A company fined last year for mis-selling credit card protection on behalf of major banks has agreed a number of credit arrangements worth £36 million that will allow it to survive.

CPP said that its partner banks, which include Barclays, RBS and Santander, had agreed to a £13 million funding arrangement that would help it to avoid collapse, saving 725 jobs in the UK

Some of its partners are also to allow the firm to defer large sums of commission worth £23 million for 2013/14 until at least 2017.

The York-based firm was fined £10.5 in November by the Financial Services Authority and ordered to pay at least £14.5 million in compensation to victims of mis-selling practices.

The company sold over 4.4 million credit card insurance policies, of which around 300,000 were sold directly and 4.1 were sold on behalf of banks.

The FSA's investigation concluded that the card protection company "failed to treat its customers fairly" and "did not provide clear information" (read more).

The company has since been working with lenders and regulators to put together a compensation fund for those affected.

It recently set aside over £50 million to cover the costs of the ordeal, but it expects this to rise as the process continues.

The company's chairman, Charles Gregson, said the new arrangements offer the company "a much improved and more stable platform from which to move forward", though CPP concedes that it still faces considerable financial challenges ahead.

James Booker
Which4U

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HSBC has taken the next step in the mortgage price war, offering a new "lowest ever" deal at 1.49%.

The new two-year fixed rate loan is available for those with a 40% deposit, and comes with a fee of £1,999.

The news comes on the anniversary of the Funding for Lending Scheme, which has encouraged lenders to lower mortgage rates for low-risk lenders with sizeable deposits or existing equity.

The low record-low 1.49% mortgage sets HSBC further apart from Chelsea Building Society’s two-year fix at 1.64%, and Yorkshire Bank’s deal at 1.66% (both 65% LTV), though both of these products carry smaller arrangement fees (£1,545 and £1,345 respectively).

For those who prefer to balance a higher initial rate with a lower fee, which is frequently of benefit to those borrowing a smaller amount, HSBC's parallel 60% LTV two-year fixed product has a higher initial rate of 2.39% with a negligible fee of £99.

Another splendid competitor in this field is the Norwich and Peterborough's two-year fixed rate mortgage at 1.99% (65% LTV) with a fee of just £295.

But in another move to tempt customers, HSBC will offer remortgaging customers an added bonus of £500 cashback on its standard and no-fee mortgage range.

"A good time for borrowers to review their existing rates" - Peter Dockar.

Peter Dockar, head of mortgages at HSBC, has encouraged borrowers to consider whether they could benefit from a better deal.

"We have seen increasing confidence in the market and with mortgage rates at an all-time low; now is a good time for borrowers to review their existing rates," he said.

David Hollingworth of the London & Country mortgage brokers warned customers not to be seduced by the initial rate alone.

"Mortgage borrowers are much more aware these days that there is more to a mortgage deal than rate alone," he said.

"That fee will have a major bearing on the overall cost of the deal and will certainly skew it in favour of larger loans."

Keith McDonald
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The majority of those who rent their property will not stop trying to get onto the housing ladder, a new report from Rightmove suggests.

The property website’s rental market report reveals that 96% of renters ‘dream’ of owning their own home, while 70% are determined to keep trying – however long it takes – until they achieve their goal.

The poll of 3,000 renters conducted in July found that only 11% are not interested in buying, but 60% now find themselves trapped in a position where they cannot afford to buy – up from 56% a year ago.

For people in this position, it's a "nightmare scenario", says Rightmove director, Miles Shipside.

"In spite of buying looking increasingly attractive, as the costs of renting continue to rise, saving a deposit continues to get harder," he said.

Only 15% of those polled said they were happy with their level of saving each month towards a deposit, while double this number said that they would need a windfall to have any chance of gaining a foot on the housing ladder.

The Help to Buy Scheme could come to the aid of many, playing the role of "dream-maker", Mr Shipside suggests.

The scheme will extend its parameters in January from new build homes to all existing homes worth less than £600,000, offering hope to first-time buyers and those with minimum deposits.

"It will not be a pre-credit-crunch free for all," Shipside observed, "but for some that have been unable to reach the higher deposit criteria, it could be a real leg up onto the property ladder."

