Tuesday, 31 May 2011

House prices jump in London

London house prices have powered ahead of the rest of England and Wales over the last year, according to the latest figures from the Land Registry.

London prices were up 5% in the year to April, while house prices in the North East were down 8% and they were more than 4% lower in the North West and Yorkshire.

Overall, house prices in England and Wales rose by 0.8 percent in April compared with March, according to official figures from the Land Registry.

It was the biggest monthly rise since January last year, but prices were still more than 1% down over 12 months.

It leaves the average price of a home at £163,083.

The Land Registry is seen as one of the most reliable guides to house price movements, because it covers cash sales as well as those involving mortgages.

House price rise not shock...

16% rise in house prices by 2015 says the Centre for Economics and Business Research.

Sounds bad for first time buyers and good for smug homeowners.

But let's not get too excited.

By the official projections (from the Office for Budget Responsibility), inflation will have pushed all prices up by 21% by then, as measured by the RPI.

So - a drop in house prices, in real terms.

The lower CPI will have risen by 13%.

Friday, 27 May 2011

Gyms trapped members in contracts

The High Court has ruled that 300,000 people who signed up for gym memberships were trapped in unfair contracts.

The membership agreements tied them in for up to 3 years, even though many members stopped attending after 3 months.

These gym contracts played on people's sometimes short-lived enthusiasm for exercising.

A new gym member might sign up on a monthly rate, lose interest after a couple of months but then be told that if the payments were stopped a bill for as much as a thousand pounds would be issued for the remainder of a 3 year contract.

The Office of Fair Trading, which brought the case, was targeting 700 smaller gyms which use a contract and payment collection service from a specialist firm, Ashbourne Management Services.

The ruling says many of the contracts were unfair, and it criticises the company for threatening legal action and reporting non-payers to credit reference agencies.

Ashbourne says it has now changed its contracts.

But the Office of Fair Trading believes the High Court has strengthened its hand against unfair terms, so that all businessses will have to check whether they are forcing customers to sign up for too long.

Debt companies warning

A BBC investigation has revealed that some debt management companies have been holding onto people's cash rather than paying it to creditors, leaving heavily-indebted families thousands of pounds worse off. The Office of Fair Trading has condemned the practice as totally unacceptable.

Here's my TV report on this worrying problem.

Thursday, 26 May 2011

Why the Ostrich label could ruffle feathers

Today HSBC describes workers as an "Ostrich Generation" for not saving enough in pensions.

This is a good marketing slogan for the financial services industry but could annoy hard-pressed families, struggling to pay the mortgage or rent, let alone save for a rainy day.

Also, it lays the blame on individuals, rather than employers, financial institutions and successive governments.


*Employers won't provide reliable pensions any more.

*The state is wriggling out of earnings-related pensions in favour of a flat rate payment.

*Personal pensions have been a big disappointment for many savers.

*Plenty of people still remember the pension rip-offs of recent years.

The Ostrich label implies that people are foolish. Well, maybe some are, but plenty have been thinking hard about the future and worry about it a lot.

They see pensions as risky, uncertain and they're concerned about locking savings away where they can't get at them..

Tuesday, 24 May 2011

Lloyds should offload more branches

The head of the Independent Commission on Banking, Sir John Vickers, has stuck to his view that Lloyds should be forced to sell more bank branches to improve competition.

Lloyds has been told to divest itself of 600 branches. Sir John, whose Commission has been told to come up with proposals to make the UK's banks safe in future and beef up competition, has already said that won't be enough.

Today he reiterated to MPs on the Treasury select committee that he was "clear that there should be a substantial enhancement" of the 600 figure, though it would be "inappropriate" come up with an exact number.

Selling 600 branches would reduce Lloyds Banking Group's share of personal accounts from 30% to 25%. But Sir John said it was a major issue that one institution could have a quarter of all accounts.

Thursday, 19 May 2011

Cashing in on coin machines

After my happy discovery that I can get rid of jars full of coppers and silver at Sainsbury's robot tills, here's more on the coin machines you can use to avoid paying a fee.

