Hundreds of jobs may be shed at the Co-operative Bank as the bank attempts to raise the £1.5 billion it needs to plug the hole in its finances.

The bank is expected to announce cost-cutting plans after receiving strong opposition from existing bondholders on its plan to list shares on the stock market.

Bosses at the Co-op agreed a ‘bail in’ with regulators last month, which meant asking existing retail investors to accept new lower-yielding bonds along with shares.

But with the bank preparing its half-year figures, which will show precariously low capital reserves as a result of its toxic debts, there will be renewed emphasis on the need to claw back its £1.5 billion capital shortfall.

The bank may seek to reduce or axe completely its corporate division as it looks to reduce its annual expenditure of well over half a billion. But any cost-costing restructure is likely to strike heavily at the bank’s 10,000-strong workforce.

The Co-operative Bank's independent review into its capital shortfall will begin in September.

Independent Review

Parent company, the Co-operative Group, said that it had launched an independent review into the events that caused the capital shortfall at its bank.

The review will be chaired by Sir Christopher Kelly, chair of the King’s Fund and formerly of the Financial Ombudsman Service.

The bank’s problems have largely been attributed to an ill-fated merger with the Britannia Building Society in 2009, during which it acquired a volume of bad commercial property loans.

The review will probe this merger, as well as the failed ‘Project Verde’, which saw the bank lined up as preferred bidders for 632 branches that Lloyds were required to sell.

It will also investigate the role of independent auditors, which failed to highlight any problems despite a swelling black hole in its finances.

The review could make life difficult for the chairman of the Financial Conduct Authority, John Griffith-Jones, who is facing calls to resign after presiding over the accounting team at KPMG - the Co-op's auditors - during the years when the bank's problems were overlooked.

The FCA was forced to defend its chairman in April after it emerged that his auditing team at KPMG had also failed to find problems at HBOS prior to its collapse in 2008 (read more).

Keith McDonald
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Providers of fixed rate bonds will be made to change their ways after the Financial Conduct Authority (FCA) found evidence of substandard practice.

The City regulator conducted a review of the sector following complaints by customers that the automatic renewal of their fixed term bond provider had been conducted unfairly.

The FCA said that over half of the firms it investigated – 16 out of 30 – needed to make improvements in terms of policy and communication with customers.

Some consumers had been given inadequate notice about the renewal of their bonds, it concluded, while some were given too short a cooling-off period to make an informed decision about the available options.

It also discovered that firms were altering the conditions of their bonds in the middle of the term, while there was also evidence that they were making difficult for customers to opt out of auto-renewal.

Returns cut in half.

Funds that have been locked away for years are being automatically reinvested, but at rates much lower than those seen even just twelve months ago.

Research by HSBC suggests that those whose three-year or five-year bonds expire in 2013 could see their returns halved if these funds were reinvested in similar products, such has been the decline in returns.

The interest on the average five-year bond today is around 2.5 percentage points lower than in 2008, the bank said.

A persistently low Bank of England base rate of 0.5% and the introduction of stimulatory measures such as the Government’s Funding for Lending Scheme are behind the drop in savings accounts, while inflation continues to rise.

"As an increase in interest rates continues to look further into the distance, the knock-on downward pressure being applied to saving rates is affecting the incomes of investors," said Bruno Genovese, HSBC’s head of savings.

Savers with maturing long-term bonds could receive only half the returns if they reinvest, says HSBC.

Firms "have reacted positively."

Though the rates available for long-term fixes remain some of the best on the market, there is increasing hesitation at locking funds away for several more years to receive on or around 2% after tax.

The FCA said that bond providers were showing signs of changing their approach.

"Within the sample of firms, where we identified concerns, firms have reacted positively and taken steps to change their contract terms and/or practice," it said.

"We are conducting some further work on automatic renewal, focusing on home and motor insurance policies, and we expect to publish our full findings in 2014."

Keith McDonald
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Nationwide has lowered its representative personal loan rate to just 4.9% for current account customers on loans between £7,500 and £14,999.

The society's lowest ever personal loan rate undercuts its nearest competitors, Barclays, Tesco, and Sainsbury’s, which are all currently offering 5.1%.

The Nationwide’s affiliate, the Derbyshire Building Society, is currently offering a rate of 5.0%.

On a £10,000 unsecured loan taken out over four years, the monthly repayment would be £225.11, the Nationwide said.

