By David Black
Principal consultant (banking) at Defaqto
David Black says lenders are taking greater care over who they lend to
The status quo is changing for personal finance markets.
The much-publicised credit crunch is having significant effects on all of us.
The wholesale funds market - whereby banks borrow from each other - is a pale shadow of its former self and is likely to remain so until investor confidence recovers.
But what are the effects of this on all of us?
On mortgages, it is almost as if we have moved back to the age when lenders are doing you a favour if they'll lend to you, as opposed to the situation in the last decade where they chased increased volume and market share.
On the one hand, interest rates and arrangement fees have increased significantly, while on the other, both the number of mortgages available and the maximum amount that will be lent per property have diminished.
The maximum loan-to-value available has decreased from a peak of 125% and many lenders will now no longer exceed 90%.
There has been fairly constant upward re-pricing in fixed rates and in the margins charged for base rate tracker products - and borrowers need to be aware that the best deals can get withdrawn quickly.
When the Bank of England reduced the base rate from 5.25% to 5% in April, it brought about the unique situation whereby, despite the base rate cut, savers prepared to move their money need suffer no cut in their interest rate.
This is because the banks and building societies are becoming increasingly reliant and eager to raise funds from the public and are having to compete by offering ever-higher rates.
There's a lesson here: when providers want to raise money, they tend to do so by launching a new account. If you scan the best buy tables, most of the entries will be for newly-launched accounts.
If you've been in the same variable rate account for ages, there is a very good chance that it won't be competitive, so it is wise to periodically review your options.
While savers are the clear beneficiaries of the credit crunch, it is not all good news for them, as the combination of inflation and tax is making it increasingly hard to get a real rate of return.
The tax-free status of cash Isas (£3,600 maximum investment per year) and the National Savings index-linked certificates are worth considering.
Lenders are increasingly focussing their attention on the creditworthiness of applicants and the result is that an increasing number of loan applications are getting declined. One of the major lenders is stating that it now rejects about 60% of applications.
The best deals are generally being restricted to those with really good credit ratings.
Lenders can make a lot of money by selling Payment Protection Insurance (PPI) in conjunction with an unsecured loan.
Regulatory pressure on the sales methods and cost of PPI is likely to greatly reduce its profitability and, as a result, I do expect to see the interest rates on unsecured loans increase as lenders strive to maintain their profits.
There is a lot of effort expended on attracting new customers, often by offering introductory rates or a short-term "teaser" ancillary regular saving account, and there are undoubtedly some good deals available.
Meanwhile, the banks are increasingly keen to get new customers, and to migrate their existing ones to their paid-for added-value or "packaged" current accounts, which offer various incentives, such as travel insurance.
Before taking the plunge, it is worth thinking about whether you will actually make use of the various incentives or whether you could buy those that you want cheaper elsewhere.
Regulatory pressure on unauthorised overdraft charges means we are facing an uncertain future, however, and it looks like an odds-on chance that "free in-credit" banking will be difficult to find in a few years' time, although it is possible that purchasing other products from the provider may reduce any fee charged.
Limited facility basic bank accounts which don't offer overdrafts are likely to remain free.
For those with a good credit rating, there is a significant incentive to review and probably change your credit card on an annual basis, because the best deals are largely restricted to new customers.
The 0% introductory purchase and/or balance transfer deals are widely available, although in the case of the latter, you'll need to take account of any balance transfer fees.
It can also make financial sense to use a different credit card for different purposes, in order to sidestep the "allocation of repayment" handicap generally in evidence.
The majority of card providers set repayments against the cheapest debt first, so if you take advantage of a balance transfer offer, only use that card for the balance transfer and use a different card for making any purchases.
On the reward side, cashback deals often offer enhanced rates for the first few months, so there can be an incentive to change a cashback credit card as well, once you've received the annual reward payment.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.