Deflation hits the UK for first time in 50 years

Deflation hits the UK for first time in 50 years

Retail price inflation hit a 50 year low official data highlighted.
The retail price index which is a wider cost of living index and includes hosuing costs fell was flat and fell to -0.04 percent year on year, which was the first negative reading since March 1960 as reported by Reuters news.

City analysts dismissed deflation as wide of the mark, and the retail price index as not fully indicative of the state of the economy. The fal in the retail price index was predictable after the fall in interest rates but it does not mean we are going head long into a deflationary economy. The figures of the retail price index support the Bank of Englands assumption that as the recession dampens the producers pricing power that inflation will ease.

A deflationary economy would only further increase the pain in the economy at the moment as price falls would only put off people from spending further, knowing that prices may only fall further next month. With the ramifications for business being hard to take and unemployemeny rising thus further reducing spending in the economy. Furtunately, indications so far suggest that this is wide of the mark.

What do you think about deflation? Let us know your thoughts?

FSA Chief Gets Tough on the Square Mile

Hector Sants, the FSA chief executive has said that he is “determined to correct” the attitudes within the square mile that people were not afraid of the FSA.

 

Mr Sants, has warned that people in the square mile and the broader financial services industry should be frightened of FSA, indicating that the FSA will be introducing a more proactive and thorough approach to regulation of financial services. The new approach is likely to be more intrusive and direct.

 

Mr Sants, has indicated that compliance will move away from box ticking to a thorough approach to regulation that will involve a review of the outcomes of the actions that financial services firms take.

 

In a strong warning he mentioned that the FSA may use its wider powers of prosecution to deliver their mandate. In the current climate and with a government that needs to save face, and be seen to be doing something many financial services firms should begin to re-think how they approach compliance with the newer focus on accountability.

 

The additional checks and balances that have been pushed onto borrowers in terms of their personal finance by lenders, seem to be getting pushed on financial services firms by the FSA. This surely can be no bad thing in the long run for individuals and the economy as greater responsibility with ones personal finance, can only provide greater security for the individual and investors, lenders and financial services companies.

New interest rate cut savages savers

With the bank of England’s decision to cut interest rates to a record low, savers will be particulary hard hit with income from savings taking a huge hit in the last few months. With even ISA’s not looking very appealing to savers it is increasingly becoming more attractive for savers to move their money into low risk investments with higher yields. For those investors with a good understanding of the property market, and a good handle on their personal finance some great deals can be found in the buy to let market.

With asset prices reducing, some investors with cash to hand are moving their money from savings accounts to property. Some of our readers have informed us that great deals can be found giving an opportunistic investor great yields.

If you’re a saver and have a personal story to tell us about how you plan to beat the low interest rate get in touch   

Lloyds shares fall further

More bad news for the UK taxpayer emerged this morning as Lloyds Banking Group shares took a tumble of 20% on the back of it’s takeover of HBOS and the latest profit warning put out on Friday by the latter sending shockwaves through the market amid fears it may require further state capital or even worse need to be fully nationalised.

Unbelievably Lloyds appeared  surprised when it announced on Friday that HBOS would make a pretax loss  of  £10bn, in excess of  expectations due to a jump in losses on corporate loans at the tail end of last year. The news had the immediate effect of wiping a third off the value of shares in the bank on Friday and has continued to see further losses on the stockmarket this morning.

Mortgage approvals begin to rise slightly

The number of new mortgages approved for home buyers increased slightly during December, according to the Bank of England.

There were 41,000 mortgage approvals, up from 37,000 in November, but still the second lowest figure on record. Read more

Northern Rock cuts rates on mortgages

Privatised Northern Rock bank has become the most recent lender to cut its mortgage rates in the wake of last week’s cut in Bank Rate. Its standard variable rate (SVR) will reduce by 0.25% to 5.08% in February.

Existing tracker rate borrowers will receive the full 0.5% reduction, in line with their contracts. The Bank of England’s 0.5% cut in Bank Rate to 1.5%, its lowest level yet, has prompted several other big lenders to cut their mortgage rates. Read more

Savings and Pensions have 0% returns after inflation

Millions of people in long term investments have little or nothing to show for decades of saving, with one in five with endowments and pensions delivering poor returns.

Investors still have approximately £290 billion in with profit endowments, pensions and bonds, which were sold during the 1980s and 1990s as a way of getting steady, equity-like returns. The schemes, which invest in a mix of assets in good years to pay out in the bad. Read more

Mortgage lending still remains tight

Lenders are continuing to demand larger deposits as they continue to ration home loans to their customers. The Bank of England revealed last week that banks and building societies will expect to rein in their lending even more during the coming months.

The number of lending deals available for those with a deposit upwards of 25% or more continues to increase as the lenders are looking to cherry pick the best customers.

Read more

Tough economic times for high-street retailers

Two of Britain’s biggest high-street names revealed yesterday just how rocky the Christmas shopping period had been, with sales slumping as the recession bit really hard.

Debenhams and Next admitted that retailers are in the grip of the toughest trading condition for decades. But there was fighting talk too, with retailer Next arguing that predictions of a complete high streets wipeout are exaggerated and Debenham insisting it will emerge as a winner from the current economic crisis. Read more

London property market crashes

London house prices crashed by an average 14.5 per cent in the last 12 months the fall accelerated through “a year of turmoil” with a drop of 2.4 per cent last month alone.

The worst hit areas were City of Westminister which plunged 21 per cent. The borough of Waltham Forest 17 per cent. Other borough breakdown reveals how even the current depressed values are far higher than levels at the start of the economic boom times nearly a decade ago. Read more

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