Archive for the ‘Energy bills’ Category

The stock market crash: how it affects you

Friday, August 5th, 2011

The debt crisis has sent stock markets into turmoil – painful news for pension savers and investors, but the silver lining is falling mortgage rates

Panic is sweeping through stock exchanges across the world, with the FTSE 100, the Dow Jones and the Asian markets all taking a pounding. Here we look at what it all means to you, and what you can do about it.

Pensions

The closure of final salary-based pensions and the shift to ones dependent on the stockmarket means this week’s falls are more painful than ever for millions of workers. The FTSE 100 has fallen by a tenth in the space of just four weeks, and at the time of writing is tumbling further.

Worst hit are those approaching retirement: they won’t be able to make up the losses. What’s more, the turmoil in markets has sent annuity rates to rock-bottom lows. Annuity rates determine how much pension income you get in return for the money you saved during your lifetime, so this means pensioners retiring today will see a lower income.

Action More of the same: save more, work longer, retire later. Younger workers can ride the storm if markets recover. Older workers may feel compelled to shovel yet more cash into their workplace additional voluntary contribution (AVC) schemes. Someone retiring this week should speak to an independent annuity adviser urgently.

Savings

Last time around, when Northern Rock and then the Icelandic banks crashed, there was real panic about the security of savings. This time around the banks at the centre of the storm – Italian ones such as Unicredit and Intesa – are virtually invisible on the UK high street. If Spain moves centre stage then expect a rumble of concern about Santander, although it has passed stringent EU tests on its capital strength.

Action The UK compensation scheme has been improved since the last crisis, and now guarantees the first £85,000 of any individual’s savings (so a husband and wife or civil partner can protect as much as £170,000). The standard advice, if you have more than that amount, is to spread it around different accounts at providers which are not in the same banking group.

Mortgages

Here’s the silver lining. While the Italians and Spanish have seen money market interest rates shoot beyond 6%, the reverse is happening in the UK. Short-term money has, oddly enough, become cheaper, as markets now think the Bank of England won’t raise interest rates until well into 2012. In the past few days banks and building societies have been rushing out rate cuts on nearly all their deals, so if you’re coming off an expensive fixed-rate mortgage you’re one of the lucky ones.

The rate on a five-year fix has tumbled from about 4.5% to a record low of around 3.7% (see, for example, Yorkshire building society’s deal and others at moneyfacts.co.uk); two-year fixes have dropped below 2.7%; while tracker deals start at 2.89% at First Direct.

But the new banking crisis is probably bad news for first-time buyers, effectively shut out of the market by demands for huge deposits. This is unlikely to ease any time soon as banks do everything they can to preserve their capital.

Action If you’re on an existing tracker deal (which follows the Bank of England base rate) then you’re probably wise to do nothing and enjoy the ride. If you have a large mortgage, cannot afford a rate rise and think inflation is going to return, then jump into one of the five-year fixes.

Petrol, gas and electricity

Good news. The oil price has come back from a peak of about $125 a barrel during spring to about $108, with most of that fall in the past few days. This morning it was up a bit, but if the world economy slows down or even goes into a double-dip recession expect further falls.

Bad news. E.ON this morning raised its prices by 18.1% for gas and 11.4% for electricity. However, if the wholesale price of gas and electricity tracks the price of oil, as it tends to do, maybe households will see an easing off in further price rises. But the utility companies have a long history of failing to pass on price falls in the wholesale market, so don’t expect price cuts in the short term.

Action It’s probably not worth switching gas or electricity provider right now – hang around for better deals in a month or two’s time.

Investments

Bad luck if your fund took a bet on European banks recovering. Ones that can play markets going down (the hedge funds and Ucits III funds) may in some cases have benefited. This morning, financial advisers were telling clients that the important thing is diversification, although one of the features of the 2008-09 market decline is that all asset classes – equities, bonds, property – went down, so diversification didn’t pay off much.

The big play of the past few years – mining and commodity stocks fuelled by voracious demand from China and other emerging markets – will look exposed if global growth slows.

But gold continues to shine. Yesterday it went up another $10 to $1,679 an ounce, and while markets remain in panic, is likely to advance further.

