The credit crunch five years on: Are you a winner or a loser?

September 14 marked five years since the run on Northern Rock – and the official start of the global banking catastrophe that caused what became known as the ‘credit crunch’.

But while it ushered in the recession that continues to dog the UK economy, not everyone lost out as a result of the credit crunch itself.

Those with variable rate mortgages, for example, have enjoyed much lower monthly repayments for several years now – thanks to the Bank of England base rate plummeting from 5.25% to 0.5% in March 2009 – where it still stands today.

Kevin Mountford, head of banking at MoneySupermarket, said: "Looking back over the last five years, it may not be as negative as we think.

“The most significant change has been the base rate reduction, which has put savers and mortgage borrowers at polar opposites on the scale of ‘credit crunch winners and losers'.”

Here, we look at how the past half-decade has affected your pocket and offer advice on how you can cash in on – or at least fight back against – the ongoing effects of the credit crunch.

Savings

Over the course of any five-year period,  the impact of inflation means that money always loses some of its value, whether it’s a recession or not. According to our number-crunchers at MoneySupermarket, who looked at the Consumer Prices Index (CPI) data from the Office for National Statistics, the purchasing power of £100 in August 2007 is now £85.47, for example.

The trouble is, at the same time, many earnings have not kept up and savings rates have plummeted.

According to our research, the average rate paid on savings accounts has fallen by 3.28% since 2007, mainly because of the much lower base rate.

Those prepared to shop around and switch regularly to take advantage of the best deals can still earn interest at around six times the current 0.5% base rate, though.

Kevin Mountford said: “Savers can still fight back by ensuring they review their products regularly and switch if necessary.”

And the good news is that the economic backdrop has convinced more people to pay into rainy day funds.

Easy access accounts worth a look at the moment include the Post Office’s Online Saver Issue 7 which pays 2.95%, including a bonus of 1.30% for 12 months.

Alternatively, ING Direct offers a rate of 2.90% which includes a bonus of 2.36% for 12 months. Both accounts can be opened with £1.

For cash ISA savers, meanwhile, the West Brom Building Society WebSave ISA at 3.18% AER (including a 12-month bonus of 1.66%) on £1,000 and above, is currently leading the field.

Savings winners
No-one has benefited from falling rates, but those who have increased their contributions and are prepared to shop around should be in a better financial position.

Savings losers
Anyone relying on their savings for a regular inflation-beating income has lost out as a result of the credit crunch, as well as those who fail to move their money when bonus rates and fixed rate bonds end.

Mortgages

The credit crunch prompted mortgage lenders to tighten their acceptance criteria, squeezing the total number of mortgage products available from 22,457 in September 2007 to just 2,502 today. The deposits required by lenders have also become bigger as they require more and more security.

People looking for a mortgage in 2012 therefore have a lot less choice and flexibility.

That said the fixed and variable rate mortgages available have become cheaper for borrowers with large deposits.

HSBC, for example, is currently offering a long term variable deal and a two-year fix, both with a headline rate of 2.64%, to those looking to borrow up to 60% of a property’s value.

Those on pre-2007 variable rate deals have also benefited from some of the lowest mortgage interest rates ever.

Mortgage winners
Existing variable rate borrowers and people with large deposits are now paying a lot less interest.

Mortgage losers
First-time buyers (FTBs) and anyone with a small deposit will find it harder to get a mortgage to buy a house with.

Credit cards

While many mortgage borrowers have enjoyed lower rates since the credit crunch, those with credit card debt have had a harder time.

Despite the plunging base rate, the standard representative APRs (annual percentage rates) on credit cards have risen by 2.03% since 2007, bringing the average interest charged to 17.25%.

The good news, however, is that the interest-free deals offered to borrowers with good credit scores have also become a lot longer.

You can currently avoid interest on balance transfers for up to an incredible 23 months with a Barclaycard Platinum Credit Card (subject to a 2.8% balance transfer fee).

Tesco has also recently upped the interest-free period on its Clubcard credit card for balance transfers to 22 months for a 2.9% fee – but this also earns you extra Clubcard points so could be appealing to regular Tesco grocery shoppers. You can learn more about this deal here.

Tesco’s Clubcard credit card for purchases is top of the tables in those stakes offering 16 months at 0% on all new purchases put on the card.

And for those who want it all, the Halifax All In One card offers 15 months at 0% on both purchases and balance transfers (subject to a 3% fee).

Credit card winners
Borrowers with good credit scores can now benefit from some of the longest ever 0% deals, whether they are making a new purchase or transferring existing debt.

Credit card losers
Anyone paying interest at a standard APR is likely to be paying more than in 2007.

Loans

Both personal loans and overdrafts have become more expensive since the onset of the credit crunch.

Figures from MoneySupermarket indicate that someone borrowing £5,000 on a personal loan will now pay 0.94% more than they did in 2007.

However, there are exceptions. Both Tesco and Sainsbury’s are offering a representative APRs of 5.7% on loans of between £7,500 and £15,000 – the lowest for the past six years – although Tesco only guarantees this rate until September 24 and you will need a Nectar card to get this rate at Sainsbury’s.

Derbyshire Building Society is also a hot contender offering a representative APR of 5.8% for loans of the same amount.

‘Great deals’ on overdrafts however, are less easy to come by. Average rates have increased from 17.81% in 2007, to 19.53% now. This means the annual cost of a £1,000 overdraft has therefore increased from £178.10 to £195.30.

Borrowing winners
Many people were prompted to reduce their unsecured debt burdens by the credit crunch and, at any point in time, the less debt, the better. Others with good credit ratings and who have shopped around, have also managed to unearth some competitive personal loan deals.

Borrowing losers
Those in need small or large loans (mid-sized loans are the cheapest) and are not armed with a good credit score, will likely pay more than they did five years ago. Anyone living in their overdraft will be almost certainly paying more.

Property market

UK house prices peaked in 2007, just before the onset of the credit crunch. And since the resulting fall, the market has stagnated.

Halifax figures show that the price of the average home in the UK is currently £160,256, down from £199,612 in August 2007.

This is partly because so many would-be FTBs are scuppered by the need for large deposits.

The average FTB deposit has doubled to 20% (or £33,000 on a typical home) while the number of mortgage products available to FTBs has shrunk from 13,644 to just 1,314.

“Cash is king for those looking to get onto the property ladder, as the leading deals now require sizeable deposits,” Kevin Mountford added.

Bizarrely, however, that hasn’t stopped London property prices bouncing back to almost pre-credit crunch levels.

Property winners
Many London homeowners have seen their properties rise in value over the last five years.

Property losers
FTBs are finding it harder than ever to get a foot on the ladder, despite property prices remaining stagnant or falling in many parts of the country.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct. We’re free, independent and compare all UK loans and credit cards, as well as offering exclusive deals you can’t get anywhere else. Contact MoneySupermarket.com at Moneysupermarket House, St David’s Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2011.

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