Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Thursday, May 31, 2007

Bush Learns The Art of Diplomacy

In the dying days of his presidency President Bush seems to be finally learning the subtle art of diplomacy, if his decision to appoint Robert Zoellick to head the World Bank is anything to go by.

Zoellick comes as a breath of fresh air, after the lamentable failure of the Wolfowitz presidency.

Many have applauded Zoellick's nomination by President Bush, hoping that it will help restore the reputation of an organisation that was tainted by the regime of his predecessor.

Pending confirmation by the board, Zoellick will start on June 30.

Rental Property Slowdown

In further worrying news for those with a stake in the housing market, figures show that the demand for rented properties in the UK suffered its worst slowdown for two years in the three months to April.

The lettings survey from the Royal Institute of Chartered Surveyors showed demand being hit.

RICS spokesman, Jeremy Leaf, said:

"Housebuyers are returning to the market to avoid rising borrowing costs, signalling a drop in demand for rental property.

Rising borrowing costs and a subsequent drop in yields have also contributed to a worrying time for landlords
."

New landlord instructions, an indicator of how many people are buying to let, fell slightly in the quarter to April.

Leaf added:

"The fall in activity has been driven by a continued reduction in yields and signs that underlying house price growth is beginning to slow.

Interest rate rises later in the year will have a further dampening effect, but the underlying strength of the economy and an active housing market should ensure a soft landing for many
."

Wednesday, May 30, 2007

Fighting Fund Set Up

Who would be a banker in today's Britain?

Gone are the days when the bank manger was a respected gentleman, in the Captain Mainwaring mould. Now the image of banks and their staff is that of a tacky used car salesman, trying to dishonestly screw the hapless customer out of every penny they own.

Another nail has been knocked into the coffin of the banks' credibility, by the launch of a £100,000 fighting fund to encourage people to launch legal challenges against what they say are illegal bank charges.

The money has been pledged by MoneySavingExpert.com and the Consumer Action Group, as well as private individuals.

The theory being that the funds will be used for claims that could set a legal precedent, in the fight against excess overdraft charges. The move comes after two county courts ruled against two customers of Lloyds TSB.

In the first, a district judge at Birmingham County Court dismissed a claim Kevin Berwick brought against Lloyds TSB on the grounds that charges were a legitimate part of the current account service and found that he had failed to lodge sufficient evidence.

The second ruling, made against a claim for £3,000 brought by Julian Rudd, came on 11 May. A judge at Lancaster County Court also found Mr Rudd, a builder, had failed to state an adequate claim.

Claims from customers have risen by 40%, according to the Financial Ombudsman. Hardly surprising, given the amount of media coverage now given to the issue of bank charges.

Which? claims that the penalty charges earn British banks £4.75BN a year.

The fund will be held in a trust by the Govan Law Centre, and will be activated when the right case presented itself.

Marc Gander, the co-founder of the Consumer Action Group, said:

"Those who do go to court usually win by default. Yet for the rare few where the bank does put up a defence, the big lesson to learn is that even where [the banks] don't show up in court, it is still worth doing proper preparation."

We shall see.

It should be remembered, as I have stated many times before, that banks are not charities. In the event that penalty charges are reduced, or capped, they will find other ways to levy charges on their customers. The most likely avenue being an end to free banking.

What will the campaigners say to that?

Tuesday, May 29, 2007

The Dangers of Mobile Phones

I am always amazed as to how foolish some people are when it comes to their personal security, wrt pass codes and credit card details.

However, I was quite gobsmacked to overhear (as did the rest of the carriage) a conversation that someone was having on their mobile phone when travelling to London the other evening.

The lady was buying some tickets for something and happily gave out her credit card details, over the phone, so that the whole carriage could hear them.

It is hardly surprising that there is an epidemic of identity theft and fraud, if people are this cavalier with their security.

Keep your details private!

Friday, May 25, 2007

Bank Fee Complaints Rocket

The Financial Ombudsman Service (FOS) has reported that there is something of a consumer rebellion, over current account fees, going on.

Last year banking complaints to the FOS rocketed by 47% to over 20,000. The FOS is now dealing with 1,000 complaints a week, from members of the public who are fed up with extra bank charges.

