Millions of people in overdraft will see their overdraft charges cut. The Halifax, with more than 5 million customers with current accounts, ha instead introduced a daily penalty of £5 if you go into the red. The bank previously charged £35 for a refused payment due to insufficient funds, £35 for authorised transactions whilst in the red, and £28 for using an unauthorised overdraft.

This all amounts to a month is £155 rather than £238 A DAY under Halifax’s previous charging arrangements.

The NatWest has announced that it was cutting the charges for a bounced cheque from £38 to just £5.

This all seems to have resulted from pressure from the Financial Services Authority although letters we have seen from banks imply that it is simply as a result of a “long-term review”.

No matter what the truth, it is a fact that banks need to be more transparent in their charging and customers need to be given a fairer deal.

Some borrowers are finding it impossible to gain access to the best mortgage deals, loans and credit cards despite having paid all their bills on time. Why? Because the credit reference agencies have made errors on the credit file they hold on that person.

Nobody gets everything right one hundred per cent of the time and this applies to the credit agencies as well. They make mistakes – but you pay dear for their mistakes!

Confusing you with someone else, recording other peoples’ credit problems on your file and general inaccuracies can wreck your credit rating and cause you untold headaches.

Our advice is check your files held by the three main credit reference agencies – Equifax, Experian and Callcredit. You are entitled to receive a copy of your file for an administration fee of £2 - and go through it with a fine tooth comb. If anything is wrongly recorded, the agencies have procedures you can follow to have your file corrected. The problem is that it all takes time and is a pain in the neck!

But until your record is corrected credit will either cost you more or even be refused. So once you have your record spot on, it’s a good idea to make the same check every year.

The FSA wants to reform the way mortgage lenders agree new mortgages. It’s proposals include a ban on self-certification mortgages and more detailed verification of the borrowers income.

The FSA’s 7 points are as follows:
1. A ban on self-certification mortgages which some have labelled “liar loans”.
2. Borrowers to provide far more detils about their income.
3. Abolish fast-track applications where mortgages are approved without detailed checks.
4. More stringent affordability checks to ensure borrowers can cope if interest rates rise.
5. Buy-to-let mortgages to be regulated.
6. All second charged loans to be regulated
7. All non-bank mortgage lenders to be subject to new and more rigorous, capital requirements.

Jon Pain, the FSA’s Managing Director is reported as saying, “We have to, learn from the lessons of the past. Affordability tests are important as we want to be sure that a borrowers net income is enough to cover the prepayments.”

Next Wednesday, judges at the Supreme Court will rule on the legal battle about unfair bank charges.

This is the case between the Office of Fair Trading and the main high street banks and will decide whether the OFT can assess the fairness of overdraft charges – which have been as much as £39 a time for exceeding your account limit. The Court of Appeal has already ruled that charges can be assessed but the banks appealed to the Supreme Court which is the highest court in the land.

It is estimated that 1.1 million people have £1.7 billion worth of charges awaiting this decision because a freeze was placed on complaints back in July 2007 when the banks appealed against the Court of Appeal’s decision in favour of the OFT.

Banking experts believe that the banks could face a £20 billion payout if they were forced to repay all the charges under dispute.

A third of fresher students at University are still waiting fort their student loans and grants to help pay their rent and food after the student loans system collapsed in administrative meltdown.

Students are reporting that the Student Loans Company has lost forms and seems unable to answer queries – and even answer the phone! This has meant that the Universities have had to step in and financially assist in the worst cases.

Apparently, a document scanning system at the loans Company failed losing documentation and forcing staff to go back to manual processing. But in practice the debacle looks more complicated than that with as many as 175,000 students waiting for their money.

This is not the first year that the Student Loans Company has got into a mess. They know the likely workload well in advance, so why, oh why, can’t they organise themselves better?

Students choosing a student bank account don’t need to worry that they’ll be saddled with the same bank after graduating. After graduating, students can open an account with any of the banks that offer “graduate accounts” and simply transfer their debt from their student account.

What’s more on transfer, some banks offer an interest free period. Take the Halifax for example. They will offer an interest free overdraft for up to £3,000 for the first 12 months – beyond that period, the rate is currently 19.8%. If the prospect of 19.8% puts you off, consider the Co-operative bank. Their graduate account offers a £2,000 interest free overdraft for 12 months followed by interest at 9.9%.

If you want an interest free period of more than 12 months, consider Lloyds TSB and the Royal Bank of Scotland. They offer interest free facilities of £2,000 in the first year followed by £1,500 in year 2 and £1,000 in year 3.

