February 17, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Mortgage lending to Buy to Let investors leapt an impressive 47% by value in the last six months of 2005, compared to the first half, or so says the Council Of Mortgage Lenders. In total, the total value of Buy to Let lending during the period was £14.6bn, the highest ever.

CML also looks at mortgage lending by volume, and by this measure the rise was not quite so steep, but with the volume of Buy to Let lending hitting 130,400 in the six month period, 39% up on the previous period, it was still the stuff for headlines.

The rise in lending coincides with a slight relaxation in lending criteria. And the average maximum loan to value ratio jumped from 80% in 2004 to 85% in the second half of the year. Back in the year 2000 the average ratio was 76%. Lenders don’t expect income to be quite so high either. They are now willing to accept average income of 25% of mortgage payments, whereas they previously wanted 30%.

But there are no signs of the market overheating. Sure there was a slight rise in the percentage of Buy to Let mortgages which are three months in arrears, but at just 0.68%, compared to 0.66% in 2004, and 0.47% in 2000, there’s no reason to ring any alarm bells.

Of course, to maintain buoyancy in the market, the rise in Buy to Let investors should counteract the fall in first Time Buyers. And Since 2000, it would appear this is exactly what happened.

According to CML, since 2000 the number of mortgages taken out by First Time Buyers has fallen from 498,800 in 2000 to just 369,100 last year. That’s a fall of 129,700. Meanwhile mortgages for Buy to Let investing rose from 48,400 to 223,8000, a rise of 175,400.

So in short, Buy to let Investors have been taking up the slack left by First Time Buyers, no wonder the property market stayed strong while first Time Buyers moved away.

The question now is this: how long will this trend continue? The first half of this decade coincided with a miserable time for equity investors and property investors would have enjoyed much better return than your average investors in shares - thank you very much. Moving forward, with the rate of interest so low and likely to stay down, the yield on property investment is likely to remain good. With the global economy set to continue to grow, we suspect the long-term prognosis for equity investing is better still.

February 15, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Warren Buffet, the world’s second richest man, and Alan Greenspan’s rival for the mantle of top economic wise man, is resigning as a director of Coca Cola. He said he needs to spend more time with his main business Berkshire Hathaway. Mr Buffett said there was nothing untoward in this decision, and that he has faith in the current management to keep the world’s “greatest brand” on track. Mr Buffett, who says he drinks five glasses of cherry coke a day (yuk - I bought a can of that by mistake once, much prefer the real thing - Ed,) still owns 200 million shares in the company, and it’s been reported”that he has no intention to sell them. The guru of investment once said his favourite time span to hold shares in a company was “forever.” He is not into charting, or other forms of voodoo to help him make investment decisions, his main criteria is: “Do I like the products the company sells?

February 15, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The government’s idea for allowing people to work beyond the age of 65 is coming under fire from Blackpool. The National Pensioners Convention (NPC) is having its annual meeting there, and its spokesman Neil Duncan-Jordan said: ” Raising the state pension age would punish manual workers unduly, since they do not live as long as people in white collar jobs… It is all very well living to 85 but many people endure prolonged ill health in the last decade of their lives.”

We sympathise, but what’s the alternative? Thanks to the demographic shift, there will be more of us over 65, and unless there’s a change in regulation, less us of us will be working. So to provide a prosperous retirement, we have limited options. The state could raise taxes; this will cause a recession in the short term, and because of the link between tax and the incentive to work, could relegate the UK to the slow lane of economic growth for years. Alternatively, as individuals, we could all save more, a lot more - but this too would cause a recession in the short term, and our already troubled retail sector could be tipped over the edge. Alternatively again, we could go on as we are, wait until the demographic time bomb is about to explode and then open the immigration gates, increasing the size of the work force.

