The signs are definitely there: Germany and France have already done it, even Japan, Hong Kong, Singapore and Thailand. The US is still in it, yet in name only. And the UK will be following not long after. To where?

If you haven’t already guessed, the answer is out of recession.

So what happens in post-recession Britain? Have we learned our lessons? Will the man in the street work longer hours, save up to buy that new 42" plasma, that Mediterranean holiday or to upgrade the family car? Or will he fall back into credit euphoria? Will UK businesses cut costs to build up their cash reserves or will they revert to being cash loan and overdraft junkies like before?

And the most leading question of them all is, will the banks be responsible and, if they succeed in becoming autonomous, will they once again become the profit-hungry, bonus-driven monsters that played a significant part in almost bringing the UK economy to total meltdown?

If there is a precedent to prevent the disasters of the first decade of the 21st century ever happening again then it is written in America’s 1933 Glass-Steagall Act. The act was drawn up following the Wall Street Crash that sparked one of the greatest depressions the world has ever known. One of the act’s principle provisions was to disallow risky investment banking and to channel bank funds and lending into the safer realms of retail banking, which the sort the UK public needs to finance the model life style that they deserve: everyday needs.

UK financial analysts hasten to point out that if such a system had been in place from around 2001 onwards, when the profit chasing was at full steam, the checks and balances would have prevented the UK banks from going as far over the top as they did. They would have been unable to hold the UK government to ransom and force the public to become reluctant shareholders in their business. Instead, the British public could have stood back and watched some of the more rickety financial institutions go to the wall, and without too many tears being shed in the process.

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Tags: Banking, British Economy, British Pound, Credit, Debt, Economy, Financial News, Glass-Steagall Act, Money Management, negative equity, Overdraft, post-recession Britain, Recession, UK Banks, UK businesses, UK Economy, UK government, Wall Street Crash

Although your bank manager will tell you that he or she is your friend, and that they have your best interest at heart when they cut your overdraft or credit card levels, don’t believe them. The truth is that banks thrive on people who are in financial trouble and know exactly how to play on your weakened situations to continue to feed their insatiable drive for profit.

More so, that when you go to them on your knees asking for just a little more leeway, they will already have made sure that you will find it difficult if not impossible to find alternative finance elsewhere, and will take full advantage by providing you with additional finance at horrendously high interest rates.

The UK public must surely have learned one expensive and painful lesson from the current financial crisis and that is to keep the credit under control, and to try to do so by achieving and maintaining a credit rating that is as pure and white as the first snows of winter.

And believe it or not, despite prodigious efforts by the FSA to prevent this from happening, lenders, be they banks, building societies or credit card companies, are pooling their efforts to make sure that people who have fallen into debt in the past will find it very difficult to improve their credit rating.

There is, and always has been, a great anomaly about how finance providers look upon a potential client. If someone has money, why should they need to borrow it? Yet in many cases it is sensible to borrow money, particularly for a mortgage, or to buy a new car or even some major household appliance. Banks carry out tens of thousands of transactions every month, although secured loans are much less attractive to them than unsecured loans, where they can make more than twice the interest.

The sad truth of the matter is that if people are in severe financial trouble the last place they should set foot in is a bank, building society or credit card company, except to ask for an extended agreement on the same terms. Under no circumstances should they agree to accept a new refinancing agreement which will certainly be on prohibitive terms.

Only time will cure most people’s problems, and eventually better times will come. In the meantime it is everyone’s interest to keep the head down, draw in the belt even tighter, and repair each credit status. Learning to be less credit dependent will be a challenge for all of us, but it will be justified by never having to bend your knees to your bank manager again.

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Tags: bank manager, Banking, Building Society, Credit, Credit Card, Credit Crunch, credit rating, Current Account, Debt, extended agreement, Finance, finance providers, financial trouble, FSA, Interest Rates, Loans, Money, Money Management, Mortgage, Mortgages, negative equity, Savings, UK Banks, UK Credit Cards, unsecured loans

Whether it is good news of bad remains debatable, as many people feel that under no circumstances people should be evicted from their homes, at least the numbers are decreasing. The Council of Mortgage Lenders announced on Friday that that the number of U.K. homes repossessed in the second quarter of 2009 fell to 11,400 compared to 12,700 in the first quarter.

