Obama's New Tax Costs UK Banks £11 Billion

Barack Obama has announced a new $90 billion tax on the US banking industry that will have massive repercussions in the UK. UK banks will apparently be forced to pay £11 billion as their share of the cost of repaying US tax payers for their support of the TARP programme.

Mortgages - Fix Rate or Not?

I have a had a New Year present from Bank of Ireland Mortgages. My mortgage rate has fallen from a fixed rate 5.99% to a variable rate 2.99%.
My original fixed rate mortgage was taken out with Bristol and West back in 2002. Bristol and West charged me 4.39% for a 5 year fixed rated mortgage. This original mortgage expired in 2007 and was repaced by the new fixed rate of 5.99% for two years. Bristol and West has been acquired by Bank of Ireland and rebranded. Due to the wider financial problems of Ireland - the country - Bank of Ireland have withdrawn most of their attractive fixed rate deals.

The question I now face is whether to fix my mortgage rate again - at around 4.8% for 4 or 5 years with another mortgage provider - or to carry on taking the benefit of a lower variable rate mortgage.

Getting a Dentist

Living in the fastest growing town in the UK has its problems. Government spending tends to be based on census data from 2001 when the population was much smaller.

Getting access to public services tends to present real problems as a smaller budget per person tends to be allocated than for other parts of the country. In addition, a growing population tends to have a higher proportion of children. And these tend to absorb disportionate amounts of heath and education spending. This problem is extremely evident when it comes to accessing a dentist. Children get priority and therefore ordinary adults have to go to the back of the queue.

NHS dental treatment is extremely scarce in the local area and many people are driven by necessity to private dental treatment. The interesting thing is the contrast between optician and dental services. Dental treatment gets more and more expensive and yet competition between opticians is driving down the prices of spectacles and sight testing.

Darling to Target Tax Increases at High Earners

UK Chancellor Alistair Darling appears ready to announce a whole range of tax increases targeted at higher earners.

According to the Telegraph Darling is expected to use the Pre-Budget Report to increase the rate of tax on company profits and levy additional taxes on the super rich such as bankers. These tax increases are on top of the increases announced last year that will come into effect in April 2010. Already in the pipeline are increases in national insurance plus a 50% tax rate for those earning more than £150,000 per annum.

Sadly for the socialists in charge of UK government finances, they do not seem to recognise that these sorts of taxes will just drive higher earners away. They are the sort of tactics tried by the Labour governments of the 1960s and 1970s. The public sector deficit is expected to top £175 billion in 2009/10 as tax revenues fall.

Estate Agents Regularly Lie

A study by the Office of Fair Trading (The OFT) has found that estate regularly misdescribe the homes they are selling.

The report shows that 24% of estate agents are not complying with consumer protection laws. Despite this, it seems that consumers still prefer to deal with a high street estate agent rather than rely entirely on the Internet.

The Internet is perhaps no more impartial than the high street agent. However, at least you are not subject to a hard sell. Given my local interest in the Kent housing market, I have noticed a new blog has started up that covers new homes in Kent.

The Kent housing market is a thriving on the back of improved transport links. The most significant being the high speed rail service that connects Ashford, Canterbury and Folkestone to St. Pancras International station in London.

House Price Rise of 4% in 2009

Savill's the upmarket estate agent is forecasting a year-end rise in house prices of 4% for 2009. This follows a fall of 8% in 2008.

The overall picture is very patchy, with the south generally outperforming the north. The bad news is that Savill's is forecasting a 6.6% fall in 2010. Why would anybody buy a house now if its going to be substantially cheaper in 12 months time?

One factor driving current demand is cheaper mortgages. With base rates still at 0.5% the mortgage lenders are making tidy margins. A rise in base rates is factored into most fixed rates. But there's still a wider margin than in previous years.

Living in Ashford, Kent the local housing market has been distorted by the arrival of the high speed train service to London. The market for new homes in Kent has been deflated for the past 18 months. So buyers are straining to access the housing stock. A neighbour recently put their house in the market for £75,000 more than they paid for it 2 years ago. It seems the house is now sold subject to contract. So maybe Ashford is performing better than other areas.

Nationwide Cuts Mortgage Rates

The Nationwide Building Society has cut mortgage rates by as much as 0.84% in a sign that competition is finally returning to the market for housing finance. The average cut across about 30 mortgage products of Britain's biggest building society is 0.23%. This is a welcome sign for those people who took out fixed mortgages 2 years ago when the LIBOR interest rate went above 6% following the near-collapse and Government take over of Northern Rock. At the time, bankers were unable to source funds on the wholesale markets.

