A new initiative launched by Sainsbury’s Bank entitled ‘The Family Finance Report’, looking at some of the biggest financial challenges facing families in 2016, has revealed that one in five people (20%)[(1)] are looking to switch some of their personal borrowing to a better deal. Furthermore 65% are planning to shop around to try and secure a more competitive quote for one or more of their insurance products.
The ‘Family Finance Report’ uses a newly assembled panel of experienced personal finance experts to offer tips and guidance on how to overcome financial challenges.
One in four people (25%) are also planning to make more use of reward points and discount vouchers this year, with 49% claiming their use of these will be about the same as last year. Only 15% said that they will not use them or use them less.
The supermarket bank says that there has rarely been a better time to be savvy with your personal finances, because its research reveals that rates on mortgages, credit cards and personal loans are among the most competitive they have ever been. For example, the average two year fixed rate mortgage with a deposit of 25% fell by 42% between 2011 and 2015, and the longest 0% APR balance transfer increased by 21 months during this period.
Switching consumer credit
Sainsbury’s Bank’s research reveals that one in ten adults are considering re-mortgaging on average £165,678 in 2016[(2)]. Also, with interest rates so low on savings accounts, 6% are thinking about overpaying on their mortgages this year.
A further 14% of people are thinking about switching on average £2,347 of credit card debt, and one in ten are researching the possibility of securing a better deal on their personal loan.
However, the findings show a huge regional difference in how much borrowing people are looking to refinance. In London for example, of those interviewed who are considering re-mortgaging, the average size is £305,548.
Switching insurance products
The bank says that people have far greater access to information and data on the best personal finance deals available. A staggering 67% are planning to shop around for their car insurance when their renewal comes up. This represents around £6.98 billion[(3)] of premiums that could switch providers. The corresponding figures for home insurance are 58% and £4.79 billion.
Simon Ranson, Head of Banking at Sainsbury’s Bank said: “Our research reveals that levels of financial confidence in 2016 are about the same as last year for almost half of UK adults (47%). Some 26% are feeling slightly worse off than they did in 2015, compared to 24% who think they will be better off this year.
“However, our findings suggest that people are becoming increasingly financially savvy and want to make sure they get a competitive deal in 2016. Six out of ten (60%) of those who will shop around believe that by shopping around for their insurance, gas/electricity and broadband, they can save up to 25% on what they paid last year.”
Analysis of industry data by Sainsbury’s Bank[(3)] reveals that shopping around for financial services products could result in huge savings:
- The average two year fixed rate mortgage with a deposit of 25% was 3.30% in 2011, but by the end of last year it had fallen to 1.90%.
- The average APR on a personal loan of £10,000 in 2011 was 7.3%, but by 2015, it was 4.5%
- In 2011, the longest 0% APR balance transfer was 16 months, compared to 40 months today
The findings from the research can be found at http://www.sainsburysbank.co.uk/familyfinance along with advice from personal finance industry experts.
Advice from financial experts includes:
Sarah Pennells, Savvywoman.co.uk says: “The cost of living is still a worry for many people. While the official inflation figures are low, already squeezed household budgets aren’t really feeling the benefits. And those who rely on their savings have had a particularly hard time in recent years.
“The key is not to feel overwhelmed by the things you can’t control, such as inflation and interest rates, and to focus on those you can.
“You might be the type of person who wants to blitz their finances in one go – switching deals and sorting out your savings. But if you’re a bit unsure about where to begin, don’t worry.
“Start with something you feel confident about tackling, such as switching your insurance or seeing if you can get a better deal on your savings. Once you’ve seen the result of one change, you’ll feel empowered to make more.”
Ian Hughes, Consumer Intelligence says: “The big change over the last two years is that the habit of shopping for car insurance has transferred to home insurance. 2015 was one of the biggest years ever for people checking the cost of their home insurance and switching. And there is every indication that this is likely to continue this year. Home insurance is already amazing value with £1m or more of insurance cover costing just a couple of hundred pounds, but we see the market slightly firming this year, so customers should really check their policy to make sure they have the right combination of price and cover.”
Andrew Hagger, Moneycomms.co.uk says: “Whether you opt for a personal loan or interest free credit card as the product to consolidate and reorganise your borrowing, it’s key that you sit down and run through your household budget to work out how much you can comfortably afford to repay each month.
“A personal loan is more structured as you pay a set amount each month and at the end of the term your borrowing is totally repaid (plus you can make overpayments without penalty with most lenders). With credit card consolidation it’s important to ensure you make at least the minimum repayment on time each month otherwise you could find your promotional rate terminated on the spot and you’ll suddenly be back to square one.
“With mortgage interest rates at such low levels, now could be an opportune time to consider switching to a new deal to reduce your monthly repayments and/or fix your rate for the next few years. You will need to weigh up the interest rate plus any fees and legal costs, so always speak to an independent mortgage adviser who can crunch the numbers on your behalf to select the most appropriate mortgage for your circumstances.
“If you’d prefer not to switch your mortgage but would like to reduce your balance more quickly, most lenders will allow you to make over payments.”
For information on Sainsbury’s Bank credit cards, loans or insurance visit sainsburysbank.co.uk or pick up a leaflet instore at Sainsbury’s.