, European economist at Schroders, agreed that the April dip was only temporary.

"Looking ahead, next month's inflation release will also include further falls in energy prices," he noted.

"However, these are unlikely to continue, which is likely to push inflation higher again in following months."

Money falling in value. Households need an extra £603 to maintain their standard of living from last year.

Cost of Inflation "Billions"

The Item Club report said that prices would remain above wages "for the foreseeable future", stating that high inflation had cost the UK economy £10 billion since 2010 (read more).

It has also been disastrous for savers, following the launch of the Government's Funding for Lending Scheme in August 2012.

Retirement income specialists, MGM Advantage, said that UK households have needed to find £15.75 billion – or £603 per household – to maintain the same standard of living from just one year ago.

Even people who have seen rises in their pay packets will be suffering, said sales director, Aston Goodey, as these rises are failing to keep pace with inflation.

"Goods and services costing £100 in 2003 would now cost one third more, or £133.89, with inflation averaging 3.2% a year, which shows just how damaging inflation can be over time," he said.

This stresses the importance of finding a solution that protects retirees on fixed incomes from inflation, he added.

"Over 90% of people have annuity incomes which are fixed when they retire, which means their real spending power over time is reduced."

Keith McDonald
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Around 10% of the mortgage customers affected by the Bank of Ireland UK’s recent rate hikes are to become exempt after the bank identified specific groups that would no longer qualify for the increase.

The much-criticised bank doubled its mortgage rates for around 13,500 customers on May 1, despite the imminent extension of a government lending scheme that has driven high-street mortgage rates to record lows.

Around half of the customers affected by the change are landlords with buy-to-let mortgages, which saw rates increases from 2.25% up to as much as 4.99%.

The bank says that it has identified two groups that will now remain exempt from the increase to mortgage rates: those using flexible facilities on their mortgage, and a smaller group that switched to a base rate tracker.

The former group, thought to total 1,000 customers, received documentation that could have led them to believe that the differential was constant for the lifetime of the mortgage, the bank said.

The latter group, thought to number around 200 customers, were not informed about the conditions that could prompt a change in the differential.

The bank claimed that a clause in its mortgage contracts allowed it to change the differential – the component of the standard mortgage rate not indexed to the Bank of England base rate – under certain sets of circumstances.

It said that an increase in the cost of providing the mortgages required it to substantially increase its differential, which is set to rise again later this year.

Vs. Bank of Ireland

The Treasury Select Committee asks whether the Bank of Ireland should be investigated.

Some customers are attempting to take legal action against the bank for what they consider to be unclear or unfair terms in its contracts.

But many have been thwarted by an anomaly that sees landlord mortgages fall outside mainstream regulation, which means that complaints to the Financial Ombudsman Service could fall upon dear ears.

And the Treasury Select Committee has also waded into the debate, after chairman Andrew Tyrie wrote to Martin Wheatley, then CEO-elect of the Financial Conduct Authority, asking whether there was a need to investigate for possible mis-selling by the Bank of Ireland (read more).

Keith McDonald
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High loan-to-value mortgages are getting cheaper, giving hope to first-time buyers as rent levels and average house prices continue to rise at pace with inflation.

According to financial analysts, Moneyfacts, the average two-year fixed-term mortgage for first-time buyers has fallen by almost a fifth – from 5.44% last year to 4.50%.

The average five-year fixed-term product has fallen by a slightly smaller proportion – from 5.65% last year to 4.83% today.

The best 85% mortgage listed on Which4U has fallen from 4.04% in December 2012 (Yorkshire BS) to just 3.49% this month (Principality BS), while 95% mortgages are now available from as little as 4.49% through NatWest’s 2-Year NewBuy mortgage.

The affordability of home loans has had a considerable impact on mortgage lending.

Gross mortgage lending rose by 4% in April on the previous month, to £12.1 billion, according to the Council of Mortgage Lenders (CML) – a rise of 21% over the last year.

“The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008,” said Bob Pannell, the CML’s chief economist.

Funding for Lending

The Funding for Lending Scheme, introduced in August last year, has improved conditions for aspiring homeowners, who now have a choice of 95% and 100% loan-to-value mortgages.

The boost to activity has had the inevitable result of adding pressure to prices, though first-time buyers appear to have been better insulated from this than the rest of the market.