The FOS also receives around 3,000 enquiries a day about banking charges. Walter Merricks, the chief ombudsman, said:

"A year ago we were receiving just 10 cases a week about banking charges.

By the end of March 2007, this had risen to 500 a week, and we are now handling 1,000 of these cases weekly
."

It would seem that the banks have some image and relationship building to do!

Thursday, May 24, 2007

HIP Replacement Therapy

The nervous property market was given a much needed boost of confidence by the government's announcement that it is in effect abandoning its unloved, and ill thought out, Home Information Pack (HIP) scheme.

HIP's were meant to have come into force this July. However, the costs involved and the fact that neither the market nor the home sellers were ready for the bureaucratic nightmare that this ill thought out idea would cause meant that most were hoping for them to be killed at birth.

Ruth Kelly's announcement has all but killed them. HIPs will, for now, only apply to 4 bedroom houses and will come into force in August.

The astute amongst you will have already realised that the fourth bedroom can be converted to a study, thereby avoiding the need for these unloved and costly box ticking forms.

The HIP is dead!

Wednesday, May 23, 2007

Another Portent of Doom?

Following on from news that Foxtons is up for sale, there are further rather worrying straws in the wind for property owners in the UK.

Demand for mortgages in the UK slowed down in April, as rising house prices and borrowing costs began to take their effects on the market.

The British Bankers' Association said that net mortgage lending rose by an underlying £5.0BN in April, less than the previous month's £5.1BN and below the £5.4BN monthly average over the previous half year.

Whilst this may not signal a crash of epic proportions, it may well signal a market "correction". However, one man's "correction" is another's "crash".

Tuesday, May 22, 2007

A Portent of Doom?

The news that Jon Hunt, the owner of estate agency Foxtons, will sell Foxtons for around £370m to BC Partners a private equity group has caused a few worries in the housing market.

This signals to many that Hunt has, in effect, "called the market" and decided that now is a good time to get out of UK property.

Foxtons started trading in a converted Italian restaurant in Notting Hill 26 years ago, it now has 19 branches in London. Hunt will continue to work in the US market.

Last year, a BBC undercover documentary made a number of allegations about the firm. It claimed staff used faked documents to support inflated prices, put forward false offers to sellers, and made use of customer information passed on to them by Foxtons-owned mortgage broker Alexander Hall, which is also being bought by BC Partners.

Foxtons joined the industry's ombudsman scheme, an independent dispute resolution service which can award compensation, this year.

The sale of Foxtons UK business is subject to regulatory approval, which is expected within six weeks.

Monday, May 21, 2007

The Wolfowitz Legacy

Following on from the much heralded resignation of Paul Wolfowtiz from the presidency of the World Bank, questions are already being raised about the willingness of member countries to maintain the tradition that the new bank president be nominated by the American president.

The World Bank, having thrust the issue of ethics and accountability firmly into the spotlight, is also facing some very hard questions about its internal structure and procedures.

Aside from internal accountability, questions are also being asked about the accountability and honesty of those nations that benefit from loans and aid handed out by the World Bank.

It is ironic that Bush and Wolfowitz may, quite unwittingly, have done the World Bank a service by forcing these issues into the spotlight.

Friday, May 18, 2007

Wolfowitz Resigns

Paul Wolfowitz has finally comes to his senses and resigned (effective as from 30 June) as president of the World Bank.

The World Bank board will meet later today to discuss leadership issues, including the process of selecting the new president.

However, as is custom and practice, the White House still has the right to appoint the president. US Treasury Secretary, Henry Paulson, said that he would help President Bush to identify a nominee after consultations with other World Bank member countries.

The United States, the bank's largest shareholder, has named the World Bank chief since it formed the bank over 60 years ago.

However, this time around Bush will not find the process of nomination so straight forward:

1 Wolfowitz, a Bush nominee, failed in the post becuase he was arrogant and ignored ethics

2 Bush's presidency is imploding, rocked by domestic political scandals and the Iraq failure, his power and authority is draining away

3 Bush is despised by many European leaders

The failure of Wolfowitz is symbolic of the failure of Bush. The next US nominee will find that the other members of the bank will subject him/her to intense scrutiny before approving him/her.