Compared to Lloyds, which has one of the most expensive rates on the market, this represents a hefty saving of £532 over the four-year repayment period.

Rewarding Current Account Holders

The Nationwide has developed a trend of rewarding its current account customers with strong products over recent years.

The Flexclusive ISA, which launched at 4.25% last year, was a market-leading effort, while its new loan rate is a record low.

Its FlexDirect current account, launched last year, offers credit interest of 5% on balances of up to £2,500 (read more).

The society is one of two major institutions, along with Barclays, to have expanded its lending since the Government’s Funding for Lending Scheme began (read more).

John Crossley, Nationwide’s head of credit cards and personal loans, said: "The Nationwide personal loan is now the most competitive rate compared to other high street providers," said John Crossley, the society’s head of personal loans.

"With new car registrations coming out on 1 September, this is a popular time of year for securing finance to buy a new car.

"Researching your finance options could save you money and a Nationwide personal loan is worth considering," he added.

Keith McDonald
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Santander has announced that it plans to scrap its packaged accounts later in the year as it concentrates on improving its customer service.

Around 20% of adults in the UK have paid-for accounts, which typically include additional perks such as travel or breakdown insurance for a monthly fee.

But these have come under increasing scrutiny in recent months following revelations that some of the policies included within these accounts are unsuitable for large groups of customers.

Last year, the bank stopped selling packaged accounts twinned with travel insurance after it was revealed that the add-on policies were far less comprehensive than the separate policies sold by the bank.

And a similarly nervous Lloyds announced in December that it would stop trading in packaged bank accounts ahead of an investigation into the sector (read more).

Santander will move customers on paid-for accounts to a free Everyday current account with the option remaining to switch to the 123 account, which remains one of the most creative and profitable accounts on the market for customers with in-credit balances, albeit for a smaller fee of £2 per month.

Santander is withdrawing its packaged account range from October.

Customer Service: Improving?

Santander says this streamlining of its current account range is designed to improve its customer service. This is something the bank is clearly working hard on.

In our March editorial, ‘banks needs to simplify for the sake of their own staff’, we argued that while choice is important, the sheer range of products has proven detrimental to customer service.

There’s simply far too much information for banks’ own customer representatives to absorb – to the extent that they’re losing sight of the basics.

But credit where it’s due: the oft-maligned Santander came second out of 15 banks when quizzed for accuracy of information. And it seems to have subscribed to the view that simplicity is all important, as it prepares to strike a dozen current accounts from its list.

"Our view is that customers want even better service and a range of products that is easy to understand," said Reza Attar-Zadeh, Santander’s director of retail banking.

"Simplifying our current account and savings product range is an important milestone in helping our service get even better."

Are you a Santander customer? Have you sensed an improvement in customer service in recent months, or is this just empty rhetoric? Let us know by leaving a comment below!

Keith McDonald
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House prices in the UK will rise by almost a fifth over the next five years, a leading agent has said, though it should not be taken as a sign that the market is returning to a boom-and-bust philosophy.

Estate agents Savills has predicted that house prices will rise by 3.5% in 2013, and by around 18% over the next five years.

The net effect, then, would be for prices to rise roughly in line with inflation rather than continuing to fall in real terms.

It will remain a regional picture, however, with prices expected to rise by 6% in London – more than double the current rate of inflation.

The new predictions are a marked shift in the agent’s previous predictions, which suggested that prices would remain relatively unchanged this year.

Savills pointed to a month-on-month improvement to the market conditions. "There are now more positive indicators than at any point over the past few years," it said.

Figures from the Council of Mortgage Lenders (CML) show that gross mortgage lending increased by a quarter between June 2012 and June 2013 – to its highest estimate since October 2008.

The Help to Buy Scheme has provided a catalyst to the market that still remains “only partially functioning”, suggests Lucian Cook, the director of Savills’ residential research.

"Help to Buy goes further than any of its predecessors in being aimed at all buyers, not just first time buyers," he said.

However, he added that it was important to see the rise in context, and not to leap to assumptions that the government was provoking another housing boom.

"While the combined package of Help to Buy measures could add 400,000 transactions over the next three years or so, they would still remain 24% below pre-crunch levels.

"Its launch into an improving market has triggered concerns that the Government will provoke another bubble. In our view, these are overstated given the conditions which attach to the scheme."

