Tonight:
4°c
What a week it's been for homeowners. First the Government magics up a two-year safety net for borrowers facing mortgage arrears, and the very next day we're treated to another one per cent cut in the interest rate. God - or at least Gordon - is determined to keep a roof over our heads.
But I'm keeping the cut-price bubbly on ice for now. Amid all the declarations that the latest bonanza for homeowners "can only be a good thing", I've discovered a catch or two that give no cause for celebration.
The biggest party-pooper is Alliance and Leicester, my building society. It seems quite determined to hang on to as much of this free money as possible. All year, since interest rates began to fall, I've been harassing them about the cost of my tracker mortgage. It's tied not to the base rate but a standard variable rate, which translates roughly as "any rate we fancy".
So last month, when rates plummeted by 1.5 per cent, the A&L ignored Government advice and passed on only 1.1 per cent to customers like me, one of the meanest amounts among bigger lenders. It seems to me my mortgage is not so much tracking the interest rate as lagging quite far behind it. Consequently, I'm still paying one of the highest tracker rates on the market.
Whammy number two comes when you look at who has actually signed up - in principle - to the emergency rescue deal. Only 70 per cent of borrowers are covered and, you've guessed it, A&L customers are among those who can go whistle.
But the real low shot is that interest-rate cuts are cruel to those of us who saved while the rest of the nation went on a credit binge. By sensibly salting away some salary every month, I've actually helped out the economy. Yet savings rates have been slashed over the past year and it's inevitable they will be again. Already my bank offers less than two per cent on easy access accounts.
Clearly, we can't have it both ways. But for me this is a lose-lose situation. As a saver I'm being penalised and as a mortgage holder I don't fully benefit. There are many thousands of us in the same leaky boat.
I don't pretend to know how to cure our ailing economy but it strikes me that rewarding careful saving over unsustainable spending would be a good place to start. Punishing the thrifty is no way to get ourselves out of this mess.
Reader views (12)
Dan from London, Dear boy, I think Charlotte's point was that those who have managed their finances sensibly are now being penalised for the incompetence and inability of others to manage theirs.
- Paul, Chatham, UK
If you think that your mortgage interest rate is too high and the saving rate is too low the obvious thing to do with your savings is repay part of your mortgage - you would then be effectively earning the high mortgage rate tax free on the amount of your savings.
- Richard, London
Charlotte,
Dear girl, where to begin?
Firstly you really only have yourself to blame if you don't at least seek to change your mortgage provider particularly if your current one is one of the worst of the lot
As for helping the economy by salting away money, how exactly has your "not spending helped the economy?
Most western economies GDP is based on spending, by saving you tie up funds and preven monetary velocity doing what it does best i.e. multiplying the effectiveness of every pound in circulation.
- Dan, london
What about people who do not own a home but have savings? They see others benefit from a substantial cut in monthly outgoings paid for with their money.
- Liz, Scotland
Our house is paid for - and we worked dammed hard to accomplish this. We have savings, which now we have retired take us out of any other benefit possible.
Now we discover that our savings will earn almost nothing in the building society. I am going to spend all my momey and join the gang of people who do not care or provide for themselves. It makes sense to me. Have another holiday and to hell with the future seems to be the thing to do in Britain nowadays.
- Amber In Mitcham, Mitcham Surrey
I think the best deal for people like you (and me) who have managed to save money are offest mortgages, as even at the interest rates we have at the moment it works out better to not pay mortgage interest than to save (assuming you pay income tax!).
- Pete, Enfield
Spot on, A. Hayward. The best net rate of interest is almost always to be obtained by paying off one's debts rather than by investing in a savings account. And one gains the further pleasure of depriving the banks/building societies of business.
- Richard, London, London. UK
Nice to know I am not the only on that thinks this is all wrong. The modern tick box approach to managing everything leaves no room for gut feeling and experience and I have a very bad feeling about all of this - my wife called me a "spirit of doom" when I insisted that this was all coming over three years ago - Not any more!!
The way out of this is not to vote for communism dressed up in sheeps clothing. Question is, are there any real sheep left?
- Joe, Sheffield
Mr Brown is such a nice clever guy. If you bought a pad in London last year(because prices will always rise 25%+ per year in London - Won`t they?)borrowed £400,000, lying about your income(everybody does a bit - don`t they?)Just tell the truth about your present income. That nice Mr Brown will get the bank to defer your interest for 2 years. If house prices start to rise again, you pay the bank back. If prices continue to fall, you hand the keys in and go bankrupt(nice Mr Brown made that easy a couple of years ago) the taxpayer pays the bank back (probably only about £40,000)and you have lived rent and mortgage free for two years. Clever innit, nice Mr Brown
- Trevor, Southend UK
Brown has learned nothing. They are still spending taxpayers' money to encourage spenders while penalising savers. But who is lending the government all this money that they are borrowing, and at what rate of interest ? These will be commercial rates of interest on the international money market. Why shouldn't UK savers benefit from this ? Room here for the financial institutions to offer a new product.
- Richard Shaw, Pinner UK (London Borough of Hillngdon)
Those of us who live with our means our subsidising the rest of the country.
Good article and for once I can identify with the columnist.
- Darren, London
Unless you can get a whopping rate of return on savings, I've decided it's worth paying off what I can on my mortgage at the moment rather than saving. Particularly if you're a higher rate taxpayer and have already used up your tax free allowance!
- A Hayward, london, UK