Action If I knew the answer to this one …

Patrick Collinson


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Posted in Banks and building societies, Business, Energy bills, Financial crisis, Global economy, guardian.co.uk, House News, Household bills, Investment funds, Investments, Money, Mortgage rates, Mortgages, News, Pensions, Property, Recession, Retirement planning, Savings, Shares, Stock markets, UK news | Comments Closed

Why installing solar power looks increasingly attractive for homeowners

Tuesday, July 26th, 2011

Falling costs plus generous feed-in tariffs mean return is higher than ever – but payback will fall in April

Are you a homeowner with some spare cash? A 20%-25% collapse in the price of rooftop solar power units in recent months has turned the government’s feed-in tariff scheme into one of the most lucrative financial propositions for households with the right sort of property.

The scheme was introduced in April 2010, when the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Back then, anyone spending, say, £13,000 up front to fit a 2.5kWp system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills.

It was described as a good investment because payments for each unit of electricity generated were guaranteed for 25 years, paid tax-free, and set to rise each year in line with inflation.

If you were planning to stay in your home and had a suitable roof (unshaded, at a pitch of about 40 degrees, and facing between south-east and south-west), the main question was how big a system to install – assuming you could raise the installation costs. The bigger the system, the greater the financial return.

However, you shouldn’t worry if you put off doing anything because it has emerged this week that waiting has worked in your favour.

Solar experts say that as a result of the installation costs coming down, the investment value of the scheme has become even better. These lower installation costs, an inflation-linked increase to the feed-in tariff payments and the prospect of rising electricity prices all mean the guaranteed returns are now above 10% a year, depending on how you calculate it. And if you install before next April – when new payment tariffs look set to come into force – you are guaranteed the tariffs for the next 25 years at the old rate.

Gabriel Wondrausch, who set up Exeter-based PV installer Sun Gift Solar, says the cost of systems has come down dramatically in 18 months. “We’ve been supplying PV systems for almost five years now and the prices have been on an almost continuous downward path,” he says. “A year ago we were selling a large 4kWp system for around £16,000. Today that same one is costing less than £13,000.” (Two years ago the cost would have been closer to £20,000.)

Wondrausch says the volume of sales has been a major factor in UK prices coming down, as has the reduction of feed-in tariffs in Germany, Europe’s biggest PV market. The panel manufacturers, it seems, price their panels according to the returns consumers can expect, and have been lowering prices as a result.

Solarcentury, one of the UK’s biggest solar companies, confirms the view that prices are falling. And even British Gas has reduced the price of its PV systems. A spokesman says business efficiencies and efficiencies in the supply chain mean costs have fallen by about 20% since June last year. “A typical 2.5kWp system cost around £13,383 last year,” he says. “Today it would cost around £10,450. We also need to consider that panel efficiency has increased – panels are 10% more efficient than they were.”

Wondrausch points out that the generous tariffs won’t be around for ever. In September the government is expected to unveil a new – significantly less generous – scheme for those installing PV systems after April 2012, suggesting that if you want to do it, now is the time to act.

Originally, it was thought the payments for new installations would be cut by 9% from their current level of 43.3p per kWh generated.

Solarcentury says the industry is currently awaiting publication of the government’s proposals for tariff cuts. “There is no doubt that the proposed cut for new installations from April 2012 will be higher than the planned 9%,” it predicts.

Meanwhile, if you are thinking of installing a system be prepared to spend some time researching the company you are using to carry out the work.

Cathy Debenham, who runs website YouGen.co.uk, says there is growing evidence of dubious sales tactics in the solar PV market. She recently came across one company that claimed you could make money by installing a panel on a north-facing roof, which is nonsense. The consumer group Which? warned that some claims made by firms selling solar PV could not be substantiated. Its advice is that consumers should be wary of any company that offers a quote without visiting the home to carry out a proper survey, or one that makes grandiose claims about the income you will receive.

Debenham’s site is a good starting point if you’re looking for information, or for a good installer who comes with recommendations from other users. The Energy Saving Trust site has lots of information too.

