MSN Money UK editors' blog

Drawbridges up

Mon, 30 Jun 2008 14:30:12 GMT

Posted by James

An Englishman's home is his castle – the saying is close to 500 years old, but still rings true for millions.

And when you find yourself in troubled times, the normal practice for castle-dwellers is to pull up the drawbridge and sit out the problems until things get better.

True to form, the nation's homeowners are doing just that. With news out today showing a ninth consecutive month of house price falls, Britons are responding to market trouble by simply not moving.

Figures from the Bank of England (also out today) show that in May just 42,000 people took out loans to move house. That might seem a lot, but it is less than half the normal average, 28% fewer mortgages than the month before, 64% fewer than the same month last year and the lowest number since the Bank of England started counting mortgages this way in 1993.

Normally you can expect to see around 100,000 loans approved for people moving home each month with this number going up to 120,000 in the good times. But things haven't been good for a while.

The last time there were 100,000 people taking out loans to move home was in September 2007, since then the number has been steadily falling: 88,000 in October; 81,000 in November; 72,000 in December and so on until we hit 42,000 in May – the latest month we have figures for.

Roughly translated that means three times more people were moving home (or buying buy-to-let properties) a year ago. Now this is both good and bad news for house prices.

Firstly, it means (in all likelihood) most of the people moving house now have to move. Whether it's because they have a new job somewhere else in the country, have had children and need more room or more unpleasant reasons such as job loss, insolvency or divorce it means they are in a weak position to negotiate.

At the same time, all the people who might like to move - but don't need to – are staying put rather than sell in a falling market.

While forced sellers are always present, if there are fewer people moving overall then they will make up an increased percentage of the national averages.

And that tells us something interesting about house prices: the month-on-month falls in house prices reported are being based very few transactions largely conducted by people who are desperate to sell.

The rest of the homeowners, safe in their castles, are waiting out the current problems in the mortgage market until they can trade up or out with a healthy profit again.

While this is terrible news for estate agents, it means the overall property market may well be stronger than many people claim.

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Methods behind our most expensive gallery

Fri, 20 Jun 2008 14:12:28 GMT

Posted by Katherine

Even people who wouldn’t hesitate to buy expensive products can shirk at the thought of investment: a few threads of saffron or a memory card for a digital camera has immediate use, whereas investing seems complicated and risky.

But whether you choose to invest in your computer or commodities, the fact remains that certain investments are a way to beat long-term inflation and save on the overall cost of living. Think of it this way: if the rising cost of oil is affecting your finance, investing in oil could offset these price increases.

In the same way, if £1 becomes less valuable because of inflation, investing in gold ties your current money to the gold standard – a much more stable and valuable unit.

Still hesitant? Look at it this way: by weight, many of the things you own are either more valuable than gold or a significant percentage of it.

To illustrate the point, we put together a gallery to show what you may invest in for day-to-day living and compare it to the price by weight of gold.

To work out the conversions, I asked Jane Douglas, science whiz and editor of the tech and gadgets channel, for help:

"For the liquids, where we had already had a volume and a price, working out cost per cubic centimetre was straightforward: the first figure divided by the second.

"For the solids, we needed a density and a mass (easy for gold, water, paper, and polycarbonate plastic for CDs) to calculate a volume, to again divide by price.

"In the case of the memory card, the volume of was found by multiplying the dimensions of the card together."

Click on Jane Douglas and Maneeza Iqbal’s grid below for details. If you have any improvements, write in and let us know.

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May feedback

Mon, 16 Jun 2008 09:06:15 GMT

Posted by James

It's the time of the month again for us to respond to your feedback. So here we go:

The state of the property market and the economy were on people's minds again this month.

"I'm sorry‚ but the articles on MSN Money are about nothing but bleakness and pessimism. All this about: 'Oh‚ we're all going to lose our money,' and 'our lives are getting worse,' does nothing but promote tension and unnecessary anxiety and worry," one user wrote.

