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UK Money
A lot is being made in the media at the
moment of the current global financial
crisis. Enormous financial institutions are
going to the wall, and others are being
bailed out by their governments, banks are
merging, and the major world banks have had
to pump hundreds of billions of dollars into
their financial markets.
At the end of the day though, many people
want to know how the current crisis will
affect them? At the moment, for example,
petrol prices are actually going down –
offering some much needed relief to
beleagured drivers. It is the banks,
however, that are suffering the most, how
then is the financial crisis going to impact
on your savings?
Firstly, the major question is the safety of
your bank. With the merger of HBOS and
Lloyds TSB the most immediate danger seems
to have been protected, unfortunately, the
bad debts that caused the problem initially
still remain on the balance sheet and banks,
accordingly, remain unsteady. Industry
experts suggest that there are no immediate
dangers facing any of the other major – or
minor – British banks, so your savings are
safe.
Should the worst happen and one of the banks
go under, if you have less than £35,000
saved you will not lose any money. A
protective measure known as the Financial
Services Compensation Scheme will ensure
that you will get your money back, but with
the system untried as yet, there’s no
guarantee that you will get your money back
quickly. However, it does mean that if you
have more than £35,000 in a bank account in
any single institution, it might be worth
moving some of it into another account.
Another major concerns is mortgages, the
cost to banks of borrowing and lending money
to each other has risen considerably over
the last six months and continues to rise,
making the cost of borrowing credit between
banks more expensive. Further, due to the
merger of Lloyds and HBOS there is less
competition on the market, and that may
result in a slight increase in the overall
cost of mortgages. Experts are suggesting
that mortgages are likely to be set further
above the Bank of England’s base rate than
previously. The BoE has predicted that the
base rate will reach as high as 5% before
dropping back down to lower levels, this
means that in the short term mortgages will
get more expensive – but in the long-term
may become more affordable.
Ultimately, then, there appears to be little
immediate danger to the average person or
their financial well-being. As far as
mortgages go it is best to hold on and wait
for a few months for the interest rate to
drop down again. It should, however, be
business as usual in most areas and there is
no reason – contrary to some suggestions –
not to open new bank accounts and move your
money around. It is always worth getting the
best deal possible, and even with the
current market it is important to remember
that there are always some excellent deals
out there on bank accounts. One company that
is offering particularly good value
bank accounts at the moment is Alliance
and Leicester, and if you are looking at
opening a new bank account, that might be a
good place to start.
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