Wednesday, December 19, 2007

Mortgages: Best Buy tables...the problems

Are mortgage best buy tables you see in newspapers misleading?

The biggest problem is Lenders know how to manipulate them, the biggest snare is usually the ones at the top have large arrangement fees. Lenders use the arrangement fee as part of the cost of the deal rather than reflecting their administration costs

There are a number of problems with mortgage best buy tables. They don't contain important information such as:

1 Miss Loan to value (how much of the property value can you borrow)
2 Loan size
3 higher Lending charges
4 Applicant's salary & profession
5 Type of property
6 How long is the rate for? 6 months?
7 Is interest calculated daily or annually?

There are 12 000 mortgage products on the market, so maybe it's worth getting advice from an independent professional.

Tuesday, December 18, 2007

Greed & fear

Sonja Schemmann of Schroder made a very simple but highly truthful statement recently.

"Greed drives markets higher, fear drives them lower"

Until this summer the markets were driven by greed, the global economy was was expanding, companies were buying other companies. Investors were putting their money into new areas without understanding the risks.

Result: markets reach new highs

Then this summer, problems emerge in the US banking sector, inflation rises due to high energy & food prices occurred. Consumer & business confidence falls & the markets drop.

Friday, December 07, 2007

Neil Woodford Invesco Perpetual "UK flirting with recession"

Leading fund manger Neil Woodford believes the UK may be in recession by the end of next year. he states fears that the a downturn in the housing market may affect consumer confidence in other areas of the economy.

He runs £20 billion worth of money in various funds. In the last 5 years £1000 invested in Woodford's High Income Fund has returned £2610 compared the the FTSE 100 which would have returned £2100.

Recently he has favored utility companies, the oil sector, telecoms and a number of stock specific situations such as Tesco.

He is most famous for investing significant amounts in tobacco companies , which generate huge profits.

Wednesday, December 05, 2007

Virgin II FTSE 100 Tracker Fund

Lawrence Gosling positively trashed Richard Branson & virgin Money with his comments in the previous post.

Would I, a Swindon based Financial adviser recommend Virgin products to my clients?

Well let's look at one.

The Virgin FTSE 100 is an investment fund which tracks the movements of the 100 biggest UK companies. This is not so great for a number of reasons.

  • The FTSE 100 still contains Northern Rock
  • Performance of FTSE 100 trackers is little better than breaking even over the last 7 years
  • The Annual Management charge is 1%, its cheapest competitor is 0.2%

Would you trust Richard Branson & Virgin with your money?

“Would you rather give your pension, to get you through retirement, to a number of Scottish financial institutions that have been around for a few hundred years and are financially secure”
“Or rather give it to a group by someone who made his name selling records and has since dabbled in gyms, trains, mobiles and more recently financial services?”
“Buying a pension or life assurance is not the same as buying a plane ticket or a CD”
"I can see no reason why anyone would want to do business with the Virgin Group for financial services. It is not offering anyhting that yo cannot get better from other financial institutions"
The views of Lawrence Gosling in this week’s Investment Week (3/12/07)