Gross lending at £24.8bn for July

Gross mortgage lending in July saw a 27% year-on-year decline to £24.8bn says the Council of Mortgage Lenders.

The CML gross lending table for July shows gross mortgage lending for the month at £24.8bn, a massive fall from the £34.2bn seen in July last year.

But the data from CML also reveals gross mortgage lending is up slightly from June, when gross lending was at £23.5bn.

Bob Pannell, head of research at the CML, says: “While there was a small month-on-month increase in activity, it represented a notable decline from a year ago.

“This continues the weaker picture seen in June and points towards the more subdued levels of lending we are likely to see in the second half of 2008.”

UK personal finance literacy worsens

Despite personal finance issues taking centre stage over the past year, the financial literacy of British adults has declined compared to this time last year, according to Abbey Banking.

The research is based on a simple GCSE-level personal finance exam conducted among a group of adults in August 2007 and repeated a year on.

It found this year, one in seven adults (7.1m) would fail to achieve the 40% pass mark needed to obtain a grade C; a rise of 1.2m since last year when one in ten would have failed.

Reassuringly, 25% of adults matched last year’s tally of A*s but A grades were down this year by 2% to 28%.

Steve Shore, director of Abbey Banking, says: “While most people are in the realms of a GCSE pass, the failure rate has increased by over one million. Quite worrying given that the credit crunch and cost of living has dominated the front pages for the past twelve months – and people say that they are more interested in understanding their finance than ever before.”

Government plans to introduce personal finance skills into Maths GCSE should certainly be welcomed by 18-24 year olds, since the age group’s average score of 56% in 2007 dropped to 53% in 2008, says Abbey Banking.

The most common wrongly answered question this year was answered incorrectly by 88% of Britons, who didn’t know they get six weeks to pay back a credit card before it accrues interest.

An estimated 38% failed to explain negative equity is where a mortgage is larger than the value of a house, a marked improvement on 47% last year.

A quarter of Britons were unaware that failure to pay a secured loan meant their house could be sold to pay for the loan, while 18% did not understand what hire purchase is, marking a rise of 6% from last year.

FSA bans adviser from management role

A financial adviser will no longer be able to operate as a senior manager after failing to supervise his pensions transfer specialist who the FSA deems gave customers “unsuitable” advice. The regulator has banned sole trader Darrell Mark Eaden, who traded as Liberty Financial Consultants in Barnsley, for failing to “exercise due skill, care and diligence” in managing the business between May 2004 and March 2005.

Eaden, who also had responsibility for 41 investment advisers and five trainee advisers, “failed to maintain an appropriate level of understanding of pension transfers”, the FSA says, so could not supervise the actions of his pension transfer specialist appropriately.

The FSA says its suspicions were raised after a desk-based review of client files at Liberty in 2005.

It says, among other things, that Eaden “could not identify any set procedures in respect of the reporting or escalation of compliance issues in respect of the performance of his firm’s advisers”. It says he relied on his staff to keep him informed and alert him to any problems as and when they arose.

Eaden stated that there was “no other suitably qualified person” to monitor the performance of the pension transfer adviser and explained in interview that his supervision of that individual was informal and ad hoc because “he [the transfer specialist] was the expert”.

The FSA says Eaden did not understand this new area of business sufficiently, either to assess the specialist’s competence or monitor his performance.

Jonathan Phelan, head of retail enforcement at the FSA, says: “Firms must have in place and operate effective systems to ensure suitable advice is given to customers – this is a key part of treating customers fairly.

“Mr Eaden was responsible for ensuring that Liberty’s pension transfer specialist was effectively monitored, but he fell a long way short of achieving this. As a consequence he has been banned from being a senior manager.

“Our action should leave firms in no doubt that the FSA places great emphasis on the importance of adequate systems and controls, and individuals responsible for those systems and controls will be held accountable if they are not adequate.”

Liberty ceased trading on 3 March 2006 before Eaden applied to the FSA for a change of legal entity to set up Liberty Financial Consultants.

The new company took over all the rights and obligations of the regulated activities of Eaden’s original firm but, on 9 July 2007, Liberty Financial Consultants went into administration and then liquidation on 10 February this year.

Three-way MPC split fuels uncertainty

Members of the rate-setting Monetary Policy Committee (MPC) were split three ways for the second consecutive month before opting to leave the base rate unchanged at 5% in July, MPC minutes reveal.