The reason for the reduction in repossessions was attributed to increased Government pressure on lenders to show flexibility to families who had fallen behind in their mortgage payments because one or more breadwinners have been made redundant. In addition, the number of delinquencies on UK buy-to-let mortgages has fallen for the first time in two years, with borrowers apparently taking advantage of low interest rates to reduce their arrears.

Average delinquencies for UK prime buy-to-let mortgages fell for the first time in two years, l from 6.2 per cent in the first quarter to 6.1 per cent.The news that, while the UK remains deep in the throes of a recession while European neighbours France and Germany have officially announced an end to theirs, has not left Lord Mandelson wanting for words. Despite evidence to the contrary, the Business Secretary has insisted that Britain is not being left behind in recovery from the recession, and that the UK needed to “keep going” y until it saw an upturn.

He went on to add “ “The important point about this good news from Germany and France is that if they are now recovering this is good news for our manufacturers, our exports, because it will mean more orders for our companies in Britain.”

In a move that owes itself more to public relations and less to sound business sense, Britain has announced that they will be injecting a further £340 million pounds in the form of long term loans that will go towards the development of wings for Airbus SAS’s A350 model. In return the European corporation formed to build the super passenger jet will guarantee an 18 percent share of work on the project. The loan will guarantee the future of 1,200 jobs at the company’s U.K. factories.

Airbus announced recently that they are in immediate need of further finance to fund the purchase of jigs and machine tools as it begins production. The 300-seat A350 is scheduled to enter service in 2013.

France plans to contribute 1.4 billion Euros in A350 funding while Germany looks likely to provide 1.1 billion Euros, subject to receiving a commitment for more work on future Airbus planes.
In return for their continued support, France, will own 38 percent of Airbus, Germany 34 percent, and Spain who gets to make the tail will own 10 percent, of the company.
The U.K.’s largest insurance company ,Prudential Plc, announced on Friday that their first-half profit had fallen 7 percent to £129 million on turnover of £1.25 billion, considerably less than analysts’ expected, largely on the back of increased U.S. sales and climb in security values held by the company.

Shares in Prudential rose 11 percent, (51.2 pence to 529.5) the most in almost five months on the news that Prudential will raise their first-half dividend 5 percent to 6.29 pence a share. Aviva Plc and Legal & General Group Plc announced last week that they would be cutting their dividends as Britons continue to reduce their outlays on life insurance and pensions.

Another UK insurer, Old Mutual announced that they are looking to inject as much as £200 million into their U.S. life-insurance offshoot to strengthen their presence. On the news, their shares rose by 4.4 percent, (3.95 pence to 93.85).

PayPoint Plc, operators of the U.K.’s largest cash payment network declared that bill and general payment transactions are in line with its forecasts while mobile top-up volumes in the U.K., Romania and Ireland are lower than last year. On the news, their stock dropped 1.6 percent, to 531.5 pence.

U.K.-based travel company Thomas Cook Group PLC issued a profit warning for 2010, due to the ongoing downturn in the industry, after posting a widened loss in the last nine months. The company said that they are still liable to meet their targets for the current fiscal years despite the widened loss, but it won’t make the £480 million in earnings before interest and tax.

Music company Chrysalis Plc announced that their overall financial performance remained in line with the board’s forecasts, and the second half of the year had started well in music publishing. Despite their opposition, shares in the company dropped 0.4 percent to 67.75 pence Shares in Taylor Wimpey Plc, U.K.’s largest homebuilder advanced 1.75 pence, or 4.5 percent, to 40.29 pence after they were upgraded to “buy” from “hold” by the Royal Bank of Scotland Group Plc, On rumours that the company may attract a takeover offer from a group of foreign investor’s shares in British Land climbed 3.9 percent to 512.5 pence

Before winding down for the weekend, the FTSE 100 dropped 41.49, points to 4,713.97 making for a total loss of 0.4 percent for the week. The FTSE 250 climbed by 32.17 points on Friday to close on 8,515.83

Sterling had another mixed day on pre-weekend trading yesterday’s markets, ring slightly against the Euro while falling against the other major currencies.
Pound/US dollar 1.6444
Pound/Euro 1.1626
Pound/Japanese Yen 155.0566
Pound/Swiss Franc 1.7675

US banking group Colonial BancGroup closed their doors on Friday, and not just for the weekend, but forever. Colonial, a property lender based in Montgomery, Alabama, holding around $25 billion in assets, will be bought out of liquidation by BB&T, a North Carolina-based bank.

