Financial markets still in turmoil

A lot of interesting stories coming up today, showing the continuing turmoil in the financial world.

First up, Edmund Conway claims the recession is over, which is about as optimistic as you can get.

Much of this unfounded optimism seems focused on the fact that the property market has seen a positive bounce over this spring - mortgage lending is up, buyer enquiries are up, and the DCLG reported a 1.1% rise in house prices over April.

The problem is, spring has always been prime home buying time, so to extrapolate this into some form of economic recovery seems absurd. It really does look like a bounce, which means we should expect economic conditions to get a lot worse towards the winter - as the property market traditionally cools.

In the meantime, other economic indicators are looking increasingly adverse.

We've seen repeated claims that the European banks have not properly written down their losses. In the meantime, Eastern Europe looks like it could crash and drag a lot of Europe down with it through a chain reaction. Latvia is already in big trouble and could be the smoking gun to bring the rest of Eastern Europe down with it, and a number of central European banks with them. And that's before we address the issue of existing write-downs the ECB is already severely worried about.

In the meantime, here in the UK, the whole banking sector continues to reshuffle in order to try and adapt to what still remains a crisis.

RBS is looking to split off business deals it claims as "unprofitable" into a separate group - in the meantime, as if the market hadn't already got itself into trouble creating complex debt instruments, this is exactly what is being proposed to get the UK taxpayer money back from semi-nationalised banks such as the RBS and Lloyds Group.

Among the building societies, the government is looking to allow changes to how they fund themselves in mass markets, in order to stop a repeat of the Dunfermline Building society crash. This is not least because others, not least the West Bromwich Building Society and others are also believed to be on the brink of collapse.

The Nationwide Building Society has already raised its mortgage rates sharply this week, close on the heels of other increases in mortgage rates last month. While the Nationwide remained one of the cheapest mortgage providers around, it no longer appears to be trying to outcompete other mortgage lenders.

If anything, the entire financial world still seems to be on a downward spiral. While the potential collapse of the banking sector appears to have been averted - certainly for now - the global economic picture is anything but healthy.

Stay tuned.

Nationwide criticism unfair

It's unfair to see the recent criticisms of the Nationwide Building Society's changes to its mortgage rates.

Yes, it's unfortunate that the Nationwide will no longer be putting new borrowers on it's existing Base Mortgage Rate (BMR), currently at 2.5% - but let's face it, the Nationwide has been pushing harder than any other mortgage lender to continue to provide mortgages to the market.

And no other mortgage lender was even coming close to beating Nationwide's BMR.

Despite the fact that the Royal Bank of Scotland, Halifax, Bank of Scotlant, and Loyds TSB, all have direct government support through part-privatisation.

This is not least receiving government money with the aim of improving lending to to mortgage and loans market.

And yet RBS, HBOS, and Lloyds are still charging very uncompetitive rates, as if they are making a particular effort not to lend, and instead just hoard the government's funding.

So it's left to a mutual like the Nationwide Building Society to offer the cheapest mortgages, the cheapest loans, and even the lowest fees on credit card use.

And then when the Nationwide finally decides it needs to move new customers onto a new higher mortgage rate - one more comparative to rates offered by Barclays and HSBC, and still cheaper than RBS, HBOS or Lloyds, some journalists think this worthy of strong criticism?


I used to be a financial advisor for a living so I like to think I can recognise a quality deal, and so far that is exactly what Nationwide have been delivering on - far more than any government-supported bank.

Nationwide have been leading the market in trying to allow responsible people to borrow responsibly.

If a small increase in rates on just one of their products for just new borrowers is deserving of such criticism, then I can only wonder why these journalists haven't been more condemning of the lousy rates being offered by traditional high street banks.

Car insurance fraud on the rise

One of the lesser reported stories to make the news during this economic crisis is the issue of increasing fraud and avoidance hitting the insurance industry.

While there's little call to be unduly sympathetic to insurers, it remains a concern to all consumers because policy premiums are simply increased to pay for the costs of fraud, which hits everybody.

In this month alone we've seen a couple of different stories come up on this. On the one hand, is the frightening statistic that police are now seizing 460 uninsured vehicles per day. That's well over 150,000 vehicles per year. And the figure appears to be increasing because some people think they can no longer afford their car insurance, and so drive without any protection. Which is mad when you think of the possible costs and impact on work of having your car towed away.

On the other hand, a general escalation of insurance fraud, not least among car insurance claims. It seems that drivers are either trying not to pay on their insurance, or else trying to play it to pay for other costs.

It's important to realise that car insurance isn't a luxury - it's a necessity, and for protecting the driver's interests at that.

