FTAdviser.com

“Now you see it now you don’t,” is no longer a saying just uttered by magician Paul Daniels. It is a cry from mortgage advisers up and down the land as 95 per cent loan-to-value deals disappear before their very eyes.This is not magic – this is trouble.Analysis from mform.co.uk published today showed home movers who need to borrow up to 95 per cent of the value of their house can still choose from around 41 lenders offering 405 products.But rates and fees on these deals have increased as the number of lenders offering 95 per cent LTV mortgages has decreased.

The majority of products available to customers requiring 95 per cent loans are fixed rates. Typical fees are around £2,000 including valuation, application fees and administration charges.

Advisers have contacted Mortgage Adviser stating they think more lenders should stay in the 95 per cent LTV market even if it means they must demand a higher lending charge to cover their costs.

What do you think?

What a difference a day makes. And in the case of today, that difference is the publication of the Financial Services Authority’s (FSA’s) interim report on the Retail Distribution Review (RDR).

And the highly anticipated 41-page report hasn’t disappointed, with a range of juicy titbits all adding up to the creation of a clear distinction between sales and advice to encourage higher consumer confidence and participation.

Highlights include the creation of a single type of ‘adviser’ that will be independent, operate across whole-market, meet minimum professional standards and, crucially, whose remuneration would be “determined without product provider input”.

Sales will, meanwhile, be kept strictly non-advised. And that’s not to mention the FSA throwing out a range of challenges to the industry, including the development of an agreed common framework for professional standards.

As expected, following publication of such a keenly anticipated report, a veritable flurry of response statements from providers and industry and consumer groups have flooded my inbox at a rate of about one every few minutes.

Responses have ranged from Aegon UK warning that the report’s recommendations “could risk leaving millions of people without access to professional financial advice”, to Fidelity International welcoming the report with open arms.

Fidelity states that “the interim report has successfully simplified the proposals, it’s also removed much of the perceived threat to the adviser industry. As it stands, the changes will also be good news for platforms as they are well-equipped to play a role in helping to separate adviser remuneration from product price”.

But surely any negative comments from the likes of providers are just sour grapes?

After all, aren’t they really just showing how much their feathers have been ruffled by the FSA raising concerns over life offices owning or even having a substantial share of distribution firms?

That’s not to mention the watchdog’s statement that it wants “to stop product providers playing any part in the determination of advisory remuneration”.

Or are such statements accurate in pointing out that the interim report’s recommendations may fall short of one of the FSA’s stated aims of addressing the lack of consumer access to affordable advice?

I doubt it – as you would expect that such concerns to be alleviated by the newly-proposed national ‘Money Guidance’ service.

In fact, the FSA expects the generic financial advice service, which will be run in partnership with the Treasury and follows recommendations by the Thoresen Review, to stimulate more consumers to seek out regulated advice and sales services.

A near perfect recommendation if you ask me.

Let us know what you think about the FSA’s interim report on RDR.

Where else do you start an Investors’ Alphabet other than alpha and beta? Greek-derived terms and other learned jargon are bandied around so much in the investment industry that investors risk what the French call “a dialogue of the deaf”. Pundits are even divided as to the meaning of the comparatively commonplace alpha, what with alpha funds meeting their omega during the latest crisis.

Needless to say, long-only managers are fond of such phrases as “my alpha is derived primarily from stock picking”, sounding suitably like cordon bleu gravy manufacturers. Investors have to hope while they are lying on a resort absorbing some gamma – rays, that is – they do not suddenly realise their alpha is little more than enhanced beta to a sector, the sigma of their portfolios is bouncing around all over the place and their boss’s mood is further from Zen than zeta.

Technically speaking, alpha is the money a manager can make under any conditions, regardless of what is happening in the alphabet soup of the markets. Investors who want pure alpha, locked up where the beta addicts can’t get at it, are therefore best served by absolute return funds. But although the IMA is now housing them in a new absolute return sector, advisers would sooner calculate the value of pi than recommend you invest in one.

Who wouldn’t want a licence to print money?

Has the government done enough to halt the credit crunch?

The scheme announced yesterday, and backed by the government, will see the Bank of England pump £50bn of liquidity into the system. Well actually it could end up being more than that as the amount the Bank of England can lend isn’t capped, but this is what the government expects the initial take-up to be.

Where: Ambridge, Borsetshire, home of Britain’s longest running radio soap, The Archers. When: Sometime in the near future. Scene: Eddie Grundy (EG) is talking to his father Joe (JG), and son William (WG) in the kitchen of their home.