1. Supermarket robot tills.

In Sainsbury, and others, you throw in your piles of change and the machine counts it all for you and uses the money to pay for your groceries.

And if there isn't enough, you can put a card in to pay the difference. No cost.

2. Coin machines in banks.

HSBC has 90 of them. It's not many, considering they have 1,300 branches, but at least they are there.

Barclays has 13, including a new one in Piccadilly, London. You have to phone to check which branches have them.

London's new Metro Bank has them too. Anyone know of any others?

The usual procedure is that you enter your card, then throw in loads of coins and the total is credited to your account. No cost.

3. Coinstar.

This company has hundreds coin machines in the main supermarkets, charging a fee of 8.9p per pound counted.

They give you a voucher to pay for goods at the till, or redeem for cash.

This is the costly route. They say a customer in Sydenham in Kent put in £5,677. By my calculation the fee would have been £505.

Emergency assistance company collapses

Homecall Plus in compulsory liquidation

Thousands of people across the UK could be affected by the collapse of a Blackburn-based firm which provides cover for plumbing, heating and other emergencies in the home.

Homecall Plus of Furthergate, Blackburn, has been put into compulsory liquidation by the official receiver in Blackpool.

10,000 customers who bought policies up to 3rd December last year should still receive cover. The policies were underwritten by Brit Insurance, which is honouring them.

However, it is thought that some customers who signed on after 3rd December, 2010, could be left without cover, under policies which cost around £11 a month or £126 a year.

The Financial Services Compensation Service has yet to decide whether such customers would be eligible for compensation.

The case has been transferred by the Insolvency Service to its Public Interest Unit which customers can contact on 0161 234 8531.

Wednesday, 18 May 2011

What's your Squeeze Factor?

The income squeeze is around 3%. That's from today's figures on weekly pay without bonuses, up 2.1% in a year, compared with RPI inflation of 5.2%.

Take inflation away from the average pay rise and the result is a 3.1% contraction in what your pay will buy, something economists call a drop in real income.

But how much have our incomes been squeezed if we look further back?

I've had a rummage through the figures over the last 5 years to see how much our real incomes have contracted, looking at March average pay each year and the inflation number each April.

And I am calling the results the Squeeze Factor.

Over two years we've suffered a Squeeze Factor of 7%. Pay is worth 7% less.

It looks better going back five years. Real incomes are 4.1% down on 2006. But they're still well down.

You can improve the picture if you take average weekly pay including bonuses and compare it with the lower index of inflation, the CPI.

On that measure you get a Squeeze Factor of 2.8% for the last year, a slightly less painful squeeze on real incomes.

And looking back five years pay has grown slightly compared with inflation, by 0.3% since 2006.

So what can we say about the Squeeze Factor?

Our incomes have been squeezed by around 3% in the last year, as I mentioned.

Compared to two years ago, the squeeze is as high as 7%.

Looking back further, the effect is less marked. But the best we can say is that inflation-adjusted incomes have hardly grown since 2006. And by some measures they are significantly lower now than they were then.

 Looking back
Weekly earnings minus RPI
Weekly earnings (including bonuses) minus CPI
1 year
2 years
3 years
4 years
5 years

Monday, 16 May 2011

Equitable in numbers

In case you forgot how many people are affected by the Equitable scandal, here are some figures:

945,000 will get lump sum compensation averaging around £800

37,000 on top of that, the With-Profit Annuitants, will receive full compensation

60% is the loss that some With-Profit Annuitants have suffered to the pensions

100,000 will get no compensation because their losses are deemed to be less than £10

400,000 Equitable policyholders are judged not to have lost out, so get nothing

50,000 policyholders have died without being compensated

10,000 With-Profit Annuitants are in their 80s or older but will not be paid anything because they started their policies too early

Equitable compensation scheme announced

Equitable victims to receive compensation letters

The Treasury has published the details of how it will pay compensation after the financial problems suffered by Equitable Life.

Victims whose pensions were reduced will receive letters from next month explaining the payment they will receive and when the money will arrive.

Some of the heaviest losers will have their pensions topped up in full, starting during the next 12 months. They'll get back payments for income they have missed.

