After the best part of 4 years in the doldrums and billions of pounds of tax payers money the Bank’s have found their mojo again. 95% mortgages are back ( 100% between family members) , £50000 of secured loans can be achieved with bad credit and little proof of income and investors can purchase property with absolutely no proof income!

So what have we learnt? The answer may well be nothing but perhaps it is worse than that. Have we realised that it is not loan sizes that are the problem but the consequences of not being able to pay them when we hit turbulence such as illness or unemployment? ( Manchester United haven’t). The recent vilification of payment protection is going to make a bad situation a lot worse. However my greatest concern is that we have bred a generation on ridiculously low interest rates who expect mortgage rates to be around 3.5%! They have a huge shock in store when at some point before they pay off their loan they will experience rates four times the current levels.

But what of the banks? They are still allowed to risk billions of taxpayer pounds in high risk derivative trading, their management team still don’t face punitive action for not understanding what they sell and the regulator who failed us miserably is changing its name but not its management.

So what am I saying. Well I am going to do a Vince Cable in that after “low” interest rates come “high” interest rates and whilst I am not saying this is imminent to use another cliché whilst it is sunny it is time to mend the leaky roof of financial affairs. It is certainly worth taking free financial advice while it still exists – but that is another story.      

Vince Cable believes the solution to our reckless casino banks is to shine a light on them. A more practical solution was recently offered by Stephen Milne a prominent Aberdeen accountant. Stephen says let’s not worry about forcing the bank’s to carry massive amount of liquidity and keep the Bank of England as a lender of last resort – but when the Directors decision making  brings a bank to its knees jail they should be jailed. Give them 30 years and a low level of provability so that the courts convict. Let’s then see how banks are managed.

I initially laughed but have failed to come up with a good reason as to why he is wrong.

RBS / National Westminster invited myself and other local professionals ( they also charged us £15!!) out to dinner last night (close your ears Vince Cable) at a Casino.  

I asked the question that all small businesses are asking to the local director “why don’t you fund small businesses”? His unashamed answer was that there wasn’t enough profit in it for them. He went on to tell me about all the expensive managers he employs and that it just doesn’t make sense to lend small amounts like £250000. In full flow our man then described the Bank’s monumental c*ck up that brought the world’s financial markets to its knees as an “error”. In regard to competition, he said when there were other lenders in the market they had to cut rates and make some deals unprofitable or  their clients would leave them. Now there is no competition they just don’t lend at all.

And finally !!! He went on to describe what he believed was the outstanding service they offered and how bank managers make brilliant consultants with their detailed knowledge in industry – the last RBS manager I met now delivers cars and has to hitch home!!!!

Small business owners even successful ones with long track records are now having to fund work in progress by remortgaging their homes. Withdrawing from the commercial lending market completely is the only way bank’s such as RBS / Nat West  will ever notice that small business did in fact feed their gluttonous bellies.

Whilst I don’t know when the Bank of England are going to increase base rate I am confident that the Bank’s are going to increase their rates fairly soon. Why do I think this? The Bank’s will claim that the Basel agreement on capital adequacy will increase their costs, they will also claim they are losing money pre credit crunch non profitable mortgages, they will claim they need to put up rates to attract savers.

In reality they will put up rates because the market is uncompetitive and they can !

Particularly if you are a mortgage owner on a standard variable rate it is absolutely time to look at your financial affairs and get all debts down to their lost cost and more importantly fixed for upwards of 3 years! Don’t forget to check out unemployment cover because the net two years at least are going to be very stormy! One last check if becoming self employed is even a germ of an idea definitely consider fixing your mortgage now as you won’t get another chance for possibly 3 years.

I was attending an excellent charity function on behalf of Hertfordshire Action on Disability when a prominent local chartered accountant stated about proposed regulatory financial services changes that not only has the horse already bolted it has probably found new stables. Indeed it has! I met with a Commercial Mortgage firm today who claim that one about to be two High Street Banks are declining loans to their customers and then passing client details on to brokers, the bank will receive commission if the deal gets placed elsewhere.   

