FTAdviser.com

At last it seems someone is singing the praises of the intermediary community.

I almost feel like standing on my chair in front of everyone in the office and chanting “hallelujah, hallelujah!” Except, I think my colleagues would find that a bit strange.

Don’t know what I’m talking about?

Well today the Intermediary Mortgage Lenders Association (IMLA) came out and wait for it… sang the praises of advisers across the country.

Yes it’s true, take a seat and enjoy this because I’m actually giving you good news.

IMLA sent us a statement saying that brokers were “vital” in helping consumers find the right deal.

Its executive director Peter Williams then went a step further and said: “It is clear that IMLA’s members and membership could not have flourished without the intermediary sector.”

He even added: “Consumers for their part have benefited greatly from the myriad of products available to them, and from the expert and independent advice provided by intermediaries who guide them through this bewildering market place.”

Now how does that make you feel? Like, finally, your well-being is actually being considered?

Continuing on this happy note, you could say today so far has been good all round for the financial services sector.

Only one company so far, The Money Centre, has announced redundancies. Yippee.

Isn’t this a great day?

Actually, come to think of it, why is it that IMLA, an association which represents the interests of lenders who market their products through brokers, are sending out such a back-slapping message? Should we smell a rat?

Looks like, the tide could be turning and IMLA has taken a step to bridge the unhappy gap between lenders and intermediaries.

I think it is extending to you an olive branch on behalf of the merciless lenders.

But are you willing to accept it? That is the burning question. Or do you think they will bite your hand off?

When supermarkets started moving into financial services, there was much consternation that they might start taking market share from the more serious professionals.

But while those who work in the financial services sector might grimace at the supermarket checkout when they see those leaflets, any passing observation of those queuing would suggest that they have other things to worry about – like getting their kids away from the sweets.

Nonetheless, this has not stopped Asda from coming out saying it is toying with the idea of getting into mortgages.

While Asda could claim to be rather successful at tapping into the needs of consumer with perhaps less to spend each week, it is a little worrying that they should be trying their hands at mortgages.

Those who read the papers closely are familiar with the never ending fines that supposedly trained and qualified advisers get hit with. So if the professionals can’t always get it right, what hope is there for the supermarket checkout girl?

Clearly Asda has not said how it would roll out this supposed entry into the mortgage market, but is it really sensible to reduce what for most people, is their biggest financial commitment, to a commodity product?

It is important now more than ever that consumers get professional help when looking for a mortgage – many advisers are saying that they are having to work twice as hard achieve the same goals, so if the professionals are saying it is tough, how does a supermarket think it can do better?

Perhaps there is some complex financing arrangement that Asda has come to with its super-giant parent Wal-Mart.

If so, then I think we should be rather afraid.

Liquidity is a rubbish term if you ask me. What does it really mean?

According to the Encarta dictionary it either means the state of being liquid or assets that can easily be converted into cash. So, basically when the FSA is droning on about liquidity it is talking about banks and building societies having to make sure they have enough cash in their coffers in case their customers decide to beat down their doors.

It is crystal clear why the FSA has been banging on about liquidity lately – Northern Rock. It may now be nationalised but it continues to cast a shadow over its rivals.

As we returned to our desks after a Bank Holiday weekend, the City watchdog published feedback to its discussion paper on liquidity requirements for banks and building societies.

The FSA paper looked at ways the liquidity policy should develop, taking into account the lessons learnt from the events in the last year. The feedback showed most lenders were currently reviewing their stress testing scenarios and contingency funding plans.

What did we get out of this latest FSA tome on liquidity? The promise of yet more chatter on this tedious topic.

Paul Sharma, director of wholesale and prudential policy for the FSA, said the watchdog would consult further on all aspects of a new liquidity regime later this year, including setting out proposals on sound practices for managing liquidity risk with a strong focus on stress-testing.

Surely all that is needed is for financial services providers to take a teaspoon of the medicine you intermediaries have been handing out to your clients for years; Don’t put all your eggs in one basket.

Northern Rock bosses believed the bank’s coffers were in a fine state because they never expected all their savers and the investment banks that loaned them cash to panic at the same time. They relied on a steady flow from little more than a single source and never saw a dam being built up overnight.