The total number of US bank failures for 2009 is now well over 70. On Wall Street, slurry of late buying saved the Dow Jones from recording their worst day in a month,
Worries about deflation added to poor consumer confidence and activity, leaving investors seeking safer assets than equities. Friday’s consumer price inflation figures, which showed the biggest year-on-year drop since 1949, saw inflation-sensitive sectors fall, with materials, industrial and energy stocks all doing badly. They were then joined by consumer discretionary shares after the University of Michigan’s consumer confidence index for August showed an unexpected drop.

The Dow Jones Industrial Average gave up 76.79 points to 9,321.40, making for a drop for the week of 0.5 percent, and NASDAQ fell 23.83 points to 1,985.52, finishing the week 0.7 per cent lower.

Hong Kong is the next industrial country to emerge from recession, after posting growth figures of 3.3% for the three months from April to June.
Hong Kong has reported negative growth for the last four consecutive quarters.

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Tags: Bank, Credit Crunch, Economy, Financial News, Money, Mortgage, Mortgages, negative equity, Repossessed, UK Banks

It has to be said. There are a lot of mixed messages coming out of the housing market. While the number of mortgage applications appears to be on the increase, the number of new housing starts is lower than they have been for many years, and the prospects of a pick- up looks to be remote. It could well be that the public who are buying properties are scouring the second hand market for bargains, and justifiably so. However that is a situation that cannot continue indefinitely, and new house sales must surely begin to increase.

What appear to be happening at the moment is house builders and mortgage banks appear to be at loggerheads. The main bones of contention between them are that undue prudence in the mortgage market was preventing a recovery in the house building sector. The mortgage bank’s lack of enthousiam to grant mortgages on new and full price properties is reported to have cost the residential building industry around £3 billion in losses within the last year.

Barratt Development, one of the UKs largest builders have announced that they have cut their prices by around 20 percent to bring in properties that will retail on average at £166,000 pounds to allow them to compete in the second hand market. However, according to a spokesman for the company a sustained improvement would not come “until the availability of mortgage finance, particularly in the higher loan-to-value segment, recovers”.

Specialist analysts for the construction industry have put a figure stating that the natural demand for the UK housing market at an average of one million units a year. However in 2008, only 500,000 houses changed hands. That means that a housing explosion is about to happen, and the private builders fear that they will miss out and fail to recover the profits they have lost in the last two years.

House builders cite high rates of inquiries at sales offices since the New Year as evidence of pent-up demand from home buyers. However potential does not pay the bills, and builders and eventually the public will begin to pressurise banks and building societies to show more flexibility.
Preference would be an increase in mortgage to property value ratio from the 70 per cent to a maximum of 90 per cent according to individual circumstances.

However analysts say that another issue that should bear scrutiny is a return to the UK standard of a realistic correlation of loan to income ratios, which rose from a standard 3.5 times joint annual salaries to the six times that became commonplace at the peak of the housing boom.

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Tags: Financial News, Mortgage, Mortgages, negative equity

The idea behind offset mortgages have been around for a long time and, at least on paper, provides some positive options for home owners, who can manage to save as well as keep up to date with their mortgage. Nowadays, no one needs to be told that things are different, meaning for most families, considerably tougher.

So for those people who have succeeded in accumulating some savings, which is currently earning them almost negative interest, the option of switching to an offset mortgage, and drawing on their funds held on deposit to pay part if not all their mortgage must hold a certain appeal. Especially if they are unemployed, or generally struggling to make ends meet

At one time, savers who held an offset mortgage could avoid paying tax on interest that their deposits earned. This is no longer an issue, and even if interest rates were to rise, it would be by little and certainly not for the foreseeable future. And with mortgage rates being low at the moment, what can be gained financially is minimal. Basically the attraction for home owners, who have money on deposit, is to release the stress factor in having to meet mortgage payments. And if the possibility of repossession exists, it is an option that shouldn’t be ignored.

However the danger lies in the possibility of panicking, and paying off a mortgage before time, leaving the family without access to cash reserves but with a property that may be difficult to retain or maintain in the future.

So anyone considering an offset mortgage should consider their options very carefully. To partially pay a mortgage every month for a pre-determined period may be the best alternative, and should be fine tuned so that savings are not allowed to deplete to too low a level.

Recent research has shown that offset mortgage lending is gaining popularity, and currently accounts for 10% of all sums lent to UK mortgage holders.

