This year one in four homeowners will see the value of their home fall so dramatically that it will be worth less than their outstanding mortgage. That’s the stark prediction from the Financial Services Authority. They expect 2 million homeowners and 500,000 buy to let properties to fall into negative equity.

These warnings were released as reports showed that mortgage lending had slumped to an 8 year low. The report from the Council of Mortgage Lenders shows how the UK’s housing market is stagnating as banks hold back mortgage lending despite lower prices and the lowest interest rates for more than a generation.

And at the same time the magazine Which? Warns that 35% of homeowners are worried about repossession. But despite these worries, relatively few homeowners have taken out insurance to cover their mortgage repayments in the event of redundancy. With unemployment predicted to rise by 50% this year to 3 million, surely more should take out this insurance?

And whilst writing about the curse of negative equity, we think it best to clarify one commonly held misconception. If your home is sold for less than its outstanding mortgage, you are still personally liable to repay the shortfall. The lender will chase you for the shortfall money. This applies even if the lender had forced you to accept a “Higher Lending Charge” when you arranged the mortgage.

Higher Lending Charges are in effect an insurance policy owned by the lender, which guarantees to the lender that if the sale proceeds of a property do not fully repay the mortgage, the insurance will repay the shortfall to the lender. You will note that the policy belongs to the lender – it eliminates the risk that the lender will not be repaid. Please note that the policy does not belong to you the person who paid for the insurance.

The hard fact is that if there is a repayment shortfall, you are still legally bound to repay that money to your lender and the lender then forwards that money on to the insurance company which underwrote the Higher Lending Charge policy.

Credit cards with no transfer fees and low follow up interest rates have become a very popular option amongst credit card buffs. These cards typically charge interest rate at 6.5% on the balances transferred from rival cards.

I think the best deal like this currently on offer is Barclaycards Long Term Balance Transfer (6.5%). This interest rate is lower than any overdraft or loan rate you’ll find. The credit card also provides you with far more flexibility regarding repayments, allowing you to repay the money in broadly your own time. For the first 10 months any purchases are interest free but thereafter, new purchases attract interest at 16.9% and your balances at this higher interest rate will not be repaid until your 6.5% balances have been repaid.

Also of interest is Citibank’s Life of Balance Mastercard. This has a low life of balance rate of 6.9% but there is also a transfer fee of 2.5%.

Abbey and Virgin Money still offer the best interest free deal. Both these deals last 15 months. Abbey charges a transfer fee of 2.98% and Virgins transfer fee is 3%.

Oh, by the way, unless your credit is perfect, don’t bother applying for any of these cards – you’ll stand no chance!

Saga has written to 230,000 of its customers who hold a Saga credit card telling them that if they don’t have an income of at least £12,000 a year, their credit card will be cancelled.

For some time now Saga, the company which sells exclusively to the over 50’s, has promoted a Saga credit card to its clients. For some years now Saga’s card has been operated for Saga by Liverpool Victoria, the company that’s better known as an insurance company. But LV has decided to withdraw from the credit card market, presumably as a bi-product of the credit crunch.

Saga’s credit card is now operated by Allied Irish Bank and the bank has set a minimum annual income criteria of £12,000. This means that the thousands of Saga credit card holders living on modest incomes will have to face losing their credit card.

This will not be well received by them. Indeed, my Aunt, one of those affected, is most irate. She thought Saga were on the side of the elderly so to be forced to relinquish her credit card is most galling for her.

A spokesperson from Saga said, ”In the current financial environment credit card firms have to be sure that the people to whom they extend credit are able to pay it back. Different lenders adopt different lending criteria.”

My Aunt is less than impressed …………….

If you are considering re-mortgaging you may be in for a shock. Low interest rates are now only available to people whose mortgages represent less than 60% of the value of the property. But as property prices continue to fall, the percentage of the property’s value taken up by the mortgage inevitably rises.

