The Salary Calculator

Our guide to mortgages

by Madaline Dunn

Deciding to get a mortgage can be an extremely exciting move. That said, it’s not without its complications, and people can feel a little bit bewildered by the process. A recent study by Paymentshield found that over half of adults (52%) aged 18-34 have a poor understanding of the mortgage process. The study also found that 32% of 35 to 44-year olds have a similar lack of understanding.

That said, it’s important to make sure that you’re all clued up when it comes to mortgages so that you get the best deal possible.

It has been widely reported that there’s currently an ongoing price war in the mortgage market, with some lenders offering super-low rates. For example, HSBC and TSB recently unveiled mortgage rates below 1%, with an interest rate of just 0.94%. However, when being drawn in by low rates, it’s important to make sure you’re not caught out by other fees.

At The Salary Calculator, we’ll walk you through some of the basics of the mortgage market. This article will explain:

• The different types of mortgage rates
• How to access the better rates
• Initiatives for first-time buyers
• Best rated mortgage lenders
• How to choose the right mortgage for you

The different types of mortgages

There are two types of mortgages out there:

Fixed-rate mortgages: This kind of mortgage will see you pay a fixed rate for a set period of time, usually from between two to ten years.

Variable-rate mortgages: This kind of mortgage is not fixed at a set price, can vary from month to month, and comes in a few different forms.

• Tracker mortgages: This type of variable mortgage follows or ‘tracks’ a specific index, typically the Bank of England’s base rate, for a set period.
• Discounted rate mortgages: This type of variable mortgage is set below the lender’s standard variable rate (SVR) for a defined period of time.
• Capped rate mortgages: This type of mortgage is also variable, meaning it can go up or down, but a cap is placed on the level it can rise.

How to access the better rates

When looking to secure the best mortgage rates out there, several factors can improve your chances.

A good credit score is a big factor taken into consideration when lenders make a decision. A low credit score indicates that a borrower may be less financially reliable and more likely to default on payments in the eyes of a lender. Likewise, a high score indicates more stability and less risk.

However, it’s not the be-all and end-all if your credit rating isn’t the highest it can be. You can boost your score. This can be done by making sure you reliably make payments, keeping your credit utilisation low, and building your credit history.

To get the best deal on your mortgage, you must also compare deals. While you may think that you’ve found a good deal, without shopping around, you may miss out. There are lots of comparison websites out there that can help you with your search.

Another good tip for securing a good rate is to try and pay a large deposit if you can afford it. This will show the lender that you are less of a risk credit-wise and lead to lower interest rates.

Initiatives for first-time buyers

There are some schemes to help those buying a home for the first time to make the process a little smoother.

The First Homes scheme was introduced to create more affordable housing and offers homes at a discount of 30% compared to the market price.

The 95% Mortgage Scheme was introduced in the Spring Budget 2021 and allows individuals to borrow up to 95% of a property’s purchase price and secure a mortgage with just a 5% deposit.

Best rated mortgage lenders

In the UK, there are lots of mortgage lenders to choose from, over one-hundred in fact. Some of the biggest lenders include The Lloyds Banking Group, Nationwide Building Society, and Royal Bank of Scotland.

Trussle found, when comparing customer satisfaction, the mortgage lenders that scored the highest included Bank of Ireland, Post Office, and Aldermore.

Those that scored the highest regarding the fastest approval of new mortgage submissions included Halifax, BM Solutions, and HSBC.

Choosing the right mortgage for you

Each person will be looking for different things when choosing a mortgage; for example, you could be buying a house for the first time, remortgaging, moving house or even buying to let.  As a result, one size does not fit all.

Mortgage comparison websites are your friend here, and it’s also worth reaching out to a mortgage broker for advice. After all, choosing a mortgage is a life-changing and important decision that will affect you and your finances for years to come.

Moneyfacts, an independent money comparison website, lists that for home-movers, some of the lowest rates are currently offered by NatWest and RBS, which both have a rate of 1.04% for the first two years before returning to 3.59%. Both also have product fees of £995.00.

The lowest three year fixed rate for home-movers comes from Virgin Money, which offers a rate of 2.15%, before reverting back to 4.34% and has a product fee of £995.00.

