Finance Matters

• 14Sep

  Mortgage bailout to cost taxpayer £40bn

  Mortgages No Comments

  From This is Money:

  The Treasury is considering a £40bn scheme that would see the kind of guarantees offered to Northern Rock extended to home loans.
  The move, possibly as early as next month, would be the next phase of Gordon Brown’s plan for cushioning the effects of the economic downturn.
  But offering taxpayer backing for the mortgage market would be a high-risk proposition and provoke fierce criticism.
  The Treasury is aware of a number of pitfalls, including the danger of encouraging reckless behaviour by banks.
  City banker Sir James Crosby, the former Halifax boss, is currently completing a study for the Treasury into ways of reviving the mortgage market, paralysed by the credit crunch.
  One Treasury insider said: ‘One major problem is a lack of mortgage finance, so if there is anything we can do to help with that we should think about it.
  ‘If Sir James comes back with something credible that doesn’t expose the taxpayer to too much risk then we would be wrong not to consider it.’…

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• 14Sep

  Stamp duty cut is ‘too little too late’

  Mortgages No Comments

  From This is Money:

  The Treasury announced a one-year stamp duty holiday on houses worth up to £175,000. It will save buyers up to £1,750.
  There will also be interest-free loans for first-time buyers on low incomes, help for those facing repossession and more money for social housing.
  Downing Street called it a modest but essential package of help for those at the sharp end of the credit crunch.
  But the emergency scheme, worth a total of £1.6bn, was dismissed by experts as ‘a drop in the ocean’ and a ‘political sticking plaster’.

  They pointed to a stark assessment from the Organisation for Economic Co-operation and Development that Britain was now in recession for the first time since the Tories were in power.
  Even more embarrassingly for Mr Brown, it said Britain was the sole major G7 economy facing imminent recession, although France and Germany are expected to grow only marginally this year.
  The assessment severely undermines the Premier’s claims that the UK is well-plac…

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• 14Sep

  Huge rise in PPI complaints prompts probe

  Insurance No Comments

  From This is Money:

  It has expressed concerns that the financial industry is failing to tackle serious problems with PPI sales and has written to the Financial Services Authority to spark further investigation.
  The Ombudsman said complaints had risen tenfold in two years and now accounted for a quarter of the problems brought before it.
  The sale of PPI has attracted much controversy since major complaints over the product started to emerge three years ago.
  The Competition Commission proposed a clampdown on its sale in June, after it found millions had been sold inappropriate policies or had the cover added on without their consent.
  Traditionally sold alongside credit cards, mortgages and loans, the insurance is designed to pay-out in the event the customer is unable to meet their minimum payments.
  However experts believe over 2m people have been mis-sold PPI over the past five years and would not be able to claim on policies that can add significantly to the cost of a loan and only pay out in part…

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• 14Sep

  Wedding insurance – if the big day goes bad

  Insurance No Comments

  From This is Money:

  Many weddings now upwards of £10,000 and for the cost of an extra tier on the wedding cake you can get insurance policies which will cover many of the nightmare scenarios that haunt prospective brides and grooms.
  A growing trend for couples to organise their big day independently – booking venues, catering, flowers and the rest separately – means that many of the costs are not insured and there is no central point of complaint or recompense if things go wrong.
  If couples book a service or goods from suppliers and they go bust, they will have to join the list of unsecured creditors and will be near the back of the line when it comes to claiming back costs.
  And insuring the big day is of even more concern if couples opt to have their wedding in a marquee or in premises not usually hired out for functions, when public liability cover will be needed to protect against claims for injury or damage.

  Wedding insurance

  A number of firms offer wedding insurance, ranging from spec…

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• 14Sep

  HSBC chief backs bank pay reform

  Business No Comments

  From The BBC:

  Please turn on JavaScript. Media requires JavaScript to play.
  Stephen Green, Chairman of HSBC talks to Robert Peston
  Bankers’ pay needs to be reformed so they are no longer handsomely rewarded for deals that turn bad, the chairman of HSBC has warned.
  Chairman Stephen Green told the BBC that the banking industry was too focused on short-term profits.
  He said that current pay schemes did not reflect long-term performance.
  He indicated remuneration was one of the causes of the credit crunch as some staff were paid too much for deals that ended up costing their banks a fortune.
  Banks worldwide have lost around 0bn (£170bn) from investments related to the sub-prime mortgage crisis.
  Initially these bets on the sub-prime market, which lends to those with poor or patchy credit histories, were very profitable for banks as house prices rose and borrowers repaid their loans.
  However, the market for mortgage-based securities turned sour last summer as defaults rose and the value of thes…