Why is it that nothing in life is ever easy when the banks get involved? Case in point was a recent trip down to my bank to arrange my remortgage.

Sounded easy enough. After all, the hubby and I had already spent hours (and a few ‘tense’ moments) comparing lenders and products across the market and had come to the conclusion that our current lender was actually offering a fairly competitive rate without too steep an admin fee. So why not stick with what we knew?

I must have been too pleased with the fact that the bank’s mortgage broker hadn’t asked us to produce the usual mass of documentation needed to prove our identities, our UK residency (as Antipodeans), our ownership of the home, its valuation etc as they miraculously still had it all on file. Remortgage done!

But little did I realise the long list of hard sells that was to come. We were in a small back office, so they had us cornered.

First it was income protection, which we quickly shot down. The broker didn’t even flinch before moving smoothly on to critical illness cover, this was followed by identity theft insurance and travel insurance, before we moved on to a VERY long list of investment options, starting with every banks’ favourite, Isas.

Five various incarnations of ‘brokers’, ‘advisers’ and ‘salespeople’ and an hour later and both of our heads were spinning. At one point I began to wonder whether we’d walked into McDonalds by accident and fully expected someone to ask ‘do you want fries with that?’.

But the worrying thing was that none of these up-selling ‘sales’ pitches was even remotely tailored to our needs, to the point where they were even trying to double-up products that we already have. For example, our travel insurance and identity theft insurance are already covered by the hubby’s existing credit card policy – with the same bank!

Given how far they managed to beat down my guard by the end of this, I’m now extremely concerned about how many people are convinced to purchase such add-ons – and possibly mis-sold – by the smooth sales patter of the banks’ agents - and their steely persistence.

As my colleague Maike Currie pointed out in the latest ‘Money Talks’ blog, the average Joe trusts their bank and believes they are receiving ‘advice’. Yet as one reader wrote about their friends working in banks: “They are given targets to sell and bluntly pushed to sell, sell, sell.” Another reader posted: “Branch managers are now often recruited for their sales experience rather than banking experience.”

This doesn’t exactly inspire a lot of confidence for the future of the market under the RDR’s proposal to separate advice and sales, as this has the potential to allow this trend to grow exponentially. And that’s on top of the fact that I’ve already lost count of the number of times I’ve had to explain to friends outside of the industry the difference between tied, multi-tied and independent financial advisers.

I don’t hold much hope – do you?

Earnings: from Jade Goody to Warren Buffett, we all like them. But while for most of us the word is just a euphemism for the bag of filthy lucre we lug home after a month’s hard labour, investors have a variety of meanings to grapple with. 

The kind Jade Goody is probably most concerned with is the most straightforward – net income after tax. A company’s quarterly and yearly earnings are its most scrutinised figures. It’s not uncommon to see an equity plummet into the red after a profit warning, just as positive numbers tend to boost shares upwards. 

Where Ms Goody will start to lose interest is earnings per share. At this point Warren’s ears get twitchy. As well as being a crucial part of the price-to-earnings valuation ratio, EPS measures how much a company has made for every share in the marketplace but hasn’t paid out to its shareholders as a dividend. As a cross between Ms Goody and Mr Buffett might put it, “How profitable is this puppy anyway?” 

Earnings momentum describes whether EPS growth is accelerating or decelerating. Factors like sales, cost improvements, market expansion and new product lines can influence this in either direction. In other words: “If things carry on the way they’re going, how profitable could this puppy be in a year?” 

Ask any equity fund manager the first valuation metric they look at, and most likely they’ll tell you the next measure – price-to-earnings. By now Ms Goody is unconscious with boredom, while old Warren is on the edge of his seat.  The p/e ratio, or earnings multiple, gives you an idea of the price paid for a share relative to the company’s annual income. It is calculated as price per share divided by EPS. For example, if a company’s paper is trading at $50 a share and EPS over the past 12 months were $2, the p/e ratio would be 25 times. When analysts talked about p/e multiples in emerging markets becoming “stretched” towards the end of last year, they were referring to ratios of up to 75 times. In common parlance, “a total rip-off, mate”.  Forward price-to-earnings ratios are used to assess share values on a prospective basis – just substitute EPS with predicted EPS in the equation, using consensus analyst estimates. 