One thing to ask your chosen installer is which panels they plan to use. Wondrausch, who was one of the first to install PV panels in the UK five years ago, says the panels vary significantly in the electricity they produce – by as much as 12.5%.

Miles Brignall


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Posted in Consumer affairs, Energy, Energy bills, Environment, Features, Feed-in tariffs, Home improvements, House News, Household bills, Money, Property, Renewable energy, Solar power, The Guardian | Comments Closed

Energy bill: landlords could be forced to refurbish energy-inefficient homes

Wednesday, June 15th, 2011

Proposed amendment would make landlords responsible for ‘greening’ properties or be prevented from renting them out

Landlords will be forced to refurbish hundreds of thousands of the UK’s most draughty and energy-inefficient homes or find themselves blocked from renting them out, under proposals unveiled on Tuesday.

The government has bowed to pressure from campaigners and brought forward an amendment to its energy bill, discussed by MPs yesterday, that would stop landlords from renting out homes that fell into the worst two bands of energy efficiency – F and G. The clause was missing from the original bill.

As a result, the estimated 680,000 rented homes falling into this category – about one-fifth of the total number of private rented residences – must be refurbished or taken off the market by 2018.

In addition, from 2016, private sector landlords will not be allowed to refuse “any reasonable request” to make energy efficiency improvements to their properties.

Landlords will be able to finance such improvements through loans taken out under the government’s “green deal” scheme, under which the cost of the loans will be paid for in installments on the energy bills at the property. The costs should be outweighed by the savings as less energy is used. “This means tenants will get a warmer home and cheaper bills, and the landlord gets the work done,” said a spokeswoman for the Department of Energy and Climate Change.

However, campaigners said the government was moving far too slowly. Landlords will be able to continue renting out such homes for six years, which they said was too lenient, as the green deal will come into force next year. Dave Timms, campaigner at Friends of the Earth, pointed to research from the Chartered Institute for Environmental Health that found ill-health caused by people living in such sub-standard accommodation was costing the NHS about £145m a year.

The groups also criticised the government for not strengthening tenants’ rights to request energy efficiency improvements. “There is nothing in the bill to protect people from retaliatory eviction – where landlords force the tenants to leave if they ask for improvements,” said Timms.

About one-fifth of the people in the UK living in “fuel poverty” – without enough money to heat their houses – are living in private rented accommodation.

Fiona Harvey


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Posted in Consumer affairs, Energy, Energy bills, Energy efficiency, Environment, Green deal, guardian.co.uk, House News, Money, News, Property, Renting property, UK news | Comments Closed

Family finances are squeezed – what can you do to ease the pain?

Tuesday, March 22nd, 2011

Brace yourself for this week’s budget. Anna Tims does the maths as Mark King and Jill Insley look at how to bridge the income gap

Spring will bring a chill for most of us – a combination of at least 45 tax and benefit changes will ransack household budgets already depleted by soaring food and fuel prices, and predicted interest rate rises will tip many mortgage holders into the red.

On average, households are already £480 a year worse off following tax changes introduced in January, according to the Institute for Fiscal Studies. April’s reforms, including increases to fuel duty and national insurance contributions, will add an extra £200 burden.

The problem of making ends meet is particularly acute for families. Last year households with dependent children needed an additional £650 a month just to cover everyday living costs compared to those without, according to the Consumer Credit Counselling Service (CCCS). Families with more than three children are, on average, £45 short of the money they need to live each month. No wonder, then, that 28% of Britons are spending more than they earn each month, according to Cooperative Insurance and homeless charity Shelter.

Joanna Parsley, associate director of charity Credit Action, said: “Even people who have had a marginal increase in their salaries will find it is cancelled out by rising living costs. Those with no children or on lower incomes might be better off because of an increase in the personal allowance, but for most of us there really is no way to avoid the squeeze. It is vital that everyone looks to revisit their finances and get them in order.”

Homeowners are likely to be more precarious than renters, the CCCS said. On average, clients who own their own home have more than £30,000 in unsecured debts on top of their mortgages. And although interest rates on credit cards and personal loans don’t usually move in line with bank base rate, a 2% rise would lead to a £307 increase in monthly mortgage payments.