James Booker
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There were positive signs for savers last week, after Skipton Building Society released a new fixed-rate bond paying 3.50%. But savers will need to lock away their money for seven years, and they’ll still receive less than the current rate of inflation once tax is deducted.

The society’s limited-edition bond matures in 2020, requiring savers to commit their nest-eggs for the rest of the decade.

But after deductions, basic-rate taxpayers will only expect to earn around 2.80% from the bond, which falls below at the current rate of inflation, at 2.9%.

The Skipton bond can only be opened in-branch, and requires a minimum commitment of £500. The bond offers both annual and monthly interest options, albeit with a small interest concession on the monthly option.

However, it is far above the remaining competition in the sector, with five-year bonds from FirstSave and Shawbrook Bank offering 2.90% (c. 2.32% net) on minimum deposits of £1,000 and £5,000 respectively.

Skipton is offering the best fixed-rate bond on the market, but you'll have to lock away your cash until 2020.

The deterioration in conditions for savers has been widely attributed to the government’s Funding for Lending Scheme, which has granted banks and building societies access to cheap funds without having to compete for them on the retail market.

And savers might not be overly convinced that the Skipton bond represents a recovery for the sector. Indeed, hopes for a resurgence might be put on ice by another local society announcing that it is set to slash its cash ISA rate by 17%.

Holmesdale Building Society, based in Surrey, has told customers with £3,000 or more in their cash ISAs to expect a fall in returns from 2.4% to 2.0% in September.

It attributed the decision to the need to “maintain its equilibrium within the financial market”, as savers desperately seek respectable returns on their savings.

The only standard savings account to topple inflation remains the First Direct cash ISA, but savers will need a whopping £40,000 to qualify for the top rate of 3.00% APR.

Discover more about the differences between fixed-rate bonds and cash ISAs in our savings guide.

Keith McDonald
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The Royal Bank of Scotland has said that it wants to become a larger player in the market for UK mortgages in the years to come.

Since its bailout by the government, the bank has reduced its corporate balance sheet while increasing its share of the market for new residential mortgages.

The institution is now responsible for issuing more than 10% of all new mortgage loans.

Its current range of products is headlined by a two-year fixed-rate deal at 1.74% on a 60% LTV loan, while its equivalent duration tracker mortgage offers a rate of 2.17% with a much lower arrangement fee of £995. A fee-free option is also available at 2.69%.

David Hollingworth, of London & Country, said that RBS’s low rate was capturing public attention, despite the large arrangement fees associated with the products.

"These big fees and low rates are about grabbing attention," he said.

"For some period they have been out of the game and it is great to have them back and with more appetite."

Targeting First-Time Buyers

The bank also hopes to boost lending at 90% LTV and above for first-time buyers, a move that has been encouraged by the government’s Help to Buy Scheme, which is due to launch next year.

Subsidiary NatWest already offers fee-free deals on mortgages at both 90% and 95% through the existing NewBuy Scheme.

The Help to Buy Scheme will offer lenders a guarantee on mortgages of up to 95% LTV in a move intended to break the stalemate of young people becoming trapped in rented accommodation by high housing costs.

"We have the funding and the balance sheet to lend more," said the bank’s Head of Mortgages, Moray McDonald, who also supports the government's new schemes.

"The government is looking to pull forward borrowing that would have taken place anyway in a few years' time," he said.

"If this means someone is able to get on with their lives, rather than wait, that will be a good outcome."

James Booker
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Chancellor George Osborne has told homebuilders and lenders this morning that the new Help to Buy Scheme will boost the housing market but that it will not become a catalyst to a new wave of unsustainable debt.

The new mortgage guarantee scheme, due to begin in January 2014, will see the State guarantee a percentage of the mortgage loan against default to offer extra risk protection for lenders.

In turn, it is expected that lenders will increase their range of higher loan-to-value mortgages. Santander has already confirmed that it will offer three new 75% loan-to-value mortgages to support the initiative.

The bank said that the scheme had an important role to play, in helping first-time buyers and other homemovers looking to buy new-build properties.

The Council of Mortgage Lenders agreed that the new scheme was helping to create "favourable market conditions" for home-buyers.

However, it said that the Government needed "equivalent focus" on the building of new houses, to prevent a steep rise in prices if supply did not rise to meet demand.

New predictions by Savills, the estate agents, shows house prices rising by 3.5% in 2013, and by 18% over the next five years (read more).