Don’t despair if these equations give you nauseous flashbacks to maths class. The nightmarish prospect of looking at the stock market on these principles day in, day out, is why we employ fund managers. And if you don’t trust someone else to get these things right consistently, cash under the mattress is still a valid investment option. 

Let me be clear that I definitely don’t want to ruin a good thing by speaking too soon, but there looks like there is a slim chance that we have weathered the worst of the storm. Well, at least from the mortgage lending side of things anyway.

Rather than seeing the usual flurry of press releases cross my desk about lenders pulling rates and products, I’ve only seen a relatively small ’smattering’ in the last week.

Admittedly there have still been a couple of rather significant blows to the market.

The Commerce Centre has just announced that it’s no longer accepting new enquiries for commercial, bridging or residential secured loans. And Cheltenham & Gloucester did pull its entire mortgage range on Monday, giving some intermediaries less than 15 minutes warning (don’t even get me started on that one).

But there is a glimmer of hope in that we may see some lenders returning to the market over the next six months or so.

Commercial First, for example, has refinanced in order to create a £40m three-year working capital facility. And while the lender has been clear that this doesn’t signal its immediate return to the market, the indications are promising.

After all, most of the lenders that closed their doors to new business in recent months branded the move as “temporary”. Granted, it’s highly unlikely all of the lenders (it is a rather long list after all) will re-enter the market.

But is it too soon – and too naive – to hope that we may have seen the worst of the storm?

There looks to even be some hope in regards to the heated topic of lenders’ providing little notice of product withdrawals.

While many are still dismissing complaints about this trend as unavoidable and “a consequence of a turbulent market”, Skipton Building Society says “this isn’t a scenario we see as long-term”. Yes, Skipton claims “there are already signs of the market moving, albeit slowly, back in the direction of normality”.

With the sounds of Treating Customers Fairly (TCF) tunes ringing in my ears and the RDR interim report lying on my desk, I thought I would share a short story on just how ‘fairly’ banks treat their customers, and in passing mention how the RDR’s great sales/advice divide might just the kind of regulatory permission which banks need to further push inept products and chase sales figures.

When polarisation was abandoned in mid 2005 it was justified by claims that it was anti competitive and that consumers had failed to understand the difference between independent and tied advisers.

We ended up with a mish-mash of different categories of advisers, with the borders between independent and tied advice blurred beyond recognition, not helped by some multi tied advisers claiming erroneously to be independent, because of the obvious cachet attached to the word.

The reforms proposed in the original RDR report were over complex and confusing. But the FSA interim report on the feedback to these proposals seem to suggest a return virtually to the status quo of polarisation, albeit with a couple of notable differences.

The consensus was for a much simplified three tier structure; if adopted it will show that the FSA has accepted that distinct independent advice is in the best interests of consumers.

Most feedback supported a single tier of adviser for full advice: to be considered independent, advisers  must offer products from the whole market; there are to be minimum educational standards with no grandfathering; and providers should have no part in determining the amount of commission paid to advisers – remuneration should be agreed between adviser and client only. So the door is not completely closed on commission, but this may change.

Any advisers who are not whole of market will in future have to call themselves salesmen, suggests the report. This is an astonishing and highly controversial proposition, which has delighted the IFA community but horrified the banks and building societies, most of which abandoned independence for the easy ride of multi tieing. There is no doubt that they won’t like it one bit, and I expect to see strong lobbying on their part for the FSA to abandon this proposal before its final report in October.

I also can’t help wondering where this will place companies like St James’s Place, which calls itself a wealth management company. Under the current regime, it is technically a multi tied agent, so its ‘partners’ would become “salesmen” under the proposals. In response to my question about how they felt about being called salesmen in the future, its spokeswoman said that SJP “view themselves very differently to what is proposed”. I bet.

There are, of course, many excellent tied advisers who give a first class service to their clients and SJP may well be one of those. BUT, they are offering a limited range of solutions and depend almost entirely on commission for their income.
The FSA said it has a huge amount of work to do on this, and needs to consider the legal, regulatory and commercial issues of the proposals, which it believes have “potential to improve consumer understanding of the market,” although “there may…be less choice for consumers”. I’m not sure why less choice for consumers might now be acceptable, when it was not in 2005.

