Money latest: Woolworths could return to UK high street; major lender increases mortgage rates and pulls deals (2024)

It is one of the biggest issues facing UK politics and is what will determine whether Jeremy Hunt has more money to spend on tax cuts.

Ed Conwaysays the government has various fiscal rules and these determine how much they can spend in the future.

One of those rules states the government must try to ensure the national debt is falling over a five-year horizon.

The terminology - fiscal headroom - refers to the amount by which government can increase spending or cut taxes in five years' time without raising the debt burden and thereby breaking the fiscal rule.

The headroom currently stands at £13bn but headroom can rise and fall quite quickly.

You can watch Conway's full analysis here...

Government borrowing came in sharply lower than expected last month, boosting the chancellor's aim of pre-election giveaways in his March budget.

Data from the Office for National Statistics (ONS) showed public sector net borrowing at £7.8bn in December.

That was £8.4bn less than in the same month a year earlier and the lowest in any December since 2019.

Economists had forecast a figure above £11bn but debt interest payments fell by more than expected.

Read more here...

Meanwhile, Premier Foods, the company behind a host of brands including Ambrosia and Mr Kipling, says selected discounting helped drive strong Christmas sales growth and there are plans for more price cuts ahead.

Premier, which also holds Bisto, Loyd Grossman and Oxo in its stable, said group sales in its third quarter were 14.4% up compared with the same period a year ago.

The performance was led by sweet treats, it said, rising 21.3% by value.

Read more here...

Today's mortgage picture just got a little confusing as Nationwide announced cuts on some of its products from tomorrow.

Earlier, Santander said it was hiking some of its fixed-rate deals - scrapping others entirely. This led analysts to wonder if the mortgage price war was over before it really began.

But now Nationwide has said it will cut some fixed and tracker rates by up to 0.81% - meaning its starting rate will fall to the lowest level in eight months at 3.84%.

Mike Straton, director at Staton Mortgages, said the building society had "played a blinder" by waiting for other lenders to start applying some caution.

"Nationwide put themselves right in the mix to cement the fact that this market is definitely improving despite what unqualified nay-sayers are preaching," he said.

"This is definitely a kick in the teeth to all the self-proclaimed social media property gurus who have been shouting about the housing market crumbling. The feast is about to begin."

For many of us, Woolworths is just a faded memory, but in Germany the name can still be found on the high street.

Woolworth Germany, which is parented by the same company as the defunct UK retailer, is thriving and has its eyes set on making a return.

Speaking to Retail Week, chief executive Roman Heini said Britain was on his "bucket list" of countries to take his company to.

"There are over 300 million potential consumers in Europe, and no dominating player. The market is still there to be divided between the potential players for the future," he said.

"I don't know of any brands where the recognition will be as high as it is in Britain, without having any stores."

Woolworth, which does not sell online, has around 640 shops, almost all are in Germany and a handful in Poland and Austria.

What are premium bonds?

Basically, premium bonds are an alternative to a bank account as a place to invest your money in exchange for a return.

While money in a savings account accumulates interest at a set rate a year, premium bonds are entered in a monthly draw, which randomly gives out prizes worth between £25 and £1m.

You can invest any amount in premium bonds between £25 and £50,000.

Government loan in exchange for cash prizes

A bond is effectively a loan invested in a government or corporation.

As such, when you buy a premium bond, you are lending that money to the government to help with its finances.

Premium bonds are managed by an organisation called National Savings & Investments (NS&I), which was established in 1861 as the Post Office Savings Bank.

It started out as a way of ordinary people being able to invest their money safely, while helping the government at the same time. Now around 24 million people have premium bonds.

While a classic government bond, known as a gilt in the UK, produces a set amount of interest after a fixed period of time, premium bond holders are given the chance to win monthly prizes, which are paid straight into their bank accounts.

How do they work?

