Talk on the economy has really been dwarfed this week by, of all things, and as our waitress this morning so eloquently put it, by Tiger bloody Woods. Seriously, it is wall to wall coverage now the blizzard is done.

USA Today had an interesting article that 30 year fixed mortgage rates had fallen to their lowest rate for ages which is starting to kick start re-financing, although several commentators are still to be convinced about this.

There does seem to be a view, in the coverage I have seen at least, that whilst the worst is over for now, more issues are to come especially when talking about how to wean everyone off the “financial stimulus”.

Unemployment is still high here but recent jobs figures suggest this has eased, albeit slightly, down to 10%. On top of this the average working week in terms of hours worked increased by the biggest margin in 3 years, showing that those firms who cut down capacity are starting to increase hours again, in turn boosting wage packets.

Another boost was that the number of temporary workers increased by the largest amount in 5 years, which can be seen as a precursor to firms taking on permanent employees once more. Inventories at U.S. factories also increased for the first time in more than a year in October, while factory orders also rose an unexpected 0.6%.

However, bank closures are still going on here, with another 5 being shut today which brings the total in 2009 alone to 130 banks that have been forced to close. Meanwhile individual states in the US are already raising taxes in order to fight budget shortfalls.

What really strikes me is just how politicised everything is over here, much more so than in the UK, and there are many who question every single stat and put their own spin on it to the nth degree.

In the UK we often look across the pond as a sign of what is to come in the short to medium term, and the news from what I can see is we all need a huge slice of realism. Whereas the next few months may represent a welcome lull and some definite silver linings and opportunity there is still an awful lot of pain to go through which may not show itself until the latter part of next year.

The good news is that for many smaller firms in the US, they have proved more robust than many feared and are starting to adapt to the new world and try to take advantage of the opportunities.

Back in good old Blighty I see a similar pattern emerging, and one that has no doubt been repeated in the immediate aftermath of every financial downturn. Newer, small/medium companies will take the opportunity whilst larger, more unresponsive companies will struggle to change in time, partly through arrogance, partly through their treatment of their staff, and partly through difficulties in cutting and manoeuvring that size brings.

The property market is slowly beginning to recover in the US, and in the UK I expect this recovery to be slightly quicker, simply due to supply and demand, especially in London and other areas of greater demand.

Whilst we do have a long way to go, the signs are there that if the move away from the stimulus packages around the world are handled correctly and sensitively things will slowly recover without too many serious glitches. If Governments handle this transition poorly, and there is a great deal of pressure on the next incumbents’ to Downing Street, they may be reaching for the red phone to say not Houston, but Washington, we have a problem.

If this is the case then perhaps that is that how some people can say “I told you so” and show the post they blogged some time ago?

Very interesting and we shall see.

By the way, I reckon Torres will score a hatrick on Saturday!

Whilst HSBC have stolen all the headlines with their 1.99% lowest rate ever malarkey, (actually the lowest rate I remember was 0% for 6 months!),  Woolwich have quietly taken up the fight and slipped in a stepped tracker product starting at 1.98% !

This is all very well, but the battleground for lenders offering these products is below 75% Loan-To-Value, so those struggling to come up with a decent deposit have a right to feel slightly hard done by, and leaves many first-time buyers relying on the “Bank of Mum & Dad” for further assistance.

With lenders still maintaining their “flight to quality”, in other words only really interested in lending to those with large deposits, a perfect credit rating and not even remotely stretching their income, you would be forgiven for thinking that the clouds of gloom over the market are here to stay a while longer.

The good news, however is that in recent weeks there have been tentative signs that things are easing slightly. We have seen reports showing that property has not been this affordable for many years, a marked increase in the number of mortgage products available, and house prices stabilising.

The biggest area of movement is in the large mortgage loan arena where properties seem to be moving quickly and many Private Banks who specialise in lending to High Net Worth individuals have taken up the slack from high street lenders.

At this level products such as a 2.99% base rate tracker, a 3.99% 2 year fixed and a 3.25% variable with no penalties offer a superb incentive for those looking to borrow above £1,000,000 to take advantage of lower house prices and not tie up all their available cash. The good news is that these products have a sensible underwriting policy and very competitive fees.

The increased availability of finance in this area is a welcome boost, and we are already seeing many traditional cash buyers deciding to borrow at historically low rates on at least part of the cost rather than tie up all their cash that could be utilised elsewhere.

There are two other products worth noting. First is that current conditions have brought about a  renaissance for the “Offset Mortgage”, which, starting at 2.97%, is now available for a tiny margin above the leading products, but brings with it a wealth of flexibility and advantages standard tracker products can only dream of.

The fact that offset products are now available at levels not seen since before the credit crunch is yet another sign that mortgage lending is easing, albeit slowly.

In simplistic terms, an Offset Mortgage is a way of using what is in your savings and current accounts to reduce the mortgage balance you are charged interest on. Offsetting like this reduces the amount of interest you need to pay the lender each month. So you can either simply pay less each month, or keep payments the same and pay off your mortgage earlier.

Secondly, there is also a marvellous product priced at Bank of England base rate plus 2.58%, with an arrangement fee of £995. In other words you start off paying a mere 3.08% for 2 years. As well as coming with a free valuation and legal fees for remortgages, the real selling point is the ability to switch into a fixed-rate product at any time without further underwriting or cost.

This really does give you the best of both worlds, and allows you to enjoy the benefits of low rates without the worry that you may not be able to fix when more security is needed or when base rate starts to rise again.

Therefore, word for word see below (to follow Paul Masons blog click here).

Paul Mason | 19:17 UK time, Wednesday, 12 August 2009

Here’s my take on the August 09 Inflation Report. First, the good news, Quantitative Easing is working. Now the bad news: working means avoiding a catastrophe. It’s taken £175bn – and says my interlocutor Doug McWilliam of the CEBR will probably take another £50bn – just to avoid a prolonged slump.

Even with 0.5% interest rates right through to 2011 and the full £175bn still in circulation until then, the Bank of England is predicting inflation will undershoot the 2% target for CPI. That means we should expect interest rates to be low for at least that long. It also signifies the recovery is going to be pretty appalling: weak and fragile.

The Bank’s famous “fan chart” looks mighty perky – a near symmetrical V, centering on the last three months, showing that – although the recession is not over, the fