Posted by James

Inflation hit 3% in April it was revealed today. This means, under official rules created by Gordon Brown, if inflation sneaks up even 0.1 percentage points higher the governor of the Bank of England has to write a letter to the chancellor.

Why? Well, inflation is meant to stay within 1% of the government's target rate of 2% annual growth in prices. If it moves further than that, the governor has to explain why it has not kept inflation within target and he proposes to do about it.

Of course, telling the Bank of England governor to write you a letter because they have failed to keep to a target you have invented (and changed, the target was originally 2.5%) seems a little odd.

Especially as the things driving up prices are food costs (not the Bank's fault) and fuel prices (again, not the Bank's fault).

What is worse for those at the Bank's interest rate setting Monetary Policy Committee is that the method normally used to bring inflation down is increasing interest rates.

Now I don't think that making mortgages even more expensive than they are now is something that will appeal to the chancellor or the prime minister.

Which makes you question the point of this whole letter-writing process.

The last letter in April 2007 makes interesting reading today. As now, food prices and oil prices were driving up prices. It adds that the Bank should prioritise prices ahead of economic growth.

That was rather easy to say back then – before the credit crunch, with strong economic growth and while house prices were still soaring – but things have changed somewhat since then.

In April last year a large chunk of inflation came from the easy supply of credit and pay growth – both factors under threat since then – and the MPC's action in raising rates to 5.75% contributed to the fall in inflation.

But since then the Bank has been cutting rates to try and stave off the impact of the banking crisis and collapsing house prices, to little effect. Real interest rates people pay for mortgage and loans and that they receive on savings have been rising despite this, from 5.8% in April to 6.08% in March for the average two-year fixed-rate mortgage – despite a 0.25% fall in the Bank of England's base rate.

Last time the Bank's governor welcomed writing the letter as an "opportunity to explain how we expect to bring inflation back to target", it will be interesting to see if he thinks the same now – and what, if anything, he can do about it.

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Posted by Katherine

I resent funding the bank accounts of Jonathan Ross, Jeremy Clarkson and Alan Shearer. I despise My Family. I hate knowing that some of my earnings after tax encourage people to go to Andrew Lloyd Webber productions.

Of course, you may disagree – you may have posters of Ross on you wall, listen avidly to the wisdom of Shearer and own the box set of My Family.

No one can deny that the BBC has a tough remit: it has to appeal often to a range of ages, backgrounds and cultures while educating the masses and providing unbiased news.

Maybe all of it could be provided without the licence fee, except for the notable exception of unbiased news.

In the US, national public broadcasting relies on telethons where people phone in to donate in support of news that is not funded by Murdoch, children’s educational programmes that do not contain adverts and political debate that is not interrupted every 10 minutes by a commercial.

You would think it would be appealing and people would be happy to pay for it, but whereas satellite and digital TV offer sexy slushy content, public broadcasting provides in-depth news.

So far, so boring. And as you may expect, public broadcasting in the US is losing the financial support of its audience. But here’s the thing: you ever think Americans are stupid or poorly educated? One of the many many reasons could simply be that they are uninformed of the events in their country as well as the rest of the world. They may be losing the ability to question or the discipline to sit still through informed debate.

Even if they wanted it, where could they find it?

So I love the existence of the BBC more that I love some of its shows, but I can live with that. But seriously, I’d be happy if they left the entertainment to the commercial channels and stuck with the things they do best.

See what others have said about the licence fee.

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Posted by James

The number of home buyers is falling, the number of first-time buyers is falling faster and - just to make things worse - mortgages are getting more expensive or being pulled from the market.

Just today Nationwide – which has traditionally been one of the good guys – announced it needs a 10% deposit for new borrowers on all but two of its mortgage products.

Add in a predicted fall in prices of 20% (which would bring house prices back to their historically average levels) mean unless you bought before 2004 you will lose out (according to a report out today from fool.co.uk).

So the question is: would you be mad to buy now?

Now this is far more than a theoretical question for me – I'm looking to buy flat in London right now.

I'm pretty lucky in that I have a decent deposit (a combination of a legacy from my grandmother and supportive parents), allowing me to get a mortgage at a reasonable rate, however my head tells me buying a house now is ridiculous.

I would be better off keeping my deposit in a savings account (therefore becoming bigger while house prices get smaller) and I would certainly be better off waiting for the effects of the credit crunch to lessen or for the Bank of England to cut rates again (which almost everyone is expecting it to do) so my mortgage payments are lower.

But somehow that doesn't matter, because I want somewhere to live.

And that's the point. There has not been a better time to buy in the last decade – especially as I am a first-time buyer and have nowhere to sell before I can move. The choice of affordable homes is increasing, and all of a sudden I can afford to live in areas that were previously out of reach.

For years people have accepted rising house prices as a matter of course, huge gains and profits have been made by people on Property Ladder, despite ignoring the best advice of La Beeny and running massively over budget.