Several Bank of England personnel have also expressed reservations about a scheme that offers state guarantees for mortgages.

The Help to Buy Scheme was announced at the last Budget back in March.

The Chancellor has warned that the new scheme will not result in giveaways. New buyers will still be subject to rigorous "stress testing", he said, to ensure that any loans part-guaranteed by the state will be affordable to the borrower.

The revelation is likely to mean that the scheme will not come as a haven for aspiring homeowners with a poor credit history. Nor will they be able to use a state-backed mortgage loan for a second property.

The CML’s director general, Paul Smee, said that lenders would continue to keep risk assessment at the core of its decision making.

"Lenders, whether they choose to participate in the guarantee scheme or stay outside, will continue to do their utmost to meet households' needs for mortgages, but always in a way that is responsible."

Keith McDonald
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An advertising campaign to promote the new switching system for bank accounts will get underway in September after the government backed the £750 million transformation for British banking.

Animated characters will appear on television and print advertisements in the autumn to inform people about the new system, after the Payments Council alerted the government that the schedule for completion was on track.

The new system will allow customers to switch their bank accounts in just seven days – a quarter of the time it can currently take – and has been designed to spur competition in the current account market, which is currently dominated by just four banks.

The scheme will be backed by an automated redirection service that will ensure payments to and from old accounts are completed, as well as a switch guarantee that will compensate customers if any problems arise from the transfer.

[Read more in our guide: Switching your bank account from September 2013].

The new switch guarantee. Select for full-size (opens in new tab).

Not all banks and building societies will join the system at its launch. Tesco Bank, which has faced numerous delays to the launch of its current account, aims to join the scheme next year when its product becomes available.

But Virgin Money, in a similar situation, does plan to enlist in the switching scheme from September, ahead of its current account launch.

Competition and Outreach

Building societies and smaller banks will see this as an ideal chance to wean customers away from the big-name high-street banks that have long dominated the market.

The new system allows them to assure customers that switching accounts will be a quick, risk-free, and painless process.

Nationwide will hope to advance its recent rise in customers, after announcing earlier this year that its new range of interest-paying current accounts was attracting 1,000 customers every day (read more).

Likewise, Metro Bank will sense the opportunity to promote itself as the consumer-centric alternative to big-brand high-street alternatives.

But as banks are asked to contribute further towards advertising the new system, they will be hopeful of a better outcome than the government’s previous animated campaign for the Financial Services Compensation Scheme (FSCS).

In 2011, a multi-million pound television advertising campaign featuring animated characters left only 3% aware of the compensation measures in place for UK savers (read more).

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The unsuccessful FSCS campaign.

With the system expected to awaken the current account market from its stagnancy, it's only reasonable to expect banks to seize the initiative and appeal to customers on their own grounds in due course.

Keep updated on the latest current account offers here on Which4U.

Keith McDonald
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Over 20 million Premium Bond holders will see their chances of winning prizes lengthened next month as National Savings & Investments (NS&I) reins in its prize fund.

Funds have been flooding into NS&I in recent months as the Funding for Lending Scheme continued to reduce the returns on conventional savings accounts.

The Treasury-backed institution recently announced a reduction on its cash ISA rate, from 2.25% to 1.75% in September, after filling its quota (read more).

Now it has moved to make Premium Bonds less attractive for savers as it attempts to establish its equilibrium in the savings market.

Premium Bonds do not pay interest but instead qualify the bondholder for a monthly draw, with the chance to win amounts from just £25 all the way up to £1 million.

Returns are also tax-free, which is an added bonus, given that tax on savings interest is dragging average rates further away from a rising rate of inflation.

But in cutting the monthly prize fund by 14% to £49 million and the number of monthly prizes by 8% to 1.75 million, NS&I is lengthening the odds on winning from 24,000/1 to 26,000/1.

The number of £100,000 prizes is to drop from five to just three, while the number of £50,000 prizes will reduce from nine to just six. As a result, the average yield on the bonds will fall from 1.5% to 1.3%.

NS&I said that Premium Bonds had become overly attractive as banks and building societies had cut savings rates. The service pointed out that it had not reviewed its terms since 2009, despite a low Bank of England base rate.

"The cut to the prize fund is 20 basis points, but this is far below the cuts that have been made among our private sector competitors," said NS&I chief executive, Jane Platt.

