samedi 5 février 2011

London Stock by Luc Verville

Last month's jump in UK inflation underlined the current headache for people having to juggle pay curbs with rising prices.
A third of 1,500 UK people questioned by economic analyst Markit said that inflation had hit their personal wealth, while expectations of inflation were also at their highest for two years.
For savers the position is equally as tough, with the prospect of any cash you do put away being worth less in real terms in a year’s time.
Figures from the Office for National Statistics showed the consumer prices index rose to 3.7% in December, while the broader Retail Price Index, which includes mortgages, rose to 4.8%.
inflation-squeeze-introMoneysupermarket.com, the price comparison website, calculated that anyone who had £10,000 in a saving account paying an average rate of 0.19% would have lost £331 in real terms, while Bank of England data suggested nearly all savings accounts lost money last year.
For savers to maintain the real value of their money, it currently requires a basic-rate taxpayer to find a savings account paying 4.63% a year, while anyone in the 40% tax band needs to find one paying 6.17%.
The number of accounts paying these kind of rates are currently few and far between for basic tax payers and almost non-existent if you are a higher rate taxpayer.
Some ISA–based accounts may do the job, but unless you are prepared to lock money away for a considerable period of time, which, with inflation rising has its own perils or take the risk of a structured product, the options are limited.
These structured products, usually bonds, link higher than average rates of interest with movements in equity markets, but they need to be approached with extreme care. For most people, the additional gain of a point or so on the rate of interest may not be worth the risk.
inflation-squeeze-big
Even financial advisers struggle at present to suggest what action savers can take. Most recommend just making the best of the current situation and shop around to stay within "arm's length" of inflation to limit the effect.
It is not just savers that are being affected by higher inflation. Mortgage lenders have started to withdraw fixed-rate mortgages following a surge in demand in expectation of a rise interest rate later in the year.
Halifax, Barclays and First Direct have all pulled fixed rate products, while nearly all lenders have raised rates of interest. The advice being given is that if you want a fixed–rate mortgage, move quickly.
Digital Look

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