The FSA plans to instruct banks to re-examine claims they have rejected for the miss-selling of payment protection insurance (PPI).

PPI was sold as a safety net to provide income to continue to repay loans and credit cards if the policyholder lost their job or became too sick to work or they had an accident. But these policies had restrictions. About 2 million people were excluded from claiming because they were self employed or part timers. Nevertheless the banks continued to sell the policies to people who had no possibility of making a valid claim. And it is not surprising that the banks were so keen on PPI – they made an estimated £1.4 billion a year from these insurances.

It now seems that the FSA believes that many of the compensation cases that have been rejected should not have been rejected. Consequently they are reported to be planning to instruct certain banks to review all the PPI claims they previously rejected. Apparently, this will affect around 40% of the companies that sold these policies and around 185,000 ex-policyholders.

The FSA have come to this decision because banks have been rejecting six out of ten miss-selling claims but when these rejections are referred to the Financial Ombudsman Service, nine out of ten are overturned in the customer’s favour.

So it seems that we can’t even rely on the banks to honestly review their own miss-selling without cheating!

We’ve all heard the talk that we’ve reached the bottom of the recession so we may be forgiven in hoping that the worst is over – but is it? It’s clear that as economists are predicting that unemployment will rise by another 500,000, many more workers will yet to face unemployment.

So maybe one of the key questions is have you got Redundancy Insurance? And do you have enough cover to maintain your mortgage repayment and any other loans that are secured on your house? And would you then have enough income to keep the family solvent?

Nobody likes considering these questions, but take my advice – no-ones job is 100% safe these days.

Redundancy Insurance is sold under a number of different names – Some policies also include cover for accidents and sickness and call the policy an Accident Sickness and Unemployment policy (ASU) some just call, it Payment Protection. So if you have any policies like these dust them off and establish exactly what you’re covered for and how much you’d receive if you were made redundant. Then work out how much income (after tax) you’d need to pay all the essential bills.

You can then buy cover in case you’re made redundant. The policies do not tie you in to a long tern contract and you can cancel them by simply informing the insurer and then stop paying.

But watch out. If you have reason to believe that you are about to be made redundant, it’s too late to buy a policy – your application will be invalidated. Our advice is be safe get a redundancy policy now. They cost in the region of £4-5 per £100 of monthly income for a policy that would pay out for up to 2 years.

The cost of mortgages is on the up despite bank’s costs falling to record lows. The cost of three and five year fixed mortgages has risen again despite bank’s paying less to obtain the funds they lend.

It means that for a £100,000 mortgage, the banks are making £515 more annual profit than they were just nine months ago in January. Figures show that the average price of a three year fixed rate mortgage increased from 4.67% in July to 4.81% at the end of August. For five year deals the price increased from 6.68% to 5.72%.

At the same time, the three year interest rates paid by the banks on the wholesale money markets was 3.3% and five year rates were 2.6 %.

But the biggest cash cow for banks are tracker mortgages. Banks are borrowing funds for these products at 0.7% and lending it out on tracker mortgages at 3.84%.

In our view these represent market forces where the demand for mortgages simply exceeds the volume of funds which banks, post credit crunch, are prepared to supply. Until demand and supply come more into balance, we are likely to see the banks making hay whilst the sun shines and taking the opportunity to boost their profits and balance sheets.

Hey fellas, if your aged between 60 and 65 you need to have applied for your winter fuel allowance and it’s worth a cool £250! And for those aged 80 or over, the payment increases to £400.

The winter fuel allowance is paid automatically to anyone who receives a state pension but men between the ages of 60 and 65 aren’t eligible for state pension and, therefore, have to apply for the allowance separately.

Anyone aged over 60 by 27th September is eligible for the payment this year.
The Department for Work & Pensions is apparently concerned that some men are unaware that they are eligible for this allowance and have been advertising the availability of the payments. If you need to claim for this year’s payment, then get your claim in a.s.a.p. and in any event before 30th March 2010. Use the Winter Fuel Helpline on 0845 9151 515

Interest rates on personal loans are continuing to rise as lenders remain worried about borrowers keeping up with their repayments.

The rates from Marks & Spencer, Egg, and Tesco have all recently risen by 1.2%, 1% and 0.2% respectively. Twelve months ago, the typical interest on a three year loan for £5,000 loan was 11.2% whereas today it is 12.2%.

