Interest rate fears fuel drop in confidence

Interest rate fears could be behind fall in household finance confidence

Households' confidence in their future financial wellbeing has deteriorated to the most downbeat levels seen in a year, according to a report.

An index measuring the outlook for household finances over the next 12 months slipped back to the lowest mark in a year in July, according to the study compiled by Markit.

Recent suggestions from the Bank of England that interest rates could start to edge up around the turn of the year, alongside higher inflation perceptions, may have influenced consumers' mood, the report said.

The overall reading for the Markit Household Finance index stood at 45.3 in July, slightly up from a six-month low of 43.8 in June. Readings above 50.0 signal that households' financial situations are improving and readings below that point indicate a deterioration.

Construction workers were found to be the most downbeat, while on a regional basis the squeeze on finances was reported to be sharpest in the North East of England, according to the report, which surveyed 1,500 people aged 18 to 64 years old from across Britain.

People's perceptions of current inflation picked up to the strongest levels seen this year so far in July, although price pressures on households remain subdued compared with historic data, the report said.

Earlier this month, Bank of England Governor Mark Carney suggested that interest rates could begin to rise at the turn of the year. Mr Carney said he expected the bank rate to rise over the next three years from its current all-time low of 0.5%.

Markit's latest study found that 14% of households now expect interest rates to increase before mid-October, marking the highest proportion recorded so far in 2015.

The proportion of households forecasting a rate rise within the next six months increased to around one in three (34%), up from 24% in June.

Philip Leake, an economist at Markit, said: "Bank of England governor Mark Carney recently suggested that the base rate may rise around the turn of the year.

"This, perhaps alongside greater inflationary pressures, has led households to take a more hawkish stance towards monetary policy expectations, with around one in three respondents predicting higher interest rates over the next six months."

10 things your bank doesn't want you to know
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Interest rate fears fuel drop in confidence
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.

If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.


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