“It is the lull before the storm,” said CCCS spokeswoman Una Farrell last week. “Mortgage holders have managed quite well because interest rates have been so low, but we are expecting a big influx of new clients as rates rise.”

No section of society is safe. CCCS chairman Lord Stevenson said: “It seems likely that many more families, including better-off ones, will be increasingly prone to over-indebtedness in the months ahead.

“It is also not a uniform picture: public sector cuts in terms of jobs, spending and benefits will weigh disproportionately on certain groups, and the incidence of unmanageable debt bears down harder on specific parts of the country, such as London and Yorkshire.”

It is easy to blame inflation and tax rises, but are we also to blame for expecting too high a standard of living? Apparently not, if research by First Direct is anything to go by. It found that young people would have to increase their income by 55% to enjoy the lifestyle their parents had at the same age. The figures show that someone in their mid-twenties would have to earn £39,720 to buy a house, fund a wedding and afford a first child; the average salary for 20-somethings is nearer £25,000.

In November the Office of National Statistics released its latest data on the cost of UK lifestyles, which showed that in 2009 the average household spent £16 a week less than the previous year – the first time expenditure has fallen since current recording methods were introduced in 2001. “In statistical terms that’s quite a robust change,” said ONS statistician Giles Horsfield. “We noticed that a greater proportion of the weekly spend went on food, and less went on transport and recreation.”

Figures for 2010 won’t be released until the end of the year, but transport and food will almost certainly swallow even bigger slices of the weekly budget thanks to an increase of about 18 % in fuel costs over the past year, according to PetrolPrices.com, and a 4.2 % increase in groceries, according to shopping website mySupermarket.

The average disposable household income in the UK of £28,354 is clearly not enough to meet a household’s daily outgoings.

So, the Observer decided to look at typical and – in most cases -essential household costs to work out exactly why we are so broke, whether the situation is likely to get better or worse – and what you can do about the income gap.

Motoring

The expense of running a new car rose to £5,869 last year, with fuel (£1,300) and depreciation (£3,072) the most significant costs, according to the RAC. Owners of used cars faced an average cost of £4,441 in 2010, including £1,396 in fuel and £1,040 in depreciation. With the average cost of a litre of standard unleaded now costing 133.34p and a litre of diesel hitting 139.71p, according to PetrolPrices.com, it will come as no surprise that the cost of running a car is expected to soar this year.

Fuel duty is set to rise by inflation plus 1p on 1 April (the ninth tax increase since December 2008), adding between 3p-4p a litre at the pump and around £50 to the average annual bill.

To combat rising fuel costs, drivers should make sure tyres are well inflated and should drive sensibly, get their car serviced regularly to maintain engine efficiency, avoid unnecessary use of air conditioning, and get rid of roof racks to improve aerodynamics. Also consider lift-sharing, try to find the cheapest local petrol – PetrolPrices.com is a useful source – and take advantage of discounts and supermarket deals.

To reduce insurance costs you should shop around for the best deal; consider buying a smaller car; pay your premium up front; park in a driveway or garage; consider a third party fire and theft policy if your car is low-value; and don’t overestimate your mileage.

Young female drivers, who are expected to be hit by soaring premiums following the recent European ruling banning the use of gender in underwriting, may benefit from the introduction of “black box” based policies which are based on the safety of a policyholder’s driving habits.

Mortgages

Thanks to the Bank of England base rate staying at 0.5% for the past two years, monthly mortgage payments have dropped to their lowest levels in 10 years. The average mortgage borrower, according to the Council of Mortgage Lenders, owes £109,110 at an interest rate of 3.5%. The vast majority of mortgages are set up on a repayment basis, and the monthly premium for a loan this size would be £546.23. However, most experts expect the base rate to rise very soon, which will increase the cost of all variable rate deals. Each 0.25% rise in base rate will add £15 to a £109,110 repayment loan, according to moneysupermarket.com.

David Hollingworth of mortgage broker London & Country says most people will opt for a fixed rate to protect themselves against rises. Nationwide building society has a five-year fix at 4.39% with a 70% loan-to-value (LTV) ratio and £999 application fee, while Norwich & Peterborough building society has a five-year fix at 5.38% with an 85% LTV and £995 fee.

