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?Dominic2023-12-01T12:23:31+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 ratesDominic2023-12-01T12:23:25+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 GovernorDominic2023-12-01T12:23:11+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.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Cash ISAs and DoomsayersDominic2023-12-01T12:22:17+00:00

Seriously Average Statistics?

1987: Less Than Zero – Kanievska

Interest rates remain depressed and look set to do so for some time to come. The Bank of England today announced that they were holding rates at the current level of 0.50%. Inflation (currently 3.0%) seems to be returning to within the range that the Bank have set as the target and we are all aware that the economy looks somewhat fragile with the combined output of all business being pretty much stagnant. A fairly unhelpful word given that in practice, businesses are far from stagnant. Most are working very hard to win orders, customers and contracts, requiring new business to replace any that is being lost. So to term this “stagnant” would seem exceedingly unfair. However as a combined average figure, the economy is currently growing at something around 0%. The first quarter of the year had a negative rate of growth -0.3%, which was from a revised figure of -0.2%, depending upon your political leaning, you might term this as a reduction by 0.1% or alternatively a 33% decline. Hence care needs to be taken when reading any such figures, whatever their source. After all, this is still only an estimate. It would appear that most of the negative growth (?) came from the manufacturing sector (-0.4%) whereas the service sector grew at +0.1%. As with all statistics, whilst accurate, how they are interpreted is open to debate. To focus on the average net result, can miss vital detail – such as the often used example, head in the oven, feet in the fridge – on average “just right”. By the way, as humans we aren’t very good at processing “average”… ask any room of people about their driving skills. Most will assert that they possess above average driving skill, which of course, cannot be possible. By the way, very few indeed would admit to having below average skill.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Seriously Average Statistics?Dominic2017-01-06T14:40:01+00:00

Good Bank… Bad Bank?

1945: The Lost Weekend – Billy Wilder

The most expensive financial costs are probably your pension, closely followed by a mortgage. So today’s news of further lenders increasing their standard variable rate, despite the Bank of England retaining their base rate at 0.50% will cause many to question the ethics of Banks again. Today, Clydesdale and Yorkshire (readers of this blog will know that they are part of the same organisation) have decided to increase their standard variable rate from 4.59% to 4.95% from 1st May. This will mean increased borrowing costs for about 30,000 of their customers. However there is a slight twist, they also seem to suggest that if you wish to move to a different lender and do so before the end of July any exit fees (early redemption penalties) will be waived. One might question why lenders would be helpful, I would suggest that this is all part of a timed strategy to tidy up a mortgage book and continue to work on improving their own balance sheet.

It often surprises me when I read industry statistics about how few people review their mortgage, yet will seem to get very worked up over the price of petrol – which is an insignificant cost when compared against a mortgage. This is something that as a financial planner I would encourage you to do. Solomon’s do not arrange mortgages, but we can put you in touch with an excellent mortgage broker that can help you. However the first thing you should do is to contact your existing lender to determine what deals they would offer you as an existing customer, once you have this information a full assessment of the market will have some context.

Banks and Building Societies are set up to make money from you and whilst it may appear to be a significant effort to move from one to another, these days things have improved. The market is a competitive one, but most rely on your inertia to make the bulk of their profits, which in turn makes them lazy and makes for a less competitive market. So as you head off for the weekend, get out your mortgage statement and have a look at your rate, compare this against a Bank of England base rate of 0.50% and consider how much over the odds you are really prepared to pay, then consider how you might better use some of this to achieve other goals, even if its just being able to feel a little better at the petrol pumps.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Good Bank… Bad Bank?Dominic2017-01-06T14:40:07+00:00

Inflation Falling Down to Two Percent

1993: Falling Down – Schumacher

Yesterday data about inflation, that is rather key to any forward-thinking financial planner, was published. This recorded the UK’s rate of inflation in January 2012 at 3.60% (CPI) and 3.90% (RPI). These figures suggest that inflation is back under control, although frankly the maths behind the numbers would imply that inflationary figures were bound to reduce. Previously you may have read that a figure of 3% was mentioned for March 2012, well now the Governor of the Bank of England (Mervin King) is suggesting that by the end of 2012 the figure will drop below 2%. This will come as a relief to consumers who have seen the prices that they pay for many items rise considerably, although I suspect that most of us never experience inflation quite in the same way the Government statistics suggest. Now I’m not sure what hacking rules apply to the Bank of England, but you can legitimately read the letter from Mr King to the Chancellor Mr Osbourne dated 13 February 2012. I think the Governor got a little carried away signing the letter. You can also see the Chancellor’s response, in which he is a little more friendly and doesn’t suffer from bigsignaturitis.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Inflation Falling Down to Two PercentDominic2017-01-06T14:40:09+00:00

How Reputations Are Ruined Over An Easy “A”

2010: Easy A – Will Gluck

There’s the good news and the bad news… which would you like first? let’s start with the Eurozone bailout fund, which had its Standard and Poor’s credit rating downgraded last night from AAA. This makes the bail out fund less attractive (solid) and therefore more money is needed to put things right. The IMF might not have enough money either… so could they have some more? Mr Osbourne is being asked to contribute another wad of cash to prop up the financial house of cards. He is keen to ensure that other nations (in particular China) also put more into the tin.