The report goes on to say that “we recognise that in making final decisions, there may  have to be trade offs against this simple view to achieve the right outcomes for consumers”. This last statement sounds to me remarkably like a get out clause for the likes of the bancassurers and SJP.

In the last few years lenders have boasted their technology has helped borrowers who would have once been refused a home loan because their income multiples did not stack up.

Simple income multiples were usurped by computer systems that could assess if a client could actually afford the mortgage they so desperately needed to climb the property ladder.

Lenders met concerns about the swift adoption of technology by heralding a brave new world. Mortgage advisers are now finding this computerised approach to assessing their clients in biting them on the backside.

The same technology once heralded as a saviour of borrowers without a regular pay packet is now being turned against those without massive deposits or a nice monthly wage.

To coin a phrase from BBC sketch show Little Britain the computers are saying no and mortgage advisers are being left with the unenviable task of having to explain this to their clients.

Lenders are increasingly using customer profiling technology to decide what deals to offer to existing borrowers as part of managing so-called churn, online mortgage company Mform has found.

Systems such as Intelligent Churn Management sort borrowers into categories based on how likely they are to switch and how likely they are to get into trouble with their current loan.

The systems then use the customer profile to decide how to deal with borrowers coming to the end of deals – and those who are seen as less likely or able to switch are offered the worst deals.

Most at risk are younger borrowers with less well-paid jobs who may only be offered standard variable rate deals – typically around 7.25 per cent – while older and wealthier customers will be offered most competitive deals.

Is using the same technology that helped get these borrowers onto the property ladder in the first place to throw them on the mortgage scrap heap treating customers fairly?

Treating Customers Fairly (TCF) – we’ve all heard about it, talked about it and read about it.

It’s that well-know piece of Financial Services Authority (FSA) regulation that has found itself splashed across so many headlines and by December must be central to the work of all firms operating in the financial services industry.

But for one day let’s forget about TCF and talk about TBF – Treating Brokers Fairly.

With all that has been going on between lenders and intermediaries recently, I wonder how many of you would support a Treating Brokers Fairly campaign?

It seems to me that brokers have had a lot on their plate or, in some cases, perhaps not enough.

Brokers are undoubtedly suffering from the credit crunch and are seeing business volumes drop. But as if that isn’t enough on its own, the issue of dual pricing has raised its ugly head.

There is no doubt that lenders have been pricing direct products more competitively than those they’re making available to intermediaries. Put simply, cutting out the middle man, which I know thousands of you are up in arms about.

But it doesn’t stop there. Lenders are also withdrawing products with hardly any notice and in some cases giving brokers as little as a few minutes warning.

It’s no wonder brokers are feeling sore.

But now it seems one more issue has arrived to challenge the patience of intermediaries. In a word: cross-selling.

When times are hard and business volumes are down there is going to be a push from all quarters to sustain and gain as much business as possible. But have you ever felt like your clients are actively being targeted by some lenders? Are they are always cross-selling to clients you introduce?

I guess it boils down to the age-old issue of client ownership.

Can a lender really promise not to cross-sell to clients intermediaries introduce? And do you want them to? Should specific agreements be put in place over client ownership to protect intermediaries?

FTAdviser.com has put these questions to a range of UK lenders, but surprise, surprise, we’re still waiting on their responses.

In the meantime, tell us what you think about cross-selling practices and if you think brokers are being treated fairly.

Any of our readers who have been chained sobbing to a desk and force fed more accountancy rules than a foie gras goose will have recurring nightmares about the double-sided balance sheet. Assets perch prettily in the left hand column; equity and particularly debt loom threateningly on the right. The balance of debt and equity on the right hand side and – most importantly for advisers – fund managers’ attitudes towards it can be critical in choosing profitable or hopeless investments. 

If a company is listed, having a lot of debt and many interest payments to make can burden its profits, its money management and its owners and directors, some of whom may be less engrossed in financial engineering than others. It is easy for companies to hide how their debt is eating into their balance sheet by producing a neat little Ebit – or earnings before interest and tax – figure every half year. If managers are particularly concerned by the debt of the companies they invest in, they will compare this to pre-tax earnings. A big difference between the two may make the alarm bells clang louder. 