Rates have risen because lenders think that the outlook for defaults continues to worsen. As a result the anticipated losses have to be covered by the majority of customers who do fulfil their obligations. This tends to indicate that the banks are supporting those economists who foresee a worsening unemployment rate. Now that the government is clearly planning savage cuts in expenditure the fuller, longer term affect of the credit crunch it is coming home.

We have to advise that despite the recent signs of recovery, the best advice remains batten down the hatches.

We think that motorist and the motor insurers will have something to say about the latest advice given to the government. The advice is that motorists should always be legally liable for all accidents with cyclists – even if the motorist was not at fault!

The advisers are called Cycling England an organisation funded by the Transport Department and they want the civil law to be altered so that insurers would always be liable for compensation. Now hands up who thinks that advice comes from an impartial assessment from a neutral adviser?

I can’t see any hands! Let’s try again, who thinks that advice comes from an impartial assessment from a neutral adviser?

Thank goodness you’re all sitting on your hands, because the proposal seems absolutely daft to me!

Apparently, the proposal has been based on regulations in Denmark, the Netherlands and Germany whose laws are heavily skewed in favour of the cyclist. Now I am less concerned about laws “skewed in favour of cyclists” than I am by the proposal lying on our government’s desk which advises that motorists should always be liable for an accident with a cyclist. To me the UK proposal goes two steps too far.

Let’s face it, why should a motorist have to pick up the tab if a cyclist is involved in an accident whilst riding the wrong way up a one way street? And what happens when the cyclist jumps the traffic lights or even goes through the lights when they are against them. These things do happen – I’ve seen it many times, especially in central London.

Motorists unite. Insurers unite. Defeat this daft proposal.

Our tip for today is pay this months’ credit card and utility bills either online, by phone, at the post office or at you bank. Why? Because the regional postal strikes are extensively delaying postal deliveries and it’s set to become much worse.

If you usually pay your bills by post, there’s a strong possibility that your payment will arrive late. That means that your credit cards will charge you a late payment fee and that late payment will find its way onto your credit rating. So you face a two way hit.

Local postal strikes have been happening since June but a national strike is now on the cards after the Communication Workers Union balloted its members on strike action over conditions and pay.

According to a recent survey 1 in 8 homeowners expect their house to fall in value during the next 12 months. This is despite 5 months of upbeat market reports from mortgage lenders and even the land Registry.

Confidence is lowest in the Midlands and Wales but even in more affluent London just over 50% think prices will rise with 31% expecting them to stagnate.

The latest Hometrack survey which is conducted amongst 6,000 estate agents and surveyors suggests that price increases were restricted to just 11% of the country – primarily in the south east. Across the rest of the UK, prices remained level.

The constant talk in the press about “green shoots” appears to be centred in the south east and amongst those in whose self interest is served by price rises. Hello Mr estate agent!

The awful customer service provided by the banks has been exposed, yet again, by the Financial Ombudsman Service. Their recent report shows that the banks not only receive more complaints than other financial organisations, but they have become surprisingly awful at dealing with them.

Historically the Ombudsman has upheld at least 33% of consumer complaints – but now it’s risen to at least 66% and sometimes as high as 95%. This tells the banks something they really must listen to.

Mis-sold payment protection insurance which was sold alongside loans and credit cards, head the list of problem areas. However, this must come as no surprise to the banks who merrily continued mis-selling the insurance for years - and now the birds have come home to roost.

If the banks’ complaints departments had been doing their jobs properly, many of the complaints seen by the Ombudsman would never have surfaced in public. As it happens, the banks appear to have decided to tough the situation out and obstruct legitimate complaints, probably in the hope that most of the complainants would get tired and simply give up.

The truth is that if the banks dealt with complaints properly the Ombudsman would never have got involved and now the banks are on the rack. It is difficult to avoid drawing the conclusion that some service and complaints departments at the banks are following a policy of confusion, delaying tactics and simply obstructing off those who complain.

If this is the case, they deserve every bit of bad press they receive and the FSA must levy huge non- compliance fines on them.

Universities are have to arrange emergency funds for thousands of students whose loans have failed to arrive in time for the new academic year The Universities are stepping in to provide money for living costs and to delay payments for accommodation as the backlog in despatching loan grants continues. Without this action the students affected would be unable to afford food and rent.

A spokesperson from Universities UK said that all universities had put arrangements in place to support students who faced financial difficulties which were not of their making.

It is the Student Loans Company that seems to have messed things up yet again. How many years does this cock up need to be repeated before the Student Loans Company learns the message that there is a huge influx of work in September each year?

