SURPRISED? BASE RATE NOW 0.75%

Surprised? Base Rate now 0.75%

The Bank of England have announced today that they have increased the base rate from 0.50% to 0.75%. This will be welcome to anyone peddingly news for the next 24 – 48 hours. It will not however mean that you get much more interest on any cash deposits that you hold. It also is not likely to have a huge impact on mortgages or loans (it will have no impact immediately if you are on a fixed rate loan of any type). The decision to raise the rate was unaminous and part of the attempt to keep inflation at 2%.

The next Monetary Policy Committee (MPC) meeting will be after the summer break, on 13 September 2018. If you wish to know more, simply click this link to the Bank’s website.

SURPRISED? BASE RATE NOW 0.75%2018-09-25T10:10:07+01:00

A Certain Future

A Certain Future

Our culture is full of clamour for certainty… tell us the future? Why was your forecast wrong? (as a Radio4 presenter seem to berate The Bank of England this morning). Why didn’t you foresee such and such? It seems that we all want certainty – perhaps to affirm our own beliefs about life and people, or perhaps because deep down we know that life is anything but certain.

It appears this quest for certainty is intense at present, I say “seems” because I doubt that’s true, but we are bombarded with messages that would leave most rational folk with a deep sense of anxiety due to climate change, Brexit, technology, feckless politicians and a sense that perhaps, perhaps… the bullies are winning.

If only…

Investors are unsurprisingly startled by the normal behaviour of investment markets, when the “corrections” come. There is always anxiety over when is the best time to invest and when is a bad time to invest. None of us wishes to appear foolish.

Yet the basic law of investing (not speculating) is that markets are volatile, short term investing is unwise, long-term investing in a globally diverse portfolio is the best, most logical way to grow the value of money over time. In exchange you must live with seeing the “value” rise and fall rapidly and daily. If only we knew the future and had some certainty…

The Phlebotomist

I’m here to tell you that there is none. Yet we will search and research for it, developing theories to help us navigate the condition of life. This in mind, I was intrigued by a brief review of a new play “The Phlebotomist” by a young playwriter (Ella Road) which considers a not too distant dystopian future, where a blood test can reveal what illnesses you will suffer from, all rather like a credit score, but a health score.

I understand that this is explored in the context of a dating app, when people are forced to consider their choice of partner, given this pre-warning information. Sadly, I am not able to see the play at Hampstead Theatre which is sold out and runs until Saturday 19th May 2018. I hope that its success will lead to a wider, longer run. If you are going, please let me know your thoughts.

Life would be very dull if we knew what would happen. A sense of “Groundhog Day” is deeply unsatisfying. This fragile life, for all its faults is delightful (or potentially) precisely because of the lack of certainty.

Anyway, here’s a video from the cast of “The Phlebotomist” by Ella Road and directed by Sam Yates.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Email me to get in touch
A Certain Future2018-05-11T10:41:16+01:00

The Base Rate

The Base Rate

After much media speculation, we can now expect the world to end as today the Bank of England has announced an increase to base rates (voting 7-2 to do so). The rate is now 0.50% instead of 0.25%. This is the first rate rise since July 2007. Seriously – over 10 years ago! One would hope that this would benefit everyone with some cash in a savings account at the bank, but we all know better than that don’t we? What is far more likely to happen is that lending rates for mortgages will gradually begin to increase. The nations largest Building Society currently has a standard variable rate of 3.99% and their base rate tracker rate is 2.50%, both considerably above the actual base rate at the time. Banks are generally a bit worse. So lenders may be inclined to sit on their hands and do nothing (for fear of being berated by minnows like me) though I suspect they are more likely to gradually increase their standard variable rate. But we now live in a world of image preservation, so perhaps they won’t all rush to increase rates.