However, private equity firms may leverage the unquoted companies in which they invest to abnormal levels. The theory is these gurus of the balance sheet should be able to use debt to expand their holdings and juggle the interest payments at the same time. If this sounds risky, it is why these firms command such high fees. 

There are many ways of calculating the basic debt-equity ratio. One of the most widespread is total debt divided by enterprise value, which discounts a company’s current cash flow. But anyone who needs nightmares about a double computer screen to supplant their visions of double-sided balance sheets should look no further than the financial analysis section of a Bloomberg terminal for more information. 

Let me stop you there – especially before anyone gets on their high horse about how any potential recession is really the fault of the doomsday media.

Because, shock horror, I’m about to take a positive approach to the UK’s economic outlook (or at least give it my best shot). Blame it on the recent sunny weather, but it does appear that not all hope is lost…yet.

After all (casting aside this week’s appalling predictions on inflation and house prices and the ongoing debate over lender’s dual-pricing) we have actually received several pieces of good news this week.

Most importantly, it appears that we’re not going to miss out on our summer holidays.

American Express has come out today stating that more than a third of us are opting to cut back on daily ‘treats’ in order to splash our cash on a summer vacation instead. I know I’ve found myself pulling back from making certain purchases – even if those sandals would have looked good pool-side in Corfu.

Such considered approaches to our finances are, of course, spurred on by the threat of the economic dip continuing. But NatWest says that many of us are already savvy enough to stockpile our savings to offset any short-term debt or money troubles. (Consider this a ‘get out of jail free’ card, of sorts.)

Research by the bank found that Londoners are the county’s best savers, with an average stockpile of £14,067 per household. But those in the North East aren’t in quiet such a positive position, with an average of just £5,370 saved up.

So it appears many of you are doing well in getting clients to consider their budgets – and safety nets – more closely.

And for some potential first-time buyers (of which an impressive 82.5 per cent used an intermediary in Q1 2008 according to figures from the Council of Mortgage Lenders) building up such a nest egg now could mean that they’ll finally be able to get on the property ladder.

Admittedly they’ll still need rather more than £5,000, but the government announced earlier this week that it plans to help out by widening its part-buy, part-rent scheme (previously only offered to key workers). Yes, an extra £100m in funding is being pumped into the scheme in order to benefit 75,000 low-income house hunters.

So while we may have to tighten our belts and forego certain treats, with a bit of savvy forethought chances are that we’ll avoid the bailiffs knocking at our doors.

How’s that for a positive outlook?

For those of us unfortunates who are struggling to get on to the property ladder for the first time, it isn’t just about scraping that 10 per cent deposit together, or being on a decent enough wage to get a mortgage.

For us would-be buyers, there is the added annoyance of having to rent in the meantime.In most cases, rental contracts go swimmingly. But my housemate and I had the utmost bad luck when the shower pipe in our bathroom burst.

Along with the mini Niagara Falls in our little semi, it was having to deal with the lack of a managing agent as our landlord had set up sticks in another continent, so the (still) on-going negotiations of sorting out the wrecked wooden floors, dodgy electrics and being shower-less for two long weeks was down to us.

Indeed, this is an extreme circumstance, as many renters I know have gone from place to place without so much as a dripping tap.

I did not realise signing up for a rental place would bring so many problems.

I wonder how far these landlords think through the whole Buy to Let scenario. Some may think that Buy to Let is a fool-proof way of profit making, with some landlords buying up rows of houses to rent out.

The Council of Mortgage Lenders had noted that number of Buy to Let loans rose by 23 per cent last year, marking a thriving Buy to Let market.

It appears to be an easy flow of income, but surely this is superficial. From my ‘character building’ experience, it seems some landlords do not know the extent to which they are responsible for their tenants’ well-being. Or what kinds of rights and responsibilities they have.

However for me, there is a stark lesson to learn – never take on a rental property without a managing agent, and number two, have more pots and pans available for future indoor downpours.

Buy a property, let it out and earn yourself a nice little retirement income. Wasn’t that the dream?

It was certainly mine.

The first part of the dream was to have my own house with a vegetable patch in the garden and then be settled enough to start building up my very own property portfolio.

My vision included targeting the student market, because after all, there’s thousands of them looking to rent properties.

