This suggests either he is incredibly slow at maths or he is a prop-onent of Enron-style accounting. He claimed that the reason for rewriting history was that the ONG (Office for Nat-ional Guesswork, occasionally also known as the ONS – Office for National Statistics) had revised some historical GDP figures.The date the Chancellor uses for the start of the current economic cycle is important because in view of the spendthrift ways of some of his predecessors, he announced he would adopt a golden rule to help pers-uade the City that he would be a respon-sible Chancellor. The golden rule was in theory very simple – over the economic cycle, the Budget would be balanced. How-ever, last week’s change of the rules was not the first, or even the second, piece of gerry-mandering of the rules for the golden rule. In December 2003, the way some figures were calculated was helpfully “clarified” and at the beginning of this year, further changes to the rules were made. Naturally, it was a complete coincidence that each time the rules were “clarified” or changed, the golden rule was in danger of being broken and each change just happened to give the Chancellor more leeway, with last week’s change giving him an extra 12bn. One of the key points to take out of these changes, particularly the latest one, as it was made only six months after the previous change and generated the biggest amount of extra leeway, is that Brown thinks the economy is heading for a rocky patch. As a result, tax revenues will rise less quickly than he budgeted and expenditure on things like social security benefits will increase. It will be a major shock if the Bank of England’s monetary policy committee does not cut bank base rate by 0.25 per cent next week and the City has already priced in a further 0.25 per cent cut before the end of the year. If the economic downturn is as bad as the Chancellor appears to be expecting, although, of course, we won’t hear him talking in such terms, the ques-tion to consider is how far will interest rates fall and how quickly? Since we escaped from the ERM in September 1992, interest rate cycles have progressively peaked and bottomed at lower levels than the previous cycle. On that basis, we should not be surprised if base rate falls some way below 4 per cent. However, even the first 0.25 per cent is likely to have a marked impact on confid-ence in the housing market. Confidence is a crucial factor in the housing market and interest rate expectations are the most important influence on confidence. Over the last year, house prices nation-ally fell on average by 5 per cent (Land Registry figures) and average earnings are up by 4 per cent. The cost of variable-rate mortgages will be unchanged after next week’s expected base rate cut and the cost of fixed-rate mortgages has fallen by about 1 per cent. As nearly half of new mortgages are on a fixed rate, this means that the average mortgage interest rate paid by new borrowers will be 0.25 per cent lower than a year ago. Put these three factors together and affordability is already significantly better than a year ago although, of course, it is still a problem for many borrowers. With confidence improving on the back of lower interest rates, I do not expect the current buyers’ market to remain for much longer.
IFA firm Buckles has made its Snowdonia funds of funds available through AIG Life after finding that insurance companies with their own multi-manager products did not want to establish external fund links.
St Jamess Place Capital has announced a number of non-executive appointments and resignations.Roger Walsom, who retired from city law firm Ashurst in April, becomes independent non-executive director. He is also non-executive director of The Pensions Regulator.John Edwards has also joined as non-executive director. Edwards was appointed HBOS chief executive of insurance and investment division in […]
Henderson Global Investors is to launch a growth and income to be run by Graham Kitchen and Andy Jones when they join the firm in October. Kitchen was recruited from Threadneedle while Jones runs Invesco Perpetual’s income and growth fund.
This week, I will continue my series of articles on recent and imminent developments in the field of pensions. As in previous articles, I will not only identify and describe the developments but will discuss the implications and opportunities for pension advisers and their clients.
Trevor Greetham, Head of Multi Asset In a marked contrast to the surge in risk sentiment that followed President Trump’s election in November, markets greeted Emmanuel Macron’s victory in the French presidential election with satisfaction and relief, rather than euphoria. After rallying strongly on opinion polls that accurately predicted the outcome, the euro held onto […]
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