From the Bank’s point of view this is great business as they still get rewarded for failure , don’t have to do any work, no regulation and best of all no capital adequacy requirements to meet! Theoretically the Data Commissioner should be interested in this but the Bank’s will no doubt claim ( and probably prove) that at some point in the relationship the customer (albeit unknowingly) consented to the information being passed on.

The regulator will definitely view this as just another commercial transaction and not see any consumer abuse in these types of transactions.

Shocking and Sad !!!!!

Planned improvements by the Financial Services Authority to prevent another mortgage crisis could make finance for the self-employed in Beds, Herts and Bucks virtually impossible. And it could even encourage mortgage fraud.

That’s the fear of local mortgage expert Mike Meldrum.

The FSA are due to announce a series of new regulations in October. It’s expected these will call for banks to prove income from everybody including the self employed and unless the bank’s change their lending rules most  businesses younger than 3-years and any other SME whose accounts show declining profits will have their mortgage application declined according to Mr Meldrum, who runs ‘The Mortgage Mine’ in Harpenden.

“The self employed have traditionally organised their finances to be tax efficient,” he says.  “And they’ve used ‘self certification of income’ to borrow money. But now it’s likely that these certificates will be made illegal by the FSA, so putting many families in a difficult position,” he says.

Ironically adds Mike, who’s been in the business for more than 15-years, another of the new proposals asks lenders to look forward and reject deals if future income is not guaranteed and again decline mortgage applications this could mean MP’s and indeed the FSA’s own staff failing the mortgage test.

“The FSA is due to be abolished in 2012 and so if current FSA employees or indeed MP’s with their uncertain futures fail to disclose their career prospects on any mortgage application form, they could be committing mortgage fraud,” he points out.

The Financial Services Authority! In their recommendations to “improve” the mortgage market say they want the future circumstances of applicants to be assessed – that’s all their employees stuffed then because we know they are being abolished in 2012.  What about MP’s they are all unemployed in less than 5 years so no mortgages for them either.

Of course if the FSA employees or MP’s fail to disclose their future career blips on their mortgage application forms they will be committing mortgage fraud and be black listed by lender.

Whilst the citizens advice bureau are correct in their calm before the storm comment this morning they referred to the “storm” as being the forthcoming public service job cuts. The real storm are the millions of people who are sitting on tracker / variable rates who when the banks start increasing interest rates to “normal” levels are going to be sitting with unaffordable mortgages. They are also unlikely to be able to go to another bank to remortgage. In addition there are millions of self employed or newly self employed who cannot “prove” sufficient income to justify a mortgage that they have already been paying for decades and who could lose their homes.

Don’t believe for one nano second that the Banks will be sympathetic because you have been a good customer since you were 16 – they can’t because their “service” has been replaced with computers who don’t care who you are or how good a customer you have been.

I know interest rates are not scheduled to go up in the next 6 months but now is time for those people whose mortgages are a big part of their income to fix the rate for 3 to 5 years and get the h*ll out of this market!!    

Don’t say you haven’t been warned!!

As many of you know I consider the ability to repay a loan or mortgage more important that the value of the house. So if I was lending your money which would be the safest risk? A couple about to start on a second marriage who have a long and successful track record in employment. Additionally they have excellent employer or personal illness / unemployment protection or a first time buyer 6 months out of university whose deposit is provided by Bank of Mum and Dad?

The first example was an actual case and the couple borrowed 110% of the value of the property and surprise surprise they have never missed a payment.

Today the regulator would throw a fit at such a deal but like every other regulator wouldn’t offer a practical alternative.

Bring Back 125% mortgages !!!!!!

I often hear today’s youngsters talking about always being positive. Fine I don’t have a problem with this but I do have a problem with valid objections and concerns being ignored on the grounds of being negative. If television is a window into society then too many kids seem to think that positivity is a replacement for skill, effort and ability.

The collapse of the banking industry is a great example of this when the talking shop took precedence over even the most basic financial control.

No doubt I will be moaning at the team again tomorrow, being accused of negativity just because I want them to understand their jobs properly and more importantly make sure our customers understand exactly what they are committing themselves to.

I know what you are all saying – I am an old fashioned broker – and you would be correct!!!