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A guide to ‘Buy Now, Pay Later,’ deals, the dangers and safeguards

by Madaline Dunn

In recent years, ‘Buy Now, Pay Later’ deals (BNPL) have become increasingly popular and were particularly boosted by the pandemic, which created a significant increase in online shopping. Data from the FCA recently revealed that in 2020, the use of BNPL nearly quadrupled and is now at £2.7bn.

These deals offer buyers the option to pay for their purchase over a period of time, rather than all at once, and have been dubbed by some as “the future of millennial finance.” However, while this once niche form of credit has benefits, it’s not without its dangers. More and more people are raising concerns that it encourages unsustainable spending, leaving many with debts they can’t pay off. 

At The Salary Calculator, we’ll help you understand:

• The ins and outs of BNPL
• Why BNPL deals can be dangerous
• The safeguards out there to protect you from harm 

What is ‘Buy Now, Pay Later’?

Buy Now Pay Later (BNPL) agreements allow buyers to purchase items on credit and pay for them later down the line, typically through interest-free instalments. For many, this seems like a relatively hassle-free payment method and has been primarily adopted by the under 30’s demographic.

There are a few different types of BNPL deals, the first works on the basis of a buyer splitting their payments into segments, typically with an upfront payment. Following the first payment, the buyer agrees for the provider to take the rest of the money over an agreed period of time. 

Another example of a BNPL deal works by the buyer delaying their payment for purchase for a set number of days, usually between 14-30 days.

The final form of BNPL involves arranging a formal payment plan at the point of purchase, and the buyer may have to pay interest and may have their means-tested.

Some examples of BNPL providers include Clearpay, Laybuy and Klarn, the biggest provider.

Speaking about the draw of BNPL to The Guardian, one BNPL investor said: “It increases the basket size, and it also reduces dropped baskets.”

Why are BNPL deals dangerous? 

Of course, as with anything, there are drawbacks to BNPL deals, and they have the potential to put consumers at significant risk.

Speaking about the dangers associated with BNPL deals, Sue Anderson from StepChange, a debt charity, said: “Buy now, pay later services don’t give individuals enough time or protection to stop, pause and understand the consequences of their purchase. Sometimes this even means people end up using BNPL at the online checkout without actually realising they have signed up.”

She added: “Second, affordability checks are only used by some BNPL lenders, and protections against taking out multiple BNPL loans are lacking. Finally, due to a lack of regulation, it’s not clear whether these services are treating customers fairly and in a way that is consistent with other credit products.”

Meanwhile, Citizens Advice likened BNPL deals to “quicksand” in that they’re “easy to slip into” but “very difficult to get out of”.

Of course, BNPL deals don’t take into consideration circumstance changes either.

This year, in response to these concerns, the government announced this area would be regulated by the Financial Conduct Authority (FCA) due to the risk posed to consumers. Now a consultation is underway to assess how to navigate the regulation issue.

What safeguards are out there to protect buyers from harm?

For a long time, personal finance experts have called for regulation around BNPL deals, and now it appears the government is finally taking heed with their consultation.

Going forward, the government is proposing that BNPL users should have the ability to take complaints to the independent Financial Ombudsman Service. On top of this, the government has also proposed that advertising and promotions relating to BNPL should be regulated by, for example, the Advertising Standards Authority or the Committees of Advertising Practice.

Moreover, the government says that statutory protection should be outlined under Section 75 of the Consumer Credit Act. Further protections have been suggested in the form of compulsory credit checks so that those who wish to take on BNPL products can afford to do so. 

The consultation ends at the beginning of next year, so it’s unlikely we’ll see any immediate changes. That said, in the meantime, when encountering BNPL products, it’s important to ask yourself the following questions:

• Can I afford the repayments?
• Are there better options out there regarding borrowing?
• Am I interested in buying this item because of the BNPL offer?

