How will banks recoup their dented profit margins?

The banks always find various ways to recoup losses through their customers.  When credit card charges had to be reduced from as high as £39 to £12, some responded by tagging on an annual fee, some have already started fining customers who are in credit and other like RBS reduced the interest free period their customers have before payments are due.  And there have been many others setbacks; mortgage exit fees, miss-sold Payment Protection Insurance (PPI), various bank account charges, and now the US sub-prime mortgage crisis.  They have already started by increasing mortgage arrangement fees to as high as 4% of the loan.  The banks are very shrewd in finding various ways to pass the buck!

Early Christmas present for pension wind-up victims

After five and a half years of campaigning by workers (who lost their pension when their company schemes were wound up), criticism from MPs, the Parliamentary Ombudsman and others, the government has finally backed down and now plans to offer more help.  Originally between 10% and 12% of a person’s pension scheme would have been paid out.  But this rescue package worth £2.9bn will payout 90% subject to an inflation-linked cap of £26,000.  Final details of the plan will be confirmed in 2008.  With 141,000 people affected, the question is how long will it take the government to make these much needed payments?

The debt storm is brewing for 2008

With 1.4 million borrowers coming off their cheap 2-year fixed rate deals in 2008, they would be in for a shock with higher mortgage costs and tightened lending criteria.  Borrowers with poor credit history looking for a new deal would find it even harder;  Lenders are now asking for 25% equity as opposed to 15% before the credit crisis hit the financial markets.  To ensure you get a good deal, first talk to your existing lender so you have something to compare other offers against.  Also be sure to take into account the cost of switching lenders; valuation and solicitor’s fees.  The easiest comparisons are with deals from other lenders that would pay these costs for you or just obviously much lower rate without extended tie in.

Northern Rock kicked out of FTSE 100

In the UK, Northern Rock’s shares (Britain’s fifth largest mortgage bank) have been the worst hit by the credit crunch dropping from £12 early in the year to less the £1.  It will be relgated later this month to the bottom of FTSE 250 index for medium sized companies.  Just narrowly missing the index that tracks small sized companies.

Northern Rock entices savers and puts off borrowers

For the past two weeks, the bank has been offering loyalty bonuses to savers and increased rates to a range of savings accounts.  But on the other hand, it has withdrawn mortgages, loans, credit card, and increased borrowing rates to rediculous highs with huge arrangement fees.  Obvious signs that its trying to recoupe some of its loses after its savers decided to match away with their money in toe back in October.  It has since then borrowed more money from the Bank of England to the tune of £29bn.  The move has pushed some of its savings products up the best buy tables and deterred mortgage brokers with fixed rates starting from 6.79% on 90% LTV with arrangement fee of £1,995.  As a good loyal Northern Rock mortgage customer, I will have to match off too unless they sort this out.

Central banks try to regain control

Five of the world’s leading central banks including the Bank of England plan to inject £54bn of cash loans into the money markets.  They hope this would ease the interbank rates (the rate used by banks to lend each other money) which has remained stubbornly high despite the quarter rate cut last week.  Although some analysts believe this will result in an immediate reduction in the interbank rates (and filtering through to mortgages/loans) others however, warn that it would take time for lender to trust each other again.  Probably not while there are still huge bank losses still to be realised from the subprime crisis for some months to come.  So will this gesture make a difference or has it come too late?  We’ll have to wait and see.

House prices to stagnate in 2008

Britain’s number one mortgage lender, the Halifax is predicting that the property market will stagnate in 2008 even if the Bank of England cuts the base rate to 5%.  This is good news for home owners in comparison to other predictions of falls of 10 to 15 percent next year.  But not so good for people still struggling to get on the property ladder.  A report for the global finance monitor said that house prices in the UK have soared in relation to incomes and now stands at about 9x annual average earnings.  Up from about 5x in 2001.

Make money from falling house prices

The UK Residential Index fund will be launched in January 2008.  What is this and how does it work?  Its a complex investment fund that uses derivatives to bet on the extent to which the property market will fall over various time periods. One of the predictions at the moment is that house prices could fall by 10% next year and would carry on into the next year.  So two years of house price falls or as they say, “correct” may be on the cards because it is believed that British property is overvalued by an astonishing 40%.

How to make millions from property!

I recently read an article on how two brothers built their £9bn property empire with a £6,000 loan from their grandmother in 1995.  They have definitely accomplished a tremendous amount in a space of 12 years.  But why is it that most of these multi-million pound property fortune I read about are from people who started out in the 1990s?  Maybe I’m just jealous but surely a monkey could do almost the same thing since property prices have tripled in the last 10 years?  We need more articles on newer successful property developers that we can aspire to.

Hope for US property market

Reports on the US mortgage applications for last week showed a surge of 22.5% on the back of plunging interest rates.  Let hope that the US economy may not go into recession after all.  I’m a possitive thinker.  As the say, when America sneeze, the UK catches a cold.  Let hope that does happen.