Thursday, May 17, 2007

The Farce Continues

The ongoing farce over Paul Wolfowitz, the embattled soon to be ex president of the World Bank, continues.

The meeting of the World Bank's executive board adjourned last night, without a decision on Wolfowitz's future.

The bank's board spent the day discussing the report on Wolfowitz, and issued the following statement:

"The executive directors of the World Bank group continued their deliberations on issues raised by the report of the ad hoc group and in their meetings with Mr Wolfowitz yesterday. They will continue their deliberations tomorrow morning."

The committee is expected to endorse the report, and call for Wolfowitz's resignation.

Wolfowitz doesn't publicly, as yet, want to go quietly. His lawyer, Robert Bennett, suggested that Wolfowitz was happy to force the board into a showdown:

"Mr Wolfowitz will not resign under this ethical cloud and he will rather put this matter to a full vote."

This show of bravado is of course a negotiating tactic, designed to maximise his payoff and public plaudits when he actually resigns later this week.

Germany's development minister Heidemarie Wieczorek-Zeul summed it up succinctly:

"...would do the bank and himself a great service if he resigned. That would be the best for all involved."

Wolfowitz's tenure is over, such is the price for breaking ethical guidelines.

Wednesday, May 16, 2007

The End Game

The end of Paul Woilfowtiz's career as president of the World bank is now in sight, all that is happening now is an elaborate negotiation about the terms on which he should leave.

On Tuesday evening, after World Bank directors accused Wolfowitz of breaking ethics rules in negotiating a promotion and salary raise for his companion, Wolfowitz pleaded with them to give him another chance.

Wolfowitz urged directors to separate the specific mistakes he may have made in handling his companion's reassignment, and larger questions about his contentious two-year tenure at the bank.

"If you want to have a discussion about my leadership, my management style and the policies I support, let's do it.

That's fair. That's legitimate. But let's get past this conflict-of-interest matter that was resolved over a year ago
."

This last minute plea is unlikely to save him, as President Bush has now signalled that he is prepared to "allow" (in Bush's mind he has the power to keep Wolfowitz in situ - he does not) Wolfowitz to resign.

Bush has let it be known, that he would "allow" resignation if the bank board dropped its insistence to declare him unfit to remain in office.

However, as with many "new initiatives" and "changes of mind" that Bush proposes, this is too little too late. The majority of the countries who fund the bank are absolutely against allowing an easy opt out for Wolfowtiz, partly this being a reaction against Bush and his administration's unilateralism over the past 6 years.

It seems that the board will endorse the findings of a special committee that Wolfowitz broke bank rules, ethics and governance standards in arranging for, and concealing, a pay and promotion package for his companion, Shaha Ali Riza, in 2005.

Now is the time for Wolfowtiz to bring his lawyers in to discuss his severance package.

Another mess caused by the ineptitude of the Bush administration, that will have consequences for America's relationship with the rest of the world.

Tuesday, May 15, 2007

Fuck Them

Paul Wolfowitz, the embattled president of the World Bank, has had his public image further tarnished by revelations that he poured abuse and threatened retaliations on senior World Bank staff if his orders for pay rises and promotions for his partner were revealed.

The revelations were contained in a report prepared by investigators that has been sent ot the bank's governing board.

In the report, one witness (Xavier Coll, head of human resources at the bank) gave testimony that Wolfowitz said:

"If they fuck with me or Shaha, I have enough on them to fuck them too."

The report criticises Wolfowitz for his "questionable judgment and a preoccupation with self-interest"

Quote:

"Mr Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply."

As any experienced and ethical business leader will tell you, it's not just what you do but what you are seen to do and how you conduct yourself that counts. You need to be whiter than white, when you are given the privileges and responsibilities of office.

The report pooh poohs Wolfowitz's defence that he thought he had been asked to arrange Ms Riza's pay package, "the interpretation given by Mr Wolfowitz ... simply turns logic on its head".

In other words, the report calls Wolfowitz a liar.

The report states that Wolfowitz's actions "had a dramatic negative effect on the reputation and credibility" of the bank.

