Tony's Ten: so much to discuss

08 November, 2012
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Well, so much to discuss.

Firstly, of course, the UK seems to be in a veritable boom with good, if one-off, GDP growth figures. This maybe a temporary reprieve as, while in general economists seem to think UK GDP figures have been somewhat understated, our friends in Europe are still not firing on all cylinders. Europe’s dire situation seems to be suppressing numbers out of the US (which had seemed to be recovering and hopefully is still on path) and China. Countering that, the ECB’s continuing statements that it will do anything to save the Euro does seem to have calmed the immediate crisis in Spain down. Nevertheless, the global economy is far from healthy; it needs to turn around because many central banks are running out of anti-recession tools. 

Mortgage reforms

The FSA may be in its death-throws but are still creating new standards, most recently in the mortgage market. The FSA is introducing some new ideas about controlling mortgage borrowing/selling behaviours, the aim being to “hardwire” common sense into the mortgage industry – see: http://www.fsa.gov.uk/library/communication/pr/2012/098.shtml

The area I am interested in is the quite sensible, and I would think barely needed, age restrictions it is looking to create (if you have £300k of income or £3m of assets then you can borrow until the pips squeak, which seems somewhat redundant if you have that kind of resources). The FSA is concerned about banks and advisers proffering mortgages to people who will be well into their 70s when the mortgage period ends. 

So that means from the age of 45 people’s abilities to get traditional 25 year mortgages will tail off, and severely once you get over 50. 

Now, that reminds me of some “research” moneysupermarket.com put out last year saying that prospective first time buyers were not expecting to be able to buy their first home until an average age of 38 and in London that rises to 43: http://www.moneysupermarket.com/c/news/do-not-give-up-on-the-mortgage-game/0011592/ 

Now, I think real world numbers are much lower than these survey-based numbers, but you do wonder when the average first time buyer age will start to intersect with the age when buyers can no longer get a 25 year mortgage! 

FSA getting heavier in its final days

With the US sending an insider trader to prison for two years (Rajat Gupta, though why would someone who had run McKinsey and been a board director of Goldman Sachs need to do it?) and the French confirm that Jerome Kerviel would serve 5 years (2 years suspended) for covering up billions of euros of losses at Société Général, what of the FSA?

Well, it has been hunting down people who are ignoring them; admittedly, this is something in a slightly different league. It has been having a crack down on people who have been prohibited from acting as advisors and have continued their business. In Birmingham, two financial advisors, Gary Hexley and his business partner John Cooper face a number of charges under the Financial Services and Markets Act 2000 because it is alleged Hexley carried on advising even though banned from operating. 

Meanwhile, it has been reported the FSA got the Kent police to search the premises of a banned mortgage adviser who now faces similar investigations as to whether he continued to operate after his ban. 

The FSA has also fined two firms; Plus500 were fined £205,128 and James Sharp & Company were fined £49,000 for failing to provide accurate and timely transaction reports. Plus500 deals in highly leveraged CFD’s (Contracts For Difference) but failed to report 189,000 trades to the FSA, while stockbroker James Sharp failed to report 71,000 trades. Both firms got a 30% discount on the fines for supporting the investigation.

But the FSA’s days are nearly over.

Long live the Financial Conduct Authority. 

The FSA has a very useful guide on its pathway to the FCA. It’s very accessible and covers, briefly, the roles of the other new regulatory authorities. It is well worth a quick read through: http://www.fsa.gov.uk/static/pubs/other/journey-to-the-fca-standard.pdf.

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