Average property prices returned to mid-2008 levels, the Office of National Statistics said, following a 2.7% increase in the past year to reach £235,000 in March.

Prices in London rose by more than double the rate of inflation (7.6%) to reach an average of just under £400,000.

But average prices for first-time buyers in England rose by around half the rate of inflation (1.3%), reaching £175,000 in March.

Rental Market

This will come as some relief to aspiring homebuyers after a new Rent Check report by BDRC Continental and Allsop LLP said that 40% of landlords increased rental costs over the past year.

The performance in the rental sector is also driving demand in the property market, with over six in ten landlords expressing an interest in increasing their property portfolios.

Are you an aspiring homeowner? Are current conditions making it easier to afford a mortgage? Let us know!

Keith McDonald
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The Co-operative Bank has introduced 'talking' ATM machines to help blind or partially-sighted people withdraw their cash independently.

The machines, available to all Link or Visa card holders, deliver instructions through a headset which is plugged into the machine.

400 of the new talking cashpoints went live today, with over 2,000 more planned for the next 18 months.

The launch follows the lead of Barclays, which currently has around 3,000 voice-enabled ATM machines in operation.

But the Co-op’s new cashpoints also include an innovative high-contrast screen (sampled right), which will significantly improve accessibility for partially-sighted banking customers.

Co-op customer Mark Ellis is delighted with the new talking ATMs, which, he says, offer him some independence back.

Persistence Pays Off

Mark Ellis, an Essex-based customer of the bank, said that his years of campaigning for talking ATMs had finally paid off.

"Conveniently, there is one 400 yards from my house and it has made such a difference," he said.

"I feel that I have my independence back as for the last 30 years I’ve relied on help when getting my cash out."

David Fawell, the Co-op’s Head of Payments, confirmed the bank’s commitment to enabling these accessibility features to the majority of its ATM stock in the upcoming months.

"By the end of 2013 we'll have 1,000 of our ATMs enabled to "talk". Our aim is to extend this out to over 2,000 cash machines which is three quarters of our entire estate by the end of 2014," he said.

The RBS Group, Lloyds, and Nationwide have all committed to adapting their cash machines for blind and partially-sighted customers.

RBS and NatWest expect to have almost 4,000 voiced-enabled ATMs in operation next year.

Keith McDonald
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Current accounts that return more in interest than standard savings accounts are helping the Nationwide Building Society to attract 1,000 new customers every day.

Nationwide, Britain’s biggest building society, says that over 365,000 current accounts were opened over the past year - almost double the number from the previous year.

This has taken the society’s current account total to over five million, though this still constitutes less than 6% of the whole market.

Chris Rhodes, Executive Director of Group Marketing at the Nationwide, said that many of those joining the society had switched their bank accounts from another provider – a trend that could gather pace from September when new rules require banks to switch accounts more quickly.

Fed-up consumers have turned their backs on scandal-struck banks in recent months, which has benefited customer-centric "challengers" such as Metro Bank .

Metro, which opened a drive-through branch in Slough earlier this month, said it had attracted close to 180,000 customers through its 18 branches, based solely in Greater London and its surrounding counties.

“Dissatisfaction with the big banks is leading people to vote with their feet,” Mr Rhodes said.

Dissatisfaction is driving people away from scandal-struck banks, says Nationwide Executive Director, Chris Rhodes.

FlexDirect and FlexPlus: The New Products

Nationwide’s resurgence has been assisted by the launch of its first new current accounts since the 1980s.

The FlexDirect account, launched in November, offers 5% interest on credit balances up to £2,500 for the first twelve months – more than twice the amount available through any other standard instant-access savings account.

Our update in March revealed that this account offered the best returns for balances up to £4,167 (read more). This is currently superseded by the Halifax, which is offering a £100 switch bonus alongside its £5 monthly incentive until July.

The FlexPlus account became the Nationwide’s first packaged account when it launched in March.

For £10 per month, account holders can earn 3% on balances up to £2,500, while also receiving benefits including worldwide travel insurance, worldwide mobile phone insurance, and European-wide breakdown cover.

(Read our full review of the FlexPlus account here.)

Nationwide's new interest-paying current accounts are attracting over 1,000 new customers every day.

Property Performance

The society announced yesterday that its share of the mortgage market had reached a record high of 15.1%, following a 17% rise in its gross mortgage lending in the year to 4 April.