The problem is that homeowners may not realise that the falling value of their property has pushed them into a higher loan-to-value category (LTV). This can really push up the interest rate you’ll be offered when you re-mortgage. Take the Halifax for example. If your LTV is less than 60% then the interest rate you’ll be offered is 4.69%. Between 60 and 75% LTV the rate rises to 5.02% and from 75 to 85% it’s 6.09%. At 85 to 90% LTV you’ll pay 7.09%.

If you’re having your home re-valued, be sure to make the valuer aware of anything which may push up the value of your home in comparison with other properties in your locality. And if you have savings, you should also consider using some of that money to reduce the size of the mortgage you need. If you’re lucky, that money could drop you down into a lower LTV band and into a lower interest rate. That would save you quite a lot of money.

So if your mortgage deal is coming to the end of its offer period, check out the position a.s.a.p. In our view, property prices will continue to fall for some time yet, so the later you get a valuation, the lower the valuation will be.

But the end of a special period is no cause or panic. At the end of the special deal period, most lenders will automatically switch their borrowers onto their Standard Variable Rate (SVR). Since many SVR’s are now down to 3% or so, that in itself can be a good deal.

Our advice is check it out a.s.a.p. but don’t panic!

In my last blog I talked about the bonus culture. Today I want to talk about corporate risk taking.

All businesses take risks. Risks are an inherent part of company development whether it be should they offer a client more credit, whether they should change a product formulation or whether they should expand the business. In the end risk and risk assessment is a fundamental function of senior management and the Board of Directors in particular.

Three fundamental questions emerge from that. To control risk, management has firstly to identify the risk, secondly assess the level of risk and finally make a decision as to whether it is in the company’s best interests to accept, or reject, that level of risk.

So where did the Banks get it wrong? It seems that some managers within the banks did identify the risk and were able to assess the risk as high. It would seem that those above them either rejected their risk assessment or simply went ahead irrespective knowing the risks. The suspicion is that as the toxic investments had “performed well” before they imploded, the Directors were seduced by the illusion of profit and, I suspect, the actuality of their blooming bonuses. Whether it was company interest or self interest which drove them, the answer for me is the same – they made major errors of judgement and for that they must be dismissed.

Coming out these most expensive mistakes in corporate history, we will undoubtedly see a new raft of management – the Corporate Strategical Risk Assessors. Whether they will be an expensive raft of toothless management or whether they will help steer companies around rapids and waterfalls, depends on the risk culture within the Board of Directors as the Directors remain the people who are responsible for the direction the company takes. If the Corporate Strategical Risk Assessors provide high calibre assessments and the Directors bring that work into their decision making process then all will be well.

Otherwise at some point in the future, we will again see the emergence of the sort of problem the banks fell for.

Keeping your money safe seems to be the theme at present – rather than the “borrow and be blowed” culture we’ve become used to.
Some things are worth spending your money on though and department store Debenhams has reported an unprecedented run on … of all things … piggy banks. Sales have rocketed by an amazing150 per cent.

Many people are failing to see the point in keeping their money in the bank, given the abysmal interest rates and are keeping it safely at home instead.

Another turn on the “keep your money under the bed” appeared in the news. There’s a bed firm selling beds with built in safes. Apparently it started a bit of a tongue-in-cheek publicity stunt but there’s been lots of interest.

As far as the piggy-banks go – the top sellers are labelled “Handbag Fund”, “Shoe Fund” and “Shopping Fund”. It seems the women are the savers.
Maybe men just aim higher – there’s still a demand for the “Ferrari Fund”!

From 6 May, Nationwide are planning to impose charges on their credit cards and from 1 June on their debit cards when they’re used abroad.

I’m disappointed about this, I must admit. I’ve always been the one to brag that it doesn’t cost me any commission when I use my card whilst we’re on holiday – wherever we go. When I opened my “Nationwide” account, some years ago, it wasn’t one of the major factors – but it was there none the less. Had I opened that account recently, with the commission-free deal in mind, I would most definitely not be amused.