Mortgage market statistics show that the Funding for Lending Scheme, launched one year ago, still heavily favours low-risk buyers with large deposits or existing equity, though commentators are optimistic that the bias is shifting towards higher loan-to-value mortgages (read more).

Nevertheless, the difficulty in saving towards a mortgage, together with the poor returns offered to savers as a consequence of the mortgage-supporting scheme, is likely to keep the dreams of many aspiring homeowners at bay for the foreseeable future.

Keith McDonald
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The majority of those who rent their property will not stop trying to get onto the housing ladder, a new report from Rightmove suggests.

The property website’s rental market report reveals that 96% of renters ‘dream’ of owning their own home, while 70% are determined to keep trying – however long it takes – until they achieve their goal.

The poll of 3,000 renters conducted in July found that only 11% are not interested in buying, but 60% now find themselves trapped in a position where they cannot afford to buy – up from 56% a year ago.

For people in this position, it's a "nightmare scenario", says Rightmove director, Miles Shipside.

"In spite of buying looking increasingly attractive, as the costs of renting continue to rise, saving a deposit continues to get harder," he said.

Only 15% of those polled said they were happy with their level of saving each month towards a deposit, while double this number said that they would need a windfall to have any chance of gaining a foot on the housing ladder.

The Help to Buy Scheme could come to the aid of many, playing the role of "dream-maker", Mr Shipside suggests.

The scheme will extend its parameters in January from new build homes to all existing homes worth less than £600,000, offering hope to first-time buyers and those with minimum deposits.

"It will not be a pre-credit-crunch free for all," Shipside observed, "but for some that have been unable to reach the higher deposit criteria, it could be a real leg up onto the property ladder."

Mortgage market statistics show that the Funding for Lending Scheme, launched one year ago, still heavily favours low-risk buyers with large deposits or existing equity, though commentators are optimistic that the bias is shifting towards higher loan-to-value mortgages (read more).

Nevertheless, the difficulty in saving towards a mortgage, together with the poor returns offered to savers as a consequence of the mortgage-supporting scheme, is likely to keep the dreams of many aspiring homeowners at bay for the foreseeable future.

Keith McDonald
Which4U Editor

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The Bank of Scotland has been fined £75,000 after it faxed customers' bank details to the wrong numbers over a three-year period.

Despite several warnings about the issue, the Bank of Scotland, part of Lloyds Banking Group, continued to fax documents including mortgage applications and bank account details to the wrong recipients for three years.

One organisation received over 20 documents, while another ten went to an unsuspecting member of the public.

The organisation informed the bank of its error in 2009, but the misdirected faxes persisted for a further three years.

The Information Commissioner's Office (ICO), which issued the fine, described the breach of privacy as "unforgivable", adding that mistakes of this kind compromised sensitive data at a time when identity fraud is on the rise.

Stephen Eckersley, head of enforcement, said: "To send a person's financial records to the wrong fax number once is careless. To do so continually over a three year period, despite being aware of the problem, is unforgivable and in clear breach of the Data Protection Act.

"Today's penalty reflects the seriousness of this case."

Security "a key priority"

The Bank of Scotland apologised for the breach, saying that security was a "key priority" and that it was reviewing its processes in light of the ICO’s verdict.

"We apologise that, due to human error, a very small number of documents relating to 32 customers were unfortunately misdirected," a spokesman for Lloyds Banking Group said.

"No customer suffered any harm or detriment as a result of this error."

Keith McDonald
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Hard-pressed savers are increasingly prepared to face the risks of unprotected fund-exchange portals as a means of making better returns on their deposits.

Research released last month by Zopa shows that households saved £18.5 billion between January and March – double the amount reached during the height of the financial crisis.

But consumers continue to lose out in real terms as the annual rise in the cost of living reduces the spending power of consumers’ cash by more than they are able to recoup through their savings.

Rates on savings accounts have been savaged in recent months by a government lending scheme that has supplied high-street banks with cheap funds and stripped the competitiveness from retail deposits.

