SHRINK YOUR BILLS
BORROWING rates are low, energy prices are falling and monthly TV and broadband packages are cheaper than a family takeaway. Follow The Mail on Sunday’s five-step guide to shrink your household bills by thousands of pounds a year.
1 BORROWING
ANNUAL SAVING: £1,200
MORTGAGE rates are cheaper than ever, loan rates have tumbled and credit cards will let you repay debt with no interest for nearly three years. Now is a perfect time to consolidate, remortgage or jump ship to a new credit card.
MORTGAGES: Nationwide Building Society has launched a new ultra-low ten-year fixed-rate mortgage at 2.94 per cent, or 2.84 per cent for existing customers. Shorter term two-year deals across a wide range of lenders are less than 2 per cent, with midrange five-year fixed deals priced at less than 3 per cent.
But millions of homeowners pay their lender’s standard variable rate – which customers automatically move to when a deal ends unless they remortgage. These are typically more expensive – often between 4 and 5 per cent.
Someone paying an average mortgage of £116,000 at 5 per cent could save £1,342 in a year by moving to First Direct’s 1.79 per cent fixed rate for two years, after a £950 fee has been deducted. The second year translates into a saving of £2,292. This assumes equity of 25 per cent and a repayment term of 20 years.
CREDIT CARDS: Barclaycard Platinum offers the longest period for paying off old debts – with a zero per cent interest of 35 months for a 2.49 per cent transfer fee, while Santander’s 123 credit card has no transfer fee and a zero per cent interest period of 23 months.
Danny Shapiro, from Borehamwood, Hertfordshire, will soon shift a few thousand pounds worth of credit card debt to Santander’s deal. He is paying interest of 18.9 per cent with an old M&S card and the transfer will cut outgoings by around £65 a month.
Danny, 38, already has the 123 account with the Spanish-owned bank so he will not have to pay the annual £24 fee for the first year. On top, he will receive cashback into his account for everyday spending – 1 per cent at major supermarkets, 2 per cent at department stores and 3 per cent at major petrol stations or on travel spending with National Rail and Transport for London, up to £300 a month.
Danny, a business analyst, is married to freelance PR consultant Amanda, 39, with whom he has three children, and says savings and cashback will help them buy essentials for his youngest child Macy, who is just four months old. He says: ‘The savings we’re making are great.’
Switching cards does come with some inconvenience. Details will need to be updated for online shops storing existing card information, for example, but Danny says the savings make the move worth any temporary hassle.
LOANS: Personal loan rates are now as low as some mortgage deals – with the most competitive three-year rates at 3.6 per cent, reserved for those with an excellent credit history borrowing between £7,500 and £15,000.
M&S Bank, Sainsbury’s Bank and Zopa are among the chart toppers for loans. For sums of £5,000 or less, the best rates increase to 5 or 6 per cent.
WHAT TO DO: To find the best mortgage rate for a fee you can afford – and a deal that you’re likely to get–speak to a mortgage adviser. London & Coun- try Mortgages is fee-free, searches the whole of the market and takes commission from lenders.
Alternatively, broker John Charcol also searches the whole market and charges anything from a minimum £495 fee to a maximum 1.5 per cent of the loan amount. The average customer pays a fee of 0.24 per cent of the loan value and the initial consultation is free. Visit websites lcplc.co.uk and charcol.co.uk.
For credit cards and loans use a ‘soft search’ tool, available on comparison websites such as MoneySuperMarket and Gocompare. Results will show deals you are likely to get without an
official search showing up on your credit report. Too many searches for credit on a report could look desperate – and lenders are less likely to want your custom.
Kevin Mountford, head of banking at MoneySuperMarket, says: ‘It’s essential to understand your credit profile first, to help minimise the risk of rejection or being offered higher rates than expected and take action to improve it if needs be.’
Check your credit report via credit reference agencies Experian, Equifax or Callcredit for an overview of your finances and how lenders might judge you.
3 ENERGY
ANNUAL SAVING: £300
BRITISH Gas, npower and ScottishPower have bowed to public pressure and lowered gas prices by 5 per cent, 5.1 per cent and 4.8 per cent respectively following a significant drop in the wholesale costs they have to pay. Minnow supplier Ecotricity, which only offers one gas tariff, will also cut prices by an average 6.1 per cent from May.
This follows a 3.5 per cent cut from rival E.On earlier this month. But the cuts will only be of small benefit to customers on standard tariffs. To squash gas and electricity bills by a significant amount, customers must move to a new contract.