NS&I's "electric random number indicator equipment" or "ERNIE" generates the account numbers of around 5.7 million holders every month who are then awarded a prize.

For every £1 you invest, you have a 21,000 to 1 chance of winning, so the more you invest, the greater your odds.

There is a "prize fund rate", which represents the average return in prize money holders get in a year.

This changes according to financial markets. It increased five consecutive times, much like the Bank of England's base rate, in 2023, and is currently at 4.65%, but will fall to 4.4% from March.

This means that the total number of prizes will fall from 5.84 million to 5.77 million – or £4.75m to £4.44m.

Myron Jobson, senior personal finance analyst at Interactive Investor, explains: "The odds of winning are determined by the total number of bonds held and entered into the monthly prize draw.

"As the prize rate decreases, the total prize fund may also decrease - but this doesn't necessarily impact the probability of an individual bond winning a prize, as it's relative to the total pool of bonds in the draw."

Unfortunately, the chances of winning the two £1m prizes every month are around 60 billion to 1.

Are they better than a savings account?

Historically, people have championed premium bonds for being secure and tax-free.

However, although they are backed by the Treasury, which unlike a bank cannot go bust, all money in UK bank accounts up to £85,000 is now guaranteed by the Financial Services Compensation Scheme, making claims premium bonds are "more secure" largely redundant.

The only difference is that the FSCS could take a week to reimburse you if your bank goes bust.

The idea of "tax-free" prizes is also slightly misleading.

From 2016 the government introduced a personal savings allowance, which means that all interest on savings is automatically tax free.

The only exception to this is if you're a basic rate taxpayer who earns more than £1,000 a year in interest, a 40% rate taxpayer who earns more than £500 in interest a year, or a top-rate 45% taxpayer.

In this case, premium bonds could be a good way of you earning tax-free cash if one of the above applies to you and you have surpassed your PSA threshold.

Ultimately, some savings account now offer higher interest rates than the premium bond prize fund rate.

And many experts stress that you need better-than-average luck to actually get a rate of return similar to the annual rate.

Mr Jobson warns: "The fact remains that some savers might be lucky enough to hit the jackpot or win big early on, but others may save and wait for long periods even for a small return, if any."

So if you're looking for regular, guaranteed returns, savings accounts or stocks and shares may prove a better choice, he adds.

Read other entries in our Basically... series...

By James Sillars, business reporter

This mortgage move by Santander is seen as a reaction to recent increases in lenders' own borrowing costs.

These are known as swap rates.

These rates have been coming down since the end of 2023 on market expectations that the Bank of England will soon start to cut interest rates.

But, since last week's inflation data that showed a slight uptick, the market interest rate forecasts have shifted.

The central school of thought now is that while the first reduction will still be May, the rate cuts will not be as aggressive during 2024.

The financial market forecasts now see Bank rate coming down by a full percentage point rather than by one and a quarter points.

These forecasts, and therefore swap rates, will shift as the picture for the economy evolves in the coming months.

The next employment and inflation figures will be crucial.

However, before that, the Bank of England will give its latest commentary on the rate picture.

If it sticks to its guns and says it remains too early to talk about rate reductions, then we could see a further wobble for mortgage costs.

Santander has announced it will increase some of its fixed-rate mortgage products from tomorrow.

After weeks of mortgage deals falling, this represents a response to higher-than expected inflation announced last week - which led some economists to conclude markets are being too optimistic with rate cut forecasts.

A number of standard residential fixed rates will rise by up to 0.20% for purchase and remortgage clients, it said.

It's also bad news for those looking to get on the property ladder, with the major lender withdrawing all residential first-time buyer exclusive fixed-rate deals that come with £500 cashback.

Its 90% LTV three-year fixed rate product at 5.18% with no fee is also being taken off the market.

"There will no change to new business large loan exclusives, tracker and buy to let rates or the product transfer range," it said.

Kate Steere, editor and housing expert at personal finance comparison site finder.com, said others may now follow.