In actual fact, having read further, it’s not all of “abroad” they’re referring to and there will be no changes if I’m travelling within Europe.

Nationwide are not alone – Saga are another company that make no commission charge within Europe, but do charge on world wide usage of their card. Thomas Cook is making changes from next month, too.

The winners, at present, in offering free-charge card use world-wide, are the Post Office. They don’t charge commission on either their Classic MasterCard or their Platinum MasterCard.

Nationwide say that the credit crisis is to blame. They can no longer absorb the fee which Visa charges them for each transaction.
Another credit crunch victim.

Vauxhall have proudly and hopefully introduced a new car at the Geneva car show. They claim that the Ampera, which runs off electricity, could go a long way to fulfilling Gordon Brown’s ambition of making the UK the ‘electric car capital of Europe’.

The car is charged from the mains and stored in a 16 kilowatt lithium-ion battery. An overnight charge from the mains, which will cost just one pound, is sufficient to take you 40 miles using just the battery power.

For longer trips you can achieve a further 260 miles by using the petrol-driven generator which is under the bonnet. Whilst driving on electricity from the battery, there is zero carbon dioxide emission. It is predicted that the Ampera will cost around a fifth the current cost per mile of a comparable petrol-engined car.

Vauxhall has plans to put the car into production at plant in Ellesmere Port, which employs 5,000 staff. They would switch from a short working week to 3 full shifts, 5 days a week.

Vauxhall’s owners, GM, are asking ministers to back a network of plug-in charging points to help the push for electric cars.
Business Secretary Peter Mandelson gave a positive response on a visit to the show, saying he though Ellesmere Port is a brilliant plant, as does GM, and offered assurance that the Government would stand behind it.

Some facts and figures show that the 40 miles of zero carbon driving, at all speeds, is around 10 miles more than 80 per cent of drivers travel in a day.

A full charge from a domestic socket will take 3 hours. Performance is 0-60 in 9 seconds with a top speed of 100mph
This is the vehicle being billed as one which could rescue the British car industry from the brink of disaster. At a cost of 20,000 pounds it’s hoped that it’ll be a leader for electric cars and a saviour for thousands of jobs.

The Ampera is scheduled to go into production this September and should be in the showrooms in 2012.

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Here’s a nice fresh cheque book, all ready for you to use. No need for a new account – it’s linked to your credit card. Watch out – there’s a catch about.

The vast majority of these cheque books are sent out unsolicited and a third of the people that make use of them do so without checking the charge there will be on them. Typically this is the normal interest rate for your particular card account plus two per cent.

If you’ve been tempted by the “blurb” that comes with the cheque book package, inviting you to swim in clear blue seas, with a deserted beach and palm trees in the background, or that flight to New York to shop ‘til you drop – right up to solving the second car problem – stop and think. You’d hardly use a credit card to pay for debts that are going to take an extended time to pay off – or would you?

Even if you were treating yourself to something that you can pay off in a few months, why use a piece of paper that costs two percent more in interest than the credit card you already have?

As you’ll have gathered, I’m not impressed very much with this expensive way of borrowing. It would be very much better to take out a straightforward loan if you need to borrow money.

So, what to do with these cheque books? Surely you have a paper re-cycling bin? Shred the cheques and bin them. If you find that you need to borrow money, there are far better and more sensible ways to go about it.

Credit crunch woes are affecting everyone, but if we’re looking for a silver lining, then it has to be the fact that more people will be holidaying in the UK. This has to be good for hoteliers, owners of self catering accommodation and the like.

Just because you can load up the car and drive to your holiday spot doesn’t mean that your holiday isn’t going to make quite a dent in your budget. You’ll save yourself some Euro-angst but don’t forget that not everything runs smoothly – even in the good old UK.

Travel insurance is invaluable. What if Great Granny (who wasn’t coming with you anyway) should suddenly be taken ill and need care – that could mean cancellation or cutting short your holiday? And you know what children are like – well one minute and covered in spots the next. You’d still have the expense of hotels or holiday accommodation. Accidents can happen wherever you go and it’s good to have the peace of mind that insurance can give.