First-time buyers, meanwhile, can secure one of the lowest rates from First Direct, which offers 2.69% fixed for two years, when it reverts to 3.54%. There is a £490.00 product fee.

NatWest also offers a low rate, at a fixed rate of 2.69%, before returning to 3.59%, with product fees of £995.00.

The lowest five-year fixed rate for first-time buyers can also be found at First Direct at 3.14%, which reverts back to 3.54% after five years.

For those looking to buy-to-let, The Mortgage Works offers a rate of 1.19% for two years before reverting to a 4.74% variable. This mortgage has a 2.00% advance.

Another mortgage with a low rate comes from Virgin Money, which has a rate of 1.48%, for two years before returning to a 4.54% variable, with an arrangement fee of £1995.

Virgin Money also offers the lowest 3-year fixed buy-to-let deal, with a rate of 1.71%, which reverts to a 4.54% variable. It has an arrangement fee of 4.54% Variable.

It’s worth noting that just because these providers offer the lowest rates doesn’t mean that they are necessarily the best deals. When making a decision, it’s important to factor in total product fees, incentives and the full costs. Rates are also constantly changing, so it’s best to review the charts regularly before settling.

Tags: Economy, First-time buyer, Loans, Mortgages, savings

A guide from inflation to stagflation

by Madaline Dunn

The world of economics can sometimes appear inaccessible and confusing; that said, some particular terms are important to understand. Inflation, deflation, hyperinflation and stagflation all affect the cost of living, impacting the price of food, transport and electricity, as well as savings accounts and investments.

At The Salary Calculator, we’ll walk you through:

• What inflation and deflation mean
• What stagflation means
• Examples of hyperinflation through the ages
• How to guard yourself against the impacts of inflation

What are inflation and deflation?

Inflation can be defined as the rate at which prices rise and generally applies to goods and services. It can increase depending on various factors, including an increase in production cost or a surge in demand for a product. Each month the Office of National Statistics (ONS) releases its measure of inflation through the Consumer Price Index (CPI).

An example of how inflation works is as follows: If an avocado costs £1 initially and the following year its price increases to £1.03, this means inflation has increased its price by 3%.

Britain’s inflation rate recently jumped to 2.5%, up from 2.1% in June 2021, which is the highest in nearly three years. Unfortunately, the Bank of England expects that it could reach 3% by the end of the year.

Deflation, meanwhile, refers to when the rate of inflation becomes negative. While this may appear to be a good thing, in the world of economics, it’s usually considered to be problematic. Common causes of deflation include:

• Technological advancements
• Lower production costs
• Decreased confidence in the economy
• An increase in unemployment

What is stagflation?

This term is pretty self-explanatory and refers to an economic situation whereby levels of unemployment are high, economic growth stagnates, and interest rates are also high. The UK was hit hard by stagflation back in the 1970s, caused in part by the OPEC oil crisis. That said, it is a rare occurrence economically.

Hyperinflation through the ages

While inflation can significantly impact the economy and make life a lot more expensive, hyperinflation takes this to the next level. It occurs when prices rise at a rate over 50% a month.

While also rare, hyperinflation has occurred numerous times throughout history. The worst example of hyperinflation occurred in Hungary in 1946, where prices doubled every 15.6 hours. Meanwhile, hyperinflation in Weimar Germany reached rates of over 30,000% per month. Elsewhere, in January 1994, Yugoslavia’s inflation reached 313 million percent. During this time, prices doubled every 34 hours!

Guarding yourself against inflation

Understandably, talk about inflation can prick people’s ears and cause concern. However, there are methods that you can use to protect yourself against the effects of inflation.

When faced with inflation, it’s a good idea to use the savings you have to reduce your debt, whether that’s credit card debt or an overdraft. Of course, you shouldn’t deplete all of your savings in this way; it’s always wise to have an emergency fund.

That being said, if you notice you have an excess of savings, it can be beneficial to invest a portion of your surplus. Here, investment in equities is a good move.

Equally, ensuring that you maximise your tax efficiency is an effective way to guard yourself against inflation. ISAs are great here and allow you to save and grow investments free of tax.

Tags: Deflation, economics, Economy, Hyperinflation, inflation, savings

How to claim mileage allowance when you’re self-employed

by Admin

If you use your own car for business, you may be able to claim a proportion of the actual total cost of buying and running your vehicle, including such things as insurance, repairs, servicing, fuel, etc. However, keeping track of every cost and working out the exact proportion of business use for your vehicle takes time and effort.

