As the temptations of shopping and going out return, here’s your to-do list for keeping a handle on your finances.
Lockdown has created an accidental savings boom. Bank of England figures revealed this week that savings deposits by UK households increased by a record £25.6 bn in May. On top of that, we paid off a record £7.4 bn of debt.
Is it possible to keep up these financial habits even as things creep back to normal? We will only find out if we try, so inews has put together a guide to figuring out the next steps for your finances.
The base interest rate is at a record low of 0.1 per cent, which means that savers are getting very little return for their money.
If the pandemic has given you a chance to save more than usual, now might be the time to think about where that money is sitting.
If you don’t have an immediate use for it, could you move some from an easy-access account to a fixed-term one with better
rates? Some people are also putting the extra money into alternatives such as premium bonds, purchases of which hit a
14-year high in April.
When it comes to keeping up the habit of regular saving even as some businesses reopen, try looking at how your outgoings differed recently and deciding which of these changes you would like to keep up.
Laura Laidlaw, the head of customer communications at Standard Life, says: “For example, after discovering the abundance of free fitness classes online, do you really need to go back to spending hundreds of pounds a year on the gym? Converting this into savings could make a big difference for your financial fitness instead.
“And what about the daily coffee run? If you managed the past few months drinking home-brewed coffee, you will have saved more than £100.”
Having savings is great, but you should not focus all of your energies on building up cash if you still have debts. Interest-free
overdrafts of up to £500 and payment holidays on credit cards are still available until the end of October, thanks to the intervention of the Financial Conduct Authority (FCA).
But remember that these should be used only when you have no other options. On credit cards, interest is still accumulated during payment holidays and it is best to return to regular payments as soon as possible.
For overdrafts, many banks were planning to introduce much higher interest rates this year and may well apply these to anything that is not paid off once your grace period is over.
The period in which payment holidays are available on mortgages has been extended until 31 October. You can still apply if you are worried about missing a payment, but once again lenders say the option should be used only if necessary, and you should talk to your bank if you are concerned about your financial situation.
Something else for borrowers to think about is whether they could be getting a better deal now that interest rates are so low. Cassie Stephenson, of mortgage broker Habito, explains: “When you first take out a mortgage, you will get a tempting deal at a cheap rate, locked in for two, three or five years. When that time is up, you automatically get moved to your lender’s much more expensive standard variable rate (SVR).
“If you are coming out of your mortgage holiday and preparing for your repayments to go back up, it really could pay to shop around for a cheaper, money-saving deal.
“An estimated 850,000 UK homeowners will be moving on to their lenders’ SVRs in the next six months. The cost of not switching is in the region of £3,500 every year.”
Renters coming to the end of leases are in a good position to try negotiating with landlords. Matthew Addison, the boss of the
group deposit saving service Stepladder, says:
“Be sure to take a look at the pricing in the area to give you a sense of how much it may have moved before initiating the conversation. Remember, for a landlord a renter moving out can represent two months of lost rent, so you have some leverage.”
Both tenant and landlord must agree to new terms in writing, or you could risk affecting your credit score.
While there is not much you can do about household bills rising, you can see whether you are on the best deals. For example,
households can save hundreds of pounds by switching energy tariffs.
“Millions of consumers whose fixed-energy deals have come to an end in lockdown could save £273 a year on average by switching from their SVR,” says Ernest Doku, of Uswitch.com. He says that the same goes for broadband and the average household could save £120 a year and even get a faster fibre service as part of a new contract.
But beware of termination fees, which could outweigh the financial cost of switching provider.
Other bits for the to-do list
- Subscriptions If you added an extra streaming service to your usual subscriptions to keep everyone entertained at home, don’t forget to cancel any that you don’t want any more.
- Refunds and membership extensions Check out whether any schemes you have been unable to use offer money back or other compensation. For example, National Trust and English Heritage are offering an extra three months to members who renew.
- Wills and testaments Getting final wishes signed off has proved difficult because of the need for in-person witnesses. Look into whether you are able to do this now.
(Article source: Inews)