"To ensure we stay within our Net Financing target – and in light of our framework to balance the needs of our savers, taxpayers and the stability of the broader financial services sector - we now need to reduce the Premium Bond prize fund rate."

NS&I will cut Premium Bond prizes from next month as the bonds become more attractive to savers.

The service’s 2012/13 results show net financing of £666 million, which follows a revision of the target from £3 billion down to £1 billion last December.

NS&I said that 88% of customers had provided a positive rating for the service, and it proved the top performer in a mystery spot-check undertaken earlier this year.

"In a very unpredictable market environment we have behaved responsibly and met all our financial and customer service targets," Ms Platt said.

"At the same time we have transformed our business and entered the final stages of our modernisation programme, offering enhanced online and phone services to more of our customers."

Keith McDonald
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Chancellor George Osborne has been accused of pandering to banks and watering down key proposals designed to make the banking system safer.

Observers from the House of Lords, where the Banking Reform bill is currently being processed, have said that important proposals relating to the ‘ring-fencing’ between retail and investment banks had been “neutered”.

Lord McFall, former chairman of the Commons Treasury Committee, accused ministers of taking power away from the regulator and placing it back into the hands of politicians.

If banks are suspected of circumventing the proposed ringfence, the regulator faces the gruelling task of requesting consent from the Treasury on three occasions before its investigation can proceed.

The Bank of England’s erstwhile governor, Lord King, and the Archbishop of Canterbury, Justin Welby, are expected to raise the issue and ensure that the legislation is not weakened through interference from the financial sector.

RBS and Dissent

The outbound chief executive of the Royal Bank of Scotland, Stephen Hester, told the Banking Standards Committee last year that the new ring-fencing proposals may increase the risk of banks needing to be rescued in the future.

But the bank was fined again by the City regulator this week, which will draw particular attention to any banks that are seen to be protesting against stronger regulation.

The Financial Conduct Authority issued the bank with a £5.6 million fine for failing to report over a third of its investment banking deals between November 2007 and April 2013 and neglecting to report over 800,000 at all.

Misreporting of trades begun under the leadership of Fred Goodwin and continued under Mr Hester, the regulator observed.

Tracey McDermott, the FCA’s director of enforcement and financial crime at the FCA, said there was no excuse for banks to flout the rules on accurate reporting.

"Effective market surveillance depends on accurate reporting of transactions," she said.

"We have set out clear guidance on transaction reporting, backed up by extensive market monitoring, and we expect firms to get it right."

Keith McDonald
Which4U Editor

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How much can you borrow on a buy-to-let mortgage? How much rent should you charge? Check out our brief guide below for more information.

The amount you can borrow on a buy-to-let mortgage is usually determined by two principal factors: the rental income you expect to generate; and loan-to-value restrictions on the value of the property.

Rental Income

As a new landlord, the amount you can borrow will almost certainly be linked to the rental income you expect to receive from the property once it is tenanted. It is therefore useful to investigate the realistic rental prices for the type of property in the area it is located.

Lenders usually prefer that rental income exceeds the mortgage repayment by about 25%.

A proportion of this rental income is expected to go towards costs such as maintenance, insurance, and agents’ fees. It will also cover periods when the property is vacated between tenants. (Find out more on our buy-to-let mortgage page.)

Loan-to-Value

The amount that you can borrow is also normally limited to a maximum of 75% of the property value, which is more restrictive than most other mortgage types.

Landlord mortgages usually require a deposit of at least 25%. Only if you have a successful history of managing buy-to-let properties are you likely to receive any significant flexibility on this, as lenders may deem you a lower risk applicant.

This might affect the rent you need to charge to make the property affordable.

How Much Rent to Charge?

So, what might determine the amount of rent you need to charge?

Size of the Loan

As described above, the amount you can borrow is normally linked to the rental income you expect to receive, though lenders often expect rental income to exceed the mortgage payment by about a quarter.

Property Type and Area

There is a careful negotiation to be made when setting the level of rent on your property.

If you set the rent amount too low, you are unlikely to maximise the investment on the property. Setting the level too high, on the other hand, risks pricing yourself out of the market and leaving the property untenanted.

(*) Rent calculations generated by London & Country's mortgage calculator.

Check out our buy-to-let mortgage page for more information and for the latest deals.