EG: “I’m sure I shouldn’t ’ave bin sold that endowment plan all them years ago when we was still at Grange Farm, but the idea of trying to claim me money back is doin’ me ’ead in”.

JG:  “’Ere, I just seen in the Screws of the World as ’ow there’s these firms what do all that work for yer. ‘No win, no fee’ says in their advert. You could get them to do it.”

WG: “Nah, you don’t wanna go to them firms. They’s all rip off merchants. Says in the Scaily Mail as ’ow you can do it all for yerself with this ’ere Financial Ombudsman scheme. And, it’s completely free, so’s you get to keep all the money you win back wivout some firm taking a big chunk ov it. And they’ve got this new simple system wiv a  freephone service that’s open till 8pm. You could call ’em when you gets ’ome from doin’ the evenin’ milkin’”.

CG: “Willyum, you’re a very clever boy. What would we do wivout you?”

The Archers was originally set up after WWII to provide information about farming in an easily assimilated manner, so the likelihood of the above scenario coming to a radio near you is not so preposterous if Lord Hunt has his way; one of the proposals made in his report on the FOS is that it should “develop partnerships to encourage relevant story lines in radio and television soap operas” to help less advantaged people access the service.

Although it runs to some 35,000 words, I was disappointed that the report did not contain more radical proposals. On the plus side, Hunt recommends that the FOS provide clear figures on recommended compensation to claimants rather than simply a formula, that case fees should be charged to claims management companies found to be submitting vexatious claims and that case fees be removed for cases found to be outside the remit of the FOS.

On the minus side, however, he rejected fees for individual complainants – even vexatious ones, ruled out any appeals process against FOS decisions, rejected any long-stop time limit beyond which firms cannot be pursued by complainants and rejected any change to fees being payable by financial services firms whether or not a claim is upheld.

Hunt has proposed that a league table be published of successful complaints against financial services firms and that a wooden spoon be presented to firms that have lost the highest proportion of cases.

Although on the surface this sounds like a good idea, I can just imagine the colossal pressure that will put on companies not to oppose even the most obviously vexatious claim in order to avoid appearing on either list. The suggestion  could end up having exactly the opposite effect of what he is hoping for.

Hunt also suggested a more ‘user friendly’ name for the FOS of the Financial Complaints Service. But the FOS is meant only to be contacted when all other avenues have been exhausted; it is not meant to be a first port of call, and changing the name in this way will only cause confusion.

Suggestions such as this lead me to conclude that Hunt seems to have completely overlooked the fact that the FOS is not meant to be a consumer champion but an unbiased and independent adjudicator.

The other night, while I was sipping champagne in one of the tallest towers in the City, a friend of mine and her partner told me that they’re trying to buy a house.

Pensions seem to have fallen by the wayside.

While dropping property prices and which lenders are offering the most competitive mortgage products have become popular dinner table conversation, it’s becoming a rare thing to hear anyone even mention the ‘P’ word.

But considering that we have just gone through the traditional bonus season – and one which was still quite plush despite the credit crunch – surely now is as good a time as any to be thinking about retirement planning.

After all, National Statistics Office figures released yesterday show that almost half of people coming up to retirement are likely to find it less than ‘comfortable’. In fact, 44 per cent of 55 to 64-year-olds surveyed don’t believe that, once retired, they will definitely have enough to live comfortably. 

Separate research by Saga Home Insurance released today also claims that an increasing number of people are facing up to having to downsize their homes in order to reduce their living costs in line with lower than expected retirement incomes.

But given that house prices are beginning to drop (the average price was down 2.5 per cent in March according to the Halifax House Price Index), people can no longer bet on the equity from their homes providing the full amount needed for a cushy retirement.

So for many of us, the choice is either tighten the belt now or in retirement – I know which one I would choose.

The third option, of course, is to work well beyond our expected retirement date. But who wants to keep working when, with a little tough love and planning, you could be supping a cup of tea with your feet up?

But even with such obvious warning signs, research by Axa released this month found that one in five high earners will either stop saving or reduce their pension contributions this year due to concerns over the credit crunch.

And this is despite another study by Axa revealing that the majority of Brits anticipate further reforms to the state pension system over the next decade, and fear these reforms will mean they will have to work longer and retire on less state benefits.

After all, who knows what kind of state pension – if any at all – we could each have to look forward to?

So, as is always the case when it comes to pensions, the time to save, save, save is now!

Tell us what you think should be done to encourage people to save more for retirement.

Well they finally did it.

The Monetary Policy Committee (MPC) yesterday came out with its highly-anticipated Bank of England base rate reduction.

