Traditionally, people would put their savings away into a savings account, generally a higher interest  account, with the highest rate accounts offering higher returns the less you touched your money (ie, notice accounts).

Those people with a lot of money to save would often look to save their money in multiple accounts with multiple savings providers, and those paying higher tax put their savings into offshore banking.

While there were additional tax-free interest savings options, such as TESSA’s, PEP’s, then ISA’s, and variations on savings such as the premium bonds, that was as complicated as it got.

Those who did not want to invest in stocks and shares, mutual funds or index funds, futures, bonds, or other investment vehicles as part of a portfolio, remained just savers.

What has happened since the financial crisis is now those savers have become investors, without realising it.

Savings rates have been slashed as the Bank of England lowered interest rates to record lows of 0.5% - with both current account and savings account rates following suit.

The result? Most current accounts now pay 0% interest, and savings accounts rarely offer more than 1.5% .

However, many savings providers are now offering higher rate savings through fixed rate bond accounts, where interest rates can be 4% or more above the Bank of England’s base rate, so long as you lock you money in to the account for two, three, or five years.

The result is a major change in the savings landscape that few have even noticed, as savers are now finding themselves forced into putting their money into bonds for a fixed term. In effect, they are now investing in investment products, rather than saving in savings products.

The surprise is that only a few savings and investment brokers have noticed this change

While some commentators have suggested that 2009 saw the growth of green shoots in the economy, others remain adamant that we are looking at a W shaped recession.

Either way, it looks like the savings landscape is not going to change any time soon, and that fixed term plans will continue to force savers to become investors in all but name.

It’s a shame, really, as Zen has a far better reputation for service and support than BT, but the problem of wireless interference is a constant and annoying problem.

Plus BT are offering mobile broadband with their new broadband packages, and free BT openzone minutes, which will be very useful for business travel.

The caveat is that the pricing on the BT website is quite misleading, as those shown only apply to certain exchanges (apparently) plus they include 24-month pricing, which can take as much as 25%-30% off the 12-month price (so Option 3 is £45+VAT over 24 months, or £30+VAT over 12 months).

Still, at least I know from experience that the BT router supplied is far less susceptible to wireless intereference.

Which is very important, because if I couldn’t get decent business broadband, I’d have to consider more serious broadband connection packages, such as a leased line or custom business SDSL, both of which are priced higher than normal mass-market broadband packages.

In the meantime, I can only hope the move to BT goes smoothly, and that I don’t end up getting caught up in their cold automated support process - as BT customer service is not renown for being good.

That may seem somewhat alarmist, but despite the claims of “green shoots” earlier in the year, we have not seen any signs that the economy is returning to normal. In fact, anything but, and that at best we’re moving into a “lost decade” similar as to what happened to Japan.

Britain’s debt to GDP is spiralling out of control, and even measures to reduce costs being mooted by Labour and the Conservatives are plain in their limitations - we are in far too much of a hole to be able to dig us out even within the next Parliament. It’s going to take a full decade to even begin to expect to bring British debt to normality, and during this period, there is no reason to presume the economy will fare any better.

Repossessions continue to be high, insolvencies are expected to increase, and consumer debt is growing through credit cards and loans at a time when paying are supposedly paying off debt. Unemployment continues to increase in leaps and bounds (forget that’s its slowing - double dip, people), and rather than help employers hire, the government is actually going to tax companies more for employing people.

In the meantime, ratings agencies expect at least a further 15% fall in house prices in the UK, and at a time when the market is limping forward, the FSA wants to bring in tougher rules on mortgages, while at the same time demanding banks hoard more cash.

And that’s before we even get into the threats of deflation and unknown consequences of “Quantitive Easing”.

The result of all these pieces in play can hardly be good for Britain - worsening debt, worsening access to credit, worsening consumer spending, falling asset prices, etc. The strategies in play may be different to Japan in the 90’s, but the state of play is looking increasingly like it.

The problem, of course, is that while matters are exacerbated in the UK, these are afflictions across the world economy. So where is safe?

The answer is relative - the financial crisis is firmly rooted in the US and Europe, and while other areas have been impacted, their fundamantals have been far less knocked by comparison.

Asia remains strong and a bulwark so far against global financial collapse. While no doubt asset bubbles there are growing, they still don;t have the problem of being so invested in complex debt instruments that have so far crippled US and European banks.