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Tags: Financial News, Money Management, Money Markets, Mortgage, Mortgages, negative equity, Offset mortgages

There were no shortage of cynics around when the Bank of England announced that they would be cutting interest rates to next to nothing and that the savings would be passed on to the UK public, and especially those who were suffering from paying excessive interest rates on their mortgages.

Well the news is that these savings are beginning to filter through, and the reduction in their monthly mortgage and overdraft payments are being welcomed with both hands by most home owners in the United Kingdom.

Yet there are a group of families, around 20, 000 in number who have found themselves in a situation where, due to some short sighted marketing strategies on the part of the UK mortgage banks, have found themselves in a situation where their mortgage payments have been reduced to next to nothing, and in even some extreme cases, where they are actually paying negative interest.

These are people who had the good luck or were wise enough to take their mortgage on an adjustable- rate basis against the current bank rate These mortgages were on offer during the height of the boom years, and didn’t seem attractive to too many people as the interest rates were much higher at the time. Today, with interest rates at 0.5%, it’s the nearest thing to winning the pools that you will find these days for the fortunate few who were convinced to take this track.

Families who took out 25 year mortgages or refinanced an existing mortgage were offered a rate of around half a percent below the current central bank rate from most of the major building societies. The interest rate was then around five percent annually and the offer were for the first three years.

Nowadays families who took advantage of the offer are paying around 0.14 percent annually, and will be doing so at least for the next year to eighteen months. How could ask for a better breathing space than this one during times of financial frugality!

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Tags: Economics, Financial News, Mortgage, Mortgages, negative equity

It may be difficult to comprehend that only two or three months ago, the UK property market was on such a rapid downward plunge, that no one could realistically predict when it would rock bottom, the only thing that was certain was, that rock bottom it would hit.

Now as spring is with us, signs are that the property slump may be bottoming out and at level much higher than even the most rabid of optimists would have dared to predict. According to a recent survey ordered by the Royal Institution of Chartered Surveyors (Cebr) it now appears that house prices may have only a maximum of 10% further to drop before the property price index market hits the bottom rung.

To add weight to the their findings the Cebr were confident that the recent increase in interest in housing would begin to gradually translate itself in firm sales over the coming months, meaning the end of the slump may soon become a reality.

This positive trend is no doubt strongly influenced by the government incentives to reduce interest rates and improve credit conditions for potential buyers. Now that these buyers are more confident that they won’t be paying highly inflated prices to own their property, it seems nothing more than logical that the housing market will bring their long awaited but still extremely cautious recovery.

Signs that the recovery will be slow but steady is indicated by information issued recently by the Bank of England that mortgage approvals for homebuyers are running at around a third of what they normally are for the same period last year, although approvals jumped by nearly 20% during February 2009..

Cebr estimated that if approvals continued to rise, and succeeded in reaching around 50,000 a month by the August or September, chances are that house prices would only fall by between 8% to 10%.

But the group added that the housing market remained ‘on a knife edge’, with credit conditions likely to remain tough for some time to come.

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Tags: Credit Crunch, Financial News, Mortgage, Mortgages, negative equity, UK Recession

It might have happened in any case, however when the dark clouds of recession eventually dissipate over high street Britain what will remain in place there seems very hard to imagine. In the falsely inflated boom time, especially over the last five years or so, to be a major retailer with a top location was the nearest thing to having the proverbial “licence to print money”.

While internet shopping was making some major inroads, the UK public still demanded their constitutional rights to touch, feel and ponder before making a decision to purchase. However as the credit crunch began to bite, and the bite deeper, the public began to stay away and sales began to plummet. Some famous names began to disappear from the scene, either closing down voluntarily or being forced into liquidation. Probably the best know of them of all was the Woolworths chain, although there were many that said that their time had come and their form of retailing was outmoded.

However for those who want to maintain their role as major UK retailers times are tough and look like getting tougher. Figures announced at the beginning of this week show that retail sales in February fell by almost 2% percent from the previous month, almost five times more than was predicted arriving at a level as low as late 1995. According to Mervyn King, Governor of the Bank of the U.K. economy has contracted to a level unseen since the late seventies from the beginning of 2009.

The main reason for the decrease in sales was in the non-food sector which fell by 3.2 percent from the previous month, meaning that the public are just not spending money on what are now regarded as luxury items.

What may bring high street retailers further cause for concern is that sales on the internet, whilst there are no official figures available, seems to be much less effected by the downturn. It may be possible that the UK public have realised the significant cost savings available online, especially in major items such as electrical goods and furniture, and have foregone the pleasure of touching and testing and being sold to, in order to save some of their hard earned cash.