Instead, many self-employed people claim mileage allowance, a flat-rate scheme that provides a much simpler way to claim back the cost of using your own vehicle for business. Mileage allowance is part of a range of “simplified expenses” options that HMRC offers to self-employed people. They’re designed to make tax admin easier and quicker.

How much mileage allowance can you claim?

If you’re self-employed, you can claim a mileage allowance of:

• 45p per business mile travelled in a car or van for the first 10,000 miles and
• 25p per business mile thereafter
• 24p a mile if you use your motorbike for business journeys.

If you travel with someone else who also works for your business, as the driver, you can claim an additional 5p per mile for each extra passenger. So, if three of you travel together, you can claim 45p + 10p per mile (two x 5p per mile for the two additional passengers) for the first 10,000 miles, then 25p + 10p per mile thereafter.

Need to know! Claiming mileage allowance doesn’t stop you claiming for other business travel expenses, such as train tickets and taxi rides. Parking tickets and toll fees while on business can also be claimed as a legitimate business expense.

When can’t mileage allowance be claimed?

You can’t claim mileage allowance for personal journeys, they must be made “wholly and exclusively for business purposes”. And neither can you claim mileage allowance for journeys to and from your usual place of work (ie your commercial business premises). You can claim for travel to a temporary workplace, for example, if you’re a plasterer who needs to travel to different sites and jobs.

Need to know! You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for or one you’ve included as an expense when you worked out your business profits. Where necessary, seek guidance from an accountant.

Working out your business mileage

Logging your business mileage is a good idea, as it can make it far easier to later work out and claim your mileage allowance. And your claim is more likely to be accurate and credible if HMRC can see precise details of dates, miles travelled, journeys and reasons. HMRC can request proof during an investigation.

Manually recording your business mileage takes more time and effort, while scraps of paper and notebooks can go missing, so it’s better to record and store your mileage details in a spreadsheet/software, with data stored safely online. Many apps have been created to help business owners track and record their business travel mileage (some even use GPS to automatically measure business mileage).

Some self-employed business owners simply estimate their business mileage, by claiming for a percentage of their vehicle’s total annual mileage. So, if your car does 1,000 miles a month and you can show that half of that is for business use, you can claim mileage allowance of 6,000 miles a year (ie £2,700).

How to claim mileage allowance

Good accounting software will do all of the hard work for you, saving you lots of time and hassle. You enter your business mileage and it calculates your mileage allowance, which you enter into your Self-Assessment tax return. The amount is taken into account and your tax liability is reduced as a result.

If you use simplified expenses to claim mileage allowance, you cannot claim for motoring costs such as insurance, road tax or fuel, because these are accounted for within the mileage allowance.

Need to know! Deliberately inflating your mileage allowance claim can lead to penalties. HMRC takes a very dim view of anyone who deliberately enters false information into tax returns.

Further reading

Visit government website Gov.uk to read Travel – mileage and fuel rates and allowances. There is also an online tool that enables you to Check if simplified expenses could save your business money.

About GoSimpleTax

Income, Expenses and tax submission all in one. GoSimpleTax will provide you with tips that could save you money on allowances and expenses you might have missed.

The software submits directly to HMRC and is the solution for the self-employed, sole traders and anyone with income outside of PAYE to file their self-assessment giving hints and tips on savings along the way. GoSimpleTax does all the calculations for you so there is no need for an accountant. Available on desktop or mobile application.

Tags: allowance, Employed and Self Employed, expenses, income tax, mileage, Self Assessment, self employed

The best credit card deals out there in 2021

by Madaline Dunn

When it comes to the world of credit cards, there are lots of benefits. A credit card helps boost your credit rating, offers you protection and freebies, and gives you some financial wriggle room.

That said, it can be hard to know where to start, and often people have lots of burning questions that need answering. It’s also important to stay informed about charges and fees.

At The Salary Calculator, we’ll make sure that you’re up-to-date with all the latest credit card deals out there in 2021. Keep reading to find out more.