As always, we recommend that you seek professional advice if you are unsure which type of mortgage is right for you and that all of the information provided above is for use as an overview only and should not be the basis for your mortgage decision.

A majority of new buy-to-let landlords see property as a short-term investment, according to new research.

A poll by the Association of Residential Letting Agents (ARLA) has found that the objectives of new entrants to the buy-to-let market are based around short-term gains rather than the long term.

While over three-quarters of buy-to-let investors (76%) see property as a fully-fledged investment, over half of new landlords (56%) see investing in a buy-to-let property as a short-term investment.

Investors are keen to exploit the higher availability of mortgages and lower rates that have arisen as a result of the government’s Funding for Lending Scheme.

There has also been a rise in the number of landlords who have decided to rent out their home because of difficulties in selling.

But the ARLA has warned new ‘novice’ entrants to the buy-to-let market that they need to "do their due diligence".

"The economic downturn has brought new entrants to the buy-to-let market and has also had an impact on the way in which existing players invest," said ARLA President, Susan Fitz-Gibbon.

"With more landlords entering the industry, less experienced individuals need to ensure they have thoroughly researched and fully understand that there are risks and responsibilities associated with the role."

Buy-to-let lenders usually prefer that rental income on the property exceeds the mortgage repayment by around 25%. This accounts for costs such as maintenance, insurance, and periods of vacancy between tenants. (See our brief guide to buy-to-let rent and costs for more details).

The negotiation for landlords is whether the amount of rent required to secure the property is feasible for the property type in the location of their search.

"It is important to have realistic expectations of what returns you are likely to receive from your property," Ms Fitz-gibbon added.

"It is also important to remember the significant responsibility in adhering to regulatory requirements."

ARLA’s list of recommendations to investors includes factoring in periods of vacancy, which has increased slightly in recent weeks, and tailoring their property to a specific category of tenant.

Keith McDonald
Which4U Editor

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Brits are still into the saving habit, opening 14.6 million ISAs during the 2012/13 tax year despite falling rates across the market.

New figures from the Office of National Statistics show that savers invested a record total of £57.3 billion into tax-free accounts during the last tax year, an increase of 7% on the previous year.

Despite the fall in savings rates initiated by the Funding for Lending Scheme, which launched in August, savers opened 11.6 million cash ISAs and 2.8 million investment ISAs over the course of the financial year.

This activity increases the number of adult ISAs to 24.4 million, which are a vital means of protecting savers from the taxman.

Junior ISAs

Encouragingly, there was also a considerable increase in the number of junior ISAs opened, as more families put aside cash for their children.

Statistics showed that 295,000 ISAs were opened on behalf of children in the last tax year – over four times the 71,000 opened during the 2011/12 tax year.

Junior ISAs proved more active than Child Trust Funds (CTF), attracting an average investment of £1,327.

The market for CTFs has come under attack for a lack of flexibility and competitiveness, though the government has earmarked proposals that will allow the 6.5 million fund holders to transfer money into ISAs instead.

The consultation to allow the switch is due to end on 6 August.

"A record amount being invested shows investors' appetite for ISAs is growing," said Danny Cox of Hargreaves Lansdown.

"Junior ISAs seem to be gaining some momentum which will be improved once transfers are allowed from Child Trust Funds."

James Booker
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Interest is growing in current accounts that are not even active yet, as consumers await the chance to switch banks with greater ease in the autumn.

Virgin Money's new current account range has attracted 25,000 expressions of interest ahead of its anticipated launch in the autumn.

The bank expects to launch a free account and a packaged current account later this year, as the introduction of a new current account switching system in September makes it considerably easier to switch between banks.

Unlike Tesco Bank, which has also yet to launch its current account range, Virgin Money has committed itself to the new £750 million system from the start.

The new switching system requires participating banks to switch customers within seven working days – less than a quarter of the time it can current take. It also guarantees compensation to customers if anything goes wrong.

(Find out more about the new switching system in our guide to switching current accounts.)

Metro Bank, which joined the UK high street exactly three years ago in 2010, is also subscribing to the new payments system.

The bank has built its reputation on customer service, and reports that it has already opened over 200,000 accounts, despite operating only a handful of branches in London and the South East.

Also subscribed to the switching system is the Bank of Ireland, representing the Post Office, which is currently trialling its three new current accounts across 29 branches in East Anglia ahead of a nationwide launch in 2014 (read more).