Average returns on easy-access savings accounts have fallen to below 1%, while the Treasury’s own savings arm, NS&I, is cutting rates on its ISA and Premium Bonds.

Zopa's report, based on findings by the Centre for Economic and Business Research (CEBR), suggests that more Brits are prepared to take risks in peer-to-peer lending as the gap between falling returns on savings accounts and rising inflation continues to grow.

Online peer-to-peer lending portals allow investors who are seeking greater returns to make arrangements with borrowers who are looking for cheaper rates than those offered by banks.

The report found that peer-to-peer lending provided investors with average returns of around 3.4% above inflation – far above the pitiful returns now available on traditional savings accounts.

The largest peer-to-peer lenders operate stringent credit checks upon new borrowers, and have historically claimed very low default rates.

But unlike standard accounts, investors’ deposits are not guaranteed by the Financial Services Compensation Scheme. The FSCS covers deposits in most banks and building societies for up to £85,000 per person per institution (read more).

The industry is set to become regulated by the Financial Conduct Authority from 2014. Nevertheless, Zopa’s CEO, Giles Andrews, said that it would take some time to change consumers’ financial habits.

"At presents many households are losing out because banks are not providing competitive savings rates," he said.

"Be smart with your money to ensure you get the best deal."

Keith McDonald
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House prices between May and July are 4.6% higher than the same period last year, according to Halifax’s latest House Price Index.

Prices rose by 0.9% between June and July, the index revealed, marking the sixth consecutive month of house price increases. The average property is now valued at £169,624.

The number of sales has also increased following efforts by the government to rouse the housing market.

Almost half a million property sales took place during the first half of the year, representing a rise of 6% on the same period last year, during which the stamp duty holiday for first-time buyers came to a close.

Nationwide’s House Price Index, released last week, found a slightly lower monthly price increase of 0.8%, but a marginally higher average price of £170,825.

Martin Ellis, Halifax's housing economist, said that improved consumer confidence and schemes such as Funding for Lending and Help to Buy were "underpinning" an increase in housing demand.

"House prices are expected to continue to rise gradually through this year with only modest economic growth and still falling real earnings constraining housing demand and activity," he said.

Robert Gardner, chief economist at Nationwide Building Society, said growth during July provided further evidence of an upturn in the housing sector.

"House prices are currently around 12% higher than the lows seen in the midst of the financial crisis," he said.

"Signs of a modest improvement in wider economic conditions and further modest gains in employment are likely to be lifting buyer sentiment."

However, both acknowledged that supply is lagging behind demand, which is tightening conditions and contributing towards the upwards pressure on prices.

"The supply side of the market remains fairly constrained," Mr Gardner noted.

"The fact that rental growth has been consistently outstripping wage growth reinforces the notion that housing more generally remains in relatively short supply."

Keith McDonald
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The limited opportunity for savers to land the best rates has been illustrated again, after Kent Reliance (KRBS) withdrew its market-leading fixed-rate bond range after just three weeks.

Kent Reliance launched its latest bond issues on July 11. The one-year bond promised to return 2.05%, while the two-year bond offered 2.35%.

But the provider is now listing the deals as “sold out”, staying true to its earlier intimation that the bonds were “strictly limited edition” (read more).

However, a re-emergence from ICICI Bank sees its two-year bond (2.30%) competing with the Islamic Bank of Britain (2.32%) at a fraction below the withdrawn KRBS account.

The one-year bond table is now headed by Britannia at 2.03%, which requires a minimum bond deposit of £1,000. Close behind are the little-known Raphaels Bank at 2.00% (min. £5,000) and the Post Office at 1.99% (min. £500).

There is little incentive to fix between the two, however, with IBB offering 2.02% on an 18 month bond (min. £1,000), and Metro Bank narrowly behind at 2.00% (min. £500).

Savings rates are still heading downwards, as savers compete for limited edition offers.

Long-Term Prospects?

Savers might be more interested in longer-term bonds, however, given today’s overtures from the Bank of England suggesting that interest rates are set to remain low for the foreseeable future.

