Two Come Along At Once

Blimey, two posts in one day....

I saw this come in on an email; today and felt it was worth publicising:

Research commissioned by Scottish Provident and carried out by Opinium Research revealed that:

• Almost four million Britons have less than six months worth of emergency financial provisions should they be unable to work after a critical illness or experience the death of a loved one.
• For those relying on credit cards their emergency financial provisions would last only five months
• About a third would have to drastically cut back on living costs

Almost a third (31%) do not have any form of emergency financial provision ("safety net") in place at all. 23 % of those questioned stated they didn't know what they would do if they suddenly had to maintain their current standard of living without the main source of income.

The poll carried out was on online one and 2044 people responded. I feel this gives a pretty good cross section of the population and the stats revealed pretty much go along with what I have heard in the past.  What I don't understand is why nobody wants to do anything about it.  Every time I see or talk to a client I check to see what their provisions are in these circumstances and make recommendations to meet any shortfalls.  Potential unemployment is a cloud on the horizon for everyone but if you take the time to look at the stats you'll find that around the same number of people are claiming long term disability benefit as are unemployed at the moment (go on try it www.statistics.gov.uk).

There is underwriting involved and sometimes it can be time consuming if your case is less than straightforward but with the help of a good adviser you can get a product right for you.  Not looked at the stats but I bet more people subscribe to Sky Sports than have an income protection policy in place.

Revolting Students

Yesterday saw some major disruption in London with Students protesting against the coalition government's plans for student tuition fees.  The majority of people protested peacefully with a small number of irate people going on the rampage at the Conservative Party's headquarters.  I'm not going to give my personal views on the protesters or their cause, except that I think we all have a right to protest in our democracy and feel that this is right and proper.

I'm thinking a bit more long term from a personal perspective as a mortgage broker.  My business has survived (and a couple of years ago thrived) on the back of two areas, remortgage business and first time buyers.  Not all my clients fall into these categories of course but they have provided the mainstay of the business.  Without the first time buyers I won't get those who want to move up the property ladder to their second and third homes and so on.

In September loans to first time buyers were 6% lower in volume than in September 2009 (according to the Council of Mortgage Lenders -CML) and it has been in the news constantly that first time buyers are finding it harder and harder to get onto the property ladder.  I don't have the stats for previous years but do recall that the number of first time buyers as a percentage of the whole market has been falling over the last two or three years.

So agree or disagree with the proposed legislation in coming years we are going to see graduates coming out of university and finding themselves with an extra 9% tax to pay at a time when it is already very difficult to raise that all important deposit on your first home.  Presumably they will still have student loans on top of this extra tax burden so I can't see the first time buyer market thriving in years to come.

Another issue is how will the mortgage lenders deal with this new tax bracket in their affordability calculations?  Traditional methods of calculating how much to lend have been three times salary or four times salary with deductions for loans etc taken into account.  More recently the high street lenders have built affordability calculators which we brokers use to determine how much our clients can borrow.  The affordability calculators are also available directly on the lenders' websites. 

I feel that in the already tight lending environment in which we find ourselves the graduates of the future are really going to struggle to get that foot on the ladder.

To Fix Or Not To Fix

Halifax announced their latest house price figures today for September and indicated that prices fell by 3.6% last month.  I'm not sure that this is a pointer towards impending doom as falls were greater in 2008 and general consensus is that prices are inflated and have been for quite some time.  For those wishing to buy their first home though it will be of little or no help that the prices to get onto the ladder are coming down as the lack of funding available for those with smaller deposits is staggering.

I have noticed one or two lenders are offering better deals than earlier in the year on the 80 and 85% mortgage level but at 90% there is a significant jump in the interest rate charged and the number of deals available.  To perhaps put some light at the end of the tunnel for those first time buyers the better deals at the 85% level might be an indication that lenders are looking to improve deals for the higher loan to value (LTV) customers.  I say this because earlier in the year there was a big difference between the interest rates charged at 75% LTV and the deals available above that.  Now the gap is much smaller and with any luck those with 5-10% deposits may be able to achieve competitive deals to enable them to buy a home.

For those with larger deposits or equity in their home then rates do look rosy, with Barclays and Coventry Building Society in particular having extremely competitive deals. Certainly now looks like a good time to consider going for a fixed rate with deals available below 3% making them attractive in comparison with the majority of lenders standard variable rates.  My opinion on interest rates is that we are not going to see a change for a good while yet, today the Bank of England announced their rate was to remain at 0.5%.  Still if the Bank pull a surprise on us then just a small increase will lead to a jump in mortgage payments and with belts being tightened around the country this could have an impact. 

I think the Bank will want to see what effect the Government's austerity measures will have first, in particular the VAT rise starting in the new year.  Further down the road losing Child Benefit will certainly cause some families issues but it's early days there and I feel they may have to review their options on that bit of legislation.  Still with the cost of living set to rise it may be prudent to consider fixing your mortgage payment for a time to help balance the household budget.

Please be aware that the above does not represent financial advice but is merely my opinion.

Compliance

This is my first foray into the world of blogging so apologies for any faux pas' I may make.  I plan to make a habit of this and hope that the information will be useful.  To be honest though my main motive is to generate business and with any luck some of you out there will think I know what I'm talking about and decide to give me a call.

Today though I'm going to tell you about the rigid world in which financial advisers have to live and why it doesn't seem fair to me.  

You may well have noticed that th UK economy is not exactly flying at the moment and the government are making cuts all over the place (no more free swimming for my kids at the local baths for example!).  The reason we all feel we are in this situation is because of the reclessness of Banks and Bankers.  Gordon Brown as chancellor praised the banks in the UK and fully endorsed their "self regulation" in one of his Mansion House speeches and look where that has got us.  

Which leads on to little old me sat at my desk in Farnham endeavoring to dispense good quality, meaningful advice to a handful of people, I'm a little fish in a huge pond and don't mind admitting it.  Why, therefore, do I have to jump through numerous hoops just to change some wording on my website?  This blog will have to be approved by my network's compliance department before I can post it.  The approval process can take a week which means that any breaking news I have will be a week old before it can be published. It is a constant source of frustration to me that the FSA did not regulate banks with their almost unlimited wealth and resources.  It is easier for them to pick on the small guy who can't argue.  So much of my time is taken up making sure each i is dotted and t crossed that I don't seem to have time to do my job of advising clients.

Of course I appreciate there are rogue traders out there and that each client should expect to be treated equally and receive a good level of service as standard but surely there must be a better way of doing things.

This will probably only strike a chord with those in financial services but I'm sure there are parallels in other industries too.  

First rant over, next time I might well dish out some useful information, providing it gets through compliance first!