The Nationwide's rate for a 4 year fixed mortgage will fall from 5.78% to 4.94%. Both HSBC and Abbey have recently tweaked their mortgage products. Various house price indices have indicated that the housing market is now past its bottom encouraging lenders to re-enter the market for 90 and 95% loan to value mortgages. The best deals remain for those borrowing less than 60% of their property's value.

Halifax Credit Cards and Inertia Theft

Why are The Halifax so useless? I started dealing with them 8 years ago when I took out a Halifax credit card and I've regretted it ever since. Now that their parent company HBOS is largely owned by the tax payer I'm ever angrier with their incompetence.

I fell out with them about a year ago over a dispute with a supplier. Halifax told me that I would have to pay the sum involved. In order to prevent that happening I told them I would close the account. Halifax said I couldn't do that because there was a £9.90 balance that wasn't due for 3 weeks. I paid the balance immediately and asked for the account to be closed. I was referred to several people before that accepted my request. However, they never closed the account. At the end of the month, £9.90 was taken from my bank account. This left a positive balance. But I'd stopped using the card and, as far as I was concerned, had closed the account.

Six months later I received a letter saying that as I hadn't used the card for some time, my credit limit would immediately be reduced from £15,000 to £500, then closed 4 weeks later. As far as I was concerned the account was already closed!!!

Any how I phoned Halifax, told them the facts and asked for my money. The £9.90 balance outstanding. According to the person on the phone this couldn't be returned unless I put my request in writing. Which I duly did. Today I've received a letter - a standard one - from an Angela Taylor who styles herself Senior Manager, Customer Services, that explains all manner of restrictions relating to future charges but no mention of the money they owe me. Given the effort I've put in to get my money I can only put this down to a deliberate policy of inertia theft. Its only a small sum. But the Halifax are driving me mad.

Interestingly, my business holds a current account with Bank of Scotland. I am so p****d of with them I'll be transferring that to another bank. Preferably one that isn't in hock to the tax payer.

Why the 50% Tax Rate Should Be Abolished

Philip Johnston of The Daily Telegraph uses an extremely amusing example of why the proposed 50p rate of income tax should be abolished. The example uses pints of beer. Where the drinkers are charged according to how much they earn. The poorest pay nothing and the rich pay the most. Everything goes well until a tax cut means the richest drinker gets the biggest rebate. The other drinkers take exception and in response attack the richest drinker. He promptly leaves the drinking circle, forcing up the price of beer for everyone else.

The moral of the story is that it doesn't take many rich people to drop out of the tax system before everyone else ends up paying more. Interestingly, in the real world, Britain has done a good job attracting tax payers from all levels. It is the richest ones who are the most mobile - take top class footballers and celebrities as recent and newsworthy examples. Just a few of these tax payers may well end up leaving in the short term. But in the long run not only will large numbers leave but fewer of the highest earners will come to Britain in the first place.

For the full story click on the post title.

Is Car Advertising Deliberately Dodgy - Seat Ibiza?

I am increasingly frustrated with car advertising. That's whether I'm intending to buy or lease. My latest frustrating experience concerns a SEAT Ibiza Sports Coupe. This was advertised at a lease price of £138 plus VAT per month.

When I contacted the company, the colour I wanted was an extra £12 per month. £12 per month equates to 8.7% of the original price. So after considerating that the colour didn't matter that much I asked the salesman for any colour that could be supplied at the £138 price being advertised. Sadly, the salesman was unable to locate any car for that price. Meanwhile, as I make this posting, the car is still being advertised at £138 per month on both the company's website and through Google Adwords. The website even has a labe of "in stock" next to price. Apparently, as I've found out, no stock exists at the price quoted.

Liberals Mansion Tax Blunder

The Liberal Democrats have blundered their way to election disaster with the announcement of a "mansion tax" on houses worth more than £1 million. Poor old Vince Cable, once seen as a voice of economic sanity, is now the target of a sustained assault by the middle class media.

Vince thought he had a vote winner. Tax the rich and make them pay for the tax cuts of the poor was his spin on the announcement. This has gone horribly wrong as many of the Lib-Dem marginal seats are in the south east, where £1 million houses are not so rare.