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!

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?

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!

A recent survey has confirmed that homeowners with debt problems are increasingly trying to borrow themselves out of trouble.

During the last year, consumers have increased their unsecured debt to an average of 194% of their net take home pay. This is despite falling house prices and increasing negative equity. Last year, it was “only” 170%.

In contrast, those debtors who do not own their own homes have been far more prudent. Their level of debt hardly changed over the last year.

This demonstrates that homeowners still feel that owning property allows them to fund a higher lifestyle through debt and it will take time for it to sink in that this is no longer true.

The Financial Services Authority has announced that it would take enforcement action against building societies, large banks and broker dealers who fail to follow its new remuneration code which is due to come into effect in January 2010.

Following its concerns that the current bonus regime contributed to excessive risk taking in the banking sector, the FSA wants pay and bonuses to be more closely linked to the profitability of financial institutions. The new code makes clear that financial institutions should not enter into contracts with employees which provide guaranteed bonuses for more than a year. The FSA also wants two-thirds of bonus value paid to senior employees, to be spread over three years.

The businesses will have to send a statement of their remuneration policy to the FSA by the end of October. This will have to be approved by the businesses’ remuneration committees and will provide the basis on which the FSA can check compliance with the code.

The FSA has said that non-compliant business will face enforcement action or be forced to hold additional capital resources if they follow risky business policies.

This new code should achieve two objectives. Firstly, Directors must ensure that the total value of bonuses distributed to employees is consistent with good risk management and sustainability. Secondly, individual compensation schemes must provide the appropriate incentives.

To action their new policies, the FSA has added eight principles to their rule book. These are designed to ensure that all financial institutions fully understand how the FSA will assess their compliance.

These eight new principles are consistent with the recommendations of the Financial Stability Board and with the measures being considered by other countries in the EU and Switzerland.

The interest you are charged is as much a reflection of the lenders’ financial circumstances as it is of yours. These are the main factors that affect the interest rates you pay:

The Bank of England’s official Base Rate
These days this affects saving rates more than lending rates. Only Base rate tracker mortgages are directly affected by movements in the Base Rate.

Money market interest rates
There are two interest rates which are very influential to the you are charged. Firstly, there’s what’s called the LIBOR rate. This is the rate banks pay to borrow money from other banks for short periods. Then there’s the SWAP rate. This is the rate banks pay for borrowing money from other banks for longer periods. These interest rates particularly influence the cost of fixed rate mortgages and those tracker mortgages that are linked to LIBOR.

The bank’s money supply
The principle is simple: If the lenders are short of money to lend but the demand is there, they’ll charge more and vice versa. At the moment the mortgage companies are using higher interest rates and higher deposit requirements to effectively control demand. As their coffers are replenished you’ll see lending criteria being relaxed.

Pressures on lenders to increase their cash reserves
Post credit crunch, the Financial Services Authority has forced lenders to hold twice as much in cash reserves. This means they have less to lend. And as we all know, some of the banks owe the Government billions which they’ll have to repay. This all creates pressures on them to increase their profits. How to the respond? Guess what, they charge us more!

Your Deposit
The bigger your deposit the more equity you’ll own in your home – and bankers like you to have plenty of equity - as that means they’re more certain to get back the money they lent you, if things go wrong. This means that they entice borrowers with plenty of equity by offering them the lowest rates.

Your Credit Score
The large credit agencies such as Experian, constantly collect information about your finances. They know who you owe money to and who you have applied to for credit and whether you’ve missed any payments. They also record defaults and County Court Judgements etc. They then use all this money to score you for your credit worthiness.

The lenders of unsecured loans and credit cards also use this information to decide not only whether to lend you money, but what rate to offer you.

Some insurance companies only have one in one hundred endowment policyholders on target to repay their mortgage and over 3 million homeowners have been warned that their policies will not fully repay their mortgage when the time comes.

With-profits endowment policies were sold a reliable way to repay your mortgage as the insurers added an annual bonus to the policy every year and then added one big bonus at the end of the policy’s term. Projections were then used to show how the bonuses would add up to produce an investment sum that would exceed the money you took out on your mortgage. Throughout the 70’s and 80’s Policyholders were assured that this was the savvy way to finance the repayment of your mortgage. They had never failed to perform and they never would.

Never say never!

The insurance companies all blame the failure to reach investment targets on the performance of the investment markets, it’s not their fault! But if that was the whole reason why is Standard Life facing 98% of its policies behind target whilst Royal London only has 2% behind target? It seems clear that the worst performing insurers cannot entirely blame the stock market. In actual fact, to us it seems that the insurers themselves are to blame!