February 15, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Now we don’t want to moan but…according to the Office of National Statistics CPI annual inflation was 1.9% in January, the same level as December, and 0.1% percentage point below the Bank of England’s target. The difficulty we have is this. Last month the ONS said December’s inflation rate was 2%. So, in effect, it’s saying inflation is at the same level, but only because it changed its mind about the December rate. Our official statistics body is prone to do that. And we wonder whether it will change its mind about the January rate in four weeks time. In the best traditions of George Orwell, whose Big Brother state used to change history after it had happened, we might well be telling you next month that CPI inflation in January was 2%, or 1.8%. Let’s hope you don’t notice.

Those gripes aside, at the current level it would appear the arguments for a fall in the rate of interest are mounting. Although there’s normally considered to be an 18 month time lag between the correlation of inflation and the rate of interest, so, in theory at least, the Bank of England should have already allowed for the currently low level of consumer prices rises.

February 15, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

There’s good and bad news from the Eurozone. The bad news, Germany and France saw a big slow down in growth in the final quarter of last year. Germany dropped from a GDP growth of 0.6% in Q3, to just 0.3%, while France slowed from 0.7% to 0.2%.

Once again, the UK is well ahead of its two European rivals, with fourth quarter growth in the land of the Queen and Celebrity Big Brother at 0.6%.

The good news comes from Spain and the Netherlands, the fourth and fifth largest economies in the region. The Dutch economy saw Q4 growth of 1%, while the economy of the Costas grew by 0.9%.

There is also some good news from Germany. Growth might have fallen, but forward indicators suggest a pick up in the months ahead, with the German Zew index showing sentiment on current conditions at its highest level for five years.

Capital Economics said of the Eurozone: “If German growth picks up in line with the forward looking surveys, then euro-zone growth overall should meet our above consensus forecast of 2.3% this year. As such, there is nothing here to stop the ECB from raising rates in March.”

February 15, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The trouble with computers is where do you begin? The list is never ending, but one of the problems facing accountants is the speed at which they depreciate. Do you capitalise spending on software, for example, showing it in the balance sheet as an asset, or do you write it off. Many businesses write it off, and so when the Office of National Statistics calculates the total level of capital investment, it doesn’t count most of the spending on software.

Is this the right or wrong thing to do? It’s a subjective decision, and ultimately doesn’t really affect us one way or the other.

But, the point is this; other countries do it differently. They count all software spending as an investment, so when publications, such as this one, talk about the low level of UK investment, they are perhaps not comparing like with like.

Now the Office of National Statistics, or so says the FT, has had a change of heart. And thanks to this, it appears we were all a lot better off over the last few years than we thought. In fact it would appear total UK growth over the last ten years or so was a full percentage point higher than previously thought, and on average since 1992, the UK grew by 0.1% per annum more than calculated.

As for investment, in 2003 alone, investment in software was not £2.5bn, as previously calculated, but in fact £13bn.

The new data can partially explain why UK productivity has been recorded as so much lower than in other countries.

Meanwhile, while the ONS says we are in fact investing more than we thought, the Institute of Directors has said our investment was pretty good anyway.

The IOD says that business investment as a proportion of GDP is 10%, that’s better than the 8-9% level recorded in the ‘87 to ‘97 period.

Graeme Leach, Chief Economist at the IoD said: “Our business investment performance is good not bad. It would be nice if we could hear a little less moaning and a little more gloating. Of course there is always room for improvement, but if one considers the recent past, business investment as a share of GDP has been above historic levels at the same time that two major trends threatened to undermine it. The first being unfunded pension deficits and the second being widespread share buybacks and high dividend payments. All in all, well done UK plc!”

February 14, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The high price of oil and energy has been taking its toll at the factories. Input prices rose last month by 1.8%, compared to a 1.5% rise in December. As for the year on year figures, input prices were up by a worrying 16.2% over the last 12 months. In the past, of course, this always meant a rise in inflation down the line, but to date the prices are not filtering through to the end user, and output prices are keeping largely in check, with a mere 2.9% rise over the last year. Of course this is bad news for manufacturers, who are swallowing up most of the extra costs themselves. Still at least you and I can celebrate. Factories might be struggling, but there is no sign of this seriously impacting on the consumer price index, and there is no talk of a consequential rise in the rate of interest.