According to Vince just 1% of housing stock, approximately 200,000 properties come into the million plus class. He argued for a 0.5% tax on the value of these, raising £5,000 per household. However, voters remember the poll tax and the difficulties of collecting that. A mansion tax will be a nightmare. Simply, if you own a £1.2 million house, split it into two and have two £600,000 houses. In addition, the sorts of people who own £1 million plus houses are also good at organising their affairs in order to minimise their tax liabilities. Imagine the battles between town halls and their wealthier residents.

Lastly, Vince's approach attacks people's aspirations. I don't own a £1 million house - yet. But I would certainly like one. If I work hard enough, having paid tax on the money I use to buy one, why should I then pay another £5,000 a year to live in it?

See also: Vince Cable's Dangerous Thinking.

House Price Rise is a False Dawn

The Ernst and Young ITEM club have produced an economic report that claims that the current bouyancy in the UK housing market is a false dawn. The club forecasts that prices will soon start to fall again and that they wont return to the peak price levels of 2007 until 2014.

Recent price rises, seen since the spring, have been driven by a shortage of properties. At some point the immediate shortage will be over and the underlying recessionary conditions will put a dampener on the ability of buyers to raise bids.

At current mortgage interest rates, home buying is currently more affordable than at any time in the previous 7 years. HSBC recently a 1.99% mortgage product for those buyers who can afford a 40% deposit.

UK Economy Shrinking Faster Than Previously Thought

The Office of National Statistics (ONS) has revealed that the UK economy is shrinking faster than earlier figures. The growth figure for the 1st Quarter of 2009 has been downgraded to -2.4% from the previous -1.9%. Not only is the economy shrinking faster but the ONS has revised 2008 GDP figures to show that the economy started shrinking earlier than previous indications. This means that the UK recession began in Quarter 2, 2008 rather than Quarter 3.

The good news for Chancellor Alistair Darling is that with such poor figures for early 2009, it may well be possible to show that the economy is growing by the time Labour calls the 2010 General Election.

HMRC Wrongly Fines Taxpayers

Britain's tax office, the HMRC, have wrongly fined 20,000 taxpayers for late submission of their 2007-8 tax returns.

UK taxpayers are fined £100 for failing to submit their returns by midnight on 31st January. Due to complaints from professional accountants the HMRC have admitted they have made mistakes. Indeed I am one of the victims. The problem I suspect is that the HMRC's computer systems cannot cope with requirement for taxpayers to make their submission online.

In my own case I tried to submit my return on the evening of 3oth January only to find the system rejected the password the HMRC had supplied me with. The following day an HMRC helpdesk operative got me to try using various browsers and computers without success. As a result of the systems failure I was given an extension. It took more than a week - until 12th February - before the HMRC could confirm that my return had been received.

Shockingly, 3 weeks later I received a letter informing me of my fine for late submission. The HMRC letter was dated 2 weeks prior to my receipt of it. I wrote back next day but have today (12th March 2009) received another letter (dated 5th March 2009) charging me with interest.

My only hope is that the revelation that thousands of taxpayers have been wrongly fined will lead to some form of amnesty.

Marks and Spencer Still Cutting VAT

There's been some debate about the value of the temporary reduction in VAT. Recent reports in the newspapers have even pointed out that some retailers have quietly managed to forget it and have moved prices back to their pre-December levels.

One retailer, however, is still keeping honest. Marks and Spencer. Today, I was cutting through my local branch on the way to the Post Office when I noticed that polo shirts were back in stock. These were labelled at £5 each. I couldn't resist buying one. At the till I presented my £5, only to be given 11p in change. This is just a tad more than the 2.13% reduction the VAT change should have made. Good old Marks and Spencer.

Bank of England Cuts Interest Rates to 0.5%

The Bank of England today cut its minimum lending rate to 0.5%. Another record low, since its foundation in the 17th Century. Given that in that time we've had two Jacobite rebellions, fought two World Wars, seen off Napoleon and built and lost a global empire, the record low interest rate gives a measure of the current crisis. So much for Gordon Brown's claimed ending of the business cycle.

At the same time, the Bank will also pour £75 billion worth of extra currency into the nation's monetary supply. This represents 5.4% of GDP. Poor old Milton Friedman and Sir Alan Walters must be turning in their graves.