It’s not expensive – in fact you’re probably covered for personal effects under your household policy. You can forget your medical troubles too, with NHS care readily available.

If you’re thinking of a series of short breaks, things can go awry even if you’re only taking a weekend break. Annual insurance is inexpensive and it’s just one less thing to think about if it’s already in place when that brilliant weather forecast or bargain break crops up.
It’s well worth it.

Gordon Brown is just a sweet old fashioned man after all! He would like to see a new age of sobriety in British banking and is calling for a return of prudency in old-fashioned High Street banks.

He’d like a return to people saving longer before investing in their first home and an end to low or no deposit mortgages.

“We want to see the reinvention of the traditional savings and mortgage bank in Britain,” wrote Mr Brown in the Observer. He envisages a future where bankers will be the servants, rather than the masters of Britain’s current critically-ill economy. More caution in the mortgage market would reduce the chances of problems in the future, he says.

Well, it may come as a revelation to Mr Brown but there are many thousands of hard working (well they would be if they could find any) and now extremely worried ordinary people who came to this conclusion a long time ago.

His comments were in relation to the UK’s new Banking Act, which gives greater powers of intervention to the Bank of England. The act should enable the Bank to act more speedily to help troubled banks and protect investors. By giving hidden support to stricken banks, the aim is to maintain financial stability.

Not everyone agrees. Critics consider that it will create an air of secrecy around the banking world, which could not be in the consumer’s interest.
Back to the pipe, the slippers and the fairy tales. A “Dad’s Army” style bank could save us all.

The Swedish town of Trollhattan is set some 70 miles or so inland from the port of Gothenburg – Sweden’s second largest city. It’s situated on the banks of the Gota Canal and just above Trollhattan Locks and the area around is magnificent. There are the Trollhattan Falls – a spectacular sight when the sluices are opened and the water cascades down the valley, by-passed by an equally impressive flight of locks, blasted into the rock of the hillside, rise up in staircase style with pine forests and pastel-painted houses accompanying the journey up from the locks into a bright and picturesque town.

In the summer, pleasure boaters moor there for a while, to restock and enjoy the area before continuing on towards the crossing of Lake Vanern and eventually across Sweden and “out the other side” – Baltic bound. In the winter the traffic is solely commercial and as the canal can be frozen for months, a passage is kept open by the ice-breakers, making a terrific din as massive sheets of ice are forced to either side to allow the boats a passage through.

As you leave the town, there’s a massive road bridge and then on one side of the canal there’s a Volvo plant. On the other the Saab factory seems like its own small town and occupies a vast area.

There’s a black cloud hanging over the winter blue skies in the Saab area at present – and no doubt in Trollhattan in general, following an emergency meeting by the Saab board. Trollhattan loves Saab and are the Swedish people are very faithful to their brand. Saab’s been a way of life and they’ve been there since 1940.

General Motors have owned Saab for some years now and they have to cut 47,000 jobs worldwide to shore up its home base and to assure Congress that US federal aid will save American jobs rather than leaking overseas. As a result, the company have made the threat of walking away from Saab unless the Swedish government help out.

Maud Olofsson is the Swedish enterprise minister and she made the statement “The Swedish state is not prepared to own car factories. “We are very disappointed in General Motors. But we are not prepared to risk taxpayers’ money; this is not a game of Monopoly,”
GM has long struggled to make money from its Swedish venture, but the losses have become a torrent in recent months. This begs the question “Has there been a level playing field or have Saab become a pawn in the game?”
For the people of Trollhattan it is beyond belief that their own government is not prepared to back their beloved brand. The future of which is very much in the balance.

Results of a poll of more than 1,400 people, on behalf of personal finance pfeg, show that British children are more financially aware than their parents were at their age.