But the Loans Company blames students for delaying their applications and say that if they got them in on time, this problem would not exist. However, they are finding it difficult to explain why students are having great difficulty getting their phone calls answered. “We’re sorry if some of our customers are having difficulties getting through”, they said.

This years, 1 million students have applied for loans and about 830,000 grants have been paid out leaving 170,000 high and dry!

Estate agents and others in the property market have consistently criticised Home Information Packs (HIPS) as an irrelevant add-on to the home selling process. But does a hidden agenda explain the Government’s lack of hearing?

Rumours abound that HIPS certificates are to be pressed into service to raise more cash for the government. Since October last year, anyone renting or selling a property has had to have a HIP certificate and an energy rating certificate. Some are predicting that the autumn budget will see the stamp duty on the sale of houses rescheduled to take into account the property’s energy rating. And we all know what “re-scheduled” means – it’s a rise!

And this could open the flood gates! If the government can use HIPS to increase stamp duty they could also use it for increasing property valuations for council tax purposes. Now wouldn’t that get the mini mandarins at the town halls salivating!

Ambitious buy to let landlords are finding it more difficult to expand their portfolios of properties as banks like Lloyds, which includes HBOS, impose new borrowing limits.

Last week Lloyds announced that its lending to landlords would be capped at £3 million and a maximum of 9 properties. Prior to this announcement, the bank would have lent £6 million on as many as 18 properties. It is not known how this will affect landlords who need to refinance their portfolios as their existing finance deals come to the end of their term, but presumably these landlords will have to diversify their borrowing to new lenders. Whether they will find new willing borrowers will depend on the equity within their property portfolios.

This move by Lloyds is another symptom of the finance sector wishing to diversify and reduce their exposure to the buy to let market which has been so badly hit during the current recession. Many landlords invested heavily in city centre apartments only to see the value of these properties fall by 50 per cent in cities such as Leeds, Manchester and Bristol.

First time buyers once again have the opportunity to get their mortgage deal without paying an up front application fee.

Since the credit crunch first bit, application fees have steadily risen to a typical level of £995 – although some lenders are charging as much as £1,498. It’s not as if the pain of paying these fees can be added to the mortgage as many insist they are paid upfront.

But now a small band of lenders have bucked the trend by offering fee free deals to first time buyers and well healed homeowners whom want to move up the housing ladder. However, they give with one hand and take with the other! You effectively pay for the fee free privilege by paying a higher rate of interest. In broad terms this means that anyone wanting to borrow £100,000 or less will be better off on a no fee deal even if the interest is a touch higher. But the bigger the mortgage, the more important it becomes to get a keen rate even if this means paying a fee up front.

If you want to check out some fee free deals, speak to Britannia, Northern Rock and Alliance & Leicester.

The lenders’ generosity is tempered however. If you want one of their fee free deals, you’re likely to have to stump up a big deposit – around 30%, and most of these deals apply to fixed rate mortgages.

Yes we know that you can still find credit cards with a 0% interest tag for an introductory period. But hey, look at the fees they charge for transferring your balances from your previous credit card!

The Nationwide offers 13 months at 0% but has a 3% transfer fee and MBNA’s 13 month 0% deal has a 2.9% transfer fee. Even Barclaycard’s 0% 12 month offering has a 2.5% transfer fee.

The average transfer fee for such deals is now 2.92% up from 2.74% this time last year. Indeed, some cards charge up to 5% for transfers, equivalent to three and a half months interest at a typical card interest rate of 17.3%.

This all means that rate tarts who have historically switched around between cards taking advantage of zero and low rate deals, are having a tough time as charges rise and credit is hard to come by.

And credit cards are becoming very choosey about who they accept. If you have a spotless credit record it may be possible to play the rate tart game for a little longer but with balance transfer fees rising, these charges are making the deals far less attractive.

Top economists say that UK interest rates could remain low for years. Their forecasts come as the Bank of England hinted that if necessary, it would continue to pump money into the economy, thereby depressing interest rates.

Only a month or two back economists were forecasting that base rates would begin to rise from their all time low of 0.5% but now their expectations of a rise are being pushed back. There have even been forecasts that the 0.5% rate could last for years!

But other economists warn that things could change markedly after the election next year. They say that as government spending will have to be cut to close the budget gap, interest rates could have to rise.

All very confusing isn’t it?

The Northern Rock has already admitted that it costs about £25 a month to administer a mortgage that is in arrears so why do many other lenders continue to charge up to £115 a month for those in arrears? Is it punishment or profit? You decide!