Martin Lewis, founder of website MoneySavingExpert, which specialises in trimming costs for everyday household purchases, says the energy price cut ‘shines a light on the fact that most households are massively overpaying for their energy’.
He adds: ‘Only switchers get the cheapest prices. Do a comparison to see how much you are overpaying.’
This is precisely what Dr Akhil Gupta has done. The 25-year-old dentist – who is single and lives with his parents and sister in a five-bedroom detached home in Woodstock, Oxfordshire – changed tariffs and knocked more than £500 off his annual dual-fuel bill.
Akhil had not changed suppliers for three years but was motivated to after his deal with British Gas ended and he was shunted on to its more expensive standard tariff.
In response, he moved to a rapidly expanding rival supplier, First Utility, a few weeks ago.
‘The standard tariff was expensive so I thought I would check to see if I could get my energy cheaper,’ says Akhil. ‘To my surprise, I saw I could save more than £500 and am now paying around £125 a month.’
He adds: ‘I used a comparison website and found it easy to compare suppliers. I just had to enter some basic details such as name, address, bank details and how much energy I use, and that was it.’
WHAT TO DO: Visit a comparison website such as TheEnergyShop or uSwitch to compare the cost of new deals to the one you are paying now. The former estimates savings of £300 for people moving from a standard tariff with one of the major suppliers to one of the cheapest deals.
Having a recent bill to hand will help. Alternatively there is a new smartphone app called Voltz for iPhone users (available on other phones from the end of next month) that focuses on simplicity and aims to switch you over to a money-saving tariff in the shortest time possible.
And collective switching company The Big Deal will register lots of people who want a better deal and then encourage suppliers to bid for their custom with cheaper prices. Visit website thisisthebigdeal or call 020 3463 0820.
4 MOBILE
ANNUAL SAVING: £150
QUAD-PLAY deals – short for quadruple play, which includes a mobile SIM card as the fourth element of a typical TV, broadband and landline package with one provider – are expected to grow in popularity and are good value for light mobile users.
Virgin Media and TalkTalk offer them, and BT is expected to if its proposed £12.5billion acquisition of mobile network EE goes ahead, while Three is in talks with O2 about a possible deal.
A SIM card can be added to any Virgin Media bundle for an extra £5 a month and includes 250 minutes, unlimited text messages and 250 megabytes of data a month – roughly enough for 500 emails, an hour of using apps and 20 minutes of streaming videos.
TalkTalk customers with Plus TV can get a free SIM with 100 minutes, 250 texts and 200MB data.
For cheap mobile phone offers separate from any TV and broadband bundle, try Carphone Warehouse, Tesco and giffgaff – an online only, no-contract network.
If you are happy with your existing phone, you only need to search for a cheap SIM deal.
WHAT TO DO: To compare mobile phone offers across a number of networks try website uSwitch, which also has an easy ‘deal finder’ tool based on the minutes and data you want for the price you are willing to pay.
The Ofcom-approved billmonitor website analyses your mobile bills to match you with a mobile contract. It says more than three-fifths of mobile phone users are on the wrong contract and if this was rectified, the average UK bill would drop by nearly £150 a year.
If your mobile contract has expired, contact your network provider to ask about any available upgrades otherwise you will overpay each month. The monthly cost during the term of the contract includes a part payment towards the phone. But if you are trying to change deals mid-contract beware of exit charges.
5 INSURANCE
ANNUAL SAVING: £300
CAR insurance is to become more expensive this year, according to AA insurance, with premiums likely to be 10 per cent higher this time next year. But the insurer says no sharp increases are expected for home insurance costs, which remain ‘extremely good value’.
But many people simply accept whatever premium renewal their existing insurer offers. Though some form-filling and time is required to switch, research by comparison website Gocompare shows that half of 2,000 people polled in a survey could save up to £234 a year by changing insurers.
Those who have never switched stand to save the most. And according to MoneySuperMarket, households could save up to £69 a year on home insurance.
WHAT TO DO: Use comparison websites such as Gocompare and MoneySupermaket to find cheaper deals – but do not simply opt for the lowest price. Keep the level of cover you need and check you would be able to afford the excess payment – the sum you need to pay before any claim kicks in.
Alternatively, online insurance broker Policy Expert will select a policy from a panel of insurers based on what you need. To search more broadly for a broker to help you find cheaper insurance, visit the website of the British Insurance Brokers’ Association at biba.org.uk or call 0870 950 1790.