‘Consumers enjoy 10 years of online banking’
May 30, 2007 at 12:50 pm
Internet banking celebrated its tenth birthday in the UK this May, as a new study conducted by Nationwide Building Society, the first provider to offer online services to British customers, revealed that over a third (37 per cent) of British adults now bank online.
Nationwide registered 13,192 customers when its internet banking service went live, back on May 27th 1997. Since then, the internet has grown immeasurably in size and influence. Today, it is estimated that more than 18 million Brits manage their finances over the internet.
The building society’s study reveals that 53 per cent of internet bankers find online financial services convenient, while 50 per cent believe that internet banking is easy to use and a quarter find that it is much faster than alternative methods of banking. More than one in ten (11 per cent) rely upon internet banking because they cannot always get to a local branch, while 4 per cent prefer to bank online because it saves on paperwork.
It was also found that 66 per cent on internet bankers log on at least once a week, and that nine per cent of men and six per cent of women check their balance every day. Most (93 per cent) manage their current account online, while two thirds (66 per cent) also manage their savings account online. Half (50 per cent) manage their credit cards online, while 14 per cent and 17 per cent use the internet to access their personal loans and mortgages respectively.
“This research shows that internet banking has become increasingly popular,” explained Mik Hodsdon, divisional director at Nationwide. “Customers have the convenience of banking from the comfort of their own home, or indeed wherever they are in the world, together with many additional benefits such as discounts and paperless statements.”
“Internet banking has continued to be developed and enhanced over the last ten years and there is no doubt that it will attract more and more users,” he said. “It will be interesting to see the advances that technology will bring over the next ten years.”
According to payment trade association Apacs, the number of adults using internet banking now exceeds those using telephone banking and half of all internet users in the UK are banking online. It estimates that 90 per cent of internet bankers also shop online, with 84 per cent of those using their online account to make payments. By 2016 it expects that over two thirds of all adults will be using internet and telephone banking.
David Kuo, head of personal finance at Fool.co.uk, commented; “Today, consumers have access to 24-hour banking, which means that they can access their money wherever they want, whenever they want. They can quickly move their money to accounts that pay better interest, which has in turn forced banks to respond with competitive offerings.”
“While the Internet has transformed the way that many of us conduct our banking, banks will only change for the better if we exercise our rights,” he warned.
“We therefore urge consumers to vote with their feet if they are unsatisfied with their banks, or better still vote with their mouse.”
‘Homeowners feel the squeeze as rates continue to rise’
May 24, 2007 at 4:20 am
The latest figures published by the British Bankers’ Association (BBA) show that consumers, particularly homeowners, started to feel the effect of increased interest rates during April, while preparing for the widely anticipated May base rate rise.
Total sterling private lending rose by an underlying £9.1 billion to £1,307 billion, an increase matching that seen in March but lower than the previous six month average rise of £11.4 billion.
Net mortgage lending rose by an underlying £5.0 billion, slightly lower than the recent monthly average of £5.4 billion, while underlying credit card borrowing fell by £100 million and unsecured personal borrowing remained unchanged.
David Dooks, director of statistics at the BBA, explained: “Lower mortgage demand, weaker deposit growth and little change in personal loans or credit card borrowing all point to people paying more attention to their finances.
“High house prices and increasing monthly repayment costs are causing a slow down in the mortgage market and people are using money from their accounts instead of borrowing to meet their spending needs.”
The Building Societies Association (BSA), which is the representative body of all 60 British building societies, recommended consumers to seek advice from their building society if they find that higher monthly mortgage repayments are overwhelming them.
“Consumers should not panic as a consequence of this rise, but should try to assess how it will affect their finances,” said Adrian Coles, the BSA’s director general. “For some, especially people who have also taken out personal loans or credit cards, this could mean a problem paying the mortgage.
“If this is the case, then they need to contact their building society as a matter of urgency,” he continued. “When they do, they will find a sympathetic response and help to get their finances sorted.
Future shocks in store
The 55 per cent of homeowners that have managed to secure a fixed-rate mortgage may feel as if they have dodged a financial bullet, while customers with variable-rate tracker mortgages suffer at the hand of larger monthly repayments.
However mortgage broker London & Country (L&C) has warned them to start planning for the future if they are to avoid a shock when their current deal expires.
For instance, in May 2005, the best value two-year fixed-rate deal was from Newcastle Building Society at 4.49 per cent. Based on a £150,000 interest only loan, L&C estimates that the monthly repayments would amount to £561.25.
However with this deal coming to an end, customers will see the interest on their repayments revert to the Standard Variable Rate (SVR), which is currently set by the building society at 7.34 per cent. Their new monthly repayment would be set at £917.50, an increase of over £350 a month.
“The payment shock for many borrowers will be substantial when their deals to come an end and it’s important that they do all they can to minimise it,” explained James Cotton, a mortgage specialist at L&C.