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• 14Sep

  Rural housing ‘less affordable’

  Business No Comments

  From The BBC:

  The average house price across rural Scotland is 13% higher than the average in urban areas, according to figures from the Bank of Scotland.
  The average rural price was £186,446, compared with £164,517, it reported.
  It found the most expensive rural local authority was Aberdeenshire (average £213,559) and the least expensive the Western Isles (average £137,319).
  But the average house price in rural Scotland was 21% lower than across rural Great Britain as a whole.
  Suren Thiru, an economist at Bank of Scotland, said: “Housing in rural areas is less affordable than in urban areas due to a combination of higher average prices and lower average earnings.
  “The difficulties for home buyers in rural locations are particularly acute among first-time buyers and are exacerbated by relatively low levels of social housing provision.”
  The bank’s fourth rural housing review also found that the average property price in rural areas was 5.9-times average annual earnings, compared with a ratio…

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• 14Sep

  New fuel measures: Winners and losers

  Business No Comments

  From The BBC:

  Gordon Brown has agreed a package of measures with the big energy companies aimed at helping people with soaring gas and electricity bills.
  It includes half price insulation for all households and a freeze on this year’s bills for the poorest families.
  But not everyone will benefit.

  Iris Hudson, 68, is one of the losers of today’s announcement.
  She and her husband, 71, both retired art lecturers, live in a Victorian terraced house in Fulham, west London.
  Under the government scheme, all over-70s qualify for free assistance to help improve the energy efficiency of their homes.
  However due to the age of her property, Iris’ walls are solid and as a result are more difficult and more expensive to insulate than more modern cavity walls.

  Add to this that her loft doubles as an art studio and has no real scope for insulation.
  “The government should be prepared to arrange alternative ways of helping a house like this which isn’t capable of being insulated in a way that they’re…

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• 14Sep

  Anger at energy boss’s winter fuel bill gaffe

  Business No Comments

  From The BBC:

  An executive at energy firm E.On has sparked anger after saying that the continued high gas and electricity prices would mean “more money for us”.
  Mark Owen-Lloyd made the comment during a presentation at a seminar run by energy regulator Ofgem looking at the impact of a cold winter on fuel bills.
  The firm, which made £877m profit last year apologised unreservedly and said it was investigating.
  Prime Minister Gordon Brown said the comments were “inappropriate.”
  “I think everybody is against people making remarks like that, and I’m pleased that there has now been a full and comprehensive apology,” Mr Brown added.
  Labour MP Roger Godsiff said the gaffe showed the firm’s “contempt” for customers.
  Mr Godsiff has been a leading proponent in calling on the Prime Minister to issue a windfall tax on major energy companies.
  “It was a very cynical comment that merely shows the contempt that major energy companies have for the general public,” he said.
  “The really sad thing is, the joke…

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• 14Sep

  Turbulent times

  Business No Comments

  From The BBC:

  Turbulence in the aviation industry has already brought down a series of small airlines over the past year – but the collapse of XL Airways is on an entirely different scale.

  The demise of the carrier and its parent firm, the UK’s third-largest tour operator, have left up to 85,000 people stranded abroad and disrupted another 200,000 people’s holiday plans.
  Travel industry insiders say its failure has sent “shockwaves” through the business and is likely to be followed by more holiday companies going bust.
  After it underwent a management buyout in 2006, XL grew quickly to become a major presence in the British package holiday market.
  It sold holidays under a range of different brands including Travel City Direct, Kosmar and Freedom Flights, as well as operating flight-only services for independent travellers.

  But even before XL chairman Phil Wyatt’s emotional announcement that his group was going into administration, there were warning signs that the firm might have overstretche…

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• 14Sep

  No-one up front?

  Business No Comments

  From The BBC:

  When West Ham’s players step out to play West Brom in the Premiership, they will do so in shirts carrying no sponsor’s name, following the collapse of XL Holidays midway through a three-year £7.5m contract.
  The Hammers have also suspended all sales of replica shirts and have started work to remove all XL branding from their Upton Park ground.
  The club’s Icelandic chairman Bjorgolfur Gudmundsson has a long connection with XL, and the failure of the holiday group which has collapsed leaving tens of thousands stranded could end up costing the Gudmundsson family up to £200m. A big hit, even for people who are very wealthy by any standards.
  Until 2006, much of the business which became the holiday group XL was owned by an Icelandic company controlled by Bjorgolfur Gudmundsson and his son Thor Bjorgolfsson.
  Family connections
  The son’s business interests are even more extensive than the father’s, and there are close connections between them.
  In 2006 the XL travel business was sold…

  Click to read the full article »

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