Thursday, 15 December 2011

Mortgage drought to get even worse

The Council for Mortgage Lenders has switched from expecting a recovery in lending next year to forecasting a sizeable drop -- as  a result of the Eurozone crisis and the poor economic outlook.

Lending this year is expected to add up to £138bn, not including the mortgage money borrowers pay.

But while the CML's summer forecast was that the figure would jump to £150bn in 2012, now it is warning that a fall to £133bn is on the cards.

The CML is sticking to its view that repossessions will rise to 45,000 in 2012, up from an estimated 37,000 this year, though still fewer than in 2009.

House sales are expected to slip further into the doldrums, with transactions expected to fall to 825,000 from 852,000, the lowest figure for approximately 40 years.

Wednesday, 14 December 2011

Is my Lloyds branch being sold?

Who's affected by the Lloyds sale of 632 branches?

All 164 Cheltenham & Gloucester branches and all 185 Lloyds TSB Scotland branches are earmarked to be sold.

In addition, a selection of 283 Lloyds TSB branches in England and Wales would be transferred to the Co-op.

Lloyds has not published an online list of the branches affected, but customers can check directly with the branch.

This list from the Guardian has most of them:

Once Lloyds and the Co-op have agreed the deal, expected in the first 3 months of next year, the bank will write to customers who will be affected and a full list is likely to be posted on the Lloyds website.

Lloyds is selling up to 19% of its mortgage book. Mortgage customers will be told next year if they have been included.

Should a customer wish to remain within Lloyds and not transfer the bank will register their request and respond to them in due course about the options available to them, likewise if they say they really want to move.

Lloyds says customers do not need to do anything now as changes will not be seen until the sale completes in late 2013.

Thomas Cook shop closures

Thomas Cook is closing 200 shops.

It has already put 22 closures in motion, some closed and some still in consultation, losing 109 posts (though some staff to be redeployed).
They include shops in Hinckley, Birkenhead, Grimsby, Coventry, Northampton, Morley (W. Yks.), Stockton on Tees, Tunbridge Wells, Ayr,
St Helens, Bangor (N. Wales), Cleethorpes, Sheffield, Gainsborough, Melksham.

Today Thomas Cook is announcing a further 115 closures. 661 further jobs are threatened. Staff are being informed today.

There will be a further 63 closures over the next 2 years, causing further unknown job losses.

That adds up to 200 shop closures, more than 770 posts lost and more to be lost later - although some staff will be redeployed.

Car insurance rip-off

The Office of Fair Trading thinks our car insurance policies could be a rip-off, so it is to conduct a market study and might refer the whole business to the Competition Commission. Why?

Well, the main reason is that the cost of paying for injuries sustained in accidents has rocketed. But these personal injury claims are being looked at by the Ministry of Justice, so the OFT is bypassing that issue.

Almost as important, though, says the OFT, is the effective scam that appears to operate over hire cars and repairs.

This is how it works. You cause an accident, so the victim makes a claim, has to have a hire car and has to get his car repaired. Fair enough.

What the OFT is saying is that your insurer might receive a bill for a hire car which is three times the actual cost of hiring one. Specifically, between £1,200 and £1,500, rather than between £400 and £600.

The heart of this problem, we are told, is the credit hire company. It is a business which exists to serve the needs of accident victims who don't have an insurance policy which promises a hire car. The victim might have third party cover only, or a comprehensive policy which doesn't have that element.

The credit hire company pays a fee to insurers, brokers, or solicitors to refer victims on - it's known as a referral fee.

It provides a hire car to the victim, free of charge, knowing that it will be able to send the bill to the insurance company which is covering the driver who caused the accident.

It's a neat little business. The OFT is worried that insurers have no control over these escalating costs.

Worse than that, insurers are part of the problem, because they collect referral fees. Also, when they act for an accident victim who has cover for both car hire and repairs, the OFT suggests that they have little incentive to keep down the cost.

They simply pass on a whopping bill to the at-fault insurer, knowing that it will have to be paid.

It's enough to make drivers seethe, knowing that a whole industry is profiting from inflated insurance costs.