Everyone else seemed to be doing it, so why not me?

Well, the fact that I had yet to earn enough to be considered for a mortgage for my own home, let alone a buy-to-let property, was the major stumbling pointing on that dream. But now, I have to say, I’m actually quite glad.

The buy-to-let market is filled with professional investors who make a living out of buying and renting out properties.

But, of course, it is also filled with people who, like me, watched endless property programmes and thought buying a property to then rent out – seemed like a good idea.

And it’s them I feel sorry for, as they look to come off worse from the current economic slowdown or the credit crunch or whatever you want to call it.

It seems entirely possible that there will be a large number of semi-professionals having their properties repossessed in the coming months.

One reason is because the cost of repaying mortgages has risen, and for those amateur property investors who were just keeping their head above water, this alone could be enough to drag them back under.

The burden of this is added to by the fact that the number of buy-to-let mortgage products available in the market is continuing to drop.

And of course the rising mortgage prices could also result in a rent void. All and all this means that the chance of a property being repossessed may actually be quite high.

Put simply, falling house prices, no change in rental prices (if a landlord has tenants on a static rental price for a 12 month contract, for example) and increasing mortgage prices spell bad news for landlords.

With many people being put off or unable to buy properties at the moment you’d think that the buy-to-let market would be sound, given that people need to live somewhere and renting is the alternative.

But that doesn’t change the fact that some landlords have simply got themselves in too deep.

You may completely disagree. Maybe you think it’s not the end of the booming buy-to-let market and that it is actually an exciting time to invest?

At the moment you could buy a property and instantly go into negative equity if you get it wrong.

What do you think?

Is it an exciting time for the buy-to-let market where there may be lots of bargains to be had for the savvy investor, or is it a dangerous one?

When it comes to offering advice and accepting recommendations trust is vital. If your client did not believe the words coming out of your mouth or you felt the individual sat in front of you was not being frank and honest then the relationship and transaction taking place simply would not work

Faith is also important when it comes to advisers’ relationships with lenders. How can an adviser recommend a client rely on a certain lender when they feel they have been stabbed in the back by the same provider?

After being bombarded by calls from advisers complaining about dual pricing policies we decided to dig a little deeper in this week’s Mortgage Adviser and call all the major mortgage lenders left in the UK market that currently do not under cut intermediaries.

Mortgage Adviser asked lenders to promise they would not offer cheaper rates directly to consumers rather than through intermediaries in the future. Only Coventry Building Society, which last year launched intermediary lending arm Godiva Mortgages, was willing to promise it would not under cut advisers.

Lenders other than Coventry observed you could never say never in the current market and would not rule out cheaper deals being offered directly to consumers in the market. This is a sad state of affairs.

Most consumers – and advisers – want certainty. By being unable to or refusing to take a stand and promise not to offer more favourable rates to customers who do not seek advice the vast majority of lenders are not giving advisers something they can cling on to, believe in and trust.

The term ‘contango’ may sound exotic, but it originated in the grime of Victorian London, possibly as a corruption of ‘contingent’. But current applications of the term lead more naturally to the resource-rich tropics. These days, contango refers to a situation where the futures price for a commodity exceeds the price of snapping it up on the spot.

Oil prices were ‘in contango’ in 2006, for example, as punters anticipated future shortages. Arbitrageurs took advantage of the situation to make risk-free trades, buying oil cheap on the spot market and selling it dear in futures contracts, knowing that the price of storage would never exceed the premium. Demand from the hedge funds forced up both oil prices and storage costs, eventually pushing the market out of contango. 

Two years on, hard commodities have found themselves sharing the investment spotlight with soft commodity counterparts like corn and lean hogs. Bad harvests, cyclones, and subsidies for bio-fuel are creating precisely the kind of uncertainties which have found expression historically in complex, non-linear futures curves. Drastic near-term shortages, with an expectation of normal supplies in the future, can even lead to ‘backwardation’ – the Jekyll to contango’s Hyde – when spot prices start to exceed futures rates.

Clever fund managers with their eye on the commodities ball will doubtless pounce on these inefficiencies. Contango may yet filter down into common parlance – and the Microsoft spell-check software. And if it doesn’t, it would be a great triple-spanner in Scrabble…

Boo! Hiss! The MPC has done it again – gone and buried its head in the sand.

