Interest rate decision divides Bank of England - what does it tell us about the economy?

0:02Lee Boyce: Welcome to This Is Money podcast sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Lee Boyce today is Helen Crane. And coming up, the Bank of England has cut interest rates again, but this time the decision wasn't straightforward. What does the division in the MPC tell us about the state of the economy right now and what does the cut mean for your money? Also today, plans to hit those in wealthier areas with bigger council tax bills. Will you be affected? Crane is back on the case, this time helping an elderly couple get money back from their water company for ruining their garden.

0:36Lee Boyce: And Lee will help you work out if you can claim from the car finance scandal and what to do if you can't find the paperwork. Don't forget you stay up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. Take control of your finances with Charles Stanley Direct. Invest, save, coach or plan. using technology where it's helpful and people where it matters. Our website and app make trading cost-effective and flexible, but we're more than just an online investment service. We're here for you regardless of your financial needs or if your life takes an unexpected turn.

1:15Lee Boyce: Your finances, your way. Take control today with Charles Stanley Direct. Sign up now.

1:22Helen Crane: Investment involves risk.

1:24Lee Boyce: But first, it was no great surprise that interest rates were cut this week. What caught people off guard was the indecision around the vote. For the first time in its history, the bank's Monetary Policy Committee was so split that it had to vote twice. One member even backed a bigger cut before switching sides in the second round. In the end, a narrow 5-4 majority brought the base rate down from 4.25 % to 4%. So what does this mean for our money, the economy and the government's plans? finance lee helen welcome lee what happened excitement why the split oh georgie it was so

2:04Georgie Frost: exciting you know these these things can sometimes be a little bit dull when you're reporting on them and you're sitting around in the office going bank oh it's a base rate decision today oh you know it's a hold or okay it's a small cut oh it was exciting georgie it was exciting this week it was it was a three-way deadlock which sounds like something you'd hear on the x factor um it was it It was very, very exciting. So you have nine members of the Monetary Policy Committee who make these decisions on where base rate is heading. Four voted for a hold. Four voted for a fall to 4 % from 4.25%. And one, Alan Taylor, went for a 3.75 % rate.

2:47Georgie Frost: That's what he thought, 0.5%. He went all guns blazing. And then I like to think the drama unfolded and he had to be talked around to temper his rate cut aspirations to just 4%. Interestingly, though, what has happened in the aftermath of this is it looked very nailed on that there was going to be another cut this year. But markets now are less certain. So before the announcement yesterday, there was a 100 % chance, according to the markets, of another rate cut. That's now fallen to 72 % in the aftermath of this decision, which would have been some of the uncertainty and the fact that four members voted for a hold.

3:34Georgie Frost: So they're less than certain that rates should be falling. Inflation, the dreaded inflation word, is starting to creep back up again. and it's expected to go to 4 % next month, up from previous forecasts of 3.5%. The Bank of England actually referenced supermarket shopping bills, our grocery bills, as a big driver of this, and that national insurance contribution hikes from the budget last year are really starting to bite at the supermarket tills, and that is what is causing inflation to tick up a little bit again. then referencing that showing potentially you know just how devastating that has been for job markets and also the price that we pay for for items on an everyday basis now everything feels a little bit up in the air as to where it goes next and i was saying to helen this morning the thing is four percent feels like a very sort of smooth figure doesn't it it's very kind of rounded it's very kind of you could see them parking the bus so to speak um we also discussed in alan taylor sounded a bit like a premier league manager from the 2000s you know so to go back to football analogies you know could they park the bus if you've got four members of the of the npc voting for holds you can see why the markets are pricing potentially a little bit more uncertainty as to as to the next steps but it's good news for potentially for your mortgage not such good news for your savings for example we've seen a fair few isa rates already being cut away from this decision mortgage rates ahead and we'll discuss with you i'm sure in a sec but for your money that looks like a better move but the economy as a whole it's all just got a little bit murkier again.

5:24Lee Boyce: Helen, I'll get to mortgages and savings in a minute. But this was ultimately a decision between do we try to bring down inflation? And the way that you would do that is increase rates or hold them where they are? Or do you try to stimulate the economy? And in this circumstance, it looks like the terrible growth figures that we've been having recently is the thing that's won out. However, people would be forgiven for asking. We've now had five base rate cuts, and yet still the economy looks to be in a really pretty rubbish state. So why is it not working?