It concludes that "the damage done to the reputation of the World Bank group" should lead the bank's board to "consider whether Mr Wolfowitz will be able to provide the leadership needed to ensure that the bank continues to operate to the fullest extent possible".

"..Mr Wolfowitz's contract requiring that he adhere to the code of conduct for board officials and that he avoid any conflict of interest, real or apparent, [was] violated."

In other words it calls for him to be fired, because he broke the rules.

It really is a simple as that, the fact that Wolfowitz chooses not to accept this means that the governing body will have to publicly fire him; a humiliation for the bank, Wolfowtiz and President Bush (who appointed him).

Wolfowitz appears before the bank's executive board today to make a final defence of his actions, with the board meeting tomorrow to consider the report and make a statement later in the week.

Ironically vice president Dick Cheney defended Mr Wolfowitz, saying: "Paul is one of the most able public servants I've ever known .... I think he's a very good president of the World Bank, and I hope he will be able to continue."

Public support from the likes of Cheney can hardly add to Wolfowitz's credibility; for Wolfowitz it is but a matter of time before he goes, he is finished.

Monday, May 14, 2007

Inflation

Analysts expect the rate of consumer price inflation to fall from 3.1% in March to 2.8% in April, when the figures are released tomorrow.

This in theory is good news for those with mortgages and debt, as it takes some of the pressure off the Bank of England to raise rates again. However, the Bank of England in its inflation report is expected to repeat its warning that there are increasing risks of inflation over the medium term.

Therefore borrowers should be aware that there may be at least one more increase in interest rates this year.

Friday, May 11, 2007

Thursday, May 10, 2007

The Debt Burden

Later today it is widely predicted that the Bank of England will announce another increase in interest rates.

This will add to the burden already faced by those with mortgages, especially those who own their first property.

Data from the Council of Mortgage Lenders (CML) revealed that first-time buyers in March spent an average 18.3% of their income on mortgage interest payments, compared with 18% in February and 16% in the corresponding month last year.

The proportion of first-time buyers' income swallowed by mortgage payments is the highest figure since 1991, when interest rates were over 10%.

David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, said:

"First-time buyers now face huge barriers to home ownership. They have to save large amounts for deposits, stamp duty and fees and then must spend an ever increasing share of their income on servicing the massive mortgage needed to buy a home.

With higher interest rates on the way, the situation looks certain to deteriorate further in the coming months
."

The success of the British economy is underpinned by the housing market, the success of the housing market is underpinned by people's (especially first time buyers) willingness and ability to pay.

The Bank of England should have a care when adding to the burden of these already over indebted individuals.

Wednesday, May 09, 2007

Tick Tock

The end days for Paul Wolfowitz, the embattled President of the World Bank, are now in sight.

A panel of seven directors investigating the Wolfowitz scandal, stopped short of saying he acted in bad faith. However, they have given him until May 9 (today) to respond. The group also faulted the bank's ethics committee for giving him insufficient guidance on how to avoid a conflict of interest.

The findings will next be considered by the bank's full board, which may meet this week.

Support for Wolfowitz has all but disappeared in Europe, and is fading fast in Washington. President Bush will have to engineer a face saving exit for his former deputy defence secretary.

Germany's director at the World Bank has been instructed by his government to co-ordinate a board campaign against Wolfowitz.

Wolfowitz, for the moment, has vowed to stay.

President Bush, having publicly supported Wolfowitz, has now backtracked by allowing White House spokesman Tony Snow to say that Bush "has confidence" in Wolfowitz.

Wolfowitz is finished, the longer he stays the more damage he does to the credibility of the World Bank.

Tuesday, May 08, 2007

The Uncollected Windfalls

Hidden beneath the headlines of today's bumper results from Standard Life, which saw sales rise by 40% for the first quarter to £3.9BN, is the less well known story that over 200,000 people with Standard Life policies have yet to collect a total of 83M free flotation shares they are entitled to.

The share price of Standard Life, since it was listed last July, has risen from 240p to 335p.

The 200,000 shareholders have until 2016 to claim their shares, before Standard Life claims the money.