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Tags: Bank, Banking, Financial News, Governor of the Bank of the U.K, Mervyn King, negative equity, Retail, UK Banks

According to a recent report issued by the UK Council of Mortgage Lenders (CML), the number of properties repossessed in the United Kingdom in 2008 rose to around 40,000. This figure represented an increase of 54% from 2007.

In a statement that can only be described as contrary, the CML hastened to add that the number of repossessions was considerably less than their original projections, due to the fact that lenders had made considerable concessions to their clients to ensure repossession was a last resort.

In 2009, as the recession really begins to bite, the CML expect that around 75,000 families and business premise owners will be asked to vacate their properties

In their report, Michael Coogan, director general of the CML’ advised borrowers strongly to make every effort to reach an agreement with their mortgage bank regarding outstanding debts. He pointed out that many borrowers simply vacate the property when repossession appears inevitable to avoid the trauma of forced eviction. Coogan advised that people who borrowed money to buy property remain liable for their debts, even after the leave the property.

In general, the situation regarding UK mortgages is certainly less than healthy, as arrears levels continue to grow.

At the end of 2008, there were more than 180,000 mortgage holders in arrears. The average arrears were more than 2.5% more than the outstanding balance, and more than 1.5% or total UK mortgage debt. .

Housing Minister Iain Wright pointed out that the fact that arrears figures were gradually rising was a cause for concern. He added that the government had instigated a range of initiatives in order to forestall repossessions that he hoped minimise the risk as much as possible

He pointed out that families where one or more of the principal wage earners have been made redundant are entitled to claim support to meet their mortgage interest payments. This option has been in place for some time, but it is now available within a much shorter time frame

Others who have suffered a major drop in income as a result of the recession will be able to apply to their mortgage bank request to have a percentage of their repayments deferred for a period of up to two years.

To provide a little sunshine in this otherwise bleak picture, the Royal Institution of Chartered Surveyors (RICS) announced in a recent statement that Wright’s programmes appeared to be making a difference. The report stated that despite increasingly difficult economic circumstances, both the number of houses taken into possession in the fourth quarter of 2008 as well as mortgage possession actions issued actually fell during that period

A set of guidances introduced at the end of 2008, stipulate that County Court judges are required to ensure that all mortgage banks are required to clearly demonstrate that they have tried to discuss and agree alternatives to repossession. In addition, court action can not be taken within three months of a borrower missing their first payment.

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Tags: Bank, Budget, Credit Crunch, Economy, Mortgage, Mortgages, negative equity, Recession

Finding mortgages is tough for homebuyers despite homes falling to their most affordable since April 2003, according to the UK’s leading mortgage lender.

The Halifax reports the average home price dropped a further 2.2% in December to £159,896 – putting prices and earnings back to April 2003 levels.

The lender said prices were down 16.5% on the year – the largest annual fall since records began.

Only 27,000 mortgages were approved in November, according to the Bank of England – the lowest for nine years.

Despite pressure from the Bank of England, mortgage lenders are still unwilling to approve loans and their closed coffers are expected to remain unlocked for several months yet. This is likely to mean property prices will stagnate at best in 2009 as the homes market is restricted by mortgage lending policies.

“Continuing pressures on incomes and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to exert future downward pressure on the market over the coming months,” said Halifax chief economist Martin Ellis.

The Nationwide Building Society will not pass on any more rate cuts for tracker mortgages, regardless of how the Bank of England changes interest rates in their monetary policy meeting next week.

Mortgage contracts of 250,000 customers say the lender does not have to lower rates when the Bank of England’s rate falls below 2.75%.

The UK and US stock and money markets were closed for New Year.

The FTSE 100 index lost 31.3% in 2008, the worst annual return since the index was created in 1984, following a 3.8% gain in 2007. The FTSE edged up 0.94% to 4434.17 on the last trading day of the year, a gain of 41.49 points.

Sterling recorded the poorest year against the euro, since the latter was launched almost 10 years ago. The pound ended the year at 95.44p versus the euro.

Against the dollar, the pound lost nearly 27% over the year, the sharpest drop since the gold standard monetary system was abolished in 1971. The pound currently stands at $1.46.

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Tags: Bank, Bank of England, British Pound, Credit Crunch, Debt, Mortgage, Mortgages, negative equity, UK Banks