And this means a lot of people have got confused about what a house is for. Apart from a small number of developers and landlords, homes are first and foremost somewhere to live.

But an ever-rising market made people think a home could replace a pension and guarantee a massive profit, as well as making them feel rich. Forgetting that the only time the property wealth turns into real money is when you sell it – unfortunately this generally means you have to buy somewhere else.

And that's why I'm still looking to buy now. I want to live closer to work and my friends and don't want to fund a landlord’s pension to do this.

Which brings me back to the lovely Sarah Beeny.

At the start of 2006, after house prices suffered their worst year for some time (although a fair bit better than now), I asked her if she would still recommend people buy in what looked like a slowing market.

"I personally think any time is the right time to buy a home," she told me.

"You earn money so you can live somewhere you want to live. So I think that if it's a home, now is absolutely the right time. It's a long term investment, the market may dip a little bit, move a little bit up [in the short term], but you're going to be there for 10 years so who cares, really?"

And that's why I'm spending my next few weekends trawling estate agents windows and viewing properties – because I want somewhere to live, not a "guaranteed" investment.

Do you agree? Is now a bad time to climb onto the property ladder? Post your comments below:

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If I were in charge of the bank of Katherine Fluke, I wonder if I would take time out from rolling ecstatically in my money to remind myself how I got there: the customers who put their hard-earned cash in my vaults  so I could make more money with my investments.

As the benevolent ruler of the money universe, would I thank my customers by treating them fairly, only lending mortgages that new buyers could afford and being trustworthy? Or would I shill them at every turn, gambling with their pensions and punishing my customers every time they disobeyed my agreed overdraft limit?

I’m truly grateful that I don’t own a bank as I really like being able to sleep at night and look at myself in the mirror in the morning. But I have had a brush with the ugly side of a bank’s overdraft fees.

By far, the worst of three jobs I worked to get through uni was in a call centre for one of the high street banks. My task was to deal with branches, who in turn were dealing with irate and indebted customers.

What I learned (besides the fact that with access to a computer I could refund £55 without it even registering on the system) was that people were getting into serious debt as a result of excessive charging.

Here’s what I saw in action: a customer would go £10 over the agreed overdraft limit, which would garner a fee of £27.50. If a cheque was presented and the customer had a cheque guarantee card, the bank would honour it but charge a fee of £27.50. Or, it would bounce and the customer would be charged £27.50. If the calendar month then expired, the customer would get another fee of £27.50 for another month of being over the limit.

Obviously, £92.50 is a lot more difficult to pay back than £10.

If the customer couldn’t pay it back or neglected to contact the bank (and hey – banks and debt are scary things), the bank would start issuing letters at a rate of £17.50 each.

When I worked there, the systems were totally automated and the administration involved was minimal, so I’m not sure how the fees were justified. I’m not the judge, the bank or the OFT – but it’s not hard to see why customers began a grass-roots revolt.

Good on them; though I doubt banks will start treating customers with respect and fair play on their own, perhaps the OFT can encourage them.

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Posted by James

Financial journalism is often seen as a poorer cousin to other fields.

The news guys are on hand when storms and disasters hit, reporting from courthouses and warzones. The entertainment writers interview film and rock stars, get to go to premiers and parties and have the inside track on all the salacious rumours we discuss by water coolers across the land.

The politics journalists work in a different world too. Westminster's wine bars and bistros are as important a source of news as the floor of the House of Commons, while lunch with men in command of the country becomes commonplace.

What's more, with politicians manoeuvring and plotting with and against one another there are leaks. Lots of leaks.

Finance is different – because while we might hear odd whispers from the city, it's almost impossible to report on them.

This is because while a rumour might affect a politician's reputation or a party's policies, or hasten a film star's divorce, it can cost a company billions.

I once worked in an office where we caused a major multi-national's share price to wobble – simply by reporting something an hour or two early. And when you annoy major multinationals you might as well put a target on your forehead and then send an e-mail to their legal department containing only the words "sue me".

But now and again the world of money writing collides with other "more glamorous" areas.

This happened this weekend with revelations that the Bank of England/the government was to lend £50 billion to the major banks in an attempt to ease the mortgage crisis.

Now the details of this will have a major impact on the stock market and many of the banks in question – but while it was common knowledge to political hacks days in advance and they freely reported on it as a politics story, it was not until mid-morning Monday that the news was officially released.

The news from the politics desks saw the share prices of major banks soar in early morning trading – only to crash again when the full Bank of England statement was finally released.

There is a certain exactness required to write about money – one that can be absent from other sections of a paper/news organisation. A story reading "house prices fall 1.6%" when the story is about house price growth falling 1.6% is bad enough (and seen far too often in the nationals) but things get worse when talking about actual companies and their dealings.

Now I'm not saying finance journalists should have total control every time a story has a financial angle (although I wouldn't complain) – but it would be nice to see some input on these matters as there are few people as well placed to talk about them.

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