Headline profits at the retail arm rose by more than half, to £475 million. However, the society has had to double its provisions for bad loans on commercial property to £493 million.

It attributed this to persistent "negative sentiment toward commercial real estate" and "uncertainty surrounding the economic outlook in the UK."

Interested in a Nationwide current account? Find out more at Which4U's current account page.

Keith McDonald
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Windsor Council has turned down a planning application for Metro Bank to redesign the front interior of a retail unit, but stressed that it is it keen for the growing bank to open a branch in the town.

Metro Bank had applied to install a full-length window frontage at 116-118 Peascod Street in Windsor, together with an ATM cash machine.

However, the planning committee for urban development at the Royal Borough of Windsor voted against the application.

Supporters of the application said that it was important to welcome the bank, which was proving a success in the suffering climate of the high street. The council has accepted the adaptation of the unit for financial services.

But councillors agreed with planning officers' recommendations to refuse the application, telling the bank that the historic town was a ‘sensitive area’ which needed protecting against outlandish designs and renovations.

The town’s council should not yield to a brand needlessly, society members contended, despite a number of empty units on the street.

Metro Bank suffered a setback in its latest expansion plan when planning permission for a re-design in Windsor was refused.

Metro Bank's Gradual Expansion

The bank was the first retail bank to join the high street in over a century in 2010, and has spread west from Greater London in recent years.

It opened a branch in Reading last year, expanded to Guildford in April, and introduced a drive-thru feature in its new Slough branch, which opened earlier this month.

Metro Bank's chief executive, Craig Donaldson, said the bank had opened close to 180,000 bank accounts ahead of the launch in Slough.

The bank is now expected to re-assess its plans, which will push back the opening of a Windsor store until 2014.

Keith McDonald
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New rules due to come into force in September should make it easier to switch banks than ever before. So if you're interested in opening a new current account, read on to discover what’s set to change.

The Changes: How Do They Help?

1. From September, banks will have just seven days to complete a current account transfer – just a quarter of the time it can currently take.

2. Customers will only need to deal with a new bank to organise the switch.

When applying for a new current account, details about direct debits or other payment orders can be left with the new bank, which will take care of the arrangements.

An automatic redirection service will ensure that payments from old accounts are processed through the new account.

3. If any aspect of the transfer goes wrong, customers are guaranteed to have any bank charges refunded.

Some banks may even continue to offer goodwill gesture payments if they fail to perform the transfer correctly and on time.

Why is Change Necessary?

• UK: Four banks control roughly 75% of the current account market.

In the UK, four high-street banks – HSBC, Barclays, the RBS Group, and Lloyds Banking Group – dominate the market for current accounts.

To consider that these groups also include NatWest, Halifax, and the Bank of Scotland, it shows how competition has reduced following the mergers between banks that have taken place since the start of the financial crisis.

Smaller “challenger” banks have made some inroads in recent months, as disgruntled customers of the scandal-struck banks have been lured by the intuitive offers and customer-friendly approach offered by smaller providers.

But the Office of Fair Trading remains concerned that major changes are still needed in the personal current account market. It is holding back on referring the issue to the Competition Commission until the new switching changes are implemented.

• Europe: Improving Competition through the EU.

The European Commission has demanded a 15-day switching service across member states by 2014 to force the banking sector to become more co-operative and more competitive.

UK has gone further and faster than this. Thanks to the Payments Council, which has invested more than £750 million in the new service, a seven-day switching service will be introduced a year ahead of this deadline.

In May 2013, it was revealed that the Council’s interventions had prompted a revision of the ISO 20022 global standard that ensures the reliable transfer of financial data.

• Research: Consumers Need Change

Source: Payments Council, Account Switching – Quantitative Market Research Results, September 2012.

The Council’s research identified the key concerns that consumers have over switching accounts – namely that switching was too slow, too cumbersome, and too error-ridden.

The faster switching process, with the failsafe of an automated redirection and a guaranteed refund in the event of complications, is designed to assuage these concerns.

Have you been put off switching your bank account because of the hassle? Will you consider changing when the new changes come into effect? For the latest current account offers, check our current listings on Which4U.

Keith McDonald
Which4U Editor

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Co-operative Bank has appointed a new chief executive as part of a shake-up designed to preserve the stricken bank.

Niall Booker, the former head of HSBC in North America, replaces Barry Tootell, who resigned after the bank's debts were downgraded to 'junk' status by credit ratings agency Moody’s (read more).

