Six-month personal finance review – winners and losers

As we launch into the second half of 2019, consumers who are planning take out a mortgage, a savings deal or a credit card may wish to know if they are better or worse off than if they had taken out a deal in January.

Indeed, the latest research from Moneyfactscompare.co.uk reveals that consumers hunting down a mortgage deal appear to be the current winners over the past six months, as lenders have cut rates to entice new borrowers. Our data shows that the average two, five and 10-year fixed mortgage rates have fallen since January.

However, savers may feel less enthused by 2019 so far, as interest rates on savings products have fallen on average, despite some marginal improvement to the top rates offered on one and five-year fixed bonds. This could increase apathy among savers who feel there is little reason to switch deals.

Meanwhile, customers who decide to take out an interest-free credit card today seem to be the biggest losers overall, as they now have less time to repay debts before interest applies compared to January. This reduction in interest-free terms could mean that borrowers are forced to increase their monthly repayments, or that they will need to switch deals sooner than planned to avoid interest being charged on their debt.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said “The past six months of 2019 have flown by, so consumers may want to take stock on whether they could now get a better mortgage, savings or credit card deal – or even more broadly improve their personal finances. While there hasn’t been a Bank of England base rate change this year so far, this doesn’t mean interest rates and offers have remained unchanged – it’s always important to review finances at least every six months.”

Commenting on the mortgage market, Rachel Springalls aid "Borrowers could find better deals today than six months ago, but whether rate competition will last is becoming less certain. As we step into the second half of 2019, lenders may well tighten the reins of their rate pricing amid market scrutiny, economic uncertainties and volatile SWAP rates. Consumers would therefore be wise to consider fixing their mortgage soon to take advance of the deals on offer, with interest rates starting as low as 1.35% for a two-year fixed deal (Halifax). In fact, average rates on both five-year and decade-long fixed deals have dropped over the past six months too.

“Potential first-time buyers may want to keep a close eye on their finances and be mindful that as both house prices and the cost of rent is on the rise in the UK, their dream of getting onto the property ladder may be further away than first thought. Still, it is important that lenders make every effort to entice these prospective borrowers responsibly and tailor their range to meet demand.

“While interest rates are a convenient measure to compare deals, it is important that borrowers consider a mortgage based on the overall true cost, particularly to save on any upfront fees. Seeking out independent financial advice is a good idea to navigate the mortgage minefield.”

With regards to the savings market, Rachel Springall, said “Savers still have some decent deals to choose from, but there has been little change based on the average rates across easy access accounts to encourage savers to switch. Over the first half of this year, there has been no change to the top rate offered on easy access accounts (1.50%), plus any saver looking to invest in a fixed bond will find only marginal improvements to the top one and five-year fixed bonds. The top rates have increased by just 0.10% and 0.05% respectively (today BLME offers 2.20% on its one-year fixed bond and Gatehouse Bank offer 2.75% on its five-year bond – both expected profit rates), however average rates are down across all three areas.

“Statistics released by the Office of National Statistics stated that the average household savings ratio is falling and a separate survey from Yorkshire Building Society reported that more than one in four consumers don’t have enough savings to last them a month if they lost their main source of income. More worryingly, one in six have no savings at all.

“Amid economic uncertainties, it is imperative that consumers put aside what they can afford and ideally aim to cover at least three to six months of essential outgoings.”

Speaking about the credit card market, Rachel Springall said "The lengthy terms offered on interest-free credit cards have continued to diminish in the past six months, carrying on from the falls seen in the last half of 2018. On balance transfer cards, borrowers have 25 days less on average to pay back their debt before interest applies than they did in January, while based on the longest term today versus six months ago, there is a difference of four months.

“Indeed, MBNA offers a 29-month interest-free balance transfer card today with a 2.75% fee, but six months ago they topped the market with a 33-month deal with a 1.99% fee. This means that borrowers today need to pay an additional £12 a month to clear a core debt of £3,000 within 29 months, compared to if they had grabbed the 33-month offer – plus they would pay £22.80 more in upfront fees.

“The average balance transfer fee overall may have fallen in the past six months, but it is up year-on-year, and while the upfront cost to transfer debt has fallen since January, borrowers are still facing a shorter timeframe to pay debts before interest applies.”

“Whether a borrower or a saver, the next few months may well stir up concerns – so if they haven’t already, it’s time for consumers to review their personal finances and switch to a more competitive deal to help brave any economic storm.”