And this problem is not small – the figures are huge. Figures from the Council of Mortgage Lenders show that there were 399,000 accounts in arrears at the end of last March. That means that they are charging nearly £46 million each month in arrears charges when the true cost is just under £10 million.

If the homeowner has equity in their house then these charges don’t seem to matter to the lenders as they will get their money back as and when the property is sold. So they don’t spare the horses on any other charge either. Say for example, you want a debt councillor from your lender to come around to see you – that’ll be another £100 please! And if the lender has to repossess and sell your property your eyes will water when you see what they typically charge for estate agents fees – we’ve heard of 5% of the sale value. Who would dream of paying an estate agent 5% when the market norm is 1.5% at the most?

And if the lender has had to change the locks then a pair of locks on the front and back doors will typically cost £400 plus a further “management handling fee” of £50.

It seems all wrong to us. People who have their backs to the financial wall should not be preyed upon. Yes they should pay the costs incurred in sorting the situation out but what we are hearing of amounts to out and out profiteering on the most vulnerable.

It must be stamped out!

The average cost of overdrafts stands at an all time high – 18.9% which is the highest since the bank of England’s records began in 1995. It would seem that the bailed out banks like the Royal Bank of Scotland, are responsible for the highest charges.

The cost of personal loans is lower with an average rate of 13.1% and this is the highest since 2004.

This is further confirmation, as if any were really necessary, that customers are not seeing any benefit of the historically low Bank Rate which is standing at 0.5%. It is clear that whilst the banks are restricting the amount they lend, they are boosting their profits and balance sheets by pushing up charges on all their financial products.

This combination of record levels of interest and restricted supply of credit is set to choke economic activity in the UK and negate the affect of the £1.4 trillion of public money that the public injected into the UK banking system. And figures out this week show that recovery in the UK is lagging the USA and mainland Europe. The reason given for this is that financial services were a large proportion of the UK’s output and it is that sector that has been most badly affected by the recession.

This all suggests that if the UK’s recovery is to get going, the Government will have to tackle the availability of credit.

Lloyds TSB clients face charges of up to £200 a month if their current account goes into an unauthorised overdraft but if users of the banks’ Islamic account goes overdrawn, only £15 is charged. This has led the bank open to accusations of religious discrimination.

The Islamic account attracts Muslim clients to the bank by allowing them to bank in accordance with their faith. Sharia law does not allow interest to be paid so these accounts do not have a overdraft facility. So if a payment is made and the account has insufficient funds, the payment is blocked and a “returned payment charge” is levied. But on some accounts there is an arrangement whereby such payments are authorised and a £15 “unplanned overdraft fee” is charged. The bank says that the £15 payment is a fee, not interest and as such is in accordance with Sharia law.

However, standard current account users who go unauthorised into the red by over £100 are hit with fees of £20 per day for up to tens. This means charges of up to £200!

One commentator said, “It strikes me that this is bordering on the illegal. One cannot help thinking that the bank is bending over backwards to assist Muslims to the detriment of everyone else”.

What do you think?

The Institute for Public Policy Research, the Labour Party’s think tank, has recommended that middle class students should be denied student loans to fund the cost of living whilst at University and tuition fees.

If this were to happen, their parents would be forced to shoulder more of the cost – £3,225 for tuition alone possibly rising to £7,000 if Universities succeed in their lobbying for higher fees plus living expenses. Denying middle class student the opportunity of part funding their University education through a student loan would place untold pressures on the middle classes.

These proposals from the Institute for Public Policy Research are in effect a massive stealth tax on families whose aim is to ensure their children are fully educated for the 21st century. The Governments reaction has been luke warm to the report but they have refused to dismiss its conclusions saying that the Government is committed to making sure that money is not a barrier to people going to University whatever their background.” Few could argue with that sentiment but as usual, the devil will be in the detail – when and if it appears!

We in the UK have some of the highest house prices in the world – but does that really mean we’re richer? There is a paradox here. Our house prices are high because there is a constraint on the supply of houses. If overnight we could construct a million houses in the right locations, which would increase our housing stock by about 4%, we might assume that the nation’s wealth would increase.

But such a sudden increase in housing supply would probably lead to a collapse of prices in the entire housing market – and lead to a reduction in our national wealth even though there were 4% more houses.

This paradox lies at the centre of our national obsession with the price of houses. We feel rich when house prices are rising and tend to borrow more against them to finance fancy cars and holidays. But at the same time we forget the obvious: that apart from a lucky few with castles in the country, higher prices force us to live in smaller and poorer houses that we would like to live in.

In this context, higher house prices make us poorer.