5:59Helen Crane: Agreed. I think it was a genuinely very difficult decision, this one. People were anticipating a cut, a definite cut. And while they did cut it, it's clear from the way that the votes fell that there is that sort of standoff between growth and inflation and do you go and stimulate the economy and hope that people spend more. Those two things are really still in conflict. And if you look back to this time last year, the financial markets were expecting that basically it would come down quite consistently, you know, there'd be more cuts probably in the last year than there have been. As you say, there've been five.

6:35Helen Crane: I think ultimately, as they said, we'll probably get to a point where rates tend to kind of stick around this kind of point. 4 % isn't an incredibly high interest rate by sort of historical standards. And I think people might just have to get used to the fact that we are in a bit of a higher rate place. And, you know, this is kind of where things aren't at while we balance the growth and the sort of risk of inflation.

7:00Lee Boyce: So whenever we talk, let's get back to mortgages then, whenever we talk about interest rate cuts or increases, the first place we land is people with mortgages. Now, why this is sort of a so-so decision for people is the vast majority of people aren't on trackers. I mean, you will automatically see a drop if you're on a tracker rate. Most people are on fixed rate. And of course, you won't notice anything until you come off them. And also, there's an element of this had already been priced in, hadn't it, Helen?

7:26Helen Crane: Yeah, exactly. So every time there's a base rate cut, it is good news to an extent for people who have a mortgage. But as you say, if you're fixed into a two, three, five year fix, as the majority of people are, you're not going to see any change until you come to your next remortgage deadline. If you're on a tracker, as you said, you will see your rate go down by 0.25 % pretty immediately. People on standard variable rates as well, which again is a small-ish number of people, will tend to see their rate go down by about that much as well. So say if you had a£200 ,000 mortgage on a 25-year term on a roughly average rate, you'd probably save about£30 a month off your mortgage payments if you did see it go down by that 0.25%.

8:16Helen Crane: So nothing to be sniffed at. But as you say, lenders tend to price this in. So most people won't see that exact cut that is the same amount as the base rate. Banks are essentially looking at where will rates be when those fixed mortgages are further down the line. So when a five-year rate is four years in or three years in, where will interest rates be then? And will the banks still be making money on the loans. So they tend to look more at a general trajectory rather than, you know, the base rate's been cut by this much, so we'll cut our mortgage rates by this much. I mean, it's good news, but it's not an immediate cut.

8:53Lee Boyce: You can get under 4 % at the moment, a lot better than the 6.85, I believe, Helen, that you could have got back in summer 2023. But for those 900 ,000 people coming off their a five-year fixed rate mortgage that they'd got pre-pandemic, oh, those glory years of, you get sub 1%. I don't think we'll be saying that anytime soon. For those people, they would have been, well, praying for Alan Taylor to have won out, wouldn't they?

9:23Helen Crane: Big Alan, yeah, they were very much Team Alan. I think, you know, there's this dichotomy between people who are coming to the end of a five-year fixed rate mortgage at the moment. So they would have locked in their mortgage in the pandemic boom days of 2020 when, you know, house prices were soaring, but the cost of interest on a mortgage was still really, really low. So they could still be on 1%, 2%. I've got friends who bought a house at that time. They wanted to move because they had a baby and they were actually, do you know what, we won't. We'll stick our mortgage out because it's so cheap.

9:59Helen Crane: It makes absolutely no sense not to. so those people are going to be coming in for a bit of a shock if they need to remortgage soon but then on the other hand we've now got people who took a two-year fix in 2023 when rates were still really really high so this was coming off the back of that mini budget rate spike when the markets went nuts and then there was another spike in sort of mid-2023 off the back of some sort of inflation figures. And they could be on rates, some of them of, you know, 5%, maybe even going to sort of 6%. So actually, even if they have to fix it, as you say, some of today's best rates of less than 4%, that's actually great for them.

10:41So it just shows how the mad sort of up and downs

10:45Helen Crane: that we've had in the last year or so that there are people coming off their mortgages and looking at vastly different rates.

10:52Lee Boyce: We saw, didn't we, Lee, this week that five-year fixes are now more expensive than two-year fixes, which the experts are saying, well, it's good because it shows a bit of normality at last is coming back to the market. Do you agree?

