Mattresses, safes and the search for security
I’m worried about the banks, should I be stuffing all my cash under the mattress?
No. If you have a burglary, standard insurance policies cover you for only the first £500 of cash stolen. If you want to keep your money at home, the four most common places to hide it are, according to a Halifax survey, (a) under the mattress (b) in the sock drawer (c) in the top of the wardrobe and (d) in the bedside table. So don’t help the thieves by leaving it there.
Should I buy a safe?
Safe manufacturers report a surge in sales - up 25% over the year. But they are probably better for documents than cash, and will set you back: a Chubb MiniBanker costs around £500. Insurers won’t pay out more than the standard amount, even if you have a safe.
RBS NatWest has made a loss of £28bn. Is it time to take my savings out?
No. The Financial Services Compensation Scheme protects the first £50,000 of your savings, and promises to pay out at least some of your savings within seven days of a bank closing.
So, if I have more than £50,000 in one bank I should move it?
Yes. If a very big bank went under, the government may have to restrict payouts to the £50,000 limit. So spread your cash around several institutions, so long as they are not in the same group. Try small and medium-sized building societies, which never got seriously involved in “wholesale” markets. Irish banks have a blanket guarantee scheme, but that depends on the ability of the Irish taxpayer to stand behind the scheme. Remember Iceland. And if your money is in a tax haven such as Jersey, it is at the mercy of the local compensation scheme.
I want to buy my first home. Will the latest bank bail-out help me get a mortgage?
The last bank bail-out in October didn’t work, so you can’t be confident this one will. Put simply, for years the mortgage companies were lending far more than they were bringing in from savers. The gap - nearly £200bn in the peak year of 2007 - was financed by banks selling mortgage-backed securities. That market fell flat on its face, so lenders have been able to lend only what they have in savings (about a third to a half of what they were doing before). Yesterday the government entered the mortgage-backed securities market, promising to underwrite £100bn-worth to kick-start lending. That should at least start oiling the wheels of the home loans market again.
Will the level of deposit required now come down?
Don’t count on it. No one wants to lend much more than 85% of the value of a home when most forecasts are for house prices to fall another 10% to 15%. The demand for huge deposits won’t go away until the property market stabilises.
I’ve got a Northern Rock mortgage. Will life now become easier?
Yes. The bank has been hectically clearing debts off its balance sheet, but has now been told to slow down.
That means when you come to the end of a fixed-rate loan with Northern Rock, you won’t necessarily be shown the door - it may offer you a decent new rate itself. It may even be kinder to its Together borrowers on 100%-plus loans who have nowhere else to go.
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