But there is some more encouraging news from the Office of Fair Trading. It says that while motor insurance premiums have risen sharply, by 12% between 2009 and 2010 and a further 9% this year, the increase is less than half that recorded by the AA and price comparison websites which analyse insurance quotes.

The reason is that drivers coming to renew their insurance are suffering smaller increases than than those asking for a new quote.

Most drivers who renew policies are older and more experienced. Many of those shopping around for new policies are younger and less experienced.

If they've just passed the test they may not find insurance they can afford at all, but the quotes are still recorded.

So, bad as the situation is with car insurance, the OFT is suggesting that it isn't quite as horrendous as it has been painted.

Tuesday, 13 December 2011

Payday clampdown

The Office of Fair Trading  is taking enforcement action against payday lenders who are flouting guidance on online advertising in the run-up to Christmas.

In a sweep of a sample of firms it found that some were not checking whether customers could afford to borrow or coming clean about charges for going into arrears.

A number were unclear about the loan terms and failed to explain the contract.

The OFT has not named the firms involved. They could be stripped of their Consumer Credit Licences or simply be forced to change their practices.

The consumer watchdog has started to check advertising on the websites of 50 further firms.

A BBC viewer, Andrew Beattie, complained today that he'd received a text from a payday lender, saying:

"Need extra cash for XMAS? Get cash in your account TODAY. No paperwork or checks."

"Many people may be tempted to follow this up, with no doubt dire consequences," he warns.

In a report sent today to MPs on the Business, Innovations and Skills Select Committee, the OFT says that complaints about the lenders to Consumer Direct rose to 1,535 in the first eleven months of this year, up from 700 in the whole of 2010.

Short-term payday loans have boomed. The market is worth about £2bn a year.

But there are serious concerns about the business practices adopted by some players.

Top of the OFT's list of worries is the misuse of continuous payment authority, which allows a lender to take funds from a borrower's bank account even if the account is overdrawn.

Next comes the rolling over of loans which can result in debts escalating out of control.

But irresponsible advertising and selling tactics have also become a major worry.

Saturday, 10 December 2011

Poop! Poop! Let's borrow again...

"You don't promise," said the Badger, "never to go into debt again?"
"Certainly not!" replied Toad emphatically. "On the contrary, I faithfully promise that the very first opportunity I have, chink-chink, I'll borrow even more!"

Christmas is a good time of year to start thinking up rules.

You can only open one present before breakfast. Spread them out: that way there will be no tears later in the day.

The turkey must be for exactly the right time: 20 minutes a pound at 180 degrees. That way no one will go down with food poisoning.

But you can't legislate against Auntie Vera and Uncle Bob having a row. Or Grandad having apoplexy and falling head-first into his plate.

It's the same with last week's Euro deal. They agreed some new rules, for the future, new restrictions on countries borrowing.

That's OK as far as it goes. The turkey will be nicely roasted.

But everyone knows they have agreed restrictions on borrowing before. And they didn't work.

The financial crisis was so horrendous, it made all that pre-tinkering irrelevant.

And, as with the unreliable Mr Toad, one has to question whether European nations will stick to what they agreed to in that room with Chancellor Merkel.

"Toad, I want you solemnly to repeat, before your friends here, what you fully admitted to me in the smoking-room just now," pronounced the gratified Badger. "First, you are sorry for what you've done, and you see the folly of it all?"

Toad looked desperately this way and that, while the other animals waited in grave silence.
"No!" he said a little sullenly, but stoutly; "I'm not sorry. And it wasn't folly at all! It was simply glorious!"

"What?" cried the Badger, greatly scandalized. "You backsliding animal, didn't you tell me just now, in there..."
"Oh, yes, yes, in there," said Toad impatiently. "I'd have said anything in there. You're so eloquent, dear Badger, and so moving, and so convincing...but I find that I'm not a bit sorry or repentant really, so it's no earthly good saying I am; now, is it?"

Of course, Toad was talking about his new obsession with fast cars - "Poop! Poop".

But I wonder when the backsliding will start in Europe?

Thursday, 8 December 2011

HSBC mis-sells to 83 year-olds...update

HSBC will look at mis-selling complaints back to 1991...

HSBC has announced that it will consider mis-selling complaints from elderly customers and their families, arising from before its takeover of the scandal-hit advice firm, NHFA, in 2005.

