The Times - UK (2021-12-18)

the times | Saturday December 18 2021 69

Money

Invest your

way out of

inflation

Pages 72-73

extra £198 a year, according to the estate agency Hamptons International. If the Bank rate were to hit 1.1 per cent they would pay an extra £1,356 a year. The expected rate rise has already been factored in to mortgage rates, which are up 0.3 per cent since Novem- ber for anyone taking out a new loan. Santander and Barclays both said within hours of the Bank of England announcement that they would increase their standard variable rate mortgages (the rate you default to

when a fixed rate ends), in line with the base rate. The Santander SVR will be 4.49 per cent from February and Bar- clays’ SVR will go up to 4.74 per cent in January. Halifax said yesterday that its SVR would go to 3.74 per cent from Feb- ruary as will Lloyds’ main default rate. Ray Boulger from the mortgage broker John Charcol said: “As the market factors in further increases that are likely in the new year, we can expect mortgage rates to rise further.” The estate agency Savills said last

month that if the rate rose to 0.5 per cent mortgage repayments would eat up more than 20 per cent of monthly income in 2022, up from just over 15 per cent now. First-time buyers, who would have to save £23,500 for a 10 per cent deposit on the average first home, can take some solace in the fact that mortgage rates are still low by historical standards. And the gulf between homeown- er and first-time buyer deals has narrowed considerably. In June the lowest two-year fixed rate on the market was 0.99 per cent. The lowest rate at 90 per cent LTV was 2.88 per cent and the lowest 95 per cent LTV rate was 3.39 per cent. Now the cheapest two- year fixed rate is 1.11 per cent while the lowest 90 per cent LTV loan has fallen to 1.63 per cent and the cheapest 95 per cent LTV deal is 2.39 per cent. David Hollingworth from the mortgage broker L&C said: “More lenders are offering lower rates for first-time buyers, although they are still markedly higher than for those that can stretch to a bigger deposit.” While house prices have soared since

the pandemic began, they showed some signs of slowing down last month after the stamp duty holiday came to an end. The average UK house price fell from £271,000 in September to £268,000 in October, according to HM Land Registry. The number of mortgages approved for a house purchase — 67,200 — was the lowest since June last year, the Bank of England said. Last month Savills fore- cast that house prices would grow 3.5 per cent next year and 3 per cent in 2023, compared with a 10.2 per cent rise in the year to October. The Bank of England is also con- sidering whether to water down stress test rules that require lenders to test whether borrowers could afford a 3 per cent rise in interest rates before they are approved for a home loan. This could help about 50,000 people on to the housing ladder. Lucian Cook from Savills said a relax- ation of the rules could “offset some of the pressures from bank base rates gradually increasing to 1.5 per cent to 2 per cent over the next five years”.

1.63%

the cheapest two-year fix for borrowers with a 10 per cent deposit

Now the mortgage gulf widens

T

he gulf between first-time
buyer mortgage rates and
those for homeowners looks
set to widen after the rise in
the Bank of England base
rate. It rose from 0.1 per cent to 0.25 per
cent on Thursday as policymakers tried
to combat inflation, which hit 5.1 per
cent on Wednesday and is expected to
go up to 6 per cent by April.
Market forecasters expect the Bank
rate to rise to 1.1 per cent by the end of

This would be the highest level
since January 2009, just after the
financial crisis.
The rise in rates could be a blessing in
disguise for first-time buyers because it
is likely to take some heat out of the
soaring housing market. Prices rose
8.2 per cent last year, about £20,000 for
the typical home, meaning they went
up faster than most people could save.
Higher rates could put off some
homebuyers and reduce demand. But
they will also put an end to the cheaper
loans that have helped some first-time
buyers on to the mortgage ladder.
Borrowers paying the average
2.91 per cent fixed rate on a 95 per cent
loan-to-value (LTV) mortgage would
repay £995 a month on a £223,000
property — £11,937 a year. If the
0.15 percentage point rise in the base
rate were added, they would pay an

Savings rates are not reflecting Thursday’s rise in the base rate (George Nixon writes). The last time the base rate increased, from 0.5 per cent to 0.75 per cent in 2018, only 32 per cent of variable rate accounts raised rates. Some £256.6 billion was held in accounts earning no interest in October, according to the Bank of England, and billions more is

earning 0.01 per cent with the biggest banks. Even money in the highest-paying accounts is losing value in real terms after inflation hit 5.1 per cent last month. Inflation of 6 per cent would halve in 11 years the value of £10,000 earning 0.01 per cent, according to the site Savings Champion. The best easy-access account, from Investec,

pays 0.71 per cent and can be opened with £5,000. Oxbury Bank has the best notice account at 1.1 per cent. You must give 120 days’ notice of withdrawals and open it with £1,000. Gatehouse Bank, an Islamic bank, pays 1.41 per cent on a one-year fixed rate bond which can be opened with £1,000. Zopa pays the next best rate at 1.37 per cent.

And no relief for savers

After a few months of falling rates for first-time buyers the Bank of England has spoilt the party, says George Nixon

A

n Eon customer was baffled when his electricity bills suddenly rose from £57 to £550 a month (David Byers writes). Chris Puttnam, 52, was offered a dual-fuel tariff of £57 a month when he moved into a small bungalow in Glenfield, Leicestershire, in December 2019. Now he faces bills four times that amount and is in dispute with his supplier. In February Puttnam, pictured far right with his friend David Glover, had a letter telling him that he was £3,048 in debt and that his direct debit would immediately increase to £550 per month to pay it off. Eon told him that he was a high user and needed to start paying the money back immediately. “I live on my own in a small two- bedroom bungalow with three storage heaters,” he said. “How on earth could I have used all that electricity?” After he complained to Eon, the company apologised and said that he should never have been put on the £57 a month tariff. They said he ought instead to have been offered an Economy 10 tariff, which gives you cheaper electricity at night. It backdated his bill to December 2019 — knocking off £1,026. But that still left him repaying £220 a month, which he thinks is far too high. Eon says this is the correct

amount because he has “inefficient heating” in his home. Puttnam says he had his storage heaters checked by an electrician to see if they were working properly and found that they were. He then complained to the Energy Ombudsman and on December 1 it ruled that Eon should apologise and offer him £150 as a gesture of goodwill. However, it ruled that Puttnam would still have to pay the outstanding balance. “I’ve asked Eon to revisit my account, not only because I can’t believe it is correct but because I am also paying for its mis-selling mistake. I just can’t afford to pay this bill every month,” he said. “I feel like I am banging my head against a brick wall and I don’t know who to turn to.” Ofgem, the regulator, says that all suppliers must have a complaints process and come to a decision within eight weeks of a grievance being raised. If you have a complaint and need help drafting a letter, the Citizens Advice website has templates you can use. If you can’t resolve the matter with the company, you can go to the Ombudsman, which will recommend a solution. Eon stood by its decision but said it would “support” Puttnam to pay his bills if he contacted them.

‘How can my energy

bill be over £3,000?

The Times - UK (2021-12-18)

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