But after two months (or 53 days – not that I’ve been counting) of waiting for another rate cut, the MPC hardly stepped up to the plate.

In reality, a quarter point base rate cut is unlikely to make much difference to the seriously troubled mortgage market. And on the flipside, it’s not great news for savers either!

For the man on the street – if he’s lucky enough to have a tracker or discounted mortgage with a lender that passes on the full benefits of the reduction – it actually only means a saving of £16 a month on a £100,000 mortgage. Hardly enough for a round of Friday-night drinks down the local.

And several lenders are, of course, still dragging their feet on passing on the reduction to customers, blaming the high London inter bank offer rate (Libor) which remains at 5.92 per cent over three months.

The mortgage market had called for the MPC to make a more decisive 0.5 per cent reduction – and that was at the very least!

But instead it got a paltry 0.25 per cent cut, which was served up without any sweeteners as the MPC offered little sign of any other aggressive action to combat the threat of a significant economic slowdown.

So why didn’t the Committee take the decisive action called for?

Basically, the argument goes that the MPC’s hands were tied due to rising inflation. As the MPC noted, the closely-watched consumer price index (CPI) hit a nine-month high in February.

Employment, output and consumption measures all remain strong, leading economists to suggest it’s still too early for the MPC to make more decisive rate cuts.

And that’s not to mention the plummeting value of the pound, which is sitting at a disturbing low value of 80p against the Euro – seriously bad news for anyone considering a European jaunt over the spring or summer.

So rather than opt for a higher rate reduction, or one at all, shouldn’t the Bank of England instead be coming out with alternative economic measures to improve liquidity and keep inflation in check?

Instead it appears to be gambling on the knock-on effects of a slowdown in the City doing some of this for it. As the MPC said yesterday, if commodity prices stay where they are “inflation should fall back”.

But is this really going to happen given the low value of the pound?

And doesn’t this just add up to the MPC simply postponing the inevitable?

Tell us what you think about the 0.25 per cent bas rate cut and whether lenders should be quicker off the mark to pass on the reduction.

The decision facing the nine-member Monetary Policy Committee (MPC) this week could be its hardest yet.

Since it was set-up in 1997, the MPC has probably never been under so much pressure to reduce interest rates.

The credit crunch began rearing its ugly head in the latter half of last year, arguably in September, but since then the MPC has adopted a rather cautions stance, choosing to reduce interest rates only twice.

In December the Base Rate was reduced by 0.25 percentage points to 5.5 per cent. This was followed by another 0.25 percentage point reduction to 5.25 per cent in February.

But with lending being reduced, repossessions rising, investment banks writing down huge amounts of money, company redundancies, and pretty much anything else negative you can think of, the pressure is now really on the Committee to take some decisive action.

So, they must choose to either hold the rates or reduce them – and if market sentiment is anything to go by, the rates need to go down, and soon.

Regardless though, there’s still a chance the MPC may sit tight and wait until next month to be sure that the credit crunch is really having an adverse effect. But if I were to go with my instincts I’d say that rates are going to go down this month… but then I’m a journalist not a psychic.

If you look at the way the MPC voted in March though, it does seem as if the balance is swinging in favour of a reduction as two members voted for a decrease last month. That was one more member than the month before.

So why is the Committee being so cautious? And what does it have to consider when deciding whether to reduce the base rate or not?

Right now, it has to question how badly the credit crunch is affecting the economy – something that is glaringly obvious to the average person on the street watching his mortgage and bills go up and credit card limit go down. However, the fact that the Bank of England last week said that the crunch is likely to intensify could certainly be a factor to influence the MPC’s decision.

There is also the matter of rising inflation and conditions in the housing market, which are not exactly good when you see a rising number of first time buyers and those without deposits being practically excluded from the market.

On top of this there are reports that house prices are falling – by 2.5 per cent in March, according to the Halifax. But the MPC’s considerations don’t stop there.

Whether they reduce interest rates or not also depends on how much money we are spending, not to mention how our trading partners around the globe are fairing in their individual economies.

Looking at all that, it seems a tough decision to make. There’s no changing the fact that we’re facing challenging financial conditions and maybe there’s actually no quick fix at all.

So sit tight and hope for the best, and maybe think about replacing that glass of bubbly for a glass of water – best make it from the tap.

Do you think the MPC should reduce interest rates this Thursday? And do you think that they will? And if they do, will it actually make any real immediate difference? Or are the problems in our economy already too deep to react?

Tell us what you think.