For the second time, Professor Tim Besley was the sole member of the Bank of England group convinced an immediate rise in interest rates was necessary to help keep “inflation expectations anchored to the target”. Headline inflation surged last month to 4.4%, more than twice the MPC’s object rate.

Besley’s backing for a rate increase was only the second time an MPC member had voted for a base rate increase in more than a year.

Conversely, David Blanchflower again backed a cut of 25 basis points, arguing there was a greater risk of undershooting the inflation target in the medium term due to “rapidly slowing activity”.

The remaining seven members maintained their assertion that the current rate was “broadly appropriate” and should remain at 5%.

Although the Bank predicts inflation will climb higher and is set to hit 5% in the next few months, it dampened expectations rates could rise by forecasting that inflation is more likely to subside and drop back to its target if rates were kept broadly unchanged.

Broker boost for Select & Protect

Select & Protect has doubled its number of broker partner relationships to over 10,500 in the past 12 months.

Since the launch of Select & Protect’s new Elements proposition that offers brokers the choice of three underwriters but just one common policy wording, coupled with a revamped website where brokers can register quickly and simply online, broker registrations have significantly increased along with new business levels which are up over 20% despite the ongoing financial uncertainly.

Scott Fynn, senior marketing manager at Select & Protect, said: “With an enhanced proposition launched, the backing of three blue chip underwriters in Norwich Union, Zurich and Allianz and a streamlined application process, we’ve seen new mortgage brokers register at a rate of over 400 each month. We don’t see this slowing down either – with certain GI providers now closely reviewing their front end incentives, coupled with the slow down in mortgage business, brokers are really focussing on the ancillary earning potential of General Insurance and Select & Protect are clearly the forerunners in the market at the moment.

“We believe we’ve struck the perfect balance for a broker GI proposition; great products, generous long term commission and a proposition that has stood the test of time. 25 years of delighting brokers and customers alike with a dedicated specialisation in offering intermediary general insurance, has ensured that we remain the pioneers of GI in this marketplace and not short term goal seekers.”

Dual pricing still hitting brokers

Home Buyer Systems has claimed that dual pricing continues to make broker products uncompetitive when compared with direct-to-lender products.

Using the Home Buyer sourcing system powered by Defaqto, the cheapest mortgage deal over two years has been tracked using two generic examples based on the Council of Mortgage Lenders’ average borrower statistics. These are: a first time buyer purchasing a property for £127,500 at 90% LTV, and a second time buyer purchasing a property for £185,000 at 73% LTV.

Tracking the actual difference between the cheapest cost of an intermediary product and the cheapest cost of a direct-to-lender product over the last month, for first time buyers the direct-to-lender mortgage is £63.09 per month (£1514.16 over two years) cheaper than the equivalent broker product, and for second time buyers the direct-to-lender product is £43.37 per month (£1040.88 over two years) cheaper than the broker product.

Richard Angliss, managing director of Home Buyer Systems, said: “These differentials between direct-to-lender and broker products have persisted for the last couple of months and they are now an established market condition that shows no sign of disappearing. In the current market, mortgage intermediaries must seriously consider switching to a fee-based service and equip themselves with the systems and technology to research and recommend direct-to-lender mortgages. As the figures show, most borrowers are likely to agree to a reasonable fee in order to gain the savings that a direct-to-lender product will provide.

“Just having access to product sourcing data that includes direct-to-lender products is not the whole story, as brokers will need to produce a KFI, generate documentation for the fee payment, and have an effective way of collecting that payment. Our HBSLite system has been designed to give advisers everything they need to sell direct-to-lender products, including the ability to produce a KFI for both broker and direct-to-lender products.”

Stroud & Swindon expands range

Stroud & Swindon has expanded its residential mortgage range with the introduction of new two, three and five-year fixed rate mortgage products for residential properties.

These will be available from 22 August.

The new product range provides a fixed rate offer of 6.09% over three different payment periods with a maximum loan to value (LTV) of 75%. Customers wanting to remortgage will also get free valuation and legal fees.

Linda Will, sales and marketing director, said: “We are delighted to be launching a new range of competitive fixed rate deals to help brokers service their customer. With these rates, we hope to help consumers at a time when it has become difficult for many to remortgage or move house.

“Our new range of products offer not only short-term but also long-term options enabling our customers to benefit from the flexibility to plan their finances according to their individual needs.”