People with Cash Savings

Frankly, I wouldn’t hold out too much hope of an immediate improvement to your savings rate. Inflation is currently 3% and nobody is offering anything near that on an instant access basis. You could shop around, but its a bit of a pain for the equivalent of a round of drinks for the year – and don’t forget the “safety” of the FSCS limits. Alternatively if you have £100,000 or more we can put you in touch with a service that will do this for you (and likely improve your FSCS cover).

Borrowers

There has been much talk about the impact of rate increases on borrowers, who are generally people that are working and repaying debt (hopefully). It is certainly the case that the low interest rate environment may well have lulled some into believing it was always this way, anyone older than about 25 frankly should know otherwise.

There is a tendency to chastise people for “borrowing too much” when this subject is reported in the media. However consider for a moment a couple of facts. Wages have not increased very much over recent years, house prices have largely continued to rise, unchallenged, except perhaps to apply some nervous brakes due to Brexit. However as Kirsty and Phil would suggest, prices are reflective of location, location, location. People have had to borrow significantly to buy homes. Those without mortgages looking to move or simply sell are stuck in the same “market” one that is dominated by sentiment. Anyone that has bought property in the last few years will be aware of the pain created by a huge tax bill – Stamp Duty Land Tax (SDLT). This was used to attempt to control property prices from spiralling ever upwards, has it worked where you live?

The increase, if passed on, will create additional outgoings, just when inflation numbers appear to reflect what we all know – prices are rising. The stockmarket tends to do well whilst there is ample inflation, not always, but often. Inflation helps reduce the “real” value of debt, so Government may say they don’t like it, but it kind of does their job for them without even trying. Some will find life a bit harder, as of today or indeed most of the last 10 years, few people expect rates to increase dramatically and nobody is predicting interest rates that are high.

As I have said previously, clearing debt, however good the maths works for having some, has an emotional value that cannot be overstated. Ask anyone without a mortgage.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Email me to get in touch
The Base Rate2017-11-02T13:08:34+00:00

HBOS scam, stranger than fiction

HBOS scam, stranger than fiction

Yesterday I wrote about Venture Capital Trusts and explained that any business is reliant upon its management. You might recall my use of the new Trainspotting film T2 as an illustration of poorly suited characters for management of any business. If T2 is 20 years on then this must surely be Trainspotting 40 years on…

As is often the case, reality can be stranger than fiction. On 2nd February 2016 there was finally a successful conviction of fraudsters Lynden Scourfield and David Mills. They are guilty of a £245m loans scam. Scourfield was a manager at HBOS, supposedly tasked with helping struggling businesses. He was bribed by David Mills to pressure HBOS business clients to use a business services company called Quayside Corporate Services. Quayside was owned and run by Mills and his wife Alison. Together they set about extracting huge sums in fees from HBOS business clients who were being told that they would lose HBOS support and sources credit finance if they didn’t comply. Many ended up going bankrupt.

Like Characters from Trainspotting…

These three and three others (Mark Dobson, Michael Bancroft and John Cartwright) have finally been sentenced to prison, having spent huge sums on all the typical cliché trappings, all evident in both Trainspotting films. They ruined various businesses, who were trapped within the Bank, who issued fairly standard penalties which evolved into eviction notices with employees of the bank deceiving their own internal systems which then kicked in to the normal processes for how to handle a failing business (which you can imagine). Under pressure people do strange things, and a number of the business owners that were scammed, gave away control and or ownership of their own businesses. However this appears to be largely due to the complexity of the scam and a classic confidence trick, regularly reassuring the HBOS customers that the Bank was agreeing their finance.

Ripped off Businesses that were ruined

This is a deeply disturbing case of a major bank failing to understand that its own staff were scamming its customers. According to reports, the scam may have amounted to around £1bn, although official reports suggest £245m, all over a 4-year period between 2003-2007 (just before the credit crunch). Thankfully the six involved, have been rewarded with a collective 47 years and 9 months in prison. You may recall that HBOS was rescued by Lloyds TSB having notched up £45bn of bad debt and at one point it was reliant on a £25bn lifeline from the Bank of England. Well done Thames Valley Police.