Yes, I know that yesterday’s decision to keep the base rate at 5 per cent was prompted by the Bank of England’s rising blood pressure over the recent pick up in inflation. But surely controlling the possibility of a slowdown in economic activity should be the more pressing issue?

Of course, escalating oil and food prices are placing increasing pressure on UK consumers, but does the MPC honestly believe that it can control such matters simply through its rate policy? Increasing food and oil prices are the result of global supply and demand and the weak US dollar!

It really does fell like a pantomime, where you want to scream at the Bank of England: “Watch out! There’s deteriorating economic conditions coming up behind you!”

Every economist worth their salary believes (or should that be ‘knows’) that the base rate will come down further this year. Barclays Stockbrokers, for example, is betting it will drop as low as 4.25 per cent.

So why is the MPC dithering? What difference is a month of thumb twiddling really going to do?

I know many of us expected the MPC to stick with its bi-monthly rate cuts. But that didn’t stop me from hoping – just a little – that the committee would shock us all by taking more decisive action. (Not the least because it would have knocked a few quid off my monthly mortgage repayments!)

After all, the economic indicators are all there – retail sales have plunged, mortgage funding remains tight, house prices are on their way south and there is a growing threat to the employment rate.

That’s not to mention today’s announcement that the number of homeowners facing court actions and the possibility of the repossession of their homes increased 16 per cent in the first quarter of 2008.

It all adds up to the fact that the base rate needs to come down – for me, it really is that simple.

What do you think?

Call me stupid, but I thought that remortgaging was a simple matter of getting one lender to pay off the loan we already have against our home, and henceforth we stop repaying lender ‘A’ every month and start paying lender ‘B’ back instead.

Silly, silly, silly. What actually happens is the nice bank that gave us our first loan – Northern Rock – causes a national scandal, a customer stampede and now legal action from shareholders. I called a reputable broker (if I can’t find one while working for FA, we’re all doomed) and set out the criteria; 30-year loan, repayment, tracker, no/low arrangement fees.

Product sourced and I gloat on how easy this process will be. Then Woolwich’s e-application system keeps crashing, eroding my lunch-break as I recite time and again to the broker our depressing estimated monthly outgoings. Having agreed a fee with the broker and with the application pending, I breathe a sigh or relief.

Then…a solicitor we used for the original property purchase had been contacted by mistake (the product has free legals) and tries to tell us that along with his astronomical hourly rate, we must also pay for new searches, new surveyancy costs, a private valuation of the property as well as the lender’s own valuation costs, plus numerous miscellanious costs (£25 for electronic data storage?!). The ball-park total runs to thousands of pounds.

My heart freezes until I speak to our broker and am reassured that this is all unnecessary. Woolwich are contacted to ensure the free legals are in place instead. We end up paying a top-up fee on the legals as we are taking a guarantor off the deed. 

We are then surprised to find that because the broker had asked for our full names, we are sent further paperwork for a legal change of deed ownership – apparently passport identification and bank verification wasn’t enough to prove that with our middle names included, we weren’t in fact completely different people who coincidentally have the same first and last names of the previous occupiers. Give me strength. This relatively simply task has created so much (unnecessary) paperwork, I’m sure we have half of the New Forest in our lounge.

The final icing on this hard-to-swallow cake was that with our broker’s keyfacts document in hand, we realised that despite paying his fee, the broker still got to pocket some £600 in commission. With Northern Rock’s SVR hitting us hard, we (perhaps foolishly) didn’t quibble about this and just prayed for a speedy completion of the remortgage and an end to the saga.

In hindsight, this both proves the value of the key facts document and that complacency can trump the most hardened of penny-pinchers, allowing brokers to line their pockets in the knowledge that everything is ‘above board,’ while the customer’s mottled perception of advisers is further tarnished.

With interest rates on the downward trajectory and our tracker now in place, this all seems like much ado about nothing. Until we venture into another remortgage, I suppose!

If I have learnt one thing from working on Financial Adviser, Investment Adviser and now editing Mortgage Adviser it is this – Advisers have long memories.