ICICI holds the top spot for three-year bonds, at 2.55%, while its five-year bond, at 2.75%, sits third behind only Shawbrook Bank (2.90%) and Secure Trust Bank (2.91%) for that term.

Skipton Building Society leads the way, at 3.50%, but savers will have to lock their funds away until 2020 to reap the rewards, which are still currently below inflation after tax is deducted (read more).

Q. I haven’t heard of some of these banks before? How safe are my deposits?

A. The majority of banks with a license to operate in the UK (including ICICI, IBB, Kent Reliance BS and the private Raphaels Bank) are regulated by the Prudential Regulation Authority and Financial Conduct Authority, and are members of the Financial Services Compensation Scheme (FSCS).

The FSCS protects deposits up to £85,000 per person per institution.

A rare exception to this is a bank like Handelsbanken, where deposits are protected by the Swedish compensation scheme for up to €100,000 under the European ‘Passport’ system.

See our guide to 'Secure Savings and Compensation' for more details.

Keith McDonald
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Leeds Building Society is to join the Government's Help to Buy scheme, and has outlined two mortgages that could help new buyers get onto the housing ladder next year.

The new two-year fixed rate deals will be available at 2.99% and 3.29% for a maximum loan-to-value of 75%.

Under the Help to Buy scheme, buyers in England with 5% deposits will be to able to apply for an equity loan worth up to 20% of the value of the property.

Kim Rebecchi, sales and marketing director at Leeds Building Society, said the society was delighted to be on board with the scheme and offering assistance to those who could afford a mortgage repayment but not a large deposit.

"We already offer 'A helping hand' onto the housing ladder by working in partnership with a number of Local Authorities to provide much needed 95% mortgages," she said.

”We are now very pleased to announce the launch of our first products under the Government's Help to Buy Equity Loan scheme and are confident they will help even more people, both first time buyers and re-mortgagers, to buy their own home."

Leeds is to join the Help to Buy scheme from January 2014 with two fixed-rate deals.

The scheme has been welcomed by construction firms that have seen projects stall during the financial crisis, though concerns remain that the flagship scheme is pushing up prices beyond the reach of aspiring buyers.

The latest House Price Index from Halifax Building Society showed that house prices in the three months to July were 4.6% higher than the same period last year (read more).

The new Bank of England Governor, Mark Carney, who yesterday committed to keeping interest rates low for the next three years, said that he would bring the scheme to an end after three years if it threatened to create a new housing bubble.

Keith McDonald
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The new Bank of England governor, Mark Carney, has expressed "tremendous sympathy" for savers after announcing that interest rates could remain at rock bottom for another three years.

Yesterday, Dr Carney announced that interest rates would remain the same until the unemployment rate fell by 750,000, which is estimated to take three years to fulfil.

This is positive news for homeowners, with fixed-rate mortgages likely to remain attractive, and variable rate (or tracker) mortgages less likely to alter if the base rate remains at 0.5% for the foreseeable future.

However, it heaps further pressure upon savers, who are already struggling to beat inflation.

The strongest performing fixed-rate bond is provided by Skipton Building Society (3.50%), but savers will have to lock away their cash until the end of the decade and will still receive less than the current rate of inflation for their troubles (read more).

One of the very few accounts left to combat inflation is the cash ISA from First Direct, but savers will need a balance of £40,000 to qualify for the tax-free rate of 3%.

Skipton BS has the best fixed-rate bond, but savers must wait until 2020 for their returns, which are below the current rate of inflation.

"Tremendous Sympathy"

Speaking on BBC Radio 4’s Today programme, Dr Carney said he had "tremendous sympathy" for savers affected by low interest rates.

"The best way to get interest rates back to a normal level is a strong economy," he said.

Savers have done the right thing, he then told Sky News.

"They have put money aside and we are fully aware they are earning much lower returns on those savings then they would have expected before.

"That is one of the consequences of the terrible financial crisis that was inflicted on this country."

But the punishment could yet be worse for savers if the Bank accepts above-target inflation in the interests of growth, notes Danny Cox of IFA Hargreaves Lansdown.

"Interest rates on cash deposits aren't going to rise anytime soon and certainly not significantly for three years it seems," he said.