It showed that even 10 year olds were using their parent’s debit or credit cards to make purchases on-line. The average age for owning their first mobile phone is just eight and their weekly pocket money now averages 6 pounds and 32 pence.
Contrast this to their parents, who received the equivalent of 3 pounds and 77 pence, but weren’t expected to help out with household chores until they were ten or older.

It seems that today’s youngsters are realising a few facts about the value of money, with seven year olds offering to carry out chores to earn pocket money.

They’re fully conversant with the internet and two out of five children between the ages of seven and 15 were likely to use it to buy computer games, music or books. 40 per cent had bought games and ringtones for their mobiles.

The online survey, carried out by Populus in January, involved 1,435 people, including 546 children aged seven to 15, 676 parents and 759 grandparents in England, Wales and Scotland.

It seems that making financial decisions helps some children to feel more in control of their lives and it’s felt that this will help them to be more responsible with their money and better at managing their finances as they reach the age where it matters and before they get credit cards of their own.

It goes back years. First of all, it was convenient. They had a branch in a large supermarket near to where we lived. With the coming of the debit card and eventually on-line banking it became irrelevant where the actual bank was situated.

It’s been a good relationship really. Until now. Everything’s changed due to a break in at our village supermarket. The thieves broke in and stole the in-store cash machine. I went in to use the cash point and there it was – gone. In its place was a large stack of family packs of crisps. Not to worry, it would be replaced – or wouldn’t it?

A day or so later my husband needed to speak to a customer accounts adviser at the same bank (they don’t seem to have bank clerks any more) and mentioned the problem– she assured him that to their knowledge the cash point was still there, in store.

We looked. It wasn’t there and still isn’t. I miss it being in its place in a well lit store which opens until late every single night. The girl at the till says it might come back, but probably not.

And the point of all this?

The Office of Fair Trading report into personal current accounts says that only 6 per cent of bank customers switched accounts in the past year, even though they could probably find accounts at other banks that are better suited to their needs and possibly would charge them less.
At the same time, it’s estimated that around twenty per cent of energy customers changed providers in one 12 month period. Mind you, I did that once, and never again.

The general view is that customer inertia is the main reason behind customers staying put - with some staying at the same bank where they opened their first account.

Maybe the time has come to shop around?

The bidding started at just 5,000 pounds and rose to 9,000 before the hammer fell on an end of terrace house in Teesside.

A house for just 9,000 pounds clearly has to be a bargain, although admittedly it’s in a rundown state and slightly lacking in a roof. However the estate agent reckoned the house should be renovated for around 27,000 pounds and have a finished value of somewhere around 45,000 pounds.

Properties in the North East don’t appear to have fallen too sharply recently, so the state of the economy doesn’t seem to be blamed for the low price – rather the lack of roof!

As for the rest of the UK, it’s reported that the average cost of a house is now 25 per cent lower than a year ago – standing at 180,000 pounds.

They say you can tell if some-one’s from the Staffordshire pottery area as soon as they walk into a café or restaurant. They immediately turn the tableware over to see who produced it.

As an adopted “almost Potter” – living for several years in Staffordshire - I was really pleased to hear that two Wedgwood family members are possible contenders in taking over the Wedgwood pottery business. Tom R and Tom D Wedgwood are leading a team of investors in a bid for Waterford Wedgwood, who have been in administration since early last month.

Design and production will be coming back to the Potteries if their bid is successful – back to where the company started back in 1759.

The best of luck to them, they deserve it, and to the workers who make the people of the Potteries so proud.

Some more news for the people who were so sad to see the name of Woolworth’s disappearing from the High Street. They’re not gone altogether. They’re making a comeback as an on-line business, after being bought by the owners of the Daily Telegraph.

That’s the wonder of Woolworth’s.

It’s a lovely morning – if you’re sitting inside looking out at the sunshine – otherwise it’s still a bit chilly out there.

What a super day to be up in the Lake District, where there’s an interesting property coming under the auctioneers hammer soon. The starting price is 145,000 pounds but don’t expect to move in just yet. The property is a farmhouse has been unoccupied for several years but it idyllically situated along a dirt track and a couple of miles to the nearest public road.