11:05Georgie Frost: That's right. So historically, Georgie, a two-year fix, you would typically get a slightly lower rate than you would on a five-year fix. That flip reversed in the last few years. So a lot of people have got used to five-year fixes actually being slightly cheaper than the two-year fix. That has now flip-reversed again. Those were the biggest deposits. You can now get a 3.73 % two-year fix, while the lowest five-year fix is 3.86%. That signals a slight return to some what you would call normality to the mortgage market. But I think crucially, what these small incremental reductions in mortgage rates does is it kind of sparks a bit of a confidence in the property market helps it get moving again i think actually the mood music in the property market last couple months has been it's been shifting again a little bit with the affordability changes for first-time buyers for example and now seeing rates sort of edging down slightly it should mean that there might be a bit more of a buoyant end to the year for the property market which is already kind of holding up anyway, to be quite frank.

12:12Lee Boyce: As we said, Helen, banks priced in pretty much this cut. So mortgage rates, you know, if they trickle down slightly, maybe no big moves. I tell you what they do do quite quickly, though. Savings rates. Yeah, they've got no qualms about bringing them down. So what should you be doing right now, Helen?

12:30Helen Crane: Yeah, it's funny that, isn't that, how they're quite quick to bring the rate down. As we've been seeing for a while, savings rates have been trickling down. So always worth checking your deal. In particular, are you earning above the rate of inflation on your money, which currently is 3.6%. So if you're not, then that means that you're losing money in real terms. So do check it. And you know, there's still good deals out there. So there have been already a couple of cuts since you've had that base rate announcement. The top easy access ISA has, it's CMC Invest, it's gone down from 5.44 % to 4.59%.

13:05Helen Crane: Still beats inflation, though. And do have a look at our savings rates tables. There's still rates out there well above 4%. So worth checking them out and switching if you're not happy with the rate you're currently getting or indeed if your bank slashes the rate you're on.

13:22Georgie Frost: just just quickly on the savings front as well georgia i should point out here we did speak to savings expert adrew hagger he says if there is another uh base rate cut uh this year we'll probably see the best paying easy access rates go under four percent so probably more like 3.8 3.9 and the best fixed rates uh to go to 4.1 for one year that's quite a big fall uh in the last two years when you consider the top of the market that nsni one-year fix in october 2023 which was paying 6.2 percent so it shows that everything is edging down in terms of savings um which you would expect with base rate decisions going this way what do i think happens next well i can only go by what the markets are saying it's still quite a strong chance that there's going to be another fall either in november or december that's what they're pricing in if you've got someone like alan taylor that already thinks it should be 3.75 i find it difficult to see him changing his mind if i'm being honest um it depends obviously on whether those who thought there should have been a hold at 4.25 percent are going to going to change and what the other four members the ones that voted for this cut whether they believe um there's justification i think we need to keep an eye on what's going to happen with inflation where inflation heads if they're predicting 5.5 percent that it comes in a bit above that you know that again uh could could change uh the confidence in what happens next to the base rate.

14:45Georgie Frost: So I kind of, as I alluded to earlier, I think that round 4 % figure, you can kind of see the argument to keep it there till the end of the year. But equally, there's still a very strong chance that there's going to be one more cut. I'd be surprised if there's more than one more cut. And that's what is being priced in at the moment.

15:03Lee Boyce: All right, then we'll leave it there. We'll move on to council tax. It's an expensive and completely illogical system. Bans drawn up in 1991 often make no sense today. So why, for example, should someone living in a band H property worth over£320 ,000 in one of the wealthiest areas in the country, Westminster in London, pay£2 ,034 a year in council tax, while someone in a house in the same band in Bishop Auckland in Durham, pay£4 ,279. Well, maybe no more. Deputy Prime Minister Angela Rayner is mulling an overhaul of the council tax system to allocate more money to deprived areas. So it will mean households in wealthy areas, including London and the home counties, will be hit with huge council tax increases.

15:55Lee Boyce: That's according to the IFS. So how will your area be affected? And are there more council tax rises on the horizon? Oh, Helen, council tax. Firstly, why is the council tax system, frankly, a bit shambolic?