 

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

HBOS scam, stranger than fiction2017-02-03T10:33:34+00:00

When is £50 worthless?

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When is £50 worthless?

£50

How closely do you observe the cash you hold in your wallet or purse? The Bank of England has announced that the £50 banknote carrying the portrait of Sir John Houblon, the first Governor of the Bank of England, will be withdrawn from circulation on 30th April. From that time, only the £50 note featuring Matthew Boulton and James Watt, which was introduced in November 2011, will hold legal tender status.

Don’t confuse your Boulton with your Houblon

If you have any Houblon £50 notes can continue to use them up to and including 30 April, but technically they will not be legal tender. After 30 April, general retailers are unlikely to accept the Houblon notes as payment. However, most banks and building societies will continue to accept them for deposit to customer accounts. Agreeing to exchange the notes after 30 April is at the discretion of individual institutions. Barclays, NatWest, RBS, Ulster Bank and the Post Office have all agreed to exchange Houblon £50 notes for members of the public – up to the value of £200 – until 30 October 2014.

The Bank of England will continue to exchange Houblon £50 notes after 30 April, as it would for any other Bank of England note which no longer has legal tender status.

Dominic Thomas: Solomons IFA

When is £50 worthless?2017-01-06T14:39:41+00:00

Banking on plastic money

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Banking on plastic money

You may have noticed the announcement by the Bank of England that they intend to print our local currency on a special paper or polymer. This should facilitate improved new security measures and increase the life of your typical banknote. This is because the paper is more durable, in particular it is better in the wet. The argument being that fewer banknotes will need to be reprinted and therefore there will be some environmental benefits. The truth is probably a little more complex, in that paper is about as environmentally friendly as it gets, anything plastic is precisely the opposite of environmentally friendly.

The first £5 Winston Churchill note in the new format will be released in 2016 and it is expected that this will be followed a year later by the £10 note featuring Jane Austen.

Dominic Thomas: Solomons IFA

Banking on plastic money2017-01-06T14:39:41+00:00

Easter Bank Holiday – Banks to receive forgiveness?

As we approach Easter and a Bank Holiday Monday – you cannot have failed to notice that the Banks have been in the news again this week, notably the problems in Cyprus and the re-opening of their banking system today. There was also the news from the Bank of England, which essentially told Britain’s banks to hold larger sums on deposit to improve their capital adequacy by a few £billion. This is likely to delay the return of the largely nationalised banks into the private sector and the main players will all seek to raise funds – either from selling off bits of their businesses or raising money through share/bond issues. The concern is that this will also lead to further tightening of lending criteria.

Today’s news is that what was once Abbey National, Alliance & Leicester and a few others (now Santander) have closed their investment advice services, well to the majority of the public anyhow. Today they announced 724 jobs culled leaving a team of 150 to support Santander investment customers UK-wide. We knew this was coming as they had to suspend their advice services due to having identified that their staff and systems were not ready for RDR (see the previous post). In addition they have some ongoing problems about bad advice to resolve with the FSA.

Life for the Banks continues to be pretty difficult, but few have much sympathy for them given the years of overcharging and mis-selling (not that this was exclusively the domain of Banks). However, we need a good banking system to help the economics of our society to function. I would like to see retail banks help people manage their finances better, do the basic stuff well, not constantly attempt to sell anything they can from roadside recovery to VIP airport services. As for attracting new customers? well we know that the average person is more likely to get divorced than leave their bank, so why on earth are millions spent sponsoring sporting events… particularly when this is really the taxpayers money? So as it is Easter, I wonder if we are collectively ready to forgive the Banks and permit them to have a resurrection experience?

The office will be closed for Good Friday and reopening on Tuesday 2nd April. Have a happy Easter.