Personally speaking, Thailand looks idyllic, but remains subject to Typhoons, as does much of East Asia. A good place to consider investing in, though.

South America is another emerging economy as well, not least in terms of investments, such as land for sale Brazil & property for sale Brazil. If South America itself seems a little rough, you could always consider moving towards central America, not least Panama, which remains under US control, and still offers a lot of decent property for sale Panama.

Australia or New Zealand could even be places worth considering moving to - close enough to Asia to feel the economic benefit, but heavily Anglicised.

In the meantime, now seems to be the moment to batten down the hatches or move on - economic power is clearly heading East, and to developing nations, and for those who remain, only the prophets of doom are left to comfort us.

I’ve come across an interesting problem while setting up my home office, though - wireless interference.

I was originally with BT as my ISP for broadband, but after previous problems with the company I decided quality of service was more important than price, so I moved to Zen Internet.

They sold me a Thomson TG784 router with the package, and all seemed to be running fine.

Until I bought a nice cordless phone, a Panasonic KX for the home office.

Both work very well and as required most of the time, but the problem is that whenever anybody rings, the broadband cuts out.

The result is quite annoying, especially as I keep getting sales calls from loan companies using autodiallers - which disconnects the internet every time, even when I pick up the phone on the first ring.

I’ve contacted Zen about the problem, but they haven’t been much help at all. And I wouldn’t expect much from Panasonic as the phone does exactly what is expected from it.

I was beginning to think I needed a different business broadband service. After all, there is a myriad of types to choose from - ADSL, SDSL, bonded broadband and even leased lines. And don’t forget the satellite option!

Apparently, though, wireless interference is not all that uncommon.

The frustration is that if wireless interference is such a problem, then why is more effort not made by manufacturers to minimise the risk of it happening in

the first place?

This is especially when there appears to be quite a push to make much of home networking wireless.

It looks as though I will now have to look at changing my router to one that runs on a different frequency. which is obviously going to be cheaper than

having to get a new type of broadband installed.

It is still a pain, though. Still, I do not think I am the only one who has never got frustrated over a computer issue!

Firstly, there are still a number of UK accounts which will provide a return of around 4-5%, as recently highlighted in the Telegraph, plus ThisIsMoney lists a number of internet-based savings accounts which offer better savings returns. The problem is, many of these set limits in place for issues such as missed payments or withdrawal frequency, offer decent interest only for a limited period, or else have limited bonuses in place to boost the savings rate. The disappointment is compounded by the fact that building societies used to be more competitive on savings rates, but at present they seem more focused on longer-term savings such as cash ISA savings accounts and eBonds.

The second option is to go offshore - which may raise jitters for some after the crash of Icelandic banks at the end of last year. However, offshore accounts are still generally offering better rates than high street banks, even where the bank owns the offshore savings company. This is actually a key point, because in the case of UK-owned offshore banks at least, the savings are guaranteed by the parent bank. In other words, you’re only likely to lose your money if the parent bank goes bust, but as we’ve seen with RBS and HBOS, any large UK bank will be propped up by the government.

There are a number of interesting comparisons worth checking up if considering going offshore - MoneyFacts and Money.co.uk both offer comparison charts. Unfortunately, the best rates being offered again seem to be bonds - in other words, locking up your savings for a specified number of years. At present secure offshore savings may offer better savings rates than high street banks, but are still not as competitive as fixed term savings plans. Additionally, do be careful of risk - I noticed that a number of building societies offering particularly good rates, but do be aware that many of these had their ratings downgraded by Moodys. In the event of these building societies or banks going bust, or being nationalised, you may find yourself experiencing a lot of worry as to whether your money is protected or not.

Overall, the picture for savings remains pretty muted as you’d expect, but there are options available for improving the rate of return. The problem is that it mostly involves locking up savings for a fixed term of up to five years, which is not something savers really should have to consider. Additionally, despite the UK government’s presence in the UK banking market via majority stakes in RBS and Lloyds Banking Group, ownership of Northern Rock and Bradford and Bingley, they seem more interested in seeing the banks recapitalise, than provide any kind of real service to consumers. The result is that the tax payer hasn’t simply paid to rescue these banks, we’re also paying to rebuild them.

This spring’s green shoots are being increasing shown to have misplaced optimism, with economic conditions continuing to worsen within the UK – GDP continues to fall, and expectations of a recovery for next year remain muted.