"You may be anti-government‚ but you have done nothing but manifest that instead of inform people. So please‚ enough with the rubbish advice about how we can save a few pennies‚ and how we are all heading for a disaster and the dark ages," they continued.

Another added: "I guess if you keep talking about disaster then it will eventually happen. The media always publish negative news that's their job! But I will keep going with my buy-to-lets and my 10% returns even today and I will let others gamble their money on shares which may I remind you is the highest risk investment you can make just ask the Northern Rock share holders."

At MSN Money we always try to reflect a balanced view – and have run articles questioning whether things are as bad as the headlines suggest.

However, when respected data shows many indicators are running at 15-year lows we have a duty to report it and look into the implications. Rest assured we will be at least as enthusiastic if things pick up.

Of course, some people love it when things start to go a bit wrong.

"How come no one is putting the blame where it should be? With the estate agents," wrote one user.

"They ‚ through greed put house prices up ‚ it's not like crops that increase because of rising fuel or wages. Estate agents make the market‚ so if it has now crashed around them good - let's hope all these leeches go under and the government get off their asses and bring in laws to regulate the so called business."

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Personal property

Mon, 09 Jun 2008 09:07:46 GMT

Posted by James

House prices are falling, rents are rising and mortgages are impossible for first-time buyers.

Except none of this is true or, at least, it's not true for everyone.

Because no one is buying the whole market, no one is renting the whole market and there are still some people who can afford to buy.

Speaking to an estate agent this weekend he told me that while viewings used to stand at 80 a week, they are now down to 40.

That's a huge drop off, but still means prospective buyers are looking at 40 properties a week. Moreover, he explained there are incredibly few new instructions going onto the market (he had only had one in the last week, a three-bed town house). This means that competition for each property is still strong.

And while house prices are falling on average, some properties are still going for above their asking prices.

That's why people need to be very careful when looking at headlines about the property market in the press. Because the only thing that matters is if you can sell your property or afford to buy a new/first one.

The specific case of one house, in one street, being sold or bought by one buyer taking out a single mortgage from one lender can bear no relation to the general trends.

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72% can afford homes?

Fri, 06 Jun 2008 11:33:33 GMT

Posted by Katherine

Perhaps I’m too bitter to judge the housing market impartially, but this recent PA story gave me pause for thought: apparently one young working household in four are priced out of the market.

“Around 28.3% of young working households in Great Britain cannot afford even the cheapest property in their local area, according to a report by Professor Steve Wilcox of the University of York,” said the story from PA.

So, nearly three in four young working households can afford to buy? Really? I didn’t know I was in the national minority – I thought that most new buyers were priced out of the over-valued property market.

Of course, the south-east is worse, where 41% cannot afford their own home, but even this figure seems low to me.

Anecdotally at least, most of my peers are nowhere near being able to afford their own home. “I would be able to afford a garage maybe – but I’m waiting for the market to crash,” said one of my colleagues, which is the normal response I hear amongst first-time buyers.

But cynicism aside, could it be the housing market is better than I thought it was? We'll be getting some writers to weigh in on this very matter later next week.

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Building for the future

Mon, 02 Jun 2008 14:10:38 GMT

Posted by James

It's a gloomy time to be a finance writer – actually, scrub that, it's a gloomy time to be in Britain.

After 10 years of soaring house prices, the wheels are off the property wagon. But that's not the only problem – gas bills are up, petrol costs more, food costs more, mortgages cost more, tax is rising and the pound is falling (making holidays to Europe cost more and making it far more expensive to move abroad).

Pay deals aren't looking too rosy either. The government has no money to spend, so the nation's teachers, nurses, police, civil servants, firemen, soldiers and an awful lot of others won't be seeing much more money handed out to pay for the rising cost of living. Private sector workers aren’t in for a great year either – with profits falling left right and centre as the public realises it doesn't have money to spare on luxuries, fuel bills has hit commercial operations. On top of this, the stock market is down about 500 points on last year and the banks have hiked rates.