But the majority will share a pot of £775m, receiving 22.4% of their losses in a lump sum payment.

Priority payments have been promised for the oldest pensioners and the estates of those who have died. Others will be paid over the next 3 years.

Will fathers be tempted by £128 a week?

How will the new arrangements for paternity pay look to fathers? It'll still look daunting to take time off, as it can do for mothers as well.

What's expected is that fathers will get six week's paternity leave, up from two weeks at the moment.

Then they will be able to agree with the mother to share 7 months of her maternity leave, 4 months of which would be paid.

So the couple could arrange things so the father gets 5 and a half months paid leave. At least that's what will be up for consultation.

The problem is that statutory paternity pay is £128 a week.

That is a lot better than nothing. But it is very much less than mid-range or median pay of £499 a week. And also less than average weekly household spending, which is just under £460 a week.

Some families will have saved up, or the mother will be bringing home enough to enable the father to take the leave, or the employer might provide more help.

But many others will find it hard to make ends meet if he goes down to £128 a week for nearly half a year.

How many fathers would actually be in a position to take the extra time off?

One thing worth remembering, though, is that if household income goes down, the family might be entitled to more tax credit.

Thursday, 12 May 2011

Tax officers target restaurants

Tax officers are to swoop on restaurants suspected of under-paying tax.

They'll start in London this week and then move to other locations across the UK, including Scotland and the North West.

One key point of scrutiny could be cash tips and how they are accounted for. But PAYE, Corporation Tax, VAT and Income Tax will all be on the inspector's menu.

And officials say that they will also be looking for evidence that restaurant staff aren't being paid the minimum wage.

Restaurants could find two tax officers appearing unannounced on the doorstep, showing HMRC identification.

Here are rules on dealing with tips.

HMRC has already announced clampdowns on doctors, dentists and plumbers.

Is inflation-proofing for you?

Pros and cons of the revamped index-linked certificates from National Savings.


*guaranteed inflation protection

*pegged to the RPI measure of inflation not the lower CPI


*can cash in early, though see below

*safe haven in stormy seas


*rate is RPI + 0.5%, down from RPI + 1% before

*5 year fixed term only, no 3 year option as before

*no interest in 1st year if cash in early, then a slightly reduced rate

*linked to RPI from next spring, by which time inflation is likely to have fallen

*stocks might not last

NS&I will be emailing 700,000 people who have registered interest in their products, many of them looking for inflation-proof investments. So there are likely to be a lot of applications.

Will they be overwhelmed again and close the issue? NS&I says it wants to keep the certificates on offer for a "sustained period".

They need to raise £14bn this year, which works out as 933,000 customers taking out the maximum investment of £15,000. But, of course, they'll be selling other investments as well.

Inflation-proof certificates are back

Savers have been desperate to find accounts which protect them from the ravages of inflation, so they'll welcome the return today of tax-free National Savings Index-linked Certificates.

The terms aren't quite as good as the previous issue, which was withdrawn last summer, causing a barrage of complaint.

The certificates are available for a five year term and pay RPI inflation (currently 5.3%) plus 0.5% as an interest rate.

Previously, you could get them for 3 or five years, and the return was RPI plus 1%.

It's extremely difficult for savers to find an an account which beats inflation and income tax combined. Virtually all of them are tax-free fixed-rate cash ISAs.

Bear in mind that the certificates don't track the monthly change in RPI. They are subject to an annual uprating.

Also, while inflation is high at the moment, it's expected to fall next year.

Wednesday, 11 May 2011

5% inflation is odds-on

The governor of the Bank of England, Mervyn King, has said that there is a "good chance" that inflation will rise to 5% later this year, pushed up by further increases in the cost of gas and electricity.

Meanwhile, the Bank's quarterly Inflation Report showed the growth rate of the economy falling back.

The Bank of England's view on inflation is watched carefully for clues on future interest rates rises and the pace of the recovery.

Mervyn King is expecting a 15% rise in gas bills and a 10% increase in the cost of electricity in the months ahead. So he no longer expects the Consumer Prices Index or CPI to peak at between 4 and 5 per cent as he said January.

Now the 5 per cent rate is the Bank's central projection for the autumn, which means inflation could climb even  higher.

