Moneyfacts.co.uk – weekly product update 23/08/2008
Moneyfacts.co.uk team comments on:
- Sainsbury’s Bank 12 month 0% deal on purchases
- Sub prime showing cracks
Samantha Owens, Head of Personal Finance at Moneyfacts.co.uk- the money search engine, comments:
Sainsbury’s Bank credit card - 12 month 0% deal on purchases
“Sainsbury’s Bank announced yesterday that it would be increasing its 0% purchase offer from 10 months to 12 months. The standard and platinum deals were already competitive, but extending its offer to 12 months pushes its standard card to hold joint top position of the moneyfacts.co.uk best buys, along with Halifax and HSBC, with all three offering a standard revert to rate of 15.9% APR. The Platinum card offer is market leading, with the next best interest free offer at 11 months.
“These cards also come with the added benefit of a lifetime balance transfer deal at 5.94% pa, which in today's market is a pretty competitive. Combined with the 0% offer, these deals are a very attractive overall package.
“More recently card providers have been focusing their attention on the balance transfer market, with deals currently found up to 15 months. Nevertheless it’s pleasing to see more providers offering excellent deals for purchases too.
“The Sainsbury’s cards receive a thumbs up from Moneyfacts.co.uk – a five star product”
Julia Harris, mortgage expert at Moneyfacts.co.uk- the money search engine, comments:
Sub prime showing cracks
“While its a little too early, for the prime mortgage market to be affected by the stock market turmoil, the sub prime sector is beginning to show cracks.
“Victoria Mortgages has withdrawn its sub prime range, GMAC-RFC increased rates by 0.75%, Mortgages Plc increased rates by up to 1% and Northern Rock by up to 0.55%. SALT will no longer considering applications from borrowers with any arrears in the last three months.
“It’s little surprise that sub prime lenders are resorting to rate rises and tightening their credit criteria as the credit crunch starts to take hold. Almost anyone can obtain a mortgage, no matter their credit position or employment status as long as they are prepared to pay a premium by way of an increased interest rate. Many of the near prime deals offer very competitive rates, not too far out of line with the prime market. However, while these borrowers may only have minor debt issues at the start, over time their credit position could worsen if they are not given the appropriate support from the lender, driving them further in to the sub prime market.
“Whilst the housing market has been buoyant and borrowers are not stretching their income beyond reasonable limits, the sub prime market has been a lucrative and fairly safe bet for lenders, especially as their target market continued to increase in size. But this hit has been from an external influence, beyond the control of lenders here in the UK. Today’s financial markets are global, which to some degree places us at the mercy of the world’s economies.
“Specialist sub prime lending is often backed by large investment houses, who will feel the brunt of the instability and falling investment returns. Take the example of Alliance & Leicester, whose prime products have seen a fall in rates, whereas their specialist mortgages, sold to investment banks have risen over the last week. So with variations between who owns the debt lenders will undoubtedly respond in different ways.
“It’s a sign of the times that the Bank of England has been forced to use its position of lender of last resort and offer a helping hand, granting a £314m loan at 6.75% to an unidentified lender.”
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