16:11Helen Crane: Well, as you said, it's all based on how much your house is worth, which first of all isn't necessarily a great system because, as you said, it means that people in wealthy areas can end up paying less than someone who lives in a much more deprived area because they, in relative terms, their house in 1991 was in a higher band. So it's all a bit mad. I think it's definitely sort of ripe for reform. And as you said, it also has this trade off with how much councils sort of want to charge and how much they need to raise. So for example, I live in Wandsworth in London, which has notoriously one of the lowest council tax rates in the country, certainly in London.

16:56Helen Crane: And they do that because they can. They're a relatively sort of wealthy council and they do it as just a bit of a sort of bung to get some kind of goodwill from their residents, I think. They're all shouting about it, like, oh, we have the lowest council tax in London, like, brilliant. And, you know, they can do that because they're a sort of relatively wealthy London council where you know you obviously have these council deprived areas who don't have that luxury and their residents sadly end up paying sometimes the same amount as people in sort of London in the south. Lee what are your thoughts?

17:29Georgie Frost: You know my thoughts I think Georgie on council tax from probably what I've been discussing and it has it is constantly being kicked around a bit at the moment including last week I don't know if you saw this but James Buckley who played Jay Cartwright in the in-betweeners was moaning on his podcast about now having to pay for his green bin saying i already pay council tax why am i having to pay for my green bin and it went absolutely wild uh it went viral it went absolutely everywhere and actually the the council that he lives in is the same as my in-laws who also say why are we now paying for our green bin um and i think that that's the kind of like bit of frustration um and how many more things could potentially be added on now just to go wandsworth right as as herdon says one of the cheapest areas for council tax what they're proposing here is that there's these rich areas that are paying not much council tax and then it should be more spread around deprived areas but let me tell you something georgie wandsworth is not all sunshine and kittens um you know i went to roehampton university Roehampton's in Wandsworth.

18:36Georgie Frost: Roehampton is not a nice place. Very different to other parts of affluent Wandsworth. Our office is in Kensington. Now, the first thing you say, Kensington, lovely area. Very affluent. Lots of rich people, supercars going up and down the high street. I tell you, if you take a wander up to North Kensington, or if you go to West Kensington, completely different ballgame. Very deprived.

18:58Lee Boyce: I used to live in Fulham and I worked at a food bank there. So I'm very aware that very rich areas have their own problems.

19:04Georgie Frost: So where I'm getting at with this is how do you justify what's deprived and what's not deprived? You can't just simply say the north is more deprived than the south. Yeah, OK, on a whole, yeah, but on a granular level, completely different. And there's pockets around all affluent areas on the whole. Again, that's a bit of a sweeping statement that are deprived enough as it is. Where do you draw the line? How do you decide all this? I think the council tax system is as ugly as it is and reform is needed. I think the reform is so complicated. It's complicated to work out what on earth it is you're meant to do.

19:41Georgie Frost: And we've already seen rises in some areas, greenlit 9 % for this financial year. The IFS report that this is coming from is suggesting that some councils could height rates higher than the 4.99 % maximum without the need for a local referendum applying to ministers for permission to raise rates. um it's a complicated beast and i think to just simply say well westminster they're not paying much on council tax let's just raise it there you know it just doesn't it doesn't add up i mean it just based on a system from the early 90s what your house price was worth it is a very strange very ugly, very difficult to reform system because it rakes in so much money and it's raking in more and more money.

20:30Georgie Frost: But lots of local council budgets are totally and utterly annihilated and they cannot seem to get the balance right. So I think there's going to be a lot of kicking and screaming about this, depending on what is decided to be done.

20:49Lee Boyce: any ideas do we know who's going to be affected how much more they'll have to pay i mean even if you're not affected by this council taxes are going up every year that's not going to stop

20:59Georgie Frost: anytime soon is it yeah exactly yeah all council taxes are going up every year and this ifs report is essentially just saying there's a reform going in and a quarter of councils lose money in real terms and there'll be winners and losers in this and some of the ones that they've picked out ifs says the biggest losers will be inner London boroughs, particularly Camden, Westminster, Kensington, Wandsworth, but also other areas singled out, Cherwell, Mid-Suffolk and North West Leicestershire. Areas that have kept rates low and done well out of business rates retention is what the IFS is saying here.

21:35Georgie Frost: And the reforms are just likely to be based on house prices, like, you know, having a big change around. There was also floated the idea of another band, kind of almost like a super wealthy band, which I would presume that they would class anything super wealthy as a house that's worth more than, say, a million pounds or one and a half million pounds.