Economists are taking this as another sign that the Bank will start to push up interest rates from their historic lows before the end of the year, in November or December.

This is despite the fact that the Bank has scaled back its forecast for economic growth this year from just over 2% to around one and three quarters.

The increasingly gloomy economic outlook had prompted some forecasters to suggest the long-awaited hikes in rates could be delayed until next year.

Tuesday, 10 May 2011

Caring can be a struggle

Here's a flavour of messages which have come in from carers. Some get the £55 a week Carer's Allowance. Some don't.


I'm a carer. Gave up my job to look look after my mum, who has alzheimers and dementia and other illnesses, and my dad who has heart problems and my husband who does not keep well either.

Some times I can go days with out sleep if my mum is having a bad time and doesn't want to sleep.

I worked out that I work 168 hours a week for the crap sum of Carer's Allowance of 33p an hour or £55.55 a week, with sometimes only 6 hours off. Even then I'm still on call with my phone in case I'm needed.

We wouldn't take a job for 33p and hour. Whatever happened to a minimum wage for all of us carers?


I care for my Mum of 88 years and have been for nearly 6 years.

I work part time in my local library but do not qualify for Carer's Allowance, as I earn too much . How much do I earn? About £10 per hour.

No free prescriptions for me either. The only benefit that I have had has been from a very kind council grant to purchase a new washing machine for which I am most grateful.

I took this job as it was close to my home but can only work part time because of my caring duties.

No tax credits for me. Little freedom. But I love my Mum, so what can I do?

The government wants us to work but how about some help for those who actually do contribute to our society saving billions for our country?

Let's have some fairness, please.


I have been a carer for my 16 year old son for all his life.

My husband lost his job in October, so I have gone on income support. But that means I lose my Carer's Allowance.

What right has the government to treat Carer's Allowance as an income?

It's an insult to all us carers. I would like to see the Government get a carer for £55 a week!


Carer's Allowance stops when you draw a pension. My mother has cared for me all my life, but her allowance was stopped when she got her pension.  

She still cares for me and gets nothing for it.

She was told she could have one or the other.  To rub salt in the wound the DWP send her literature saying 'you could claim' this, knowing full well they will reject her claim.

PS I have changed the names.

The staggering number of dodgy PPI sales

Just to be clear about the number of Payment Protection Insurance policyholders who may be in line for compensation, this is what the Financial Services Authority is saying...

16.1m policies sold since 2005, worth £17bn
The significance of 2005 is that the FSA took over regulation of the sector at this point. It issued tighter definitions of its selling rules in 2010: the court case was about applying these back to 2005.

1.5m policyholders have already complained about misselling
Some of these have been held up by the banks during the court case, so haven't yet been resolved. Not all will be paid compensation.

2m non-complainants will be paid compensation
These will be the the result of the banks looking back through their records and contacting customers who haven't complained but were affected by systemic failures in sales. The obvious evidence of this is when lots of others in a group of customers have already complained about misselling.

750,000 future complaints
These are the number of people the FSA believes will be paid compensation after putting in complaints over the next few years.

Total: 4.25m, more than one in four!

These figures don't include pre-2005 cases, where different rules apply but banks may pay out compensation. Lloyds, for instance, says it might go back another 10 years.

Also, the number of future complaints is an uncertain figure. The banks don't have to contact all their customers to tell them they can make a claim.

But common sense suggests it may grow significantly, now that more people are aware of the issue.

Friday, 6 May 2011

Debt Relief Order - what's that?

6,788 people found out in the first three months of this year.

That's up from 6,172 in the quarter before and sharply higher than 5,644 a year ago.

Debt Relief Orders, or DROs, are on the rise and the numbers are likely to climb further.

The Orders are a sort of bankruptcy-lite, simpler and designed for people with burdensome debts but limited assets.

I explained in a previous note why the arrival of DROs is significant, but one obvious advantage is that they are a cheap way to make a new start.

A DRO costs £90, while going bankrupt is £625, rising soon to £700.

Bankrupts end up paying even more than that out of their assets, if there's enough after everything is sold off.