“The advice is simple: see what new deal your lender is willing to offer and shop around elsewhere. Most importantly, plan ahead and don’t leave it until you’re already paying Standard Variable Rate.”
‘Instant access is ‘top priority’ when it comes to savings’
May 22, 2007 at 10:54 am
New research from Nationwide Building Society has revealed that UK consumers consider instant access to be the most important feature of a savings account.
The building society found that more than half (54 per cent) of British bankers consider it essential that a savings account allows for instant access withdrawals and transfers. The research also revealed that more than four in five customers (84 per cent) believe it is important that there is no penalty for withdrawals.
While 56 per cent of respondents considered a high interest rate for the first year to be crucial, over three quarters (77 per cent) preferred to have a good rate over a longer period, showing that most were planning to invest in the long term.
The increasing prominence of internet banking was confirmed by the fact that two in five (42 per cent) bank customers felt they needed to manage savings online, but face-time is still important to people and 56 per cent want to be able to manage their accounts in a local branch.
The research indicated that over a third (35 per cent) of British adults save on a regular basis, while a further 44 per cent put money away from time to time when they feel they can afford it. It also showed that 21 per cent of the population fail to make any savings whatsoever.
Although 78 per cent of those surveyed claimed that they save money in a savings account, 12 per cent admitted to leaving their cash in a current account, while 10 per cent chose not to keep their money in a bank at all.
“Saving doesn’t have to be difficult or complicated and no matter how much you can afford to save, it is important that your money is saved in the right place – not under a bed or in a jar,” said Matthew Carter, Nationwide’s divisional director of mortgages and savings, in response to the findings.
Changing savings patterns
According to research from Birmingham Midshires’ (BM) Saving Britain campaign, prioritisation of instant access by consumers reflects the rise of a “have-it-now” culture in the UK. Indeed, the bank claimed that more than half (51 per cent) of all British savers opened a new instant access savings account in the first quarter of 2007, while fewer than one in five (16 per cent) were willing to tie their money to any longer term schemes, such as fixed-rate bonds.
With the Office of National Statistics recently reporting that consumption of goods by UK households increased by 73 per cent, between 1991 and 2005, BM suggested that many of Britain’s consumers are, in fact, saving to spend.
Jason Robinson, BM’s director of savings operations, commented: “Instant access accounts are an excellent way of saving for short term needs however we would encourage savers to also remember the long term and make adequate provisions.
“It is worth considering a number of savings ‘pots’ for different purposes which can nowadays be very easily managed online,” he explained.
‘Bank of England raises interest rates to six-year high’
May 15, 2007 at 2:46 pm
The Bank of England increased interest rates to a six-year high of 5.5 per cent on Thursday, in an attempt to tackle inflation which is at its highest level in ten years.
It came as no surprise to analysts that the BoE’s Monetary Policy Committee (MPC) decided to increase rates by a further quarter percent. The Consumer Price Index (CPR), which measures the inflation rate, reached a decade-long high of 3.1 per cent in April, and many experts believe that further interest rate rises will be required to reduce the CPI back to its target level of two per cent.
Indeed, the National Institute for Economic and Social Research (NIESR) recently advised the BoE that it would need to increase rates to at least 5.75% if it was to reduce inflation.
Mervyn King, governor of the BoE claimed that the new interest rates should see inflation fall sharply over the next six months. However, the NIESR is fully expecting further rate hikes if inflation is to be normalised before the end of 2008. It blames current inflation levels on the interest rate cuts that were made back in 2005.
Mr King was forced last month to write an open letter to the chancellor explaining why the inflation rate had been allowed to reach its highest level since the MPC was set up and given control over interest rates, back in May 1997.
Commenting on the interest rate change, Angela Knight, chief executive of the British Bankers’ Association (BBA) said: “Higher interest rates will squeeze family budgets tighter. There are no short-term prospects of costs going down and it’s now the time for people to have a good hard look at their finances and draw up a proper budget for the future.”
Savers to lose out
Interest rates are now a whole percentage point higher than they were last year and millions of homeowners with variable-rate tracker mortgages are feeling the squeeze as their repayments continue to rise.
Although the banks may be quick to increase their mortgage rates following the latest hike, many are not so willing to give anything back to their customers, in the form of increased savings rates, and the Post Office believes that customers with some of the largest high street banks are set to potentially lose millions of pounds.
While the Post Office and a few other account providers such as Sainsbury’s Bank have pledged to pass on the entire base rate change to savings account holders, and will be paying up to 5.75 per cent Gross AER on balances, some of the largest banks are still offering savings rates as low as 1.7 per cent.
“It’s easy to become a base rate loser when account providers fail to pass on interest rate rises in full to their customers,” warned Richard Norman, head of savings at the Post Office.
“Interest rates have risen sharply over the last year, and many experts believe there are further hikes to come. As people tighten their belts due to rising mortgage payments, they should make sure any money they have in savings is working as hard as it can for them.”