It may be a bit tumbledown but it has an impressive name – Sleddale Hall, and it’s near Shap, in Cumbria. The farmhouse was used in the film Withnail and I, which starred Richard E Grant and Paul McGann and in the film the property was known as Uncle Monty’s Cottage.

The farmhouse has, as the estate agents like to put it, “many original features” and it sounds as though it’s all ready to make a really lovely family home for someone looking for a restoration project.

The agents are Savills and the auction is in Mid February – just in time to appreciate the snowdrops and daffodils in that lovely part of the country.

There’s not a great deal of good news for us today – and amongst the bad bits we learn that it’s expected that more than 600,000 UK jobs could be lost during 2009.

If you’re lucky enough to keep your job, it’s probably too much to expect a rise and the British Chambers of Commerce says companies are in “survival mode”. In actual fact, many companies are putting their workers on to a shorter working week to preserve jobs and retain skills.
Looking at the rest of the news there’s “Freak Weather hits Australia”, “Meteor Strikes Across Sweden” and a second meteor strike over in the USA. Not to mention the inauguration of their new President Barack Obama- this must be doing much to raise the spirits of the USA people. A report says that around 70 per cent of them think that Obama is going to be a great president and have confidence in him to lead them out of the bad times.

Just a glimmer of ever so slightly better news, depending how you look at it – we learn that the Council Tax payers of England are facing a lower rate rise this year. Still a rise, though. The Local Government Association said that councils were doing their best to hold down tax increases at a time of economic hardship. The opposition were not too impressed and described the rise as a “kick in the teeth” for families and pensioners at this really awful time for them.

The conservatives have criticised business minister Baroness Vadera for her comments, which she made to ITV, regarding her claim that she could see “a few green shoots” of economic recovery.

Business minister Baroness Vadera has denied she is out of touch after claiming she could see “a few green shoots” of economic recovery. She went on to say “Is this a positive straw in the wind, or should we say one swallow doesn’t make a summer? It’s too early to say.”

Now I’m all for being positive and offering encouragement, but maybe these remarks were not the most sensitive due to the fact that they were made as the job loss figures in the UK sounded like the football scores being read out. A slump in the price of shares of virtually 5 per cent didn’t do a great deal for everyone’s spirits, either.

Later the Baroness defended herself, saying she had been referring to improvements in the credit market, where one particular large company had just been successful in raising hundreds of millions of pounds. The fact that this was fresh in her mind seemed to raise her spirits – and is this a sin, at such a miserable time? It just could be, to the thousands of people who’d just heard that their jobs had been lost.

We await the good news, in the belief that it’s just around the corner - albeit a very long one. But as every gardener knows only too well, the earliest green shoots can be attacked by the frost, before they re-appear as the green leaves of summer – or not, as the case may be.

Just when we thought we’d got away with it, it’s finally happened. We are being told to recycle and risk a fine of something like 1000 pounds if we fail to do it, apparently. There was a notice attached to our wheelie bin this very morning. It’s official.

Not that I personally have anything against it. I’ve long thought it’s a good idea for other people, but when it comes to it – I haven’t a clue. I’ve been really good about going along to our local station car park and happily tipping bottles into appropriately marked bins. I’ve saved newspapers for the boy scouts, helping them to make money – but apparently no one wants them any more. (Newspapers that is – I don’t think boy scouts are endangered species yet).

Cardboard boxes in theory go to the tip, but in actual fact the other half has a thing about “what if we need to take something back – we’ll need the box” so they’re taking up valuable shed room. We’ve composted too – although it never seems to break down quite how it’s supposed to.
So – it’s finally come to it – just at the same time as we hear that there’s a glut of waste and they don’t know where to put it. But can anyone tell me – if there’s a cardboard tube with a metal top and bottom – do I separate it or treat it as one or the other? If I chop my finger off washing out a corned beef can, will my household policy cover?

And where shall we put this multiplicity of containers, I ask. Don’t tempt me!