The largest current outstanding windfall belongs to a member in Derby, who is owed £116,123 from 36,923. Second is somebody in Glasgow who is owed £115,151 and third is an individual also from Derby who is owed £109,424. There are a further two uncollected pots of cash worth around £71,500.

It is truly unbelievable how foolish and absent minded some people can be, when it comes to money.

Friday, May 04, 2007

Rate Rise Warning

Louise Cuming, head of mortgages at www.moneysupermarket.com, has warned of the impact of next next week's expected rise in interest rates.

Quote:

"The looming rate rise is of grave concern. We feel it could even be a 0.5 per cent rise, which will drive an alarming number of people into financial difficulty.

Home owners on a £150,000 interest-only tracker mortgage face additional costs of £750 a year, or £62.50 a month, for every 0.5 per cent that interest rates rise.

Assuming the May rate rise is 0.5 per cent, many borrowers will have their mortgage repayments rise by 1.25 per cent over the last 12 months - an increase of £156 a month, or £1,875 a year
."

Moneysupermarket.com claim, based on research that they have carried out, that 14% of households would be forced to refinance their loan if a rate rise led to a mortgage repayment increase of up to £50 a month.

Around 40% would remortgage their home if monthly repayments went up by £100.

Thursday, May 03, 2007

Prudential Asked For Views on Break Up

The Telegraph reports today that the Prudential's chairman, Sir David Clementi, has received a letter from a fund manager with a "substantial holding" asking him to explain the board's thinking on a break-up.

The shareholder notes that there could be advantages to splitting the business up.

The letter is a sign of the frustration that is felt amongst investors over Prudential's UK performance compared with the performance of Asian/US business.

Market speculation has increased, as it is reported that hedge funds have been buying Prudential over the past few weeks.

The market is trying to push the Pru into demerging, we shall see.

Wednesday, May 02, 2007

FSA Lacks Co-ordination

The Financial Services Authority (FSA) has been rapped on the knuckles by the National Audit Office which, in a report published today, says that the FSA needs to coordinate its work better with other international bodies so that it can better oversee how multinational financial institutions operate.

In other words, it doesn't have a clear insight into the working of international organisations.

Needless to say Treasury Minister Ed Balls ignored the conclusion and plastered over the findings, by using the well worn phrase of all politicians who didn't want to have a review in the first place:

"I welcome today's NAO report."

How I loath the insincerity of that expression.

Balls went on to say:

"The report shows that the FSA is working well and is a world leader in a number of areas, which can only be good for the competitiveness of the U.K. financial-services sector."

Amazing how politicians can distort the message!

Tuesday, May 01, 2007

RBS Invents a New Charge

Congratulations to the Royal Bank of Scotland (RBS) for being so creative when it comes to inventing new ways to make money out of their customers. Hot on the heels of the announcement by the OFT that they would be investigating unfair bank charges on overdrafts, RBS foisted a new charge on customers who don't inform it of a change of address in a timely manner.

RBS will impose a £12 penalty charge on customers who fail to notify it of a change of address, after two statements have been sent to the customer's old address.

Needless to say its customers are less than impressed. However RBS remains unrepentant.

Quote:

"It is in the interest of customers to ensure the contacts details we hold for them are correct. We give clear instruction on each monthly statement on how to contact us to update these details."

Richard Mason, head of credit cards at the price comparison analyst Moneysupermarket, said:

"I've never come across this kind of charge before. But the OFT has cut credit card lenders' profits and that has made other charges inevitable."

Michelle Slade, an analyst at the personal finance consultancy Moneyfacts, said that credit card companies were finding new ways to increase revenue.

In April seven credit card providers, including American Express, Morgan Stanley and MBNA, have raised their interest rates. Other lenders have introduced new fees payable by customers who rarely use their cards, or cut the number of days following a credit card transaction after which interest becomes payable on the spending.

There are also new classifications of what constitutes a cash withdrawal; eg spending on internet gambling accounts is now regarded as a cash withdrawal, and charged at higher rates.

As I noted yesterday, banks are not charities. Squeeze their profits in one direction, and they will find another way to make money. The customer is a cash cow, there to be milked dry.