(The list of institutions that are participating at launch can be found in our guide.)

Adrian Kamellard, the Chief Executive of the Payments Council, said: "Creating the Current Account Switch Service has involved massive systems changes on both a central and individual institution level.

"The new service, when launched in September, will deliver a significant step-change for current account switching in the UK, leading to more competition in the marketplace and greater choice for customers."

For an acerbic take on the proposed advertising campaign for the new switching system, see our latest blog post: getting animated over bank accounts.

Keith McDonald
Which4U Editor

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The volume of complaints regarding payment protection insurance (PPI) may have hit its peak, after the Financial Ombudsman Service reported a decline in the number of complaints.

Though numbers remain high and banks are still allocating hundreds of millions into the compensation pot for affected customers, this may be a sign for banks that the worst has passed.

The chief financial ombudsman, Natalie Ceeney, reported that the ombudsman was receiving 2,000 new cases every working day, a third less than at its peak in mid-winter.

Banks have already set aside in excess of £14 billion in compensation for PPI and hedge swap mis-selling compensation. Barclays' provision alone has recently been increased to around £4 billion.

Barclays' chief executive, Antony Jenkins, conceded that the sum was a "very large number", but he added that the "conservative" estimate was essential for establishing greater certainty surrounding the bank's capital position.

Banks may hope to benefit from greater certainty if complaint numbers continue to fall. But figures suggest that only 15% of customers who have been sold a PPI policy have decided to claim to date.

Ms Ceeney warned against attempts to predict the patterns, while she also criticised banks' handling of complaints.

"The interesting thing about PPI is none of us know where it's going to go," she said.

"Will it fall to 1,000 in six months? I just don't know."

Once referred to the ombudsman, over three-quarters of complaints (78%) were being resolved in the customer’s favour, she revealed.

"Too many of the banks have not taken enough care on PPI complaint handling. Most of the big banks have outsourced it," she said.

"The problem if you outsource is that you have to pay huge amounts of care to make sure your outsourcers are working to the right standards."

Keith McDonald
Which4U Editor

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Metro Bank is looking to the future with optimism, after increasing its customer base by half in just six months to over 200,000.

And with a new current account switching system due in September that will make it easier for customers to move to a new bank, Metro could soon be building on this momentum (read more).

Metro commemorated its three-year anniversary this week, having become the first bank to join the UK high street for more than in century back in 2010.

The bank's network of 19 branches, located in Greater London and surrounding counties, is growing steadily, with five more set to open this year. The bank plans to have 200 branches running by 2020.

Metro Bank celebrated its third anniversary in the UK by reaching 200,000 customers.

Its customer-based ethos has caught the crest of a wave, following the mass of banking scandals.

The bank has endeared itself to a public that has grown increasingly disillusioned with banking by opening on evenings and weekends, by welcoming families and pets into branches, and by offering useful services such as coin-counting machines and fast-print debit cards.

Craig Donaldson, Metro Bank’s chief executive, said: "The British people have demanded a revolution in banking, including a focus on service, the end of stupid bank rules and ultimate convenience.

"Given the strong start we've had in 2013, we’re on track to have a record breaking second half of the year and look forward to bringing the best in customer service to thousands more people and businesses."

The bank's activity is building at pace with its swelling customer base. Lending has more than doubled since the start of 2013, to £366 million, while deposits, through current accounts and savings accounts, have now exceeded £870 million.

But the bank is still dealing with losses, despite the growth in its retail operations. The bank posted an first-half operating loss of £19.4 million, which follows an annual net loss of £34.6 million at the end of 2012.

Are you a Metro Bank customer? Are they delivering a 'revolution'? Would you recommend the experience to others? Let us know by leaving a comment below!

Keith McDonald
Which4U Editor

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The clampdown on bad practice in the payday lending market has claimed the scalp of fourteen lenders, which have since decided to withdraw from the industry.

The Office of Fair Trading (OFT) wrote to fifty leading payday lenders in March following a year-long review into the sector, giving them 12 weeks to prove that they were bringing their practices into line with the report’s recommendations.

With the deadline now passed, the OFT has revealed that almost a third of these lenders had decided to withdraw from the sector.

Three have surrendered their credit licenses, while 11 others will continue to trade in other financial services.

Aside from those under investigation, the OFT confirmed that three other payday lenders had seen their licenses revoked following failed appeals into the regulator’s action, while two more had surrendered their licenses voluntarily.