The bank is discussing with regulators how much it needs to raise to repair its balance sheet, which is expected to be in the region of £1.8 billion.

Much of the shortfall has been attributed to bad commercial loans the bank acquired during the takeover of the Britannia Building Society in 2009.

The episode is expected to end the stay of the group’s head of finance, Steve Humes, who will be pressed to resign by the group's new chief executive, Euan Sutherland, after two years in the role.

A number of UK banks need to raise a collective total of £25 billion to strengthen their capital bases. Until now, relatively few details had emerged about the shortfalls of individual banks.

The Co-op has sought advice from Swiss giant UBS about its position, and could yet sell off or close its banking division.

It has already ceased new lending to businesses, and says that an “extensive review” is needed before the future of the banking arm is decided.

But the group is thought to be considering a clawback of large bonuses awarded to those who presided over this critical period.

Peter Marks, the recently-departed group chief executive, received bonuses approaching £600,000 over the last two years as the bank slid inexorably towards crisis point.

And Neville Richardson, the former Britannia boss, received a compensation package of £1.4 million for loss of office following the takeover, despite the toxic assets from the takeover causing many of the Co-op’s financial woes.

Mr Booker, the Co-operative Bank’s new boss, offered little sign of surrendering the bank to closure, though he did concede that any turnaround of the bank would not be immediate.

"There are no quick fixes here, but with the support of the Co-operative Group, our staff and our loyal customer base, I am confident we will be able to stabilise and develop the franchise," he said.

"I will be focused on the actions to strengthen our balance sheet and satisfactorily resolve our underlying issues."

Keith McDonald
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The longest ever 0% balance transfer deal from Barclaycard could give new customers a whopping 27 months to pay off their existing debts without interest.

Barclaycard's new 27-month Balance Transfer Platinum card retains the group’s market-leading position for the longest 0% balance transfer offer, nudging ahead of RBS / NatWest and Virgin Money, which are all now encroaching with 26-month 0% offers.

Just six months ago, in November 2012, the longest balance transfer term was 23 months.

New applicants will need an excellent credit history to receive the full 0% on their existing balances, but those who are successful will have until the late summer of 2015 to pay off their existing debts without incurring further interest charges.

One drawback to the new Barclaycard offer is its hefty transfer fee of 3.50% (e.g. £35 per £1,000), which is higher than its competitors.

Virgin Money is charging 2.99%, while RBS and NatWest are charging 2.65%.

Customers able to pay off their debts more quickly could benefit from Barclaycard’s shorter balance transfer cards. The 25-month 0% balance transfer card currently commands a smaller transfer fee of 2.40%, while the 12-month card charges a 0.9% fee.

Contactless Problems

Another drawback concerns the contactless feature of newly issued cards, which is deemed by many to be too sensitive.

Contactless cards speed up transactions by allowing customers to make payments worth up to £20 without entering their PIN by passing their card within close proximity of a payment terminal There are 32.5 million contactless cards issued in the UK.

Contactless is growing in popularity but is not without its problems.

But recent reports have seen customers of Marks & Spencer and Transport for London stung by accidental charges made to their credit cards through the near-field communication technology.

M&S has defended its payment system, saying that it has undergone extensive testing and is fit for purpose.

Banks are currently implementing new measures to boost security on contactless cards, though they have not yet been willing to issue widespread replacements of older, vulnerable cards until they expire.

The UK Cards Association, which says the risks of double-payments can be reduced by taking contactless cards out of a wallet to make a payment.

New and existing customers might wish to consult this quick video guide to contactless technology.

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Keith McDonald
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The number of new complaints received by the Financial Ombudsman Service (FOS) exceeded half a million in 2012/13, reflecting an increase of 92% on the previous year.

As expected, the mis-selling of payment protection insurance (PPI) dominates the figures, constituting 75% of all new cases.

The 378,699 new cases opened in the past year represent a rise of 140% on the previous year.

Those in the North East, where budgets are particularly stretched, were most likely to file new PPI complaints, the FOS said.

But most other sectors also saw worrying rises. New complaints about mortgages rose by a quarter, to 11,920, while complaints about current accounts rose by a third, to 19,560.

Customers have complained that they have been unable to use the advertised benefits of their packaged current accounts, while some have said that their banks have switched them from free accounts to paid accounts without informing them.