Keith McDonald
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An increase in mortgage activity and the sale of new houses is offering clear signs that the housing market is picking up pace once again.

A total of 56,475 mortgage applications for home purchases were approved by lenders in July, according to LSL Property Services, an increase of 21% from July 2012.

Meanwhile, homebuilders are also reporting a significant rise in sales. Newcastle-based Bellway Homes said that reservations on new homes had risen by 27% on last year. It added that it had increased sales by 8.2%, to 5,652 homes.

Activity in the market has been boosted over the past year by government schemes such as Funding for Lending and Help to Buy, which have pushed mortgage rates down and encouraged more interest in new-build homes.

Bellway said the Help to Buy scheme had boosted confidence amongst homebuyers, encouraging more to consider a new build. Fellow constructors, including Barratts and Taylor Wimpey, have also voiced their support.

The controversial Funding for Lending scheme launched last year has proved detrimental to savers and has largely ignored small businesses to concentrate on the residential mortgage market.

But borrowers have been able to take advantage of some of the lowest rates on record. The lowest-risk category borrowers, who have a 40% deposit or existing equity, can fix for two years at just 1.49% with HSBC.

The housing market is strengthening, but prices are rising as demand outstrips supply.

With signs that house prices are rising above the level of inflation, there is a clear risk that the stimulatory measures could begin to alienate those they are designed to support.

Ben Thompson, Managing Director of the Legal & General Mortgage Club, believes that it is time to focus on the supply of new homes to avoid the market becoming overheated.

"Whilst we can see that the Government fully appreciates that we need a healthy housing market... It is just as important, if not more so, to focus relentlessly on freeing up the ability for many more new homes to be built in the right areas in the UK," he said.

"Yes, we need a healthy market, but a healthy housing market has to be one that allows first time buyers to be able to afford to buy at a sensible age."

Keith McDonald
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The government's measures to drive down mortgage rates have proven to be great news for new and existing homeowners. But inevitably they've had a few side-effects as well.

One of these is the hike in ‘booking fees’ or ‘arrangement fees’, as lenders attempt to claw back margins that have been lost to lower interest rates.

Lenders are now enticing borrowers with stunning headline rates, but the high fees attached to these deals often make them deceptively expensive and less competitive than other, less spectacular deals.

Soaring mortgage arrangement fees could offset the gains of the low headline rates.

It could all depend on how much you borrow.

If you are borrowing less, you are more likely to be disadvantaged by a large arrangement fee, even if you achieve a very low rate mortgage.

This is because the saving offered by a lower interest rate is far less on a smaller loan, and the impact of a low rate is unlikely to offset the large arrangement fee, especially if the offer period lasts for just a few years.

Therefore, it is important to weigh up the balance between enticing interest rates and the size of the arrangement fee.

It is often the case that sacrificing a few tenths of a percent in return for a much lower fee could save thousands of pounds, depending on the size of the loan required.

The table below shows the full cost of a number of leading deals over their two-year offer period for different loan amounts, including the arrangement fee.

As is clearly evident, for loans up to and even above £200,000, the Norwich & Peterborough mortgage proves to be the cheapest option.

Despite a higher interest rate than its competitors, the lower fee (between £1,050 and £1,704 cheaper than its rivals) has a greater monetary impact for customers taking out smaller mortgage loans.

Only when it comes to larger loans, of around £275,000 and above, does the impact of the lower interest rates offered by the Yorkshire Building Society and HSBC begin to offset the arrangement fee and prove more valuable to a homeowner.

• Borrowing less? Consider a lower fee option.

• Borrowing more? Consider a lower rate option.

Consumers are aware that exceptional rates rarely come without a catch. The trick now is negotiating the right balance between the headline interest rate and the fee involved for the amount that is required.

As the example here shows, a fairly inauspicious deal could prove to be the most suitable, rather than an attention-grabbing table-topper. Shop carefully!

Keith McDonald
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Interest in mortgages shot upwards last week, brokers have said, following the Bank of England's announcement that interest rates were likely to remain low for another three years.