However, those who are more confident that their finances can absorb some extra costs may prefer to take the risk that the base rate will rise slowly, opting instead for a tracker mortgage. HSBC’s lifetime tracker is set at 1.79% above base and has an LTV of 60% and fee of £99.

Food

The FAO Food Price Index rose for the eighth month running in February, up 2.2% from January and at the highest level since January 1990 when the index began. In the UK, certain foods climbed in price at the beginning of the year as VAT rose from 17.5% to 20%, but other items – tea, ground coffee, butter, pasta, fruit juice, bread and vegetables – have shot up still further, according to mySupermarket.co.uk.

Dalia Mays, a spokeswoman for the site, says there to reduce the cost of the weekly shop. Try swapping your regular supermarket for a cheaper one: buy your staples at Asda rather than Sainsbury’s or Waitrose. Try setting a budget and shopping online: it means you can buy everything you normally would but you won’t be tempted by off-list extras. She adds: “Everyone has the brands they will never swap, such as Diet Coke or Heinz ketchup. But for things you’re not too bothered about, try the supermarket own brand, or better still the supermarket value range.”

Mysupermarket calculates the VAT increase will cost food shoppers an extra £66 in 2011 compared to 2010. But you can avoid VAT altogether by making crafty substitutions: buy tortilla chips instead of crisps, cream gateaux instead of arctic roll and chocolate chip biscuits instead of chocolate covered ones, unshelled salted nuts instead of shelled ones.

Utilities

Although households benefited from price cuts in 2009, the proportion of the household budget spent on energy rose substantially in 2010 thanks to freezing weather at the beginning and end of the year, and prices have risen by an average of 6.5% over the past 12 months. The average annual dual fuel bill was £819 in January 2008, but now stands at £1,132, according to uSwitch.com. Spokeswoman Ann Robinson said that if Ofgem considers current profits being made by energy companies as reasonable, and oil prices remain high, there is “a reasonable chance energy prices will go up later this year”.

Consumers should check whether they can save money on bills and cut the amount of energy they use. Consider fitting an energy efficiency device to help reduce use, and turn things off when they are not in use. Insulating a home or installing an energy efficient boiler can produce longer-term savings.

Paying by direct debit each month will help reduce bills (suppliers offer discounts for paying this way) and consumers should make sure take regular meter readings as estimated bills can be disporportionately higher. Anyone who is concerned about paying their energy bills should contact their supplier to discuss the options.

Council tax

The average band D household is expected to pay £1,438.87 for council tax in 2011, down 35p on last year, according to the Chartered Institute of Public Finance and Accountancy. The government has stumped up £650m to local authorities to allow them to freeze bills this year, although some are still imposing increases.

There’s not much you can do to reduce the size of your council tax bill. But if you are the only adult in the household, you may qualify for a 25% discount. Other adults may be “disregarded”, including full-time students, student nurses, young people on government training schemes or those following apprenticeships, and live in care workers. If everyone who lives in the property is disregarded there will still be a council tax bill, but it will be discounted by 50%.

Check whether your household qualifies on the Citizens Advice website.

Credit cards

The most vulnerable to debt are those with children because they have less flexibility to reduce their expenditure, which means they are more likely to take out credit to meet living costs.

If you want to reduce the interest you pay help may be at hand with MBNA’s recent introduction of an 18-month 0% balance transfer card. This sparked a card price war with Virgin Money entering the fray with a deal to match the MBNA card. Barclays then stretched its own 0% interest period on balance transfers from 18 months to 20 months.

While the credit-scoring might be tougher on new cards, switching your debt to a card incurring no interest is a sensible move. Decent deals are also on offer from M&S (0% for 15 months) and Nationwide (0% for 17 months) – but make sure you compare the balance transfer fees and check the length of the offer for new purchases made on the card – the reversion interest rate is always markedly higher.

Anna Tims
Mark King
Jill Insley


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Posted in Borrowing & debt, Consumer affairs, Council tax, Credit cards, Energy bills, Family finances, Features, House News, Household bills, Money, Mortgages, Motoring, Property, Tax, The Observer | Comments Closed