21:58Lee Boyce: well lee what surprised me actually i didn't realize this when i was looking at the the westminster council tax because i was like why a band h but band h is the highest in westminster and that's over 320 000 which is odd because you would think 320 000 would be more like a d but surely you could quite easily implement sort of extra bands for properties in places like

22:20Georgie Frost: westminster that don't have that well exactly i can't imagine there's many houses or properties is worth less than 320 ,000 pounds for Westminster. But when these bans were made, you know, it's a different kettle of fish, isn't it? And that's the argument. These things haven't changed. Should there be an extra ban for some of these councils in which council tax is very low? But then the argument is, you know, some of these bigger houses, I constantly see this in our reader comments. Well, you know, we've got a big house, but we've got the same amount of bins. Yeah, that is the argument that gets thrown back.

22:52Georgie Frost: And people, I think, are fed up of council tax, funds being misused and not actually improving local services but don't get me down that road because i will be here all day but what i'm trying to say is that there is a lot of kind of anger i would say around the council tax thing really highlighted by j8 of the in-betweeners which is a sentence i never thought i'd be saying on this podcast that's it for part one take control

23:20Lee Boyce: Take control of your finances with Charles Stanley Direct. Invest, save, coach or plan. Using technology where it's helpful and people where it matters. Our website and app make trading cost-effective and flexible. But we're more than just an online investment service. We're here for you regardless of your financial needs or if your life takes an unexpected turn. Your finances, your way. Take control today with Charles Stanley Direct. Sign up now.

23:51Helen Crane: Investment involves risk.

23:53Lee Boyce: Welcome back. Crane has been back on the case and this time she takes on a water company that dished out some bad advice. So last autumn, says the reader, my water pressure at home became extremely low. So much so that the reader and his wife, both in their 80s and he registered disabled, couldn't even have a shower in their own home. I contacted our water company, United Utilities, and someone was sent out to investigate in October. They said the water supply pipes needed to be replaced. This took months. It required the excavation of our front lawn, for which I paid£1 ,776 to a local contractor, as well as£1 ,783 fee to United Utilities to replace the pipe work.

24:37Lee Boyce: Unfortunately, these works made no difference to the water pressure in the house. In April, a second United Utilities engineer visited and said the water meter needed replacing. This was free of charge and fixed the water pressure problem instantly. United Utilities offered us£300 in compensation. But I feel, unsurprisingly, my words, this is not enough, given we paid£3 ,559 and couldn't shower for seven months. Helen, I had an issue with this. Actually, when I was living in Fulham, that my shower water pressure wasn't working. I had to go to my local gym to have a shower. But that was just for a few days.

25:15Lee Boyce: Very inconvenient.

25:16Helen Crane: and this has been seven months or had been seven months oh i can't even imagine honestly georgie i i've had a similar problem you know having to go to my friends down the road to shower and i it drove me absolutely bonkers and you know to think as well this couple are elderly the man is unfortunately disabled and it was actually their daughter um the man's daughter who got in touch with me to begin with and she said that she'd been picking them up and taking them to her house so they could shower. I mean, it's just it's absolutely appalling. It should have been sorted so much more quickly. And it's really one of the cases that I've had recently that I think has been been the most shocking, you know, so obviously, this mistake has been made, they've come out, the water pressure isn't working, United Utilities have rightly sent someone out to have a look at it.

26:04Helen Crane: And they decided that it's a problem with the pipes that go from I've learned so much about water drainage and supply this week honestly Georgie so there's a how the supply works is there's a big water pipe that goes under for example your road and then there's a connecting pipe which takes that into your house and if this pipe is inside the boundaries of your property you have to pay for that to be fixed which is why this person ended up paying this three and a half thousand pounds to to get this sorted so uh you know and i can completely understand why they did that you know if someone from a water company comes around and says your pipes bust you're just like yeah oh yeah sure it probably is you know you don't know about how your water meter works really i mean i have a water meter do i know how it works no if someone comes around and says your pipes are broken do i just agree and say well then yeah i guess i just have to pay yeah i absolutely you do so this means digging up the garden to get to these pipes which is gutting um i recently got my first garden i'd be distraught if someone said we need to come and dig this up after all after i planted all my little flowers and done my oh i'd be so upset um so there's that and then just the disruption like but it's terrible uh and i really do think you know obviously it turned out that after they'd paid for all this work and had all this disruption, it didn't fix the water pressure.