So, while DROs are on the rise, bankruptcies are going down, the Insolvency Service tells us, though many predict an overall rise in individual insolvencies later this year.

If you want to find out more about Debt Relief Orders, here's a good place to start.

Beware of holiday club sellers

The Office of Fair Trading has stopped two companies and seven individuals from pressuring members of the public into buying holiday club memberships.

The action comes after 1,200 people complained about the sales tactics. And the fact that they couldn't cancel memberships they had been pushed into buying.

That's a big number in the OFT's book, though it's less than the consumers' gripes about dodgy builders and used car salesmen.

The companies - Personal Travel Group and Geo Demographic Market Research - were accused of using misleading and unlawful marketing tactics.

Timeshare owners were invited to presentations, lured by the promise that they'd be able to get rid of their timeshares and maintenance charges.

In fact, they faced high pressure sales pitches for club memberships costing up to £12,000.

Sales staff said they'd be able to get most of the money back but didn't come clean about restrictions which applied.

And they played on fears that their children would be liable to pay the timeshare maintenance fees.

Trading standards officers in Edinburgh, Milton Keynes, North Somerset and Durham assisted in the investigation.

The OFT started the court action late last year. It has obtained interim enforcement orders until a final court hearing at a future date.

Thursday, 5 May 2011

Lloyds compensation -- will they contact you?

"Please read the letter that I wrote," Lloyds will be telling customers who were mis-sold Payment Protection Insurance.

Those lucky ones will learn that they can claim compensation.

But will Lloyds be writing to all of them? The answer is no.

The nub of this issue is that where Lloyds identifies a "systemic failure" in its sales process, it will write to everyone who has been affected.

But such a failure may only be deemed to have affected tightly defined groups of customers -- and others may be left out.

Lloyds says it is not obliged to contact every single PPI customer to tell them they might have been mis-sold a policy.

The FSA calls the approach "root cause analysis". Here's the section from its rulebook:

In respect of complaintss that do not relate to MiFID business, a respondent must put in place appropriate management controls and take reasonable steps to ensure that in handling complaints it identifies and remedies any recurring or systemic problems, for example, by:
(1) analysing the causes of individual complaints so as to identify root causes common to types of complaint;
(2) considering whether such root causes may also affect other processes or products, including those not directly complained of; and
(3) correcting, where reasonable to do so, such root causes.

Wednesday, 4 May 2011

Only 5% deposit at Nationwide

Any addition to the options for first time buyers has to be welcomed at the moment.

Nationwide has added its Save to Buy scheme, allowing first timers to obtain a 95% mortgage or, putting it the other way round, put down a deposit of just 5%.

It adds to offers from Lloyds, Barratts and Taylor Wimpey and a deal from councils.

The rules are that prospective buyers have to open a special savings account with Nationwide and deposit £50 a month for at least 6 months.

Then they qualify for a 3 year fixed rate mortgage at 6.29%, for a discounted fee of £400. Or a five year fix at 6.89%.

If I were to niggle I would say it is a shame that the savings account can't be a tax-free ISA. Nationwide says it wanted a simple account for all.

Plus, it points out that savers qualify for a bonus of up to £1,000 to help with the mortgage, if they do eventually apply for one.

How much difference will it make?

Well, Nationwide lent to 17,000 first time buyers in the 11 months to February this year, slightly more than its overall market share warranted.

But the total number of new buyers last year was 197,400, so an increase the Nationwide figure is unlikely to transform the situation.

According to the Council of Mortgage Lenders, the highest number of purchases by first-time buyers recently came in 2001, when the total was 568,200.

Hence, some would argue that you need to bring hundreds of thousands of first time buyers into the market to get things moving healthily again.

None of the schemes on the table will do that, together or separately.

House prices sharp fall

Land Registry reports biggest monthly house price fall for 25 months.

The figures are the last word on house price movements, taking in all sales, including cash sales which represent a big share of transactions at the moment.

The Land Registry says house prices in England and Wales fell by 1.1% in March, the biggest drop since February, 2009.

Prices were 2.3% lower than a year ago.