February 14, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Yesterday we told how the combination of NTL and Virgin Mobile TV could create a new player in the TV content arena, with the company going head to head with BSkyB, for example, in buying up sports coverage rights.

Now we bring news of how BT too is muscling in on the market. It’s entered into an agreement with Endemol, the company behind Big Brother.

Of course, in its 21st century network, BT wants to facilitate more than the passive viewing of TV. It wants us to get involved and interact. Voting, no doubt using our BT fusion phone, for our favourite contestants in reality TV shows, for example. And in this field, Endemol is considered a market leader.

A BT statement said: “This agreement builds on the content deals already announced with some of the world’s biggest entertainment companies including BBC Worldwide, Paramount and Warner Music Group, factual powerhouse National Geographic Channel and with kids’ TV programming leaders HIT Entertainment and Nelvana.”

“BT will unveil further big name deals this year as it builds to a launch of the pioneering service in Autumn 2006.”

February 14, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Never mind concerns over Iran and Nuclear weapons, never mind the threat of terrorism, if you are a parent with more than one teenage child you will understand what we mean when we say it sometimes seems the biggest single threat to world peace lies with conflict between siblings over who is going to use instant chat on the family computer.

It’s a battle that is fought in homes across the land, and for all we know across the globe every night.

But now a group of mobile phone companies have clubbed together to offer a solution: instant messaging for mobile phones, meaning if you’ve got a phone then you have your own personal instant messaging device.

Vodafone’s chief executive, Arun Sarin, is at the 3GSM World Congress in Barcelona, and he described the move towards instant chat on mobiles as a “worldwide phenomenon. ”

But before we thank the mobile phones for this generous peacemaking gesture, we should point out there’s a fly in the ointment. Many parents report their children as becoming addicted to instant chat services. So maybe, as America is weaned off oil, a new habit is emerging, and the mobile phone companies could be adding to the woes of the helpless addicts.

February 14, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

A couple of years ago Nokia was on the receiving end of a barrage of criticism. It had misread the market and ignored clamshell phones opting instead for more fancy models, and lost market share as a result. We said at the time that maybe the company was looking too far ahead, but that one day this strategy would pay off, because when you are the market leader, you can afford to look over the horizon with ideas to protect your market share in years to come.

Yesterday the company revealed plans to launch a dual-purpose mobile phone combining traditional wireless telephony with VoIP when in range of a Wi Fi hot spot. The product is due for launch within the next few months - probably in the second quarter of this year.

The Nokia product will be the first mass market, genuine VoIP mobile phone available. As yet the company has not announced which network will provide the traditional mobile phone coverage when out of range of a hot spot, but Jorma Ollila, the company’s chief executive said that there were plenty of “US and European operators who want to be the first one.”

Two Nokia phones will initially support the feature, the 6136 and the N80.

But while The Finish company throws down the VoIP gauntlet, BT has come under criticism over its fusion product. On paper, the BT Fusion is of a similar ilk to the Nokia product, and offers phone calls via a BT broadband connection when you are at home or at the office, but uses a traditional network while you are out and about. But the phone only works over your BT broadband connection, and is not true VoIP. The tariff for the cost of calls has also come under criticism, with BT charging calls at landline rates, and international and 0845 calls are charged at mobile phone rates.

The BT fusion phone is supplied by Nokia’s arch rival, Motorola.

The move to mobile phone calls over the Internet has a ring of inevitability about it, and for the mobile phone operators this is bad news. The suppliers of handsets, however, make money from selling their products, and to them it makes little difference how the calls are actually made.

For VoIP, be it at home or on your mobile, to truly take off, the end user’s experience has to be made simple. How many of us over the age of 25 really know how to use all the features on our mobile phone? At the moment, from the end user’s perspective, a shroud of mystery still surrounds VoIP. Only when this lifts will the market take off; but that this will happen is, in our view, a foregone certainty.