Tags: Loans, Money, savings, The Salary Calculator

UK expenses: From grocery shopping and travel to days out

by Madaline Dunn

When it comes to day-to-day expenses, prices can vary widely depending on where you’re located in the UK. The North-South price divide is indeed true, too, and the further you go up North, typically, the cheaper things get.

At The Salary Calculator, we’ll walk you through the sort of prices you can expect to pay across the country at supermarkets, restaurants and pubs and where you can go for a cheap day out. We’ll cover:

• A comparison of UK supermarket prices
• Dining out across the UK
• Price differences for activities
• Travel costs contrasts

The UK Supermarket comparison

Across the UK, the price of your groceries will change depending on which supermarket you decide to shop at. There’s a pretty wide range to choose from, too.

Nimblefins analysis of ONS data also reveals that, on average, a UK household spends £3,312 on groceries a year, but where can you find the cheapest trolley?

Which? found Lidl is the cheapest supermarket in the UK. For 23 essential items, a Lidl shopping trolley comes in at £24.11, while not far behind, an Aldi trolley comes in at £24.54. The location with the most Lidls is London, which has a whopping 72 supermarkets. Elsewhere, Sheffield, London, Cardiff and Liverpool are the cities with the most Aldi stores.

Meanwhile, Asda sits at third place, with a trolley of 23 essential items costing £25.22. Fourth is Morrisons, where 23 essential items cost £27.14.

That said, a new supermarket chain, Mere, is set to launch in the UK, and founders claim that it could be up to 30% cheaper than competitors Lidl and Aldi.

Contrastingly, the most expensive supermarket in the UK is Waitrose, where a trolley with 23 items is priced at £32.20, over £8 more expensive than Lidl. Ocado, the online supermarket, is the second most costly at £30.33.

London is also home to the most Waitrose stores in the UK, with a total of 54 stores.

Dining out and drinks across the UK

In the UK, the average household spends £1,716 on restaurants and takeaways each year. That said, UK inflation recently saw its biggest increase on record in August 2021, meaning food and drink are getting even pricier. So, where can you find the cheapest places to eat out and buy drinks?

Sheffield is the most affordable city to buy a pint, according to research from Numbeo, costing £3.36. Liverpool and Leicester offer similar prices, with a pint costing £3.47 and £3.66 respectively.

Unsurprisingly, some of the most expensive pints can be found in London, where a pint will see you part with nearly £6 (£5.60). Meanwhile, Bristol pints cost £4.76 on average, and you’ll pay around £4.72 a pint in Norwich.

If you’re looking for a cheap bite to eat, on average, the most affordable place to buy a 12’’ Margherita pizza is Belfast, costing just £5.99. London, again, is the most expensive place comparatively, costing £10.99.

Meanwhile, for those looking to taste the finer things in life on a budget, the Michelin Cornerstone in Hackney, London, will set you back just £21.50 pp, and outside of London, the Coach in Marlow, Buckinghamshire, which cost you £23 pp.

Dundee offers the cheapest night out for those hitting the town, costing around just £25.35 on average. Cardiff and Swansea are also cheap options at just £27.33 and £27.35 per night, respectively. London and Oxford are much more expensive, ​​at £49.66 and £42.30 on average a night.

The cost of activities

It may be confusing to understand why there’s such a difference in price for activities like going to the cinema or joining a gym depending on where you live, but typically these price differences are due to rent and running costs varying regionally.

If you’re a fitness enthusiast trying to review where the cheapest places to workout are, up north in Newcastle, you can find a gym membership for just £16. This jumps up considerably the further you move down south.

Cinema prices vary widely, too. In Bradford, an adult ticket costs just £6.74, but this doubles if you move further south. In Wandsworth, for example, an adult ticket soars to £13.74.

Travel expenses

Travelling across the UK can be pretty expensive, especially if you choose to travel by train. These days, choosing the train costs 50% more than flying by plane!

According to Nimblefins, on average, a UK household spends around £1,100 a year (£94 a month) on public transport.