The Bank’s “forward guidance” strategy delivered by new Governor Mark Carney has pledged to keep interest rates at their record low 0.5% until the rate of unemployment falls to 7%, which is estimated to take three years.

The move, designed to add ‘stability’, has been criticised for adding confusion to the markets. But it has had clearly had the desired effect on the housing market, with mortgage brokers receiving a surge in requests since the new strategy was laid out.

Andrew Montlake, director of mortgage broker Coreco, said there had been “an influx of enquiries” from borrowers with renewed confidence in taking on short-term fixed-rate deals.

The focus on unemployment would retain low rates, he said, which would give borrowers extra surety that mortgage repayments would not rise suddenly to unaffordable levels.

“This is a major step to ensuring the property price growth we are already seeing takes root,” he said.

“I expect the Governors' announcement to lead to a greater stampede of people wanting to take advantage of the record low rates.”

Jobless Total Could Fall Faster

But new data suggests that the jobless target of 7%, which would require the creation of another 750,000 jobs, could be reached sooner than the bank’s anticipated target of 2016.

The latest Labour Market Outlook report from the Chartered Institute of Personnel Development suggests that recruitment prospects are currently at a stronger level than over any period of the last four years.

The difference between the proportion of employers who expect to recruit and those who expect to downsize is at +14 for the current quarter, it says, compared to just +5 in the winter and -8 during the previous winter.

One of the ways in which firms are funding new recruits is by cutting down on the costs of recruitment, such as the use of agencies and private consultants. A quarter of private-sector firms said that they were likely to use social media as part of their recruitment strategy.

Keith McDonald
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Peer-to-peer lender Zopa says that the value of loans arranged through its online portal could more than double this year.

The site has facilitated loans worth £20 million in July, and expects to exceed £200 million this year, before doubling this again in 2014.

Zopa’s online platform allows investors and borrowers to make arrangements at more favourable rates than those offered by mainstream banks. The figures offer further evidence that lenders and savers are turning their backs on traditional sources in the pursuit of better rates.

A report released last month by the lender, based on findings by the Centre for Economic and Business Research (CEBR), found that more Brits have been prepared to risk alternative lending as rates on savings accounts have plummeted.

It shows that peer-to-peer lenders have provided investors with returns of around 3.4% above inflation on average, while stringent credit checks upon new borrowers has helped to keep default rates low (read more).

Unlike standard savings accounts, investors’ deposits are not guaranteed by the Financial Services Compensation Scheme.

But leading peer-to-peer lenders have encouraged greater regulation of the sector to boost confidence in the safety and robustness of their operations. The sector will fall under the regulation of the Financial Conduct Authority in 2014.

Expansion to Business Lending

Further evidence of growing confidence in the popularity of peer-to-peer lending is the promise of government funding for distribution to small businesses.

Zopa is awaiting a trench of government funds worth £10 million, which will be lent to sole traders.

"It's a big deal for us," said Giles Andrews, Zopa's chief executive.

"For any business to get some kind of government support after a lengthy due diligence process is a positive step, and it takes us into a pretty interesting new business area."

The move follows the failure of the Funding for Lending Scheme to reach beyond the residential mortgage market – a measure which has decimated the savings market and pushed more savers towards peer-to-peer lenders.

Keith McDonald
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Train commuters struggling on stagnant wages are braced for an average fare increase of 4.1% in the New Year.

Train companies are allowed to set their fare increases to one percent above the Retail Price Index (RPI) measure of inflation in July, which was revealed today to be 3.1%.

During a week when it was revealed that real wages in Britain had suffered more than disaster-struck Spain or Cyprus since mid-2010, hard-pressed workers now face losing another chunk of their salary to the daily commute.

The TUC said that a 4% hike in 2014 would equate to a 40% rise in regulated fares since 2008 compared to a rise in average earnings of just 14% over the same period.

How much could your season ticket cost in 2014?

Increases "Essential"

Michael Roberts, chief executive of the Association of Train Operating Companies (ATOC), defended the fare rises, claiming that they were essential for upgrades to the network.

"Someone has to pay for that investment," he told the BBC.

“Over many years government policy has been to allow regulated fares like season tickets to go up above the rate of inflation.”

