Let's talk real issues at the G20
As the top UK financial leaders prepare for the next G20 summit, Lord Turner, head of the FSA, urges them to consider capping bankers' bonuses. Funny the FSA didn't mention that they should have tightened lending before the credit crunch. See if you agree with me that this is just another distraction from the real issues?
We take a look at the LIBOR and how it's now on par with the BoE base rate at 0.57. This is good news for those who are on a LIBOR tracker. It's also a sign that stability and trust are beginning to build between banks. Although they are not yet on top of their balance sheets this will definitely help.
And if you are looking for a new mortgage, don't just look at the interest rate as you may be paying more than your neighbour (even though he is on higher rate). We'll work out the real price of mortgages and learn how to look at the overall rate to get the best out of the market.
For the third week running we'll close on a good note. The CBI says 'Britain has probably come out of recession'. Things are looking up much quicker than predicted!
As always if you have any questions or want to have a chat about current opportunities call the team on 0207 812 1255.
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Brett Alegre-Wood
Transcript of video 'Let's talk real issues at the G20'
Hello and welcome to this week’s Property News Update with Brett Alegre-Wood, your source for everything that’s happening in property in the UK, Australia and around the world.
Hey guys and welcome to Weekly Property News Update. I’m Brett Alegre-Wood and today is Wednesday the 23rd of September 2009.
So today what we’re going to be covering first of all the G20 Summit which is happening, looking at the banker’s bonus and really I think it’s just a distraction – we’ll have a look at that; Libor and the Bank of England base rate – the fact that they’re almost the same – we’ll take a look at that; house builders – they’re looking for more cash which is really great news for us as investors because it means off plan now is starting to get into full swing; government debt – the entitlement mentality that we’ve created over the past few years and the effects of that – we’ll take a look at that; MPC or Monetary Policy Committee – they’re uncertain about the recovery; alright we’re going to look at the CBI – the fact that the recession is over or they’re talking about the recession being over; and the real price of a mortgage 6.49% – we’ll look at who that applies to; and then finally that the pound struggles – but read the ending paragraph and I’ll introduce that in a sec.
Now in terms of my thoughts for this week – look, first of all it’s a mixed bag. What I’m getting from every angle and this is whether it be experts, property investors, nobody knows. We’re talking about it’s going to be a slow recovery, we’re talking about it’s going to be a quick recovery, but the general consensus and what I’m finding is that things are moving quicker than were predicted say six months ago so we’ve actually moved a head a lot quicker which is great news for us as investors because what we want to do, we want to get back into good solid steady growth as soon as possible and that looks like it’s coming, coming sooner than we think. But don’t get too overly optimistic because again you know it could be a slow one out, so it doesn’t mean that next year everything is going to be great, we’ll forget about it, actually it’s looking like we’re out of it and certainly the worst of it’s over but it could be a slow recovery out which you know at the end of the day – that’s not what really we want, we’d love to come out of it but we also don’t want to go straight back into a boom because that’s likely to cause a double dip. But anyway, that’s my thoughts for the week.
So let’s have a look at what’s on the websites.
UK regulator calls for bankers to limit bonuses in advance of G20 Meeting: The thing with this, I just look at it and laugh because actually it’s such a distraction, it’s such a you know, the real news that should be at the G20 Summit is not about banker’s bonuses, you know they’re focusing on these banker’s bonuses. Why? Because it just happens to be that Lord Turner, okay, who’s talking about all these banker’s bonuses is head of the FSA and the FSA is one of the organisations that is squarely blamed for not slowing things down prior. You know, it’s sort of like the knee jerk reaction that happened well and truly too late. So I think he’s trying to create this perception of the you know banker’s bonuses or distraction of the banker’s bonuses from the real issues with the FSA. So interesting there but you’ve always got to read between the lines.
Lenders lower rates as banks borrowing costs edge toward Bank of England: Now what we’re talking about there is the Libor, the London Interbank Offered Rate – it’s the rate the banks lend to each other. That’s come down to 0.56 or sorry, 0.57. Base rate 0.5. So they’re almost on par, okay? Now that hasn’t happened for a while and what it’s showing is this stability, there’s the trust built between the banks again and you know lots of people talking about how the banks are much more stable than they were. Their balance sheets are still crap, they’ve still got toxic debt, you know Lloyds is looking at pulling some extra, or investors money in, so you know it’s not, we’re not out of the woods by any banking standards. Okay.