27:30Helen Crane: So United Utilities come around again and they say, oh no, actually, oh, we didn't check the water meter before. And the engineer literally just takes the water meter off, blows through it, and it's like, oh, it's blocked. No air can get through. So the water's not getting through. So that's the problem with the whole system, which is crazy. And water companies give out water meters for free. So this would have cost them nothing if they'd checked that to begin with. so then yeah they replace the water meter obviously it's sorted but then when they go back to the company and say uh excuse me like this this is terrible we've just paid thousands and it was just a an issue with a water meter they said it wasn't their policy to check water meters when the water supply went off it's like why is it not your policy like it's just so silly um but i think to a sort of more serious point like water companies are really fast becoming the big baddies of bill charging companies I feel you know obviously had all this terrible stuff about dumping sewage and that's feeding into customers bills you know we're all paying for them to fix those things and water bills are going up and then when they do something like this it just isn't really helping their case at all is it like luckily when I contacted them they did so before I contacted they'd agreed to pay 300 pounds in what they call compensation but it's not compensation really because it doesn't even cover like a tenth of the cost of what they paid um oh and also they said they were going to charge vat on it so it'd actually only be 240 pounds which i think some people have i know but then which i think some people note in the comments that isn't actually even the correct amount of vat so like who knows what they were they were even trying to charge there um but luckily when i went to the you know they quite quickly did agree that they would pay all the money that they'd spent out back.

29:18Helen Crane: And they paid them£750 compensation on top, which I would argue doesn't make up for seven months of not being able to shower in your own house, but it's something at least. So glad I was able to get it sorted.

29:30Lee Boyce: Not if you're disabled and in your 80s.

29:31Helen Crane: Yes, exactly.

29:32Lee Boyce: Lee, this is just absolutely galling, isn't it? And also the fact that, yes, as Helen rightly pointed out, they have become the big baddies here, but they're not doing themselves any favours. If they had just made it their policy, it doesn't seem a big one, just to check the water meter in the house, they could have saved themselves thousands. I mean, how many times do they do this? Just mind boggling.

29:54Georgie Frost: It was just when Hedda and Sona, they sort of blew into the pipe, you know, like you would do old computer game cartridges. You've got a super Nintendo just like blowing on the cartridge to make it work. And now it works.

30:05Lee Boyce: Did they turn it on and off again? It feels like that.

30:08Georgie Frost: And actually, Georgie, this is one of the cases from the past year that I woke up the next day after editing it and I digested it a bit more. I was like, that is bonkers. It bedded in. That is crazy that they've done that. Like, that's a lot of money. That's a lot of upheaval. And actually, I'm obviously editor, but also reader and like reading interesting stories. And this is definitely one of those where the reader comments. For example, someone said, amazing how quickly companies act once exposed in the media. also seeing as this has cost united utilities roughly four thousand pounds of compensation plus the cost of all the unnecessary work done i guess in the end myself and the rest of united utility customers will be forking out for their incompetence and there's quite a lot of that in here you know how on earth would this be the first thing to do united utilities should be utterly ashamed of themselves here as someone put in the reader comments incredible amount of upheaval cost and in a time when they are the baddies water bills have gone up on average something like 25 percent i think this year but some people have seen bill rises far higher than that and the whole water industry absolutely feels rotten to the core at the moment and this story is just one i'm sure of many incompetences across all of the water companies that we are fed up with here here

31:31Lee Boyce: Lee, last week, the Supreme Court largely overturned a court of appeal ruling on car finance. That's where we're headed next. They would have seen compensation payouts of up to 44 billion pounds. But the scandal is far from over. Lenders could still be on the hook for between nine and 18 billion pounds after the city regulator announced it would launch a compensation scheme for those affected. Lee, that still seems quite a high figure. So I thought on one hand, when we got the Supreme Court decision, that, all right, that's it, it's over. And a lot of people agreed that we don't want another PPI payout, etc.

32:11Lee Boyce: But now we've got a situation where, well, people could be entitled to compensation. Before we get there, give us a recap, Lee. What is this all about?