In the last few weeks we have been inundated with emails from intermediaries moaning about lenders putting out direct to consumer deals that under cut their intermediary ranges.

Halifax, Woolwich, Nationwide and Abbey were accused on widening the gap between direct to client and intermediary products. All lenders said the move had been about controlling levels of business, they had been forced into it by the market and it was not intended to upset advisers.

Advisers are an understanding bunch. I know many appreciate the work being done by Abbey, which last week brought back mortgage exclusives for intermediaries, and the other three lenders who incurred their wrath this week.

They know how tough the market is at the moment and appreciate some things will occur that hurt them. However when the going gets good again – and it will eventually – they will remember those who stuck by them.

After a three-day Bank Holiday weekend, all seems to be strangely quiet in the financial services sector.

Beta is the second letter in the investors’ alphabet after alpha, so you might expect it to play second fiddle. But if you are looking for funds whose returns bear some relationship to a transparent benchmark, you are putting beta back into pole position. 

There is just one number investors need to remember in relation to beta. Luckily for their memories, that number is one. If a fund’s beta exceeds one, its performance will magnify the benchmark, overshooting spectacularly when the benchmark soars and undershooting wildly when it dips. If a fund’s beta is lower than one, it is more likely to do the reverse. 

Whether you opt for low beta or high beta depends on your risk profile. A high beta fund will sink its teeth into a rising index, but a low beta fund is a safer insurance against the index crashing just when you need to withdraw your money. Managers can also enhance or reduce their beta to certain sectors to profit off significant top-down trends. 

The most famous, or infamous, types of beta funds are trackers, which have a beta of one to whatever index they track. Their notoriety depends partly on a sheep mentality – if the index falls off a cliff, they fall off too. But the best UK All-Share trackers outperform the average active manager after charges, partly because they are so cheap to run. Legal & General, which runs billions in UK tracker money, has built up such huge stakes in UK companies that it can claim an important role in UK boardrooms. Are beta hacks the new activist investors? Alpha masters, eat soup.

The gloomy conditions in the UK financial system may be about to improve.

Or at least that’s what the Bank of England tried to convince us yesterday in its Financial Stability Report.

In its twice yearly financial stability review, it recognises that the end of the credit boom has finally come and is proving to be even more prolonged and difficult than expected.

It also predicts a rise in financial distress among vulnerable borrowers as a result of the tighter credit conditions.

Not exactly groundbreaking stuff.

The bank seems to be holding onto the fact that one of the main problems facing our country – and one of the reasons the economy hasn’t bounced back to good health – is the lack of consumer confidence.

In fact, it says our increasingly negative outlook is actually fuelling some of the problems in the financial markets because of the reluctance to take risks.

These self-inflicted problems aside though, the bank claims that the most likely outcome for the economy is that the risks to financial stability will decrease gradually in the period ahead.

And the report goes further to say: “There are some signs of an improvement in credit market sentiment in recent weeks.”

Really? Is this true, or is this just incredible optimism, I wonder.

It’s not that I want to be negative but somehow I just can’t see this being the beginning of the end to all of the problems.

If you look at individual businesses you won’t see management breathing a sigh of relief and getting more lax with their budgets. No, you actually see them continue to tighten up.

Perks that were once taken for granted continue to be taken away and pay rises are basically non-existent.

So regardless of the fact that the bank says basic fundamentals such as employment levels and economic growth remain strong, the bottom line is that people are still feeling the pinch and expect to do so for some time.

What do you think? Is the UK going to avoid a full-blown meltdown? Or are we in for a bumpier ride, with worse to come?

Tell us what you think from your experience on the frontline.

Given the break neck speed the world of mortgages moves at I should have known excitement about Abbey for Intermediaries decision to re-introduce mortgage exclusives would not last long.

Abbey pulled exclusive deals for advisers last month in order to maintain service levels so it was nice to see them return with competitively priced propositions on Friday morning. It was as if a rain of sunshine was finally bursting through the clouds.

However, no sooner had the world started to look a little brighter than Chelsea announced it has been forced to pull its entire intermediary mortgage range due to increased demand.

A year ago Mortgage Adviser used to ask lenders what was on the horizon for the mortgage industry in the next 12 months. Most industry commentators are now reluctant to predict what may occur in the next 20 seconds.