From Interest Rates to Big Takeovers: Your Financial News Roundup 📰

Fasten your seatbelt because the world of finance has been all but dull lately.

From UBS's bold takeover of Credit Suisse to the Bank of England's recent announcement of a 0.25% increase in its base rate, we've all been on the edge of our seats. And let's not forget about Debt Awareness Week, which shed light on some critical issues.

So, pour yourself a hot cuppa, get comfy, and get ready to be informed, entertained, and maybe even dazed by all the latest finance news. Let's dive in!

Debt Awareness Week

As the world grapples with the aftermath of the pandemic, the cost of living continues to escalate, and for many, debt is a looming shadow that can't be ignored. Against this backdrop, Debt Awareness Week took place from March 20th to 26th, reminding us of the importance of financial literacy and debt management.

This year's theme, 'What is debt advice?' highlights the many free, confidential, and impartial support schemes available throughout the UK. From financial education to debt counselling, these organizations offer a wealth of resources to help people regain control of their finances and alleviate the mental toll that debt can take.

Can debt ever be good? 🧐

Not all debt is bad, though. We are all familiar with the types of debt we manage every month, which help us live our lives: car finance, mortgages and credit cards.

Debt can help us start businesses and get on the property ladder. These debts give us access to assets that will grow in value in the longer term. A well-managed credit card can prove invaluable for emergency repairs, larger purchases or surprise expenses such as vets' bills.

Managing your repayments and keeping abreast of your debts demonstrates responsibility. Sound financial planning around debt means it is manageable and fits your monthly outgoings.

Before taking out a loan, determine what's affordable and make a repayment plan. Your credit score will improve if you pay back the right amount on time every month – a good score will help you to get credit in the future. 

Do your research before taking out a loan, and make sure you get an affordable deal that will work for you.

Talking about debt and getting advice

Discussing debt can be tricky – it's hard not to feel down, even if the circumstances surrounding your debt are beyond your control (having to close your business, for example). 

Money worries, bills and financial obligations can keep you awake at night and have a negative impact on your mental health. However, debt charities are non-judgmental and will listen and work with you to make a plan to pay it off or reach settlements. There's loads of support – it's all about taking the first steps.

Step Change charity is experienced at helping people to manage the worries and practicalities of debt. If you're not ready to phone up and talk to someone, they offer equally comprehensive online assistance.

This booklet from Money Saving Expert is free to download and offers help to anyone with mental health and financial concerns.

And don’t forget Citizens’ Advice, who will provide information to help you make the right choices.

Your mortgage deal is ending…positive steps to take now

If your mortgage deal is ending, it can be too easy just to let it 'roll over' onto the default plan, usually a standard variable rate, which is often a lot more expensive. Interest rates are rising, and finding the right deal will be crucial for your family finances. The ONS believes that more than 370,000 fixed-rate deals will come to an end between April and June.

🏠 The mortgage landscape may have changed since you took out your last deal, which is why it is worth planning now. Think ahead and start looking around well in advance – lenders often allow you to sign up for a new mortgage deal up to six months ahead of the current one finishing, so ask your existing lender about deals that are coming up. 

🏠 There will be less admin involved if you don't have to move providers – however, don't automatically assume they have the best deals. Seek an independent mortgage adviser to help you find the deals that are best for you elsewhere, too, as they may be able to find deals that an online search cannot.

🏠 Although interest rates are higher than they have been for a long time, some lenders are introducing lower fixed-rate deals again, so shop around and see what's available. With interest rates going up again last week, the likelihood is that your monthly payment will increase, so take an overall look at your household spending to see what impact the new mortgage payments will have.

🏠 Finally, if you can overpay on your mortgage before your deal ends, that will save you money in the long run as it reduces the overall amount of interest you pay. If you think overpayments will be likely, ensure this is possible without penalty for the new mortgage you take out.

What does the UBS takeover of Credit Suisse mean for your money?

Last weekend, banking giant UBS stepped in to rescue its troubled rival, Credit Suisse, in a £2.6bn deal. In the wake of the Silicon Valley Bank collapse, questions are being asked about which other banks and investments might be impacted.

The Bank of England swiftly announced that the UK's banking system is 'safe and sound' following the Credit Suisse deal – and these aren't just hollow PR words. The Bank of England, the US Federal Reserve and four other central banks got together to help mitigate the crisis by increasing the flow of US dollars through 'swap line arrangements'. 

These swap lines were already in place, making currency available for central banks to lend to other banks. If there is a run on a bank and all its customers want to withdraw their cash, these bolstered swap lines ensure the funds are there to do so. But what the central banks' plan should also do is increase wider market confidence.

Since the 2008 crash, the UK banking system has also made regulatory changes that it is thought will insulate it from a repeat of the events of 15 years ago. Banks have amassed capital which should also help to ward off a crisis. However, some may be wary of lending in current circumstances, which may affect the housing market and potentially the broader global economy.

It's worth keeping an eye on rising interest rates: because prices are increasing worldwide, central banks have been raising the cost of borrowing. If a bank holds government bonds, these lose value when interest rates rise; smaller banks may find their assets worth less.

It seems unlikely that UK banks will collapse, but be reassured that the Financial Services Compensation Scheme safeguards deposits of up to £85,000 (£170,000 in a joint account) in the event of a bank going to the wall. Your savings should be safe, too – provided your bank is regulated in the UK.

One way to protect yourself in the event of a crash is to split your money between institutions (less than £85,000 in each bank, building society, or online financial company). Ensure UK regulations cover them, and don't just pick the first website you find – do some research first.

Figure of the Week

Base rate of interest is now 4.25%

Have you heard the latest buzz about the Bank of England's interest rate hike affecting not only debt but also savings?

If you're someone who's been squirrelling away your hard-earned cash in a savings account, you'll be pleased to know that many providers have already increased their interest rates in response. And with banks and building societies vying for new customers, now is the perfect time to check if you're getting the best deal possible.

Take advantage of the opportunity to grow your savings - see if you can snag a better rate today!

Don’t forget, the National Minimum Wage and National Living Wage goes up on 1 st April

With only a few days until the start of the new financial year, the Government is increasing the minimum wage by at least 9.7%. The rate varies depending on age, but if you are currently being paid at the national minimum wage level, you should expect to see an increase in your income next month.

If you are a business with employees, you'll also need to take action to make sure you increase the hourly rate for your staff by the correct amount. Here are the 2023/24 rates:

What is the difference between the minimum wage and the living wage?

The minimum wage is the level set for all employees who are of school leaving age or above. It increases with age and depending on your role (apprenticeships are at a lower minimum wage).

The National Living Wage is paid to anyone over the age of 23 and is slightly higher than the minimum wage. You can find out more here and some helpful calculators to ensure you are paying your team correctly.

Meet the expert – Julie Eddicott

Julie is a financial advisor with over 30 years of experience under her belt. Within that time, she founded Eddicott Wealth Management and continues to be the director to this day. Julie is passionate about people’s financial, physical, and mental wellbeing. Difficulties can often stem from a lack of education about money.

“I will help you gain control of your finances to give you peace of mind that underpins your wellbeing. I will gently challenge your thinking to ensure that you are on the right path to meet your achievable goals.”

To find out more about Julie and the support she can offer you, click here.

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