The figures paint a contrasting picture to the Nationwide survey, which reported a 0.2% fall in April and a 0.5% rise in March.

Wales experienced the sharpest fall, with prices down 3.3% on the month and 7.2% year on year. In Blaenau Gwent prices were down nearly 20% over the year.

The Land Registry's figures come out a month later than those from Nationwide or Halifax. But they are based on all property sales, while the lenders refer to their own mortgage business.

PS House prices were up on the month in Rutland (3.2%) and Pembrokeshire (2.3%), also Derby, Merseyside, Milton Keynes, Gloucestershire, Anglesey and Denbighshire.

Tuesday, 3 May 2011

So what did happen in the 1870s?

Shrinking incomes could take us back to the 1870s, according to the economist, Roger Bootle.

He says "I expect real earnings to fall by about 1.5% this year. This will mark the fourth successive year of falling real earnings – the first time that this has occurred since the 1870s."

What was happening 140 years ago?

The 1870s got off to a bad start with the Franco-Prussian War, which left France seriously short of money.

Then there was the Panic of 1873: a crash in Vienna followed by railroad failures and bank runs in the USA.

The UK was beginning its long slow decline, production falling behind the US and Germany.

Prices for grain and cotton plummeted, so there were years of deflation.

But at the same time the Bank of England kept interest rates high.

The whole period of 1870 to 1890 was a time of squeeze, known later as the Long Depression.

Train chaos in North West

Big trouble buying tickets for train hourneys in the North West of England today.

Ticket offices couldn't issue tickets from early on until 11.45am, though they were available from vending machines and on the trains.

Here's the explanation from Northern Rail:

"At 06.30am this morning a server failure occured affecting our ticket offices across the north west. This happened at 67 stations and the problem has now been rectified. We provide our customers with alternative opportunities to purchase tickets, 25 of these stations have a Ticket Vending Machine (a self-service ticket machine), and customers also have the opportunity to purchase a ticket on board trains, and we have no reported wide spread issues with this service."

Give books and tat -- and get tax back

Had a big clearout over the weekend and took 4 crates of children's books to Oxfam.

What was new to me ( maybe not to many readers) is that they can claims back tax on the value of what you give.

It's the Tag your Bag scheme, for which you have to be registed with them for Gift Aid.

Effectively, they act as your agent in selling the goods, then you donate the money on which the tax refund is claimed.

Here the tax people HMRC explain how charities can do this, so even a small local charity might be able to take advantage -- and boost the value of donations by 28%.

Credit card refund for laptop

From Financial Ombudsman Service last week...

Complaint about faulty laptop bought with credit card.

Miss T’s new laptop developed a serious fault just six weeks after she had bought it, so she took it back to the supplier and asked for a refund or replacement.

The supplier told her it was unable to help. It suggested that she should get in touch with the manufacturer, who would arrange to inspect the laptop and then decide whether to repair or replace it.

Miss T explained that she was busy revising for her college exams and could not afford to lose study time while the laptop was out of action. However, the supplier was adamant that her only course of action was to contact the manufacturer.

Concerned about the amount of time this might take, Miss T then visited a different supplier, where she used her credit card to buy another laptop.

She had used her credit card to buy the original laptop and a few weeks later, once her exams were out of the way, she contacted her credit card provider.

She explained the problem she had experienced with the original laptop and said she wanted to claim a refund.

However, the card provider told her it could not help because it was ‘not responsible for the quality of goods bought with a credit card’.

Miss T arranged to have her laptop inspected at a local computer centre and was told that there was a problem with the motherboard.

She subsequently obtained another report on the laptop from an independent computer specialist. This confirmed that the motherboard was faulty – and said that replacing it would cost more than the value of the laptop.

Miss T then referred her complaint to us.

Complaint upheld

On the basis of the evidence supplied by Miss T, we said that the laptop was not fit for purpose, as it should not have developed a fault of this nature so soon after Miss T had bought it.

We noted that Miss T had attempted to reject the laptop as soon as the fault became evident. She had only bought a replacement because it was essential for her studies and because the retailer had failed to deal correctly with her complaint.

We pointed out to the card provider that it was jointly liable with the supplier for any breach of contract.