The Italian PM Mario Monti is sounding more than a little anxious as he is suggesting that Germany needs to still do rather more to support the system, which in translation means provide more cash so that new borrowing arrangements are not so punitive as to make them unworkable for Italy. This is not looking much good is it? Add this to the fact that on Friday night France had its AAA status downgraded and we now have the scenario of politicians bleating that the credit rating agencies are wrong and making the situation worse, a situation that they themselves had effectively allowed to occur. The bleating is getting louder and it is my opinion that the blaming will begin rather shortly.

The financial crisis is now akin to the each credit card being maxed out and no one is left able to pay the monthly payments. That is of course unless new money is “created” which is the preferred choice of most Governments except Germany, who are all too aware of the calamity that inflation can bring. Perhaps news of China’s rate of inflation decreasing together with Britain’s rate reducing considerably to 4.2% and set to fall to around 3% by March if Bank of England Monetary Policy Committee Member, Spencer Dale is right, will provide some comfort that inflation is not out of control. That said the Bank of England has a target rate of 2% which it still fails to achieve. Perhaps the signs of falling inflation may move the Germans to relax their views about printing money, though as one of the only growing economies in the world, why they should change policy would surely be questionable. That is until you consider that in this global economy Germany needs to sell manufactured goods to make their own numbers work. Angela Merkel will no doubt be reflecting on how she can pull off helping Eurozone neighbours without ruining her own reputation.

So what does this mean for investors? well frankly more caution. It is important that clients keep in mind when cash (capital) is required from a portfolio – planning withdrawals and ensuring that there is enough in reserve. I also advise checking that you remain “comfortable” with the level of risk within your portfolio and that you discuss with me any changes in your capacity for loss.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

How Reputations Are Ruined Over An Easy “A”Dominic2023-12-01T12:48:08+00:00

Homeless for Christmas? Past, Present and Future

1997: The Borrowers – Peter Hewitt

The FSA are reported to be claiming that repossession increased 5.88% from 9,134 to 9,670 between the third quarters of 2010 and 2011. However the Council of Mortgage Lenders state that the figure is 9,200 for the third quarter of 2011 compared to 8,900 for the same period in 2010. The CML figures would suggest a rise of 3.3% over the year. It is possible that the difference in figures is due to the fact that CML cover 94% of the residential lending market, not all of it. Back in 2010 there were 11.4million mortgages in the UK with loans amounting to £1.2trillion. In 2011 there are 11.2 million mortgages in the UK with loans amounting to £1.2trillion (no difference).

Perhaps in the big scheme of things, the difference in the numbers is fairly inconsequential – unless of course you are someone that has been repossessed. These figures are useful indicators about the health of the economy. We currently have the lowest interest rates for many years, yet clearly for some people mortgage payments are still too onerous. Indeed the CML would argue that their data for October 2011 shows that mortgages are the most affordable that they have been in 8 years. In October of the 28,000 mortgages taken up and £4,500m borrowed across the country the average mover took out a 69% mortgage equating to 2.89 times gross income with payments costing 9.2% of income. The typical first time buyer (all 16,400 of them) borrowed a total of £2,000m (average £121,950) with a 20% deposit (£30,500) and had an average income of £38,110 – which is above the national average wage. Lending levels fell by 10% against the September 2011 figures for first time buyers.

The Christmas nativity reminds us of a couple that ended up in a stable and whilst the forecasters appear to have over-estimated the figures for repossessions, they are still very high and over 102 a day. Making sure that your financial planning is properly budgeted is vital to avoid the sort of pressures that some fall victim to. That’s why each year we issue a Financial Statement, showing our clients precisely where there money has been spent – but this should be a tool for also looking forward and planning spending in 2012 which ought to take account of yesterdays announcement that CPI is 4.8% and RPI 5.2%. Preparation is everything.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Homeless for Christmas? Past, Present and FutureDominic2023-12-01T12:48:23+00:00

Time for Confessions of a Shopaholic

2009: Confessions of a Shopaholic

The Bank of England have held the base rate, as expected. They also decided not to throw more money onto the Quantitative Easing fire. A good result for anyone with debt, but not a great piece of news for savers with cash deposits – save for the fact that more people are becoming better educated about the global economy and finances… if it looks too good to be true (interest rates of 7.25% offered on Italian Bonds) then it probably is… in short the higher “interest” offered is effectively a priced risk for not getting back all or any of the capital placed “on deposit”. A simplistic explanation, but covers the main points.

Italy has been spending too much and borrowing to pay for it. Due to the way their debts are structured, they need to make a payment to their lenders shortly – but can only do so by borrowing more. This is most definitely a case of robbing Peter to pay Paul. If the Italians cannot secure new finance, they will be “bankrupt” which will mean anyone that has provided funds to Italy will have to take it on the chin. We’re all connected as Banks lend to Banks who lend to us as a way of diversifying their own risk. Sadly none of the countries, seem capable of doing basic financial planning for themselves. The leadership of most European nations is nothing short of inept, which in their defence, is due to short-term political vote winning… this month is going to be a landmark month for Europe and the Euro. However, the whole of Europe (including the UK) needs to do some self-reflection, recognising that the entire system is skewed towards consumption and credit, as outlined in “Confessions of a Shopaholic“.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Time for Confessions of a ShopaholicDominic2023-12-01T12:48:47+00:00