There is some good news though – manufacturing is up.

For the last two-and-a-half years this much-maligned section of the economy (Brown's economic miracle was meant to be focusing on services and financials – the two sectors being hammered at the moment) has been doing rather nicely. And now more firms are recruiting to keep up with demand.

"Most manufacturers have made hay while the sun was shining, and are proving much more resilient to the credit crunch than many analysts had predicted," said Bob Hale, head of manufacturing at financial advisers Grant Thornton.

And this is good news for more than the manufacturers of boats, light switches and vacuum cleaners – it might even help the economy long term.

After a decade of growth in services, property, government posts and financial services the economy has become rather unbalanced.

But despite its un-trendy image, Britain can still do well in manufacturing. Car manufacturing is back. There are plants for Nissan in Sunderland (which at one point was the world's most efficient), Honda in Swindon (which is so good it exports to Japan), Toyota in Derby and Mini/BMW in Oxford, while smaller firms are innovating and there is success from boat builders to light switch manufacturers.

So, amid all the negative news, it's good to know that something's going right for the economy.

Do you think the economic pessimism has been overdone? Have your say by posting a comment below

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Credit where it’s due

Fri, 30 May 2008 13:09:41 GMT

Posted by Katherine

One of the best things you can do to get your credit back on track is to monitor your credit report. If you’re not on the electoral roll, you can join and see the marked improvement. You can rectify any mistakes and tidy up credit cards.

Better still, seeing the small, incremental payments add up can give you a much needed boost of encouragement when you’re trying to get out of debt.

But what if you don’t have access?

One of our users just wrote in:

“I have one comment about credit reports. To get one online it's necessary to give details of a credit or debit card first. But, like others, I cannot have a credit card because of my credit rating.”

It’s awful to run into even more stumbling blocks when you’re trying to sort out your debt, so I took this question to Experian.

They said: “If you don’t have a credit card you can still sign up to CreditExpert using a Masetro (Switch) card. Alternatively to order a single copy of your credit report by post you can contact Experian and make payment of £2 by cheque or postal order. The address to write to is PO Box 8000, Nottingham, NG80 7WF. If writing, you need to provide your full name, date of birth and addresses over the past six years.”

Let us know if you have any more questions about any other stumbling block you find while on the site, and we’ll get back to you.

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The price of single

Thu, 22 May 2008 16:50:02 GMT

Posted by Katherine

While I understand that the government should never subsidise lifestyles, I must admit that living by myself hurts. For a start, rent, food, gas and electricity aren’t charged on a per-user basis.

But some things just drive me nuts: council tax, even with the generous discount, still leaves me paying 25% more than someone living with a partner. This is despite using 50% less of their services. While I love the BBC and have no problem paying for a TV licence, I resent paying the same as a cohabiting couple. And while I completely see that having a holiday is optional, it makes me see red that I have to spend as much as a couple to do so.

A recent article by Naomi says that I spend only £60 less than a couple spends each month – and the recent food and fuel prices have started to pinch. I never drink, I don’t smoke, I don’t eat meat and I have a careful budget (I aim to spend £5 a day or less to cover food and such), but even this admirable lifestyle leaves me perilously close to my overdraft each month.

What else can I do? To suggest I can save up for a pension or a deposit is laughable, which brings me to the next point: it’s not going to get any better. There’s a good chance I won’t be able to retire or buy a flat unless any rich and previously unknown relatives comes out of hiding – and I earn a living wage.

Seriously, what can the government possibly expect from people who have children, or people on the minimum wage? That they should save the cash they need to eat for a day on an expensive pension that may not match inflation?

It hardly sounds like a good deal. But how on earth can you begin to make it fair? Feel free to leave your suggestions.

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Debt-problems and the affluent

Mon, 19 May 2008 13:17:07 GMT

Posted by James

Headlines are screaming this morning about the fact middle class people are now facing a debt crisis.

