SVR – The Great Mortgage Rip-off

Once upon a time ALL mortgages were Standard Variable Rate (SVR), and all SVRs were pretty much the same – building societies all moved their rates up or down together like a herd, every time the Bank of England changed the Base Rate. But ever since the banking crisis, when the Base Rate was slashed to 0.5% that model has been broken.

house rateNow SVR is no longer the standard – it’s the exception. Only about 20% of mortgages are now on SVR. And SVRs vary wildly – HSBC is the cheapest of the big six lenders at 3.69% and Santander is comfortably the dearest of the big six at 4.49%. Smaller lenders may have even higher SVRs – the Newcastle Building Society’s SVR is an eye-watering 5.99%!

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Standard Variable Rip-off?

big six

A rip-off is a ‘theft, cheat, swindle or exploitation of those who cannot prevent or counter it’. And a lot of people think that’s a pretty good description of the Standard Variable Tariff (SVT) that the big energy companies use to price gas and electricity. Unless you’ve opted for a fixed price energy contract, then by default you’re being charged your supplier’s SVT – and you’re probably being ripped off!

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Easy Money – the journey starts here

Money fascinates me. We all know a lot about it and deal with it every day, even though economists can’t agree on exactly what it is. As a banker I’ve dealt professionally with money and debt all my working life. And I have personally struggled with overdrafts and credit card debt for many years before gradually getting the upper hand. I’ve also tried to help other people with their money management problems. For several years I volunteered as a Debt Counsellor with Citizens Advice, and now I’m a Money Coach for Christians Against Poverty, who have developed the excellent CAP Money System as a way of managing money.

I’ve learnt that managing money well or badly has as much to do with emotion as with logic, and that psychology is just as important as arithmetic. A lot of money blogs seem to assume that we all like dealing with numbers and we just want some help in analysing the cheapest deal, or the highest rate of interest on a savings account. In this blog we’ll be starting from a different point. My assumption will be that most of us don’t like thinking about money. We only do it because we have to. We don’t feel good about money; we never seem to have enough and we often struggle to make it stretch to the next payday. We suspect that other people manage it better than we do. Perhaps thinking about money makes us feel guilty – perhaps we feel that we have failed in some way – because we’ve not earned enough, or not saved regularly, or spent too much on the wrong things.

My hope is that I can help more of us to enjoy the feeling of financial wellbeing more of the time. That means not thinking about money most of them time, and when we do occasionally have to think about it, we feel OK about it. It doesn’t mean being rich, but it does mean being able to open the morning post without a feeling of dread. This is what I mean by “easy money” – making it easier to manage money on a day-to-day basis by organising our finances so that we only have to think really hard about money (which we don’t like doing) very occasionally.

I’ll be talking about simple ‘easy money” tools and techniques that we can use to increase our financial wellbeing. Some of these you’ll already know about, others may be new to you.

Things like “Jam Jar” accounts: many of our grandmothers had a row of jam jars into which their husband’s weekly pay packet was divided – a jar for rent, groceries, milk, rainy days etc. It was a good way of making a small amount of money stretch. We can use multiple bank accounts in the same way. You can start by using one account for paying all your regular monthly bills, and a separate account for everything else. That way you don’t have to worry about having enough left in your account to pay your monthly bills, and it’s a lot easier to see how much you’ve got left to live on.

Things like using cash when shopping for groceries. We find it much harder to spend cash – we actually find it painful – so we instantly become much cannier shoppers. Research has shown that people who go shopping with cash spend significantly less than people who pay with plastic.

I’ll be talking about these ideas and others like them in my blog, and I’d be interested to hear from you about your experiences, and about tips and techniques that have worked for you. Let’s learn from each other.

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