Another question supports our belief. The insurers have resolutely failed to explain how policies that were previously on target can suddenly fall behind so much. For example, last year only 19% of the Pru’s 164,000 endowment policies were likely to fall short of their target. That figure has now risen to 74%. How come?

Perhaps the insurance offices would care to explain.

Mortgage lenders now believe that 1 in 10 borrowers owe more on their mortgage than their house is worth. But the position does vary depending upon which area of the country you look at. For example, the East Midlands is particularly bad in cities like Northampton, Derby and Nottingham with up to 23.6% of borrowers facing negative equity.

Whilst we have seen growth in house prices over recent months, commentators are warning that the worst may not be behind us. We warned about this very point last month and we still believe that the green shoots of the housing recovery will die back. If housing prices do go into reverse again, the curse of negative equity could easily hit 1 in 3 borrowers.

This is very worrying, not just for those afflicted because many more of them will end up in default and subsequent repossession but also for the housing market at large.

Negative equity prevents people moving home because they cannot afford to buy another home if they sell. This means that the supply of homes to estate agents is restricted and, somewhat perversely, this tends to push prices up. Then as the supply of houses increases again, unless mortgage financing becomes easier, prices edge back again.

If you are in negative equity, don’t panic. Negative equity is only a problem if you have to move or remortgage. Your best bet is to ride out the storm – this may take time but for many it’s the only option.

As the banks tighten their credit criteria are and more people are being refused any form of credit. That goes for loans, mortgages and credit cards.

According to Datamonitor, by the end of 2009 some 9 million people will be unable to raise credit from Britain’s banks. That’s 1 in 7 people.

On top of this, the companies that only two years ago were lending to those with poorer credit histories are falling like flies. London & Scottish went bump before Xmas, Benefitial Finance closed last month and Cattles appears to be teetering on the brink. That leaves just a few companies such as Provident Financial operating.

But don’t rush to Provident. They operate through agents going door to door collecting weekly instalments and their interest rates are eye watering. What would you guess their typical interest rate is? 25%? 30%? Could it be 40%? No it’s a mere 100%!

For some the only other option is what’s called a “pay-day loan”. That’s a loan given to workers to tide them over until they receive their next pay cheque.
A typical charge fort this service is £25 for a £100 loan. And that works out at an annual interest rate of 2000%. So perhaps we should consider Provident as a bargain!

These interest rates look morally wrong to us. We think that the Government will have to set up an enquiry into what is happening to see whether these interest rates are giving rise to excess profits – and if they are, they’ll have to set a cap the maximum interest rate and charges.

If you have had money stolen from your bank accounts or credit cards as a result of fraud or identity theft, then unless the bank is sure you took care to protect your banking details, they won’t pay up and the police won’t bother to investigate the case either.

This leaves you in a legal black hole. Unless you yourself can prove who stole the money (some chance!), you have no way of getting either justice or compensation.

And in the mean time you’re out of pocket – and probably big time!

In the four years since chip & pin systems were introduced, fraud on bank cards has halved but it is still running at the rate of £54 million a year. But remember, this figure represents the money the banks lost. It doesn’t take into account the stolen monies that the banks would not reinstate.

Under the Banking Code, you are entitled to claim for any money fraudulently taken from your accounts unless the banks believe you have acted irresponsibly. In practice, this means that if your bank thinks you did not keep your banking details secure, they won’t repay the money that’s been stolen from your accounts.

Now that the interest rates on fixed rate mortgages have shot up, it may be a good idea to consider a tracker mortgage with a cap.

The way capped trackers work is that you would pay their current interest rate, which should be around 3%. Ah, I can hear you saying, but you’ve been telling us that the bank of England’s base rate is going to rise – so that tracker rate will rise too. Yes that’s correct, but if you have your interest rate capped, the rate on your tracker will never be higher than that cap and that limits your upside risk.

Take First Direct for example. The cap on their new tracker mortgage is set at 4.99% until 2012 whilst the rate you’d currently pay is 2.98%.

This means that if interest rates were to rise by more than 2% then you would have the security of knowing that 4.99% was the absolute ceiling on what you’d have to pay.

So you have a dilemma – go with a tracker and accept that you’ll have to pay more as interest rates rise or pay more now with a fixed rate mortgage knowing that you’re paying more now (than a tracker) but sitting comfortably knowing that your payments won’t rise until the fix terminates.

So we’re back to difficult decisions in the mortgage market! Our advice is take advice and get a mortgage professional to help you get your decisions right.