"While borrowers thought they may be able to breathe easy again, this move by Santander shows that they're not out of the woods yet," she said.

"Last week's unexpected rise in inflation has called into question predictions that the Bank of England will cut the base rate at its next meeting.

"Santander isn't waiting around to see and has pulled the trigger on its fixed-rate mortgage rates. A bold move that we may see other lenders follow in the lead up to the Bank's next rate announcement on 1 February."

Rohit Kohli, director of The Mortgage Stop, said these minor setbacks are "inevitable" and there will be some "ups and downs over the coming months".

"Inflation rose unexpectedly, if only marginally last week, giving lenders pause for thought, but a day or two later the retail sales data for December was published and was dreadful, which will highlight the fragility of the economy to the Bank of England," he said.

"The one positive to take out of it all is that lenders are fighting to lend money after a poor 2023 but how long it lasts is anyone's guess."

More than a million train tickets are seeing price drops of up to 50% during a seven-day sale that started this morning.

The so-called Great British Rail Sale sees cheaper tickets available from 12.01am today until 29 January, the Department for Transport (DfT) has said.

The Cheaper Advance and Off-Peak tickets will be sold for travel across England and Wales - and cross-border trips into Scotland - for travel between 30 January and 15 March.

No more will be offered once they are sold out.

Some price reductions include tickets from Birmingham to Bristol down from £30.60 to £15.30 and tickets from Manchester to Leeds down from £8.60 to £4.30.

Commuters looking to find the best deals will be able to find information on the Rail Delivery Group's website.

The sale comes before train fare rises across England from 3 March.

Lidl staff are to receive thehighest hourly pay rates in the supermarket sector.

A £37m investment will see the discounter's entry-level rates increase from £11.40 to £12 outside of the M25 from 1 March.

This will then rise to £13 with the length of service.

Those working within the M25 will see pay rates rise from £12.85 to £13.55, increasing to £13.85 over time.

These new entry-level rates will be up to 17% higher than the national minimum wage being introduced in April.

The German retailer will also introduce a bank holiday premium of £2 per hour and will increase its nightshift premium to £3.50 per hour.

The move, which is likely to put pressure on more retailers to increase staff wages, comes after Sainsbury's announced it will be investing £200m and increasing staff pay by 9.1% to £12 per hour.

Ryan McDonnell, CEO at Lidl GB, said customers were "switching to Lidl from every other supermarket" and it was "only right" they be thanked for their work.

By Nick Martin, people and politics correspondent

Birmingham City Council, Europe's biggest local authority, recentlydeclared itself effectively bankrupt. A backlog of equal pay claims and a failed IT system has crippled its finances.

It is a bit like in Monopoly: when a player runs out of money, their only option is to start selling off their assets.

So every asset the council owns is now under review and could be "disposed of" to help meet a forecasted £760m equal pay bill.

Landmarks that help make the city unique are among the properties under investigation.

Nothing is off the table - historic buildings, libraries, parks, entertainment venues, car parks and community centre are all at risk.

Why are councils going getting into financial trouble?

Councils have seen a stark reduction in the amount of money handed to them from central government over the last decade.

Grant payments were cut by 40% in real terms between 2009-10 and 2019-20, from £46.5bn to £28bn, according to the Institute for Government.

A spokesperson for the Department for Levelling Up, Housing and Communities said they were supporting the city and its concerned communities...

"Birmingham City Council faces a unique financial situation following its failure to get a grip of the significant issues it faces, from its equal pay liability to the implementation of its IT system.

"That is why we are working closely with the commissioner team, who were appointed at the council last October, to protect local residents and tackle the serious financial and governance problems.

"Our £150m Community Ownership Fund is also supporting communities to take ownership of assets at risk of closure and we have already secured the future of four community assets in Birmingham with £996,000 of funding."

Read Nick Martin's full piece on the fight to save landmarkshere...