The FOS said that it had supported the claimant in just under half (49%) of all the 508,881 disputes.

It attributed the huge rise in complaints to a combination of customers being more willing to complain and firms failing to handle those complaints satisfactorily.

“We have seen a much stronger consumer voice in the last year, with people becoming more aware of their rights and less willing to put up with poor customer service,” said chief ombudsman Natalie Ceeney.

“As levels of confidence in financial services have eroded, it is disappointing that we still have not seen any significant improvement in complaints handling.”

Lloyds Group, backed by the British Bankers Association, said that claims management companies had encouraged people to submit false complaints.

Claims Management Companies

The British Bankers Association (BBA) blamed the rise in complaints on claims management companies, which, it said, have encouraged people to submit claims regardless of eligibility or their chances of success.

Back in February, the chief executive of Lloyds Banking Group, Antonio Horta-Osorio, wrote to the Justice Secretary asking for claims management firms to be penalised for any false complaints they had generated (read more).

Banks face a charge of up to £850 by the Ombudsman for almost every referred complaint, regardless of the outcome, while claims management firms are not liable for any fees.

But the FOS said that the number of claims driven by these companies had fallen by 12% as consumers realised that they could pursue complaints themselves without facing any fees from third parties.

The service is considering another recruitment drive to handle the sheer volume of complaints, which reached 7,000 per working day last year.

Keith McDonald
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Cash payments now account for just over half of retail purchases, as use of cards and coupons continues to rise.

According to the British Retail Consortium (BRC), which analysed 60% of all retail payments made, the use of cash has sunk to a new low.

Cash was used for 54% of all transactions, representing a 7% decline in volume and a near 10% decline in value from last year.

Debit cards accounted for around 30% of all transactions, while credit cards accounted for just below 11%.

And the speed in which people are reverting away from cash to alternative methods of payments is accelerating, it said.

Payments made by vouchers and coupons more than doubled in popularity, to account for 5% of the total number of transactions.

The use of cash has fallen to a new low, says the British Retail Consortium.

"New ways to pay and new ways to shop are shaping the retail landscape like never before," said Helen Dickinson, the BRC’s Director General.

"Cash is still the most popular way to pay, but our survey shows how rapidly alternative and emerging methods are gaining ground, with growth more than doubling on the previous year, albeit from a low base.

"These methods will be the ‘ones to watch' in the future, and retailers are investing heavily to make sure their customers have choice and convenience in ways to pay, whether in-store, at home or on the move."

The BRC reiterated its concerns that, unlike cash, credit card transactions were more costly to retailers, averaging at 38p.

"The one jarring note is that charges remain disproportionately high," Ms Dickinson added.

"They continue to rise even though credit card use has fallen. It beggars belief that retailers incur average charges of 38p per credit and charge card transaction, 25 times more than for cash."

James Booker
Which4U

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People approaching retirement age are taking out more in unsecured loans, according to Aviva, as the rising cost of living continues to put a dampener on debt repayments.

According to the insurer’s latest Real Retirement Report, the level of unsecured borrowing has risen by 4% in the past year amongst the over-55s.

In 2013, the average borrower aged between 55 and 64 now owes an average of £23,188 – a rise of 36% from two years ago.

A quarter of borrowers in this age bracket owe almost three times this amount (£70,000) on their mortgages, while a third owe money on their credit cards.

They are also least likely to save, with almost four in ten unable to save each month. This contrasts with those aged 75 and above, which have nest eggs worth an average of £15,000.

“Pre-retirees are the least optimistic about the prospect of leaving an inheritance,” observed Clive Bolton, managing director of Aviva’s ‘At Retirement’ business.

“Although increasing numbers count on a wage to boost their monthly income, this suggests that careful financial planning will be essential to help them realise this ambition in later life.”

The rising cost of living has taken its toll on those aged 65-74, who have become more dependent on credit cards in the past year. 31% now use credit cards regularly compared to just 27% in May 2012.

A steep increase in food and fuel costs has been identified as one of the main reasons preventing the over-55s from making significant inroads into debts, though the level has fallen a little over the last six months.

"It is encouraging to see incomes rise since December 2012, but the over-55s are under no illusions that the general atmosphere of austerity is here for some time yet," Mr Bolton continued.

"Both short and long-term financial fears have risen significantly since our last report, and with further welfare cuts in the offing, the need to carefully balance finances in later life continues to be a priority."