“Chelsea temporarily pulls plug on intermediary range”, “Mortgage availability set to worsen”, “Salt pulls full product range”.

These are just a few of the many gloomy headlines flashing across FT Adviser.com this week.

In fact, Chelsea Building Society, The Co-Operative Bank, First Direct, Lehman Brothers’ subsidiaries Preferred Mortgages and Southern Pacific Mortgages (SPML), Salt and Stroud & Swindon have all withdrawn mortgage products in recent days.

Given the speed with which we’ve been publishing these alerts, you’d be forgiven for wondering whether there are actually any products left on the market. You’d be right to ask.Shockingly, the number of different mortgage products available has dropped by 12 per cent since Monday alone, falling to 4,754. This compares with 15,599 different deals at the beginning of July 2007 before the credit crunch first hit.

This morning’s news that Salt has pulled its entire mortgage range proves that this already low figure is still dropping.

So what should those unfortunate few who need to remortgage do in such a rapidly moving market?

And yes, sadly, I am including myself in this group (due to bad timing by reaching the end of my current deal, rather than overall bad financial management I might stress).

Yesterday’s announcement from the Bank of England that the number of available mortgage products is expected to fall further over the next three months only reaffirms that there are no benefits to the ‘wait and see’ approach.

Worse still, according to the BoE’s first quarter 2008 credit conditions survey, the cost of mortgages also looks also set to increase due to the higher borrowing costs which lenders themselves are incurring.

That’s not to mention that part of the reason for the recent flurry of product withdrawals is because lenders offering the most competitively priced products have been very quickly overcome with applications.

Lenders have of course been tightening their credit criteria for some time now.

It’s unrealistic to expect this to change, just as it’s unlikely that lenders will stop reducing the maximum loan-to-value (LTV) ratios they are prepared to advance. Although Halifax’s announcement this afternoon that it will introduce an additional 75 per cent LTV band to its mortgage range from Monday does offer a small glimmer of hope.

Given all this, for me at least, it boils down to one very simple question – higher fees and a lower rate, or lower fees and a higher rate?

I’m not sure what you’ve got planned for the weekend, but I’ve booked appointments with my IFA, my bank’s tied adviser, and also a nice long date with my laptop and several mortgage comparison websites.

Tell us what you think about the product withdrawals.

I know it’s April Fools’ Day, but I doubt there’s a lot of Northern Rock employees that are laughing.

Well that is except for one former member, Adam Applegarth.

Yesterday’s report on Northern Rock’s full year 2007 results revealed that the former chief executive received a rather nice severance package totalling £760,000, plus a pension fund of £2.62m.

His appetite for big houses and top of the range cars should certainly be satisfied by that.

And then there’s Ron Sandler, the latest addition to the bank who has been hired in the hope of being its saviour.

He is being paid £90,000 a month for his efforts as executive chairman regardless of how fruitful they may be.

His deputy, chief financial officer Ann Godbehere, is thought to be on around £75,000 a month.

All of this is a big investment for a bank that comes with no guarantees of becoming profitable again.

The bank’s management still has to convince the EU that its business plan to return it to a profitable financial institution is indeed a solid one, and that competition rules will not be breached.

Indeed, hidden deep in the bank’s 2007 financial results report is a line that says that in the event that EU approval is not gained, the bank would likely be wound down.

“I cannot say with any certainty that the plan will be accepted by the EU, but I am hopeful,” were the words Sandler spat out yesterday.

But when so much money is at stake – our money – I’d like a bit more reassurance please.

So are any lessons being learned? Not yet it seems. Taxpayers are still saddled with risky debt and have also taken on the running costs of the not so solid Rock.

But this is just one side of the story.

On the other, are around 4,000 nervous people unsure if they’ll be in their job next year, or even next month.

Of the total number of Northern Rock employees, around 2,000 are to get the sack – most likely in 2008.

It doesn’t take a genius to work out that they must be pretty angry.

And then of course there are thousands of shareholders who have seen the value of their shares tumble from over £12 this time last year to virtually nothing today.

If you add them up, it gives us around 18,000 shareholders who’ve lost their money and 2,000 workers who will lose their jobs.

They are the big losers in this story.

Whether Sandler manages to turn the bank around or not, he will still bring home the cash.

According to Vince Cable, Liberal Democrats’ shadow chancellor, the Applegarth pay-off was “outrageous” and a “straightforward case of reward for failure”, and I have a tendency to agree with him.

But will the failures stop here? Or is this temporary nationalisation led by Sandler just another disaster waiting to happen?

Tell us what you think here.