Ever the ones to ensure a balanced view, tabloid headlines have been restrained: "NIGHTMARE OF MIDDLE CLASSES AS DEBTS SOAR," was the Express' take on the story while the Mail on Sunday headline read "middle class families face huge debt crisis".

But how much of a debt crisis can someone on a good income really face?

There was a sketch on satirical news show Bremner, Bird and Fortune this weekend involving a group of people having dinner discussing falling house prices. "Does that mean I'm poor now?" asked one of the dinner guests. "What am I going to do?"

"Well," responded another: "You could always sell your house in Normandy."

And I suppose that's the point.

The full story from the debt charity explains that "middle class people who took out loans when money was cheap are turning to advice agencies", whereas in the past the clients were "mainly benefit claimants and social housing tenants".

Now, while not everyone has a house in Normandy to sell, a few middle-class homeowners, who borrowed unwisely, being forced to sell their homes and move into something smaller is not something that I see destroying the economy.

While an unpleasant prospect for those involved, especially if they have young families, few of these people are going to be in serious trouble in the long term.

However headlines screaming of a tidal wave of debt sweeping the country and now enveloping not just the poor, but also the middle classes, is something that will hardly help the situation – although it might sell more papers and give you something to talk to your friends about over a glass of Chablis and a salmon en croute starter.

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April feedback

Wed, 14 May 2008 12:41:35 GMT

Posted by Katherine

The comments were short but sweet for this month, so let’s get right to it.

The cost of living
Emma-Lou should really make clear that the first two items on her cost of living article apply to England and Wales only as Scotland's prescription prices have gone down to £5 per item (on a sliding scale until free in 2011) and also in Scotland everyone‚ irrespective of age‚ gets free dental check-ups and also free eye tests on the National Health Service.

This eagle-eyed user was absolutely correct, but the rest of the price hikes will certainly still smart for the entire UK.

Conversion rates
Hi‚ why is that the exchange rate is no longer included on the UK MSN home page (exchange rate as in £/$)?

The main MSN UK homepage was re-jigged a bit, and while we gained a standfirst (the sentence under the main headline), we lost space under the stories.

Alas, were we in charge, the entire portal would be MSN Money, but we have to share space on the main homepage with the other channels.

Experian
One user ran into technical problems when he tried to get his free credit report from Experian.

Using links from your homepage to order a free credit report from Credit Expert (from Experian) I was unable to complete the application because clicking on the 'continue' tab at the bottom of the second page nothing happened. Have these details reached the correct destination or was the application aborted? I hope the details have not ended up in a questionable place?

While the company attempted to find the user based on his first and surname, they were unable to narrow it down from other clients with the same name.

After apologising for the inconvenience, a spokesperson from Experian explained: "Generally customers who do not fully complete the application their details are not saved. If a customer completes the first page then we hold their e-mail address and send out further e-mails."

The details would not have ended up anywhere untoward.

Page downloads
One user was frustrated with the amount of time it took to load pages on the channel:

There are issues with the page download times - the pages are freezing for minutes at a time‚ due to the time it takes to download the ads!

Usually, when something goes wrong with an ad, the editors here are the first to notice it, given the amount of time we spend on the site. There really is a wide gulf between editorial and marketing here, so we experience almost the same environment as our users. Furthermore, user experience is a higher priority than pushing an ad that is broken, so keep on letting us know if an ad is too obtrusive.

That’s it for now – keep your comments coming in, and we’ll do the same next month.

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The letter's in the post

Tue, 13 May 2008 11:22:27 GMT

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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See what others have said about the licence fee.

The entertainment tax

Wed, 30 Apr 2008 13:58:31 GMT

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.

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Buyer's market?

Mon, 28 Apr 2008 14:42:28 GMT

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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Forcing banks to be fair

Thu, 24 Apr 2008 12:40:33 GMT

Posted by Katherine

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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When money and politics collide

Mon, 21 Apr 2008 15:36:21 GMT

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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