32:21Georgie Frost: Sorry, Georgie. I'm doing a nervous laughter because last Friday I was working, I was at my desk till something like nine o 'clock puzzling all of this stuff together. Because last Friday they didn't put the announcement out until 4.35pm after the markets closed in case the lenders that were involved in this, there was big swings in what the decision meant. But of course 4.35 getting the document is one thing and that seems like wading through treacle. Can you imagine how much there was in this? It was absolutely incredible. Three cases had been taken to the Supreme Court over this. It has been a feeding frenzy.

32:59Georgie Frost: Even last Friday morning, I kid you not, through my letterbox was a leaflet saying you could be entitled to compensation if you take a car finance out to 2007 to 2021. It has been absolute carnage. There's been claims management firms out there rubbing their hands waiting for this decision. Now, I'm not going to go into all of it. I'm just going to go into the important parts because it's not complicated, but there's just a lot to it. But something like 2 million cars are purchased using finance deals every year. As many as 6.6 million people unwittingly signed up to a discretionary commission arrangement, which is called a DCA.

33:37Georgie Frost: This is where they paid more in loan interest than they should have done, which is a ruse bumped up by the commission salesmen could earn. Now, what we mean by that is basically Southampton weren't acting in your best interest quite a lot of the time, shock horror, and were charging more interest than they should have done. Now, the difficulty about this, and as you rightly say, actually, there was this whole thing about it being PPI on wheels, and it might cost the industry$44 billion. but it's still going to potentially cost the industry up to 18 billion which is no small fry roughly about 950 quid up to depending if you had more than one car finance agreement which between 2007 2021 is quite likely uh you might have had more than one personal contract purchase or higher purchase agreement between those times so you might be uh entitled to a little bit more now of course a lot of people will go well hold on i did have car finance in 2007 8 9 10 11 12 34 i don't of the paperwork for that like what on earth am i meant to do for from that it really the onus is on the car finance provider to have kept the paperwork even though we're kind of told six years is the longest time necessary but the fca have got involved in this and the fca are kind of pouring over the details of this and whether it should just be blanket compensation whether you need to apply to try and get compensation for this um but also don't underestimate britain's ability to keep hold of paperwork i i maybe just speak for myself here but i definitely have one of those kind of folders where you just bung in paperwork and i very rarely get rid of it so i think well it might come in handy at some point and i don't think i'm alone because toby wall now one of our reporters is currently pouring through loads of people's contracts uh car finance agreements as we speak because people have kept have kept hold of it now i do have an example georgie of how rife this was and what was going on so i've never had car finance and in 2018 found out that my wife was pregnant we were driving a ford fiesta loved the little uh one liter eco boost ford fiesta wonderful car zippy brilliant couldn't deal with the rig as a family life there's no way i was bunging in a giant buggy in there and everything else you have to throw in when you have a child so we went into a car dealership i won't reveal which one because i don't want to get into a legal headache here but went into a car dealership we've done lots of research aka i'd asked motoring report motoring editor uh rob poll what car should we buy need a bigger car uh and then we sat down he told me what we should get went into the dealership sat down with salesman want this model and we want little luxury touches leather interior heated seats kick boot feeling like real middle class adults this wasn't a massively disgusting expensive car georgia 28 000 pounds is expensive but you know not compared to what you can get uh potentially but building all this car sounds like oh you know looking forward to being a parent and really nice and go for all the chit chat and whatnot and then he said right let's get to the car finance agreement and then actually my wife i remember saying oh actually um no we're not doing it on finance we've got savings uh to pay for pay for the car and can we have a discount as cash buyers and the whole demeanor of the salesperson changed oh your cash buys you're not putting it on finance and i remember walking away thinking is it because he's missed out on commission i genuinely walked out of that dealership thinking would he have earned more if we had put this on finance and he was very very insistent that we took out car finance i was very insistent that we weren't going to take out car finance now i know you're listening to this going when you buy a new car you drive it away and it loses half its value which is the common advice isn't it and actually this is what this guy started saying and it makes you buying a new car such a strange business where else in life do you buy something and then within one minute of ownership it sort of like halves in value such a weird concept uh to get your head around but um just to say there's method behind the madness you know we planned on holding it for 10 years um 2 800 pounds a year or 233 pounds per month we had savings we had a lump sum um and that's that 2 ,800 pounds a year and 233 pounds per month figure doesn't include when we eventually sell it on um so that will get even lower um we have had the car for seven years 60 ,000 miles one careful owner no problems with it to the point where i think we might even potentially hold on to it for another 10 years because we aren't materialistic i'm not bothered about what badge we drive of car as long as it does the job and sometimes when you've got we have two young children now that car's a wreck it gets treated like a a fourth bedroom of the of the house you know just all stuff in there buggies in there kids spilling stuff in there you know we are not fussed about getting a 60 70 80 grand car trading in making balloon payments all that stuff like this is this is what we wanted to do and this is how we did it but he was not happy about it and now i think that this case when i i can picture them i can honestly picture the man's face and i can picture the moment uh his face dropped um i don't know if you watch the simpsons georgie but there's that bit uh when lisa and ralph are doing valentine's day cards and ralph's heart ralph's heart breaks when lisa sort of says she's not interested in him that's what the car salesman i can picture the exact moment his face dropped when i said we weren't interested in car finance sorry to bring a simpsons reference up but you know sometimes you've got to bring this car finance and money stories to life haven't you but yeah so there we go and are you entitled to compensation quite possibly if you have car finance between 2007 2021 do not i repeat do not use a claims management firm do not uh don't panic into signing up to one now wait to see what the fca say uh and what the next steps are going to be but you do not want someone a claims management for taking the cut of what potentially if you've overpaid on your car finance you know it should be a relatively straightforward process to put a claim in and in the meantime if you're confused or not too sure we had a case study in the story that we had in the paper on Wednesday and he's written to all of the car finance providers and manufacturers that he's taken finance out in the past to find out what the next steps are there's no harm in doing that as well.