Keith McDonald
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The Public Accounts Committee, chaired by Margaret Hodge, said that the regulator had overlooked a series of "disgraceful" practices by lenders that had cost consumers around £450 million per year.

The committee’s report said that the number of people resorting to payday loans alongside credit cards and personal loans had increased to two million as budgets became squeezed following the financial crisis.

And payday loan companies, which advance short-term high-cost loans, are suspected of overlooking credit checks to coax the financially vulnerable into a spiral of debt.

OFT “must stop tiptoeing”

Ms Hodge accused the OFT of operating reactively rather than proactively and said that it needed to show more willing to carry out its threats of revoking credit licenses for wayward firms.

“It passively waits for complaints from consumer before acting,” she said.

“The regulatory regime must stop tiptoeing around the problem.”

The committee’s report said that the OFT had lost sight of all of the operators within the industry, and that it had not done enough to ensure that lenders which had been stripped of their credit licenses could not simply re-register under a different name.

The OFT defended its performance, saying that it was forced to operate under tight legal guidelines.

"We are disappointed the committee has not acknowledged the legislative constraints under which the OFT currently operates, including a lack of regulatory powers and the limited circumstances where a fine can be imposed," a spokesman said.

Only in February did the regulator receive the power to revoke credit licenses with immediate effect rather than allowing firms to continue operating for up to two years on appeal (read more).

Since that point, it has warned 50 lenders to clean up their act or face sanctions. Five of these have since lost or voluntarily surrendered their credit licenses.

Keith McDonald
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Mortgage lenders are continuing to slash lending rates to attract aspiring homeowners, while pushing up so-called 'arrangement fees' to compensate.

Those with existing equity or a healthy deposit are benefiting from record-low mortgage rates, as a low Bank of England base rate and further government stimuli have continued to drive down borrowing costs.

In the past year, the average cost of a two-year fixed-rate mortgage has fallen from 4.66% to 3.82%, the Independent reported.

But banks appear keen to lock new customers down to longer arrangements, with the average five-year fix falling by a whole percentage point, from 4.86% to 3.86% - lower than the average three-year fix (4.13%).

Nevertheless, banks are compensating for falling rates by pushing up ‘arrangement’ fees, with those at the top end now broaching £2,500.

Mortgage arrangement fees are increasing at seven times the current rate of inflation.

The hike in arrangement fees, also known as ‘booking’ fees, ‘administration’ fees or ‘completion’ fees, remains controversial, as a static economy and low wage growth questions the need to push arrangement costs any higher.

According to financial analysts, Moneyfacts, the average fee charged by five of the UK’s biggest mortgage providers – HSBC, Santander, Nationwide, Halifax and NatWest – has risen from £912 to £1,066 in the past year – around seven times the current rate of inflation.

This gives borrowers something extra to think about with headline rates continuing to fall, as arrangement fees running into the thousands may make the best headline rates less competitive.

Interested in a new mortgage? Check out how much your monthly payments could be through our mortgage calculator.

Concerns about new boom-and-bust

There are growing concerns that government measures to slash lending rates could support a unsustainable new boom in the housing market, as the Funding for Lending Scheme and newly-announced ‘Help to Buy’ programmes tackle prompt a surge in activity.

The Funding for Lending Scheme (FLS) continues to assist the residential mortgage market almost exclusively to the detriment of commercial lending.

Concerns are mounting of a return to boom-and-bust in the housing market.

New figures from the Bank of England show that lending has shrunk in three out of the last four months, including a £3 billion drop in April, questioning the effectiveness of the scheme to sectors other than the residential mortgage market.

Meanwhile, the Help to Buy scheme, which is to underwrite over £100 billion in mortgage debt, is expected to push up prices as the supply of new homes fails to match the rise in demand.

A new report from investment bank Morgan Stanley suggests that property prices will rise by between 8% and 13% next year, prompting fears of a return to the boom and bust cycle that propagated the crisis.

Keith McDonald
Which4U Editor

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Hitachi, best known for its electrical products, is to shake up the market for unsecured personal loans by undercutting high-street providers.

Hitachi Personal Finance has offered credit on purchases for some time, but it now keen to make an impression on the market for personal loans by offering competitive rates of 5.4% on lower loan amounts.