Here, London again tops the list of the most expensive places regarding public transport. Deutsche Bank’s 2019 survey found that transportation costs £150 a month for a travel card for zones 1-3. However, London prices are lower for buses, and a single hopper ticket will cost just £1.55. Elsewhere in the UK, a single ticket for a 20-minute journey from Middleton to Manchester city centre will set you back £4.50.

Tags: 2021, Economy, savings, The Salary Calculator, Travel

A guide to house prices across the UK

by Madaline Dunn

House hunting is exciting and often symbolises a new start, and adventure. That said, it can be somewhat overwhelming reviewing house prices, especially considering that global house prices are rising at the fastest pace since 2005.

According to Halifax, house prices shot up by 10.3% over the last year, with an increase to £287,440 on average!

But, don’t worry, at The Salary Calculator, we’ll walk you through:

• Some of the housing market trends right now
• Whether now is a good time to buy a house
• Where the cheapest house prices are
• Where the most expensive house prices are located

What are some of the housing market trends right now?

For those looking to break into the housing market in the UK, there are a few things you should know. In August, house prices jumped 7.1%, a record high, with more demand for greater space and a trend towards more home-working pinned as the reasons behind increased buyer activity.

In relation to this, following the pandemic, more and more people are looking to move out of cities, and now there is reportedly greater demand for rural areas. A survey from Royal London revealed that when movers were asked about their ideal living locations, 46% of Londoners said rural areas, while this figure was 45% in Manchester and 42% in Liverpool.

Andrew Asaam of Halifax said: “It’s clear from speaking to our mortgage customers that many have prioritised space over location as a result of more time spent at home over the last year and a half. We’ve seen evidence of this in areas right across Britain, with house price growth in the vast majority of cities now being outstripped by increases in their surrounding areas.”

Is now a good time to buy?

According to the experts, house prices are pretty pricey right now, and there’s been a month-on-month increase in price. Nationwide House Price Index found that in August 2021, the average house price stood at £248,857, which was 2.1% higher than in July. Demand is also high, meaning there’s a bit more competition.

Robert Gardner, Nationwide’s Chief Economist, says demand is likely to remain solid: “Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices.”

Meanwhile, speaking to Woman and Home, Chris Salmon, a property expert said that a large price drop is unlikely to happen in the next few months: “For the most part, they will remain largely the same as they are now. Although the Stamp Duty Holiday fully ends at the end of September, only a small amount of properties are affected by that, not enough to see a significant drop in house prices.”

Where are the cheapest house prices?

If you look at the UK by region, some of the cheapest places to buy a house are:

• Scotland: Average house price: £206,359
• Yorkshire and The Humber: Average house price: £207,106
• North East: Average house price: £213,091
• North West: Average house price: £228,307
• East Midlands: Average house price: £250,946

Meanwhile, by city, some of the least cheapest spots to buy a house are:

• Hull: Average house price: £156,424
• Carlisle: Average house price: £163,232
• Bradford: Average house price: £164,410,
• Sunderland: Average house price: £179,567
• Inverness: Average house price:£191,840
• Glasgow: Average house price: £196,625

Where are the most expensive house prices?

In the UK, buying in some of the most expensive regions will cost you an arm and a leg. The South West is now the most expensive region, and experts have largely put this down to the second home market surging.

Across the UK, some of the most expensive regions include:

• South West: Average house price: £430,488
• East: Average house price: £385,420
• South East: Average house price: £441,246
• London: Average house price: £706,267
• West Midlands: Average house price: £264,017

These days there are actually locations in the UK that outdo London when it comes to house prices. Winchester, in particular, was found to be one of the most expensive places to live. There, the average property costs 14 times the average salary. Oxford is not far behind, with a price-to-earnings ratio of 12.4.

The following locations are the most expensive in the UK:

• Winchester: Average house price:£630,432
• St Albans: Average house price: £604,423
• London: Average house price: £564,695
• Oxford: Average house price: £486,928
• Cambridge: Average house price: £482,300

Tags: Economy, house prices, houses, savings

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