40:04Lee Boyce: I'm going to channel my inner Helen here, who as much as she likes to point out and hold the bad guys to account, Helen, you also like to give praise where praise is due. Listening to your story there, Lee, about going into the car dealership, I want to praise, and it took me a while to think about this because I bought my car six years ago, very similar to you, Lee, or exactly the same. I was buying the car with cash. If I can't afford something, I won't buy it. Vauxhall SLM in Tunbridge Wells had none of that they could not have been lovelier they were brilliant providing me great service I can't even remember that they offered me any sort of finance I'm sure they must have done I don't know but absolutely wonderful so the yin to your yang or the yang to your yin

40:50Georgie Frost: there Lee and it's true Georgie I'm not I'm not trying to tarnish all sounds people with the same brush here so I don't mean to sound like mean about sounds people it's a tough job and I'm sure that this is just a one-off case that happened to us and actually you know where else in life do you make such a big purchase and then not mention up front how it is that you know i don't know how the conversation hadn't begun with right can you afford this car uh you know looking back now it would have been like well how are you how are you paying for this car but it probably shows you how simple it was to get car finance at various levels quite simply with very little checks But where we can have a go at them is for these discretionary commission payments, because if buyers have lost out and paid more than they should have for their car finance because of some underhand tactics, then those people, those car finance firms and those manufacturers should be massively called out.

41:43Georgie Frost: What I'm trying to say is not always, especially when it comes to finance, are people acting and companies acting in the best interest. And you should always check through your terms and conditions. The trouble is with some of these car finance deals is that the terms and conditions are beastly, absolutely huge. And it's a purchase. You're excited. You're excited to get a new car. You know, so are you going to realistically look through dozens, potentially hundreds of pages of terms and conditions to try and unearth every single facet of what the deal entails? Almost impossible. And I think that's where a lot of this boils down.

42:20Georgie Frost: A lot more of our financial life should be made simpler by having clearer, shorter, easier to understand terms and conditions rather than hiding behind subsection clauses. Go turn to this page on this page to find out about X, Y and Z. And I think that's what a lot of this boils down to, the language used. And if South people were acting out of their own interest to try and earn more commission by doing something that was not correct for you, a.k.a. charging you more interest than what should have been charged.

42:49Lee Boyce: All right, Lee. Thank you very much. Thank you, Helen. And thank you for listening. That is it for this week. You can keep up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. and if you have any comments or questions to the team or anything you'd like them to look into

43:03Georgie Frost: Lee yeah you can email us at podcast at thisismoney.co.uk come visit the website thisismoney.co.uk and find the podcast story and you can comment in there and you can also x us at this is money facebook us at this is money we'll see your message eventually so do get in touch and if

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43:57Helen Crane: Investment involves risk.