Page last updated at 13:37 GMT, Thursday, 9 October 2008 14:37 UK

Q&A: Your finance questions

Christine Ross
Financial expert Christine Ross
On Wednesday, the government announced a rescue package for British banks totalling 50bn of public money.

BBC News website readers have been sending in their questions about how the measures announced by the government will affect them.

Financial expert Christine Ross is the group head of financial planning at SG Hambros bank. Below, she answers some of your questions.


Where does the government 'borrow' money from? Other than raising taxes do they borrow from financial institutions in the form of government bonds? Aren't these the financial institutions that the government is attempting to rescue? In short, where is the money coming from?
David Pescodd, Cranleigh, Surrey

CHRISTINE ROSS: The government is able to borrow money in the world money markets. The Bank of England also has reserves that can be used to inject liquidity into the markets.

I have deposits of 50,000 with Heritable bank which is a Landsbanki subsidiary. Will these be covered in addition to my Icesave deposits by HM government?
Mrs P Brenner, Durham, England

CHRISTINE ROSS: The UK government has arranged for all deposits with Heritable Bank and Kaupthing Edge to be transferred to ING Direct UK. This means that your Heritable savings will be secured with ING. As far as Icesave is concerned, the UK government has promised that all savers will receive the full value of the accounts (not just the 50,000 limit provided by the Financial Services Compensation Scheme).

Who is buying the marked-down bank shares? Will they be making a profit?
Antony King, Newcastle-upon-Tyne

CHRISTINE ROSS: Some investors may now believe that UK bank shares offer good value. Anyone buying these shares will be taking the risk that the share prices will not fall further. If they call the market correctly and the prices rise then they will make a profit.

Does anybody know what the impact is on the HBOS/Lloyds merger situation? I have an offset mortgage with Intelligent Finance (part of HBOS) and worry about ending up with no money at all due to the 50,000 guarantee only covering your net assets. This would be an intolerable situation, I still have bills to pay!
David, Bristol

CHRISTINE ROSS: The offset mortgage question has baffled many professionals and I am sorry to say there is still not a clear answer on this one. I would encourage you to ask Intelligent Finance. Nor is there a clear answer on the HBOS/Lloyds TSB deal - hopefully the details will be finalised shortly. It is unlikely the UK government would allow savers to lose money - they have said as much and recent actions have proved this. However, if this does not allay your fears then you may wish to remove part of your deposit from Intelligent Finance and place it elsewhere. I know that this is not tax efficient but it may give you peace of mind.

I am interested to know in what way the taxpayer will benefit if or when the banks start to prosper again. Will we receive a tax-cut by way of recompense?
Chris, Bury

CHRISTINE ROSS: The government will subscribe for preference shares in a number of UK banks. Preference shareholders rank higher than ordinary shareholders. The detail will be complex but basically the government will profit from the recovery of the banks due to its shareholding, and in turn so will the UK taxpayer. The consensus is that the taxpayer is likely to benefit from the recovery of the banking sector.

Will mortgage rates fall with this cut in interest rates?
Mr Pino Lusardi, Newport

CHRISTINE ROSS: Mortgage rates should come down as a result of the 0.5% cut in interest rates. Whilst banks have not always immediately passed on the rate-cut to borrowers they will be keen to make mortgages more affordable as new mortgage approvals have fallen dramatically in recent months. Hopefully we will start to see the return of discounted and attractively priced fixed-rate deals.

I'm going through the re-mortgage process as we speak. Principally I have agreed a rate of 6.2% on a 2-year fixed term, but with this latest interest rate cut, I'm wondering what effect this may have on the mortgage rates. Am I best advised to stick to the deal I'm about to seal or wait to see what action the banks may take with the deals?
Jason, St. Helen's

CHRISTINE ROSS: I would wait to see the new rates that are likely to be published by your prospective lender. This will not stop you going through the mortgage application process. You can usually have your case accepted in principle but confirm the actual rate at the last moment. If you are not too far down the application process and have not paid fees you might want to take a look around a few other lenders before you commit. Do take into account the level of application fees - not just the headline rate - especially as you are applying for a relatively short term fixed deal.

We have just sold our house and are currently renting for the time being to see if the market falls any further. Although we have spread the money from the sale of our house, two-thirds of the money is still with a major retail bank. How safe is it and do we risk losing everything?
Anon, London

CHRISTINE ROSS: I have answered questions from 'renters between homes' many times recently. The UK government has demonstrated that savers will not lose money. However, the prudent course of action is to spread your money as widely as practicable. Many investors are now looking for safety rather than just for the rate. Make sure you put your money in joint names with each institution - this allows you to 'double up' on the maximum compensation of 50,000 per person per institution.




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