Cash call: This is really really awesome news for us because what we’ve got is Barratts and Redrow and there’s another one Liberty – house builders that are going out and they’re looking at raising cash from their markets. Okay? And then putting that into building houses which means for us off plan investment, and make no mistake – if you’re resisting off plan now give it a year – you won’t be because most of the stuff you’ll be doing is off plan because there won’t be as much stock. Stock has dried up, there’s very limited amounts of good quality stock left so off plan is the way and we’re seeing really you know good growth in these because what happens and Barratts in particular, are one of those ones, they will put with each phase the price up and that means there’s the potential for us as investors to make money and obviously if you want to check out more about off plan go to offplan.yourpropertyclub.com – it’s our sub site – it talks all about it, you’ve got two videos there to explain everything about it. We’re also partnering up with a company called Exbond that allows you to take and exchange bond. Effectively it’s a guarantee, a bank guarantee that’s given to developers so you don’t have to put your cash up front to buy that off plan. Huge opportunity there and it’s a really good partnership and we’re looking forward to grow that.
Inflation is likely but not because of monetary policy: What I wanted to talk about here is you know the thing that I find with this is we’ve developed this entitlement mentality that everything is free, you know? And he just mentioned that since World War II (encouraged by politicians) voters have come to believe that they have a great many entitlements regardless of what their earnings allow them to pay for. No matter how little a modern Brit earns he believes himself entitled to financial security, decent healthcare, 13 years of education for his children, the support of social workers, subsidized travel, solid housing and a pension when he is old, not to mention the protection of the military and the justice system. We’ve come, and this a modern society, it’s not just the UK, it’s every westernized democratic society that I know, we’ve come to expect everything from the government. The problem is that costs so either we’ve got to pay for it somehow and right now the government’s borrowing more money than it’s earning to pay for that. Now as you and I both know if our income is this and our expenses are that, there’s a little bit left over but if it’s the other way around our expenses go up here, we’ve got to borrow that from somewhere and eventually somebody says: You’re not credit-worthy and stops lending to you, and that’s the fear right now, that’s the problem here. You know what this raises is the fact that actually we’ve created this entitlement mentality that we want it all but who’s going to pay for it? Well we don’t want to, we want to drop the taxes we want to pay lees, but on the other hand we want more entitlements. So for me you know the answer for this, the answer has always been is to drop the entitlement mentality and I’m going to make the money myself, I’m going to be independently wealthy and be able to afford this and yes, certainly buy taxes, healthcare and things like that. But you know I really don’t want to rely on anyone else so you know private schooling and all those sort of things.
Monetary Policy Committee Rate Setters uncertain over recover: Now you think about this – these are the top economists in the country that have been chosen to sit on a panel to decide effectively how fast or slow the economy grows and major decisions and yet you know in their notes, in their minutes of their notes they’re talking about they’re uncertain. So if people with that much experience are uncertain, what how do you and I have of actually being able to accurately predict anything? So look we can’t, so you forget about that. What you can do is look for the trends and the trends are that we’re going to along the bottom, we’ll come out slowly and we’ll rise back up, we’ll get into another boom and as Alan Greenspan says, and I’m reading his book at the moment, and he talks a lot about human nature and the fact that you can’t solve the boom-bust cycle because it’s based on human nature, and it’s an amazing thing, for some reason we forget that. So what’s happening now is commentators saying “Prices can’t keep going, house prices can’t keep going up.” They will, you know, there’s no doubt about it, they’re based on human nature. Just a quick one.
CBI says recession over: So this is the Commerce Business and Industry and what they’re saying is they think we actually grew between July and September 0.3%. So it’s not much growth but it’s still effectively or technically taking us out of recession and they’re saying that the forecast for the fourth quarter will be 0.4%. So not huge growth but it’s certainly not decreasing. So it’s good news and there will be lots of people saying we’re coming out of the recession which is you know, great!
The real price of a mortgage: 6.39% Now interesting. You read that and you think, well actually I’ve got a few mortgages that are less than that. But actually what he’s talking about is first time buyers here. Now interestingly if you look at this 6.49%, buy-to-let investors are actually paying more than that right now and have been for some time and the reason I say that is because when you factor in the arrangement fees, all the different fees and charges and things like that you’re going to find that you probably actually paying around about 7%. You know depending on how long you keep it and so your pay rate may only be 5.29% or 5.49% but actually when you work in your 3% arrangement fee and you keep the mortgage for two years it adds another 1.5% to your actually interest rate which takes it now to around about 7%. So you’ve always got to factor in every element of that. Okay, just finally.
Pound struggles despite data: And then it goes on talking about how the pound struggled and they expect it to struggle more, and then finally and I always love showing these things. To make sure you don’t miss out on any opportunities to secure your currency at preferential trade rates… Now it’s all of a sudden what they’ve done is it it’s just an article written to the end which is the call to action, which is about – Hey! If you want to get in now while the pound I still strong, or strongish, then get in now. Okay? So you’ve always got to read through the article because oftentimes it’s the last sentence that actually says everything about the article that’s presented. As much as the headline realistically should, but the one thing in marketing as we know is it’s called AIDA (Attention Interest Desire and Action). The headline is there to get your attention. The last part is to get your action. The action here is to go and obviously use whoever they’re promoting to do some foreign exchange.
Anyway guys have a great week and we’ll see you next week.
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