The reluctance of so many payday lenders to face further scrutiny from the regulator is likely to cause some alarm at the scale of malpractice that has prevailed in the marketplace over recent years.

Failings of the Payday Lending Sector

The OFT's action had been prompted by concerns that lenders were failing to undertake adequate affordability checks, failing to prevent fraudulent activity, and harassing customers who were struggling to make repayments on time.

The investigation into the sector found that 17 of the 50 investigated lenders were promoting the ability for customers to 'roll-over' loans at rates of interest that reach several thousands of percent per year.

Meanwhile, three quarters of these lenders (38) failed to comply with at least one complaint-handling procedure set out by the Financial Ombudsman Service.

Last month, the OFT said it was referring the payday lending market to the Competition Commission for a full market investigation.

Keith McDonald
Which4U Editor

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Credit card holders can now receive 0% on a balance transfer for a record 28 months after Barclaycard once again nudged ahead of the competition.

The new 28-month 0% balance transfer Platinum card marks the third extension to the maximum duration in 2013, as the lender continues to fend off competition from rival providers.

Back in March, Barclaycard extended its longest 0% deal to 26 months, fending off competition from Tesco Bank (read more).

It then extended its 0% balance transfer offer to 27 months at the end of May, as rivals RBS / NatWest and Virgin Money encroached with their own 26-month 0% offers (read more).

The latest increase to 28 months follows a bold move by both the RBS Group and Tesco Bank to match the previous 27-month leading offer.

A new customer accepted for the card for the full 0% duration will have no interest to pay on a transferred balance until December 2015.

Barclays has nudged ahead of the competition again with a market-leading 28-month 0% balance transfer offer.

The new 28-month Platinum card carries a rather hefty fee of 4%, which is reduced to 3.5% if customers transfer their balances within the first 60 days of opening the card.

Even accounting for a swift transfer, then, it still adds £35 to the balance for every £1,000 transferred. And only those with a excellent credit rating are likely to be accepted for the card at the full duration.

Nevertheless, customers could still benefit from the remarkable period at 0% – now within touching distance of two-and-a-half years – to pay down debts at no further interest.

The 27-month Platinum Visa, for the concession of just one extra month at 0%, carries a lower fee of 2.9%, which is closer to its competitors. This represents a saving of £6 per £1,000 on the record-breaking card.

Find out more and apply at our credit card page.

James Booker
Which4U

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New figures reveal how the Government's Funding for Lending Scheme (FLS) has condemned savers by redistributing the returns into low-risk mortgage and re-mortgage products.

Launched a year ago to boost lending to households and businesses, the £80 billion scheme has precipitated a slump in savings accounts and the returns they offer, with banks and building societies no longer needing to compete for retail deposits.

Moneyfacts Group has revealed that the number of easy access savings accounts has fallen from 470 a year ago to just 364 today, while the average return on these accounts has tumbled from 1.08% to just 0.67% – over two full percentage points below the rate of inflation.

The low-cost funds that have been made available to banks under the Funding for Lending Scheme have prompted an increase in the number of mortgage products available.

But lower equity low-risk options have been given much the greater priority, while a leap in 'booking' or 'arrangement' fees has allowed institutions to cream off additional margins from those looking to re-mortgage at lower rates.

According to Moneyfacts, the number of 60% loan-to-value deals available on the market has increased by almost 30%, from 472 to 606, over the scheme's twelve-month lifespan.

Customers with deposits of at least 10%, on the other hand, still have only around half this number of deals available, despite a rise in products from 259 to 370 over the same period.

But Adrian Anderson, of mortgage broker Anderson Harris, said that a shift in bias had started to help first-time buyers.

"At the beginning from what we could see most of the FLS money was quite concentrated on mortgages at lower loan-to-values, but the people who are benefiting now are first-time buyers and others who are borrowing at a high LTV," he said.

Economists believe that the scheme has aided a recovery in the housing market, though not to businesses, while there is also concern at how the market reconciles when the scheme ends in 2015.

Howard Archer, chief UK economist at IHS Global Insight, said the scheme had been "a significant factor in improved housing market activity."

"It has helped to bring down bank funding costs, thereby underpinning a drop in some mortgage rates and lending rates to households and some businesses," he added.

Keith McDonald
Which4U Editor

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