Following in the footsteps of many of its high street competitors, Alliance and Leicester has announced that it will no longer accept new customers onto its Online Saver and Direct ISA accounts. The interest rate for the Online Savers account is also being cut from 5.35% to a straight 5%.
Richard Brown of the financial comparison website Moneynet ( http://www.moneynet.co.uk ) believes that Alliance and Leicester (A&L), in common with its high street competitors, has seen its costs rise as a result of recent rule changes covering things like the way mortgages and general insurance are policed. He added, “Unfortunately it’s the consumer who shoulders much of this additional burden”
It seems to many of their loyal customers that A&L is indeed determined to make their customers pay in an effort to purge costs and boost their profits. These cuts are only the latest of a series of changes that A&L have made during recent months. First to go was the cashback scheme on their Moneyback credit card. The Moneyfacts (http://www.moneyfacts.co.uk) financial data website pointed out in February, that A&L had increased the APR on their credit cards for all purchases up to 16.9%; as well as increasing penalty fees, and introducing punitive new clauses to current accounts. Other charges have been introduced to their mortgage products, balance transfer fees on credit cards, reductions in children’s savings accounts, whilst The Guardian (http://money.guardian.co.uk/saving/banks/story/0,12410,1509094,00.html) has revealed some suspect changes that have been implemented to their systems to increase the number of customers who breach their overdraft agreements, triggering penalty charges.
A&L has said that there is no hidden agenda, and that it still leads the way compared with its banking rivals.
A&L however, are not the only financial group to be feeling the pinch. Barclays, HBOS and Royal Bank of Scotland have all warned about credit arrears. An announcement concerning job losses at Scottish Widows, came alongside admissions from their owners LLOYDS TSB that there was, “An increase in the number of customers experiencing repayment difficulties” with their credit card debts and unsecured personal loans. According to Lloyds' Chief Executive, Eric Daniels, we are currently experiencing, "a slowing consumer environment".
Recent announcements by the Treasury delivered the worst monthly public borrowing figures since records began in 1993, re-igniting fears over a possible rise in taxes.
Consumers are reducing the amount they borrow on credit cards and analysts predict mortgage lending in the UK will plummet by 10 per cent over the next three years, as the out of control growth in house prices finally stalls.
Independent market analyst Datamonitor claims, lenders who have been enjoying a boom in recent years, will struggle to maintain the momentum and be forced to work harder to secure market share.
Investor Connections, a group of independent financial advisers, has called for an accurate assessment of the UK's current economic position, after statistics showed the three main asset classes, shares, bonds and property are all experiencing downward trends.
This downturn should spell good news for borrowers and homeowners, as the mortgage and credit industries fight for customers and sharpen up on their competitiveness; however the evidence of Lloyds TSB’s actions seems to belie this. With HBOS forced to criticise the other credit card companies for failing to provide customers with adequate product information, despite repeated requests to do so from consumer lobby groups and watchdogs on the Treasury Select Committee, it looks like the majority of finance companies are currently out to protect themselves and their share-holders, with little regard for their customers.
At a time when UK consumers are proportionately saving less than half of what they were 25 years ago, you might be forgiven for thinking that competition in the banking world would be becoming increasingly cut-throat in order to gain customers’ business, but it seems that the big institutions are instead looking to go down the route of cost reduction to protect their profits. There are savings are out there to be made, but they are savings in costs to be made by the finance companies, at the expense of the consumer, rather than beneficial savings for the customer.
Mortgage sales hit problems
The housing market has been buoyant over the past few years, but mortgage providers and first-time buyers are both now facing a tough time. Following announcements from the Bank of England that there has been an overall decline in the total number of UK home-buyers, and a declaration from the Financial Ombudsman Service (FOS) that the number of disputes concerning mis-sold mortgage endowments has now hit record levels, it seems that mortgage lenders are facing a bleak time. Add to this the results of a new survey, by the Edinburgh Solicitors Property Centre, which shows potential first-time buyers fear that they may never get onto the property market, and you start to see a worrying picture of the housing market emerge.
How to score with credit
With a massive £1.3 trillion of personal debt in the UK, obtaining credit and staying financially afloat are daily dilemmas for the British consumer. Many major banks, including Lloyds TSB, have recently declared an increase in the number of customers experiencing repayment difficulties, with the need for better financial advice and support has never been more important.
UK debt becoming a cause for concern
The UK attitude toward debt has received a major shift over the past few years. Where once the UK was seen as a nation that held up thrift as being virtue and considered debt a vice, it has now changed to owing £1.3 trillion on mortgages, credit cards and other loans.The main cause of this growth in debt is the British obsession with house ownership, making up 80% of the borrowing. Figures for the number of repossession orders granted in the first three months of 2005 have reached nearly 26,000, which is the highest figure since 1995.