Currently, market-leading rates of 5% are offered by the Derbyshire Building Society and M&S Bank, while Sainsbury’s is offering 5.1% with a 0.1% discount for repayment within a shorter term. Peer-to-peer lender Zopa is also challenging high-street lenders, with a best deal of 5%.

But all of these rates are only available to customers wishing to borrow above £7,500.

In a break from this tradition, Hitachi is targeting the gap in the market for those who wish to borrow lower sums, offering loans at just 5.4% for lowest-risk customers on sums above £2,500.

For those wishing to borrow £7,500 or more, Hitachi is ready to undercut the competition here too, by offering rates of just 4.9%.

It’s a radical turnaround of almost 30% on the 6.8% APR it offered on sums above £7,500 at the turn of the year. Hitachi says it is here to stay and that the new rates reflect a recovery in the faith of consumer finance.

“The confidence in the consumer market is getting stronger,” said Hitachi Finance’s head of marketing, Theresa Lindsay.

“We have a sustainable product. We’re not going into the market with a lower offer that three days later goes higher.”

It will be hoped that a cheaper alternative for smaller personal loans will spur consumer spending, which remains cautious.

Figures from the Office of National Statistics (ONS) show that consumer spending only increased marginally in the first quarter of the year (0.1%), despite an upturn in economic growth of 0.3%.

James Booker
Which4U

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Mercifully, Brits aren't known for losing children down the drain-pipe (and we're all thankful for a happy ending in Jinhua). But remarkably, it seems a third of us have lost something down the plughole or toilet, ranging from cash to… clothing.

A poll commissioned by the AA’s Home Emergency Response service suggests that more than a third of Brits have clumsy moments near our sanitary installations, potentially costing millions of pounds in total.

The most likely item to be lost in this way is jewellery, which unfortunately proves to be the most expensive.

15% of respondents admit to losing a piece down the drain, which was estimated to be worth an average of £175, though sentimental value could render such a loss much more painful.

Among the other costly items to be lost included mobile phones, which one in ten said had found a watery grave, and keys, which 5% had lost at an average replacement cost of over £58.

2% claimed to have lost cash or even credit cards to the sink or toilet, while – rather worryingly – 1% of respondents claimed to have lost underwear or even socks to the drainpipe.

Women were the most misfortunate gender, with around 40% confessing to losing an item. One in twenty respondents reported that they had lost fairly costly items of makeup to the drainpipe when getting ready in the bathroom.

Precariously balanced: a third of Brits have lost something down the drain, with 2% losing cash.

"Our engineers tell us about the strange things they find in customer's drains, and it does make you wonder how they got there," said Tom Stringer, head of the AA's Home Emergency Response service.

Most people who ordered a callout managed to get their items back, he said, though some were rendered useless after their adventure.

“Luckily, about three-quarters of those who'd lost something down a drain had managed to get it back.

“A lot of the things that people lose - like jewellery and mobile phones - are expensive. They might have a lot of sentimental value too, or be difficult to do without.

"But even when those items are retrieved they might not be fit for use any more. Nobody wants to use a toothbrush that's been down the loo!"

(Mercifully, we add, the baby boy rescued in China is reported to be in good health following his own early visit to the pipes.)

Have you lost anything down the drain before? Was it valuable, embarrassing, obscure...? We'd love to know your stories. Drop us a comment below!

Keith McDonald
Which4U Editor

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The hunt is on to track down 900,000 Premium Bond prize winners, some of whom are owed tens of thousands in unclaimed prize money.

National Savings & Investments (NS&I), the government’s savings facility, is trying to track down almost 900,000 bond holders who are owed a collective total of £44 million in past prizes.

There are two jackpots of £100,000 among the unclaimed prizes, which belong to female bondholders from the London and Manchester areas. Further unclaimed stashes are worth £50,000 and £25,000.

In a quaint look to the past, NS&I revealed that the oldest unclaimed prize dates back over 55 years, shortly after the bonds were first introduced in 1956.

There are also four unclaimed prizes worth between £25 and £100 dating back to the summer of 1960.

The average unclaimed prize is worth around £50. But with over half a million unclaimed prizes, it is certainly worth a quick check for bondholders who do not follow the progress of their bonds.

Bondholders wishing to check whether they are a prize-winner can do so by entering their bond numbers into the search engine at NSandI.com.

Not as flash as EuroMillions, but there are 898,000 unclaimed Premium Bond prizes, worth up to £100,000.