Dominic Thomas: Solomons IFA

Easter Bank Holiday – Banks to receive forgiveness?2017-01-06T14:39:49+00:00

Cash ISA rates

It has been a while since I updated information about various deposit rates. I’m providing a list here of some of the top rates available. This is not advice, just a list. Importantly with cash accounts the FSCS only cover up to £85,000 per person per bank and be warned that this really means per banking license. Many banks (and building societies) share the same banking license due to mergers. The table below shows instant access deposit accounts, then fixed and variable rate Cash ISAs.

INSTANT ACCESS  Best online  West Bromwich BS 2.30%
 Best High Street Bank  Virgin Money 2.00%
 Best Building Society  West Bromwich BS 2.26%
FIXED RATE CASH ISA  Best online  NatWest 2.30% 3 year fixed
 Best High Street Bank  Santander 2.50% 2 year fixed
 Best Building Society  Derbyshire BS 2.25% 2 year fixed
VARIABLE RATE CASH ISA  Best online  Monmouthshire BS 2.50% 30 day notice
 Best High Street Bank  Virgin Money 2.00%
 Best Building Society  Earl Shilton BS 2.70% 90 day notice

So it is important that this is checked carefully. Please also note that I am generally fairly suspicious of any bank or building society offering particularly high rates, this suggests that they need your money rather more than other banks do and this is generally not a good prospect.

Quite obviously interest rates are pretty dreadful. As RPI is currently 3.1% and CPI is now 2.7% (according to ONS figures) the above all represent below inflation rates. This means that your money devalues in real terms. In plain English – the money in your pocket is worth less due to inflation. Here is a good short video from the Bank of England about inflation with some useful historical reminders. Note that as this is a Bank of England video, whether or not the MPC (Monetary Policy Committee) has been successful or not is probably best judged by others. At the moment the Bank of England base rate is 0.50%.

Cash ISA rates2017-01-06T14:39:49+00:00

New Governor

The new Governor of the Bank of England

Canadian Mark Carney has been announced as the next new Governor of the Bank of England. Mr Carney’s credentials are impressive, most importantly his understanding of credit risk enabled Canada to largely escape the banking crisis that swept most other western nations. He is currently working as the Head of Canada’s Central Bank (since 2008), with a further two years on his contract. He is 47, married with 4 daughters. I understand that he will take over from Mervyn King next summer on 1st July and is expected to hold the position for 5 years.

…meanwhile Mr Bean has agreed to stay on to help with the transition process. As you might expect, not that Mr Bean, but Charles Bean, the current Deputy of the Bank.

New Governor2017-01-06T14:39:51+00:00

Cash ISAs and Doomsayers

1950: Edge of Doom – Robson
Here’s your updated Cash ISA and instant access account information. Remember this is a list (and not a very long one), it is not advice. The only advice here is to ensure that you know the compensation limits on bank accounts as outlined by the FSCS, which means not holding more than £85,000 in any account with any bank or group of banks under the same banking license. Be wary of any bank that offers the top rate, think about why they may wish to hold your money.
Instant Access Accounts
Online: ING 3.24%
Bank: Virgin Money 2.60%
Building Society: Manchester 2.81%
Cash ISA Variable
Online: Santander 3.30%
Bank: Santander 3.30%
Building Society: Market Harborough 3.00%
Cash ISA Fixed
Online: Governor Money 4.05% Fixed for 5 years
Bank: Halifax 4.15% Fixed for 5 years
Building Society: Kent Reliance 3.75% Fixed for 5 years
You may be aware that the UK’s inflation figures came out today. CPI (the Consumer Price Index) have fallen to its lowest level since November 2009 and is 2.4% but above the 2.0% Bank of England target. RPI is 2.8%. So by these figures all of the accounts shown above now beat CPI, so accounts are now heading in the right direction. This comes on the back of more miserable news from the IMF which has downgraded Britain’s GDP (growth) forecasts considerably. It seems that the world is currently full of doomsayers, which don’t forget is a very easy position to hold when being wrong is actually good news.
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Cash ISAs and Doomsayers2017-01-06T14:39:59+00:00
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