The move opens the way for thousands more claims for compensation.

Three days ago the Financial Services Authority fined HSBC £10.5m for mis-selling investment bonds designed to cover care homes fees.

The bank said then that it was likely to shell out an additional £29m in compensation. Now the bill looks set to grow.

NHFA had 11,000 customers while it was owned by HSBC, of whom 2,485 were possible victims of the poor advice.

Today the bank said it would accept complaints going back to 1991, during which time NHFA dealt with another 9,000 customers.

There is no indication of the extent of mis-selling during that period. Many of the victims are likely to have died, so HSBC will take complaints from surviving family members.

Customers who signed up from April 2004 will receive letters from HSBC and don't need to take any action.

Tuesday, 6 December 2011

Christmas for £182

Family Action has had a go at working out the cost of the minimum acceptable Christmas for a family of four, coming up with a figure of £182.

The shopping list includes a Monster High Lagoona's Hydration Station for £34.99 for the daughter and a 4GB Touch Media Player for the son, costing £29.99.

Add in an £18 Christmas Tree and a £15 turkey from Tesco and you can see that there's severe pressure to keep down the cost of everything else.

Decorations and stocking fillers come from Poundland, as you'd expect.

It's worth having a look at the breakdown, which is on pages 19 and 20 of the report.

The point of Family Action's campaign is to ram home how families are particularly stretched in trying to afford Christmas this time round.

Yet even in the £182 budget, there is room to make choices to try to lift everyone's spirits.

The list include gifts for the children's friends, Christmas cards and various treats.

Monday, 5 December 2011

HSBC mis-sells to 83 year-olds

It is a dark moment for a bank with HSBC's pedigree to have to own up to mis-selling investments to elderly people with only 2 or 3 years to live.

HSBC has tried to distance itself from the poor advice given by its subsidiary, NHFA, saying that the advisers involved were not its employees.

Against that many will point to the fact that NHFA was in HSBC's clutches for nearly five years before the wrongdoing was exposed.

And how painful will this record punishment really be?

One leading financial adviser, Roddy Kohn of Kohn Cougar, has pointed out that the commission earned from selling the investments could exceed the value of the £10.5m fine.

Customers typically paid a 5% up front charge for the investments, followed by 1% a year. Apply that to the £285m worth of care plans NHFA sold and you end up with a tidy sum.

Friday, 2 December 2011


What's all the fuss about six letters: CPI and RPI?

Millions of teachers, nurses and other public sector workers have been told that they'll have to get used to CPI in future and forget about RPI.

What does it all mean?

Most of us know about the Retail Prices Index or RPI. For years it was the "headline" rate of inflation and the rate used for annual upratings of pensions benefits and a host of other payments.

No longer. Now the Consumer Prices Index, CPI, is king.

It is the product of a harmonised European method of calculating the rate of inflation. But that's not why it has become the government's inflation measure of choice.

It is the chosen one, because it is usually a smaller number. Use it and you get a smaller increase and a smaller bill for the taxpayer.

Both indices use a similar basket of popular goods to measure price increases month by month. But the results are different.

When I asked the Office for National Statistics to explain why, this was the analogy they made:

Imagine you go regularly to a market stall to buy apples. One time you turn up and you find that a particular variety - say it's Cox's - has gone up in price. Do you buy them? Maybe you don't. Maybe you turn to another variety which is the same price as before, Braeburns or Pink Lady even, and buy them.

RPI thinking concentrates on the rise in the price of Cox's.

CPI thinking considers the other apples too. It allows for the fact that shoppers may not feel the full impact of a price rise because they are likely to shop around for something cheaper.

The result is that RPI is likely to be 1.4% a year higher than CPI in the long run, according the Office of Budget Responsibility.

Another difference is that RPI includes the cost of home ownership: mortgages and house prices. These are excluded from CPI, so sharp changes in interest rates or prices can make the two indices diverge for a time.

CPI does have a housing element, but it's more to do with the cost of renting.

All of this becomes hugely important over time for the uprating of pensions and benefits.

Getting around 1% less of an increase each year will cost a typical retired public sector worker tens of thousands of pounds over a whole retirement.