While it’s easy to just look at the UK in isolation, there are a couple of major economic pointers on the horizon that suggest the world’s economy could suffer major set backs – even before a recovery has begun. And this is likely to bode ill for Britain, with existing downbeat expectations potentially proving to be optimistic if these factors play out.

The first is the credit bubble in China. So far, the Chinese economy has continued to grow strong – but it seems that rather than learn from the mistakes of the West, the Chinese are keen to repeat them. Yes, there’s a credit bubble forming in the Chinese economy, as the government there encourages lending to such a degree that the IMF is already alarmed.

The second is the original engine of the credit crunch – the US real estate market. So far it has shown no real recovery, and what’s worse, is that not only are repossessions (foreclosures) continuing to increase, they are not expected to peak until after August 2011, when the last big wave of ARMs – subprime mortgages – come up for renewal past their discount period.

These are not the only negative indicators – the IMF continues to warn that the world economy faces a deflationary spiral, that if borne out, could leave much of the West enduring an economic scenario equivalent to Japan’s lost decades.

The UK has its own problems as well, not least due to the major debt bubble it’s been sitting on for the past few years (it’s not simply about house prices anymore). Lending in the UK is still suffering, with a mass withdrawal from the personal loans market, and such poor lending to business by the banks that Alaister Darling is now having to try and appear to be doing something about it. In the meantime, the IMF is warning that the UK’s credit card debt could be crippling.

Any suggestion of an improving mortgage market should be taken in context of the fact that Spring and summer are traditionally the peak season – and what we’ve seen so far is still weak.

In short, economic conditions in the world remain fragile, but there are no positive indicators at present to suggest we’re past the worst of it – anything but. There are still major dangers on the horizon, which leave little room for optimism for future economic conditions. ]]> http://www.richmondway.co.uk/2009/07/30/adverse-economic-conditions-continue-to-build-up/feed/ http://www.richmondway.co.uk/2009/06/25/mortgage-rates-continue-up/ http://www.richmondway.co.uk/2009/06/25/mortgage-rates-continue-up/#comments Thu, 25 Jun 2009 11:13:10 +0000 John Richmond http://www.richmondway.co.uk/?p=42 The BBC reports a disturbing trend of mortgage providers raising their rates. Just to prove I was right about the recession.

This is especially disturbing because the Nationwide originally offered the most competitive rates on the market, as if using its competitive position over the weakened HBOS and Lloyds to claim a larger share of the UK mortgage market.

More coverage here:

http://www.breitbart.com/article.php?id=prnw.20090611.PH30964&show_article=1

http://www.businessnewstoday.co.uk/nationwide-building-society-expands-mortgage-products/

http://www.streetinsider.com/Press+Releases/Nationwide+Building+Society+Expands+Mortgage+Products/4723424.html

https://www.examiner.com/p-359752~Nationwide_Building_Society_Expands_Mortgage_Products.html

http://www.sys-con.com/node/998177

http://www.bizjournals.com/louisville/prnewswire/press_releases/national/United_Kingdom/2009/06/11/PH30964

http://www.entrepreneur.com/PRNewswire/release/167295.html

http://www.forbes.com/feeds/prnewswire/2009/06/11/prnewswire200906110300PR_NEWS_USPR_____PH30964.html

http://finance.yahoo.com/news/Nationwide-Building-Society-prnews-15497034.html?x=1&.v=1

http://forex.einnews.com/article.php?nid=30784

http://www.upi.com/finance//?ChannelID=3197&GUID=9098304&Page=MediaViewer

http://industries.hoovers.com/real-estate/real-estate-investment-trusts-(reits)/office-reits/industry_news?article=125737

http://www.businessnewstoday.co.uk/nationwide-building-society-expands-mortgage-products/

http://www.freedomfromgreen.com/home-mortgage-loan

http://www.marketwatch.com/story/nationwide-building-society-expands-mortgage-products

http://finance.intomobile.com/intomobile/?GUID=9098304&Page=MediaViewer&ChannelID=3197

http://markets.chron.com/chron/?GUID=9098304&Page=MediaViewer&ChannelID=3197

A lot of interesting stories coming up today, showing the continuing turmoil in the financial world.

First up, Edmund Conway claims the recession is over, which is about as optimistic as you can get.