While most accidents in the UK are not fatal, there are still more than 8 deaths on the road each day. And even seemingly minor injuries such as whiplash are renown for the potential to develop into a more debilitating medical condition.

In either instance of injury or death in a car accident, the insurance isn't going to heal wounds or resurrect - but at least it can pay for costs, for repairing or replacing the vehicle, paying for extra medical expenses, and many have a built in death policy which can help protect income and inheritance for dependents.

In the meantime, I'm currently running a car insurance policy with Nationwide, but I'm very close to being eligible for the over-50 discounts with Saga. As I've iterated before, though, don't try and save money trying to get the cheapest car insurance, but instead look for one that gives you all the cover you need.

After all, where's the point of saving a few pounds, if in the event of a claim, it can cost you a lot more in expenses, lost time, and lost income, by having the wrong policy?

Savers losing out to bank rescue

The Royal Bank of Scotland just announced a staggering £28 billion loss.

While we’ve seen a number of banks declare billions in losses over the past year, and the process still continues, the RBS loss is going down as the biggest corporate loss in UK history.

It’s unbelievable what’s happened to the banks, and what’s even more unfair is that it’s the tax payer who is paying for all the mistakes of the banks.

We’re not just paying in terms of government funding and asset swaps with the Treasury, but also as customers. Interest rates on savings accounts are dead, but mortgage and loan interest rates remain a lot higher than the Bank of England’s base rate.

Which means the banks are doing what they can to widen profit margins to recapitalise themselves, meaning that we’re ending up paying twice to save them from their own greed.

I currently have a Nationwide bank account which is paying less than 1% interest. On the one hand, at least I know Nationwide is one of the stronger financial institutions and isn’t under any threat of being part-nationalised like RBS and Lloyds, and doesn’t look likely to be nationalised any time soon.

Even still, as I’m saving for a deposit on a house, I don’t like the fact that my savings are no longer working as hard as they used to.

Hopefully the banking crisis will soon be over, and perhaps for the sake of the financial system, banks need to widen profit margins in order to bring this to an end sooner, rather than later.

But just don’t expect me to enjoy being part of the bail-out, when all I can see is the cost from it all, rather than the benefits.

Bank of England punishes savers

This week’s move by the Bank of England to cut the interest rate to an all time low of 1% is a bad move for all of us, especially those trying to save money.

It is an unfortunate double whammy, because while the tax payer is subsidising the banking system via RBS and Lloyds especially though part nationalisation, plus through government guarantees and debt swaps with its special liquidity scheme, the cut in interest rates especially benefits the banks by increasing their profit margins.

A major way banks make their profit is through arbitrage between savings rates on loan rates. In other words, the bank offers a relatively low interest rate to savers, a relatively higher rate to borrowers, and the difference in between is profit.

The problem is that while savings rates have come down a lot, especially as the Bank of England cuts interest rates, the actual borrowing rates remain comparatively high.

For example, with mortgages, it used to be the case that tracker rates would follow the Bank of England’s rate up and down. If they still did this, then many people would be feeling the benefits.

However, lenders have now instituted a “mortgage tracker rate” which means the tracker rate they offer is a few full percentiles about the Bank of England’s interest rate, but does not necessarily comes down if the Bank of England’s interest rate is cut.

Many previous tracker mortgages also came with a mortgage floor which effectively means that the tracker mortgage will not come down below a certain rate, even if the Bank of England interest rate continues to fall.

Coupling the constant cutting of interest rates on savings, with the artificially high mortgage repayment rates, means that the UK’s banks are cashing in at the detriment to the very consumer’s whose taxes are keeping such banks afloat.

We as a nation are therefore hit by a double whammy of subsidising the UK banks directly through billions in government support, and additionally by the banks ensuring that interest rate cuts actually boost their own profit margins.

Not many people are aware of just how depressingly manipulated we are being used to help support the very institutions, whose greed and maladministration brought us into what appears to be a deep recession, and yet it will be the banks who end up profiting most from it.

Starting out on Blogger

Well, I’ve already been trying out blogging by myself at Richmond Way as part of trying to understand the online environment, not least with the current development of my A1 brand websites.

Even still, I have to admit it feels sometimes isolating and lonsesome to blog without any real understanding of what audience may or may not be around.

I’ve therefore decided to start up blogging at a few online blogging communities, where perhaps it may be easier to engage with an online audience, and that’s why I’ve set up this blog at Blogger.

I’m not sure what to expect as yet, and perhaps lack of expectation is good. Nevertheless, it will be an interesting experiment.