Jill Walters, NS&I’s operations manager, said that people rarely remember to keep the service informed of any change of address, and that they often lose track of their bonds.

"Prizes often become unclaimed as a result of people moving house, or forgetting that bonds have been bought for them as a child, or executors are unaware the bonds are held when someone dies," she said.

Bond holders can avoid missing out on future prizes, she added, by registering to manage bonds online, which would see future prizes being paid directly into a bank account.

Keith McDonald
Which4U Editor

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The Co-operative Group is continuing the restructure of its management team by appointing a new chairman for the bank and a new Group finance chief.

Richard Pym, the former chief of Alliance & Leicester, has been appointed as the chairman of the bank.

Richard Pennycook, the former finance director at Morrisons, becomes the new Group’s new head of finance.

The move comes a week after Niall Booker, the former head of HSBC in North America, was appointed as the replacement to Barry Tootell.

Mr Tootell resigned after the bank’s debts were downgraded to 'junk' status by credit ratings agency Moody's (read more).

Mr Pennycook replaces Steve Humes, who was relieved of his role as Group finance chief following the revelation of a shortfall in the bank’s balance sheet which is thought to exceed £1 billion.

The Co-operative Bank continues its management revamp with a new bank chairman and Group finance chief.

The bank has called a halt to new business lending last month, as it seeks to repair its capital position.

But recent figures from the Bank of England suggest that the Co-op has artificially patched up its balance sheet by using cheap government funds designed to stimulate the economy.

The Co-op took out £900 million in cheap funds from the Funding for Lending Scheme in the first three months of the year, over a third of the industry total, but its net lending fell over the same period.

The bank's new chairman, Richard Pym, said that it was important to preserve the Co-op as a competitor in what remains a "concentrated" market.

"We are clearly focused on actions to strengthen the bank's balance sheet and resolving the current underlying issues," he said.

"This will allow us to continue to provide customers with an alternative choice to the traditional banks."

Keith McDonald
Which4U Editor

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People are three times more at risk from criminals attempting to steal their cards and data at ATM machines than they were a year ago.

According the Financial Fraud Action UK, there were 7,525 reported incidents at ATM machines in the first four months of the year, compared to 2,553 in the same period in 2012.

Typically, thieves at cashpoints observe card holders entering their PIN numbers before distracting them and snatching the card as it re-emerges.

Police believe this rise in upfront theft is caused by the improved security with debit and credit cards, which offers some protection from more sophisticated fraud.

Not that this has stopped fraudsters from trying. Numerous devices have been found attached to cash machines in an attempt to retrieve details.

Some are designed to trap cards so that users cannot retrieve them, while others are designed to skim cards as pinhole cameras record cardholders entering their PIN numbers.

Within the last six weeks, police in Belfast and Edinburgh have reported finding skimming devices on cash machines.

Even where skimmed cards cannot be used at cashpoints, they can be used online and sold on to criminal networks.

However, extra layers of security, such as Verified by Visa, are assisting the crackdown, which is drawing more criminals back to a snatch-and-grab approach.

To DCI Dave Carter, head of the dedicated cheque and plastic crime unit, the cost of the more sophisticated technology needed to orchestrated more hi-tech crime was driving gangs back to petty crime.

"This equipment is difficult to get hold of,” he said. “It tends to be quite hi-tech and therefore it's expensive.”

"This is a complete return to a simple distraction or con tactic if you like, so it's a lot cheaper and it can be effective."

The number of ATM incidents between January and April has risen by three times on 2012. (Image: Financial Fraud Action.)

Financial Fraud Action’s Guide to Cash Machine Safety

Choose Your Cash Machine Carefully.

• Be alert to your own safety, and if there is anything unusual about the machine, report it.

Using the Machine.

• If you are being watched, cancel your transaction and go to another machine.
• Don’t allow yourself to be distracted, especially if ‘well-meaning’ strangers try to interact with you at a cashpoint.
• Shield your PIN by standing close to the machine and using a hand to shield the keypad.

Leaving a Cash Machine

• Ensure your card and cash are secured before leaving the cash machine.
• Keep your bank’s number at hand, so you can report immediately if your card or money are not returned properly.
• Do not leave cash machine receipts, including mini-statements or balance enquiries where others can access them.

Download the promotional PDF here.

Keith McDonald
Which4U Editor

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