But as we detailed in our June blog, A Total Public Rip-Off, commuters have become increasingly disillusioned with a poor-performing rail system and a culture of exorbitant bonuses that is seen to be rewarding failure.

Our graphic from 2013 shows how trains have become the most expensive form of transport (read more).

ATOC says that only 3p in every pound spent on rail fares is profit, while 48p goes to Network Rail for maintenance.

However, bosses at the taxpayer-funded organisation are set to receive over £10 million over the next three years, despite a failure to reach modest punctuality targets which could land the firm a £75 million fine from the Office of Rail Regulation.

A damning report from the Centre for Research on Socio-Cultural Change said that privatising the railways had led to the highest fares in Europe with cramped conditions.

Fare increases had largely gone straight towards returns for shareholders, it said, leaving the taxpayer to pick up the cost of investing back into the railways.

"Running the railways is a hugely expensive business," conceded transport secretary, Patrick McLoughlin.

"I'm afraid the passenger also has to make his contribution."

What are your thoughts on the pending 4% rise in train fares? Is it justified? Are trains becoming unaffordable? Let us know by leaving a comment below!

Keith McDonald
Which4U Editor

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Customers at NatWest and RBS who register for a new rewards scheme can now earn cashback using their debit cards, though only a small number of retailers are participating at the launch.

The free Cashback Plus scheme is available to new and existing current account customers (though not basic bank accounts), and provides a return of at least 1% from debit card spending at a number of retailers, including BP, Cineworld and Caffè Nero.

Though only a small number of retailers are currently participating, customers can also benefit from 1% cashback on groceries at Tesco until the end of November.

The scheme is not without some nitpicking exceptions. BP will not offer cashback at stations featuring a Co-operative mini-market. Nor are cashback rewards available through third-party retailers, such as Amazon.

RBS and NatWest now offering 1% cashback on debit card spending - though participating retailers are currently few in number.

Participating retailers

• BP
• Cineworld
• Café Nero
• Loch Fyne Restaurants
• Hungry Horse
• Ernest Jones
• H. Samuel
• Charles Tyrwhitt
• Feather & Black
• Multiyork
• American Golf
• Tesco

Cashback

Customers are able to redeem cashback once they reach a threshold of £5 (following £500 of eligible spending). This can be returned in cash to the customer’s current account, donated to an associated charity (such as NSPCC or Cancer Research), or converted to gift vouchers.

The gift voucher option appears in the first instance to be the most valuable. £5 in cashback can currently be doubled in value through a £10 gift card at H Samuel, or exchanged for a greater value still at Cineworld, which will offer two evening cinema tickets.

In cashback terms alone, the RBS / NatWest account still pales in comparison to the Santander 123 current account, which also pays competitive rates of interest on credit balances.

However, following an increase in the incentive offered by First Direct for switching customers, the move by the RBS Group adds further spice to the current account market just one month before the launch of a new switching system that will make it much easier for people to switch between banks.

Find out more about the new switching system here.

Keith McDonald
Which4U Editor

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More payday lenders are reported to have quit the market rather than face further scrutiny from the Office of Fair Trading (OFT).

The OFT says that of the 50 lenders it had investigated, 19 have now left the market, with one more reporting that it has ceased trading.

The regulator contacted 50 leading firms in March, following a year-long review into the sector.

Lenders were asked for an audit and given three months to prove that they were bringing their practices into line with the terms of the consumer credit act, upon which their licence to operate is founded.

By the end of July, the OFT revealed that almost a third of the lenders had decided to withdraw from the sector (read more).

Another five have since followed, taking the total to 19, although the majority of these will continue in other regulated financial services.

The OFT’s concerns with the payday lending sector include the lack of adequate affordability checks, a failure to guard against fraud, and a culture of intimidation for customers who struggled to repay on time.

The rate of withdrawal from the market is raising concerns at the kind of malpractice that is assumed to have taken place over recent years, with just over half the number of leading lenders willing to abide by the expected legal conditions.

The OFT also referred the sector to the Competition Commission after finding fundamental issues that work against the interests of the consumer.