Reasons you could benefit from a credit card

To some, credit cards can seem intimidating, and many believe it only leads to debt, but they can be helpful in some circumstances. Credit cards can help you with your finances and assist you with building a good credit report. If your credit is in the red, and you’re looking to make a big investment like a house or car, a credit card can push it into the green.

Some credit cards also enable free borrowing and purchase protection, as well as offering reward deals so that you can earn free money too.

That said, it’s important to be aware that you shouldn’t rely on credit cards to borrow money, especially if you don’t have the funds for repayments. Plus, when the interest-free period ends, you can be faced with some pretty significant charges. Credit cards also have varying levels of APR, which refers to the rate at which you’ll be charged for borrowing. So, make sure you don’t get caught out by the small print!

Santander All in One Credit Card

Arguably, the biggest plus of this credit card offer is that cardholders can benefit from 26 months interest-free on balance transfers. Other benefits include a 0.5% cashback on all purchases and no foreign transaction fees.

However, it’s not all sunshine and rainbows, and the card does have a £3 monthly charge, which works out to £36 a year. Another disadvantage of this card is that you will also be charged transaction fees if you withdraw money – interest applies here too. Moreover, it has an APR of 23.7%.

To be eligible for this card, you must have an income of at least £7,500 a year and be 18 or over.

Aqua Advance Credit Card

This card is excellent for people who are looking to build credit and requires no credit rating. It has an initial APR of 34.9%, but customers who stick with this card will be rewarded through staggered APR reduction. After 12 months, if you keep up with payments and stay within your limit, your rate could be reduced by 5% each year. This means that the APR can go as low as 19.9%.

This card also offers access to the Aqua Credit Checker, allowing you to view your credit rating and its improvement.

Other benefits include credit limits of between £250-£1,200 and no extra charges for purchasing abroad.

To be eligible for this card, you must fulfil a specific criterion. Applicants must be over 18 with a permanent address. Additionally, you must have a current UK bank or building society account and must not have been registered as bankrupt in the last 18 months. Equally, you cannot have any ongoing bankruptcy proceedings against you.

Finally, eligibility also depends on not receiving a County Court Judgement (CCJ) in the past 12 months. You also cannot already have an Aqua card or have an Aqua, marbles, opus, Fluid card taken out in the last 12 months.

American Express Platinum Cashback Everyday Credit Card 

This is a great card for those looking to get a little more bang for their buck with no annual fee. It offers a 5% cashback on all purchases up to £100 for the first three months. This does, however, decrease over time.

That said, it’s important to note that you need to spend £3000 or more to access cashback offers, and unfortunately, it’s not available for those with a bad credit history. It has an APR of 22.2%,

To be a successful applicant for this card, you must be aged 18 or over and have a clean slate regarding debt. Applicants must also have a permanent UK address and a current UK bank or building society account.

M&S Shopping Plus Credit Card

For those looking for a credit card to spread the cost of large purchases, this is the perfect one for you. With no annual fee, it also boasts a 20-month interest-free period of new purchases. That’s right, no interest at all for 20 months! Accompanying this, the card also offers cardholders an 18-month interest-free period for balance transfers. That said, this only applies within the first 90 days. Also, remember if you opt for this card, you must pay off your balance before the interest-free period ends.

As with everything, there are pros and cons to this card, and the reward points you earn through this card are only available in the form of M&S vouchers. So, this isn’t necessarily a great deal for everyone. It also has an APR of 21.9%.

Eligibility for this card requires that applicants are over the age of 18 and UK residents.

Barclaycard Rewards Credit Card

This is a great travel card for those who want to earn as they spend abroad. With a 0% foreign transaction fee and no annual fee, this is a pretty attractive deal. This card also offers 0.25% cashback on all spending and savings on live events with Barclaycard Entertainment.

However, compared with other credit cards, a 0.25% cashback rate isn’t the best deal and it does not offer a balance transfer option. It also has a 22.9% APR variable.

Applicants must be aged 21 or over, have a personal income of £20,000 or above, and have had a permanent UK address for at least two years. Those looking to get in on this deal must also have at least four years of managing credit, make payments on time and be able to afford repayments.

Lastly, applicants must not have had Individual Voluntary Agreements, CCJs, and must not have declared bankruptcy in the last six years.

Tags: 2021, Credit card, Economy, Personal finances, The Salary Calculator