Much of this unfounded optimism seems focused on the fact that the property market has seen a positive bounce over this spring – mortgage lending is up, buyer enquiries are up, and the DCLG reported a 1.1% rise in house prices over April.

The problem is, spring has always been prime home buying time, so to extrapolate this into some form of economic recovery seems absurd. It really does look like a bounce, which means we should expect economic conditions to get a lot worse towards the winter – as the property market traditionally cools.

In the meantime, other economic indicators are looking increasingly adverse.

We’ve seen repeated claims that the European banks have not properly written down their losses. In the meantime, Eastern Europe looks like it could crash and drag a lot of Europe down with it through a chain reaction. Latvia is already in big trouble and could be the smoking gun to bring the rest of Eastern Europe down with it, and a number of central European banks with them. And that’s before we address the issue of existing write-downs the ECB is already severely worried about.

In the meantime, here in the UK, the whole banking sector continues to reshuffle in order to try and adapt to what still remains a crisis.

RBS is looking to split off business deals it claims as “unprofitable” into a separate group – in the meantime, as if the market hadn’t already got itself into trouble creating complex debt instruments, this is exactly what is being proposed to get the UK taxpayer money back from semi-nationalised banks such as the RBS and Lloyds Group.

Among the building societies, the government is looking to allow changes to how they fund themselves in mass markets, in order to stop a repeat of the Dunfermline Building society crash. This is not least because others, not least the West Bromwich Building Society and others are also believed to be on the brink of collapse.

The Nationwide Building Society has already raised its mortgage rates sharply this week, close on the heels of other increases in mortgage rates last month. While the Nationwide remained one of the cheapest mortgage loan providers around, it no longer appears to be trying to outcompete other mortgage lenders.

If anything, the entire financial world still seems to be on a downward spiral. While the potential collapse of the banking sector appears to have been averted – certainly for now – the global economic picture is anything but healthy.

Stay tuned.

The trouble is, this also affects everybody because policy premiums are simply increased to pay for the costs of fraud.

We’ve already seen reported in the news that police are now reporting a record number of uninsured vehicles being taken off the road, with the current figure at around 150,000 a year and increasing.

On the other hand, a general escalation of insurance fraud, not least among car insurance claims.

It’s important to realise that car insurance is a necessity, and for protecting the driver and the driver’s interests. It’s not just the car that’s protected, it’s you.

While most accidents in the UK are not fatal, people are still killed on the UK’s roads every day. And even a seemingly minor injury, for example, whiplash, can develop into a much more serious medical condition.

Car insurance helps ensure repairs can be paid for so you’re not out of pocket. And most also have health and death protection built into the policy. So if you are injured, you can be compensated, which is especially important if this stops you working for a while. And death cover at least provides income protection for your dependents and family.

In the meantime, I’m currently running a car insurance policy with Nationwide, and I chose it because it gives me the features I need, with the protection I need, and all at a very good price compared to other companies. Even still, I’m very close to being eligible for the over-50 discounts with Saga which should allow me pretty much the same level of cover, at an even cheaper price.

And that’s the key insurance about insurance. People should look to ensure they have adequate protection first, instead of trying to save money getting the cheapest car insurance.

After all, where’s the point of saving a few pounds, if in the event of a claim, it can cost you a lot more in expenses, lost time, and lost income, by having a cheap but limited policy, or even no car insurance policy at all?

Simple obvious ones include having an alarm system, steering lock, and other immobilisation devices fitted.

Others include parking off the road in your garage, or having advanced driving training.

Fairly common sense stuff.

Interesting enough, though, the commercial fleet sector has taken up vehicle tracking in a big way, and it can reduce the insurance bill for companies by around 30%. Now that’s a nice reduction.

Only, we see little use of vehicle tracking in the wider private user market.

I find that a bit odd, as this is something that insurance companies already recognise in reducing premiums.

Additionally, there’s peace of mind in always knowing exactly where your vehicle is, and this should certainly work as a deterrent to thieves.

Still, perhaps it is simply a case of waiting for the technology to be accepted. After all, once upon a time car alarms were very rarely used, and nowadays it is hard to be in any urban area without hearing the familiar noise of a car alarm going off.

With vehicle tracking systems costing around £200-£300 per vehicle, it remains an accessible solution. And for many cars, the savings on the insurance premium alone can easily pay for vehicle tracking in the first year.

We may yet see this become a more widely used consumer technology yet.