The Commission has opened its investigation into the sector, and will seek to determine how consumers are able to shop around and establish value for money on loan products.

Keith McDonald
Which4U Editor

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A new current account switching system will launch on September 16th, a month from today, which will allow consumers to switch banks within seven days.

Participating banks and building societies will be required to process current account transfers within seven working days – around quarter of the time it can currently take.

33 banks and building societies are signed up ahead of the September launch, covering the vast majority of current account providers. Tesco Bank will join the system next year, when it prepares to launch its own current account range.

The Payments Council’s £750 million switching system takes care of inbound and outbound payments (Direct Debits, standing orders, etc), removing much of the stress involved in a transfer.

It also redirects any payment activity from the old account to the new one for 13 months, so customers will not be affected if an employer takes time to update their details.

And if anything goes wrong with the switch, customers are guaranteed to be refunded for any charges incurred.

Find out more about the switching system and see a full list of its participants in our guide.

The new system was developed following recommendations made by the Vickers banking commission in 2011 to improve competitiveness between banks.

The chief executive of the Payments Council, Adrian Kamellard, said: "We look forward to a new era of account switching which will lead to greater choice for customers and wider competition in the marketplace.

"After two years of work and commitment by the Payments Council and financial institutions to develop this new standardised switching service, today marks a significant day for all parties involved."

Keith McDonald
Which4U Editor

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Amendments to Yorkshire Building Society's mortgage range now makes its two-year fix a best-buy on the market.

The society's two-year fixed rate mortgage (65% LTV) has been recently reduced to 1.66%, with a lower combined product / processing fee of £975.

This now undercuts competition from major banks in this headline category.

The Rate / Fee Negotiation

Currently, in the mortgage market, stunning headline rates are being undermined by high fees, which make the mortgages less competitive than other deals.

The example we used in our recent guide was Norwich & Peterborough, where, despite a higher initial interest rate than its competitors (1.99%), the lower fee of just £295 produced a better deal for those borrowing up to around £275,000.

Only when it came to loans above this amount could the lower interest rate eventually offset the larger arrangement fee.

Yorkshire's astute move is carefully calculated on these grounds.

By combining a lower rate (1.66%) with a lower fee (£975), the Yorkshire deal now becomes cheaper than rivals over the two-year offer period for loans above £178,000.

Below, we can see the cost of leading two-year fixes over the offer period (including the arrangement fee) at loan denominations of £100,000.

9th August 2013

16th August 2013

Previously, there had been only a small bracket where Yorkshire's headline deal proved most competitive. But with a few readjustments, the mortgage now tops HSBC, the West Bromich and Chelsea BS for buyers seeking homes valued above £274,000.

That's how much of a difference the fee can make. Check out Yorkshire's mortgage listings here, and our guide to arrangement fees for more details.

James Booker
Which4U

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Mortgages have fallen to their most affordable level since the twentieth century, according to a new survey.

The Mortgage Affordability Review by Halifax has revealed that mortgages reached their most affordable level since 1999 during the second quarter of 2013.

Rates have tumbled following the launch of the government’s Funding for Lending Scheme, causing a horde of new and existing homeowners to pursue better deals.

According to the Halifax review, payments now account for just over a quarter of a new borrower’s income (27%), compared to almost half (48%) just six years ago. As a proportion of earnings, mortgage payments have halved in more than 20 areas.

Camden, in north London, was identified as the least affordable district, where mortgage payments still consume over half the average income (53%).

Record-Low Rates

Mortgage rates are currently at record-low levels, even dipping below 1.50% for those with large deposits (West Bromwich Building Society [1.48%] / HSBC [1.49%]).

Craig McKinlay, director of mortgages at Halifax, said that government schemes directed at the housing market had been instrumental in improving conditions for consumers.

"The Funding for Lending scheme has helped lenders to cut mortgage rates, causing a further modest improvement in affordability over the past year, despite the modest rise in house prices nationally," he said.

"Substantial mortgage rate reductions and lower house prices have led to a significant improvement in mortgage availability since the peak of the housing market six years ago."

Keith McDonald
Which4U Editor

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