by The Investor
on April 9, 2008
Just when peer-to-peer bank Zopa was getting interesting again thanks to higher rates, it’s somewhat annoyingly announced plans to limit the kinds of loans you can make with your savings.
The new regime will see one, two and four-year loan terms scrapped, with only 36 or 60 month loans being offered to borrowers. This means you can no longer lock away your money as a lender for just a year or two in the normal market, although the ‘listings’ market, where you deal with individuals, will still offer the old flexibility.
Zopa claims the move will streamline the business for both lenders and borrowers. It believes too many lenders are put off by all the different fiddly options, and argues that the 36 and 60 month terms make for more attractive lending.
I’m uncomfortable however with the idea of locking myself into such a novel business model for three years or more, so I’ll probably not increase my Zopa lending as planned, at least not until these changes are digested by the Zopa community.
The full message from Zopa is as follows:
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by The Investor
on April 9, 2008
This is the third article in a series on the key UK personal tax changes from April 2008. For the others, please see the introduction.
Basic rate of income tax has been cut to 20%
At last, something to cheer about! The world economy is in turmoil, banks are going belly up, and stock markets are falling, but at least this year will see most UK employees paying less income tax. The exceptions are lower-paid workers who are more affected by the scrapping of the 10% tax band we covered yesterday than by any gain from the cut in basic rate tax.
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by The Investor
on April 9, 2008
What to make of news that HSBC, the UK’s biggest bank, is offering new customers a mortgage matching deal from Monday 14 April, which will match expiring fixed-rate deals for another two years?
Other banks are bolting and nailing shut closing their doors to business and putting their mortgage rates up. Have the senior bods at HSBC not been reading the newspapers recently, which only yesterday went crazy over a drop of 2.5% in house prices?
Quite the opposite. HSBC has suffered a little at the hands of sub-prime in the US, but it’s lightly exposed to UK housing, with just a 3% share of the mortgage market. That’s way out of line with its status as our biggest bank and FTSE 100 heavyweight.
HSBC is incredibly well-funded, too. Thanks to legions of diligent Far Eastern savers, it has no need to access the wholesale funding market that’s shut down due to the credit crunch, and which ultimately did for Northern Rock.
HSBC wants the best new mortgage customers
I don’t believe HSBC wants to expand its exposure to Britain’s wobbly housing market too much, however. Rather, it’s using its strength to cherry pick the new best customers, as well as cannily benefiting from free publicity due to its apparent contrariness.
The small print excludes all but the best customers:
- A 20% deposit is required to qualify for the new deal
- You’ll need to pay a hefty fee
- The maximum loan is £250,000
- According to the BBC’s Working Lunch, you’ll also need to open a current account with HSBC
The deal does look very attractive if you do qualify; the lowest rate it will match is 4.54%, which is extremely competitive in the current climate.
HSBC says the deal will only be available for five weeks from Monday, so keep an eye on the HSBC website if you’re interested.
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by The Investor
on April 8, 2008
This is my second article in a week long series on the key personal tax changes that came into affect in April 2008. For the others, please see the introduction to 2008 tax changes.
10% tax rate abolished
Sunday saw the scrapping of the 10 per cent starter rate (also called the 10p rate) for the first £2,230 of taxable income. The move was introduced in conjunction with a reduction from 22 per cent to 20 per cent on the basic rate of tax on income of up to £36,000 a year.
While everyone with taxable income will be due to pay more tax on the lower portion of their earnings because of the 10% band’s abolition, those on better salaries won’t notice because they’ll gain more from the cut from 22% to 20% than they’ll lose on the 10% band scrapping.
The lower-paid will notice, however. The Institute for Fiscal Studies has said a total of 5.3 million households will see their take-home pay fall as a result of the change, particularly people earning between £5,200 and £18,500. (When your earnings are greater you’ll start to benefit more from the basic rate cut to 20% than you’ll lose on the abolishing of the lower 10% band, while those earning less than £5,435 don’t pay income tax at all).
You can see the Goverment’s website for a detailed picture of personal tax allowances and rates.
Why is a Labour Government taxing the poor?
The Government argues it will make up the shortfall for the lowest paid and vulnerable with child tax credits and other state handouts; people over 65 get higher personal allowances, for instance.
That’s done nothing to stop a row erupting, driven by an unlikely alliance between David Cameron and the more right-wing media, and Labour MPs and other leftwingers who baulk at tax hikes for the poorest workers. There is even confident talk of getting the abolition overturned.
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