The implication for the financial services markets has yet to be assessed. You can still get 3 or 4% on your savings. And very few people are benefiting from super low mortgage rates. Interestingly at this precise time the FTSE is showing a fall of 3.0% against last night's close.

Sir Fred Has Little Prospect of Enjoying His Millions

Poor Sir Fred Goodwin. Sitting smugly up in Scotland contemplating the largesse of English tax payers. Sir Fred has got it all wrong. If he had any sense he would immediately return the £23 million he filched from the tax payer as part of his compromise deal for the greatest financial failure in corporate history. He is finished. He has as much chance of enjoying his retirement as Al Capone. For the rest of his life Fred will be as welcome as a leper. Al Capone made it to 48. Fred is already 50. The UK citizenry have paid him 40p each. They will want their pound of flesh. As the most despised person within the UK he has money but no personal credibility. Don't be surprised if Fred succumbs.

Bankers Pension Row Rumbles On

Six months after being told that the politicians were going to crack down on greedy bankers, the public realise that these same politicians stood by as the bankers helped themselves to more money.

We are gradually finding out that even in failure these superstars of the banking crash were being handed million of £s at the very time the politicians were claiming to be cracking down on city salaries and bonuses. Fred Goodwin of RBS wasn't alone in being heaped with largesse. Fred's £8 million - up to £16 million according to some analysts - pension uplift may be the biggest pension top-up. But out there several more high profile bankers were rewarded with multi-million £ pension pot contributions just to give up their jobs. Jobs that had been done so well that their organisations were driven to record levels of bankruptcy.

The latest character to come to public attention is Peter Cummings. He was head of corporate lending at HBOS. Seems poor Mr. Cummings has to get buy on a pension pot £5.9 million. Now according to reports, much of this pension pot was agreed as a condition of his departure. Who were the idiots that dreamt up such huge rewards for such atrocious performance? Seems the politicians and their civil servants were blinded by the city slickers.

Kent's Hidden Value as House Prices Slide

The Land Registry has published data that confirms that the value of UK housing continues to slide. Land Registry data is based on actual completed transactions and so measures prices slightly behind the Nationwide House Price index, which is based on mortgage approvals. In addition, The Nationwide represents just a sample of UK housing, whilst The Land Registry is a census. Lastly, the Nationwide report used data collected up until the middle of February, whilst the Land Registry's cut-off is 31st January.

Anyhow, according the the report UK house prices fell 15.1% over 12 months, with the average house transaction being £153,753.

At a more current level, I am definitely seeing more "sold" boards in my locality, Kent. Indeed some of these houses have been well above the average as my local postcode has an average transaction value of £450,000. Maybe Kent, and Ashford in particular, is a special case. Compared to the home counties at large, Kent has always represented value for money. Indeed on the basis of drive time and commuting distance from central London, Kent housing represents real value for money.

The environment for Kent house builders is also looking quite positive given the development of its transport links. Last week Ashford International Station saw the reintroduction of its Eurostar Brussels service and an increase in services to Paris. Secondly, and perhaps more importantly, South Eastern Trains have announced the early introduction of the high speed rail service to London St. Pancras. The 36.5 minute service (yes 36.5 minutes) will reduce fstest peak time journey times by 30 minutes. Powered by Japanes Hitachi trains and running on a dedicated high speed line, the new service will mean Ashford is as accessible to the capital as most towns on the M25 belt, whilst it is situated in the lowest densely populated area of the south east. This will make Ashford and the stations connecting to it a magnet for London's highy paid commuters. Prices for homes in the area can only go up - despite the general malaise elsewhere.

House Prices Fall 17.6%

According to the Nationwide House Price Index, UK house prices have fallen by 17.6% in the 12 months to February. The fall during the month amounted to 1.8%. According to the building society average house is now worth £147,746. This is a fall of £31,612 against a year previously.

The Nationwide data conflicts with some of the anecdote emerging from the housing industry, that there has been an upturn in buyer interest. Much of the data suggests that the market has bottomed out and that for buyers with sufficient funds the market represents great value.

The market for housing market is currently hamstrung by the need to raise a much larger deposit than has traditionally been the case. First time buyers have typically entered the market with a deposit of 5 or 10%. However, finance providers have been reluctant to lend on this basis given the risks presented by negative equity.

A more positive sign is that the UK government-owned Northern Rock is back in the lending market. Prior to its demise as an independent business, Northern Rock was famous for its 125% mortgages. This time round, Northern Rock will require a 10% deposit.