Monthly Archives April 2012

Mortgage News – From the Inside

From the ashes of disaster grow the roses of success. The problem is the ground isn’t very fertile and nobody’s watering the bed.

We’re in a recession again albeit more of an economy that is ‘bouncing along the bottom’ than a sharp drop and I don’t think the title ‘double dip’ is strictly accurate either. Too much time has passed since the last recession and it is barely a ‘dip’ this time around.

It is plain to see however that the outlook is still pretty grim.

National Australian Bank has announced the loss of jobs at Yorkshire and Clydesdale Banks between now and 2015 because the forecast for the European economy isn’t looking good for several years to come.

I guess this means interest rates are likely to be kept low for a few more years, if possible, to try and help households keep their heads above water and to encourage lending to businesses.

But what happens if mortgage lenders end up being forced to pay higher rates of interest on the money they borrow from money markets because of the state of the UK’s economy and the increased risk associated with lending to the UK? This would increase mortgage interest rates despite a low base rate at the Bank of England which would in turn put pressure on households, reduce the amount of disposable income and put more strain on an already fragile situation.

But if interest rates do go up it will actually be good news for – mortgage advisers!

As things stand, interest rates are low. Many home owners are currently sat on their mortgage lenders Standard Variable Rate because there simply aren’t any offers out there that can beat the rate they are on.

I personally know mortgage advisers with hundreds of existing clients who are just sat on their lenders SVR because at the moment it’s the cheapest place to be.

Imagine this, a mortgage adviser has 300 clients and all of a sudden they all want to remortgage. If the adviser makes an average of £1000 in fees and commission from each, there’s a quick £300,000 to be made!

So any mortgage advisers still active in the industry with a good solid client base are itching and twitching at the prospect of interest rate rises.

But every morning they wake up and look out the window only to see that things have not improved and today will not be their lucky day.

Some consolation may come from the fact that active independent mortgage advisers are now a rare breed. I heard (and I need to really double check this) that there are now only about 5,500 active independent mortgage advisers in the UK.

There are more advisers working but they include advisers in banks and building societies who are limited to what they can sell.

So if that figure is true and there are only 5,500 active independent advisers they will all be very busy and very happy when things start to improve – if they can wait that long!

Thinking Differently about Insurance

Many people don’t enjoy spending money on insurance. Car insurance is a legal requirement and can sometimes feel like a financial burden which is one reason people like to shop around for the best deal.

Anyone who has had to make a claim on their car insurance is more likely to appreciate the benefit and may subsequently start to look more closely at what they are buying to make sure they receive the best care when they need it most.

Car insurance comparison sites know this which is why a few years ago they started to display some of the key features like courtesy cars, protected No Claims Discount and add-ons like breakdown and legal cover.

Instead of thinking, ‘I’ve got to spend £300 on my car insurance this year’, consider this line of thought:

‘If someone claims against me after a car accident I’m going to have access to up to £500,000 of legal protection to cover compensation and it’s only going to cost me £300!’

It’s a bit more positive and makes you feel good about what you buy.

I’ve been reviewing other types of insurance and started to see them in a different light.

Take life insurance for example.

I recently helped someone with medical problems get cover of £500,000 for 20 years and it’s going to cost £55 per month.

That person could be thinking, ‘I now have to pay £55 a month for the next 20 years!’

Or, look at it this way.

£55 per month for 20 years will cost in total £13,200.

Seems like a big number but depending on how it’s put it can make the cover sound very positive.

E.g.: ‘If I give you £13,200, my family will get £500,000 (half a million pounds) if I die at some point in the next 20 years?’

‘Yes, and you can pay that monthly with no interest on the payments!’

This is why life insurance quotes now display the total amount you’d pay over the term.

It helps people put it into perspective.

When it comes to Buildings & Contents insurance it’s a little difficult to for most of us to appreciate having cover that will give us enough money to rebuild our house if it falls down. I mean, how many people do you know who’s house has fallen down?

Things that can be more important are cover for things like  flood damage or subsidence but for the majority of people the real seller should be the contents cover!

Aside from a house falling down you are more likely to hear friends and family say things like: ‘I spilt coffee on my laptop and got a brand new on on the insurance!’ or ‘One of the toddlers put jam in the DVD player and we got a new on our insurance!’

This is ‘Accidental Damage’ in action and if you said to someone you could get them a new computer, a new stereo or TV, sofa etc. if they are accidentally damaged and it’s only going to cost £100 per year then all of a sudden it seems like a good idea.

It is the benefits that make the difference with insurance and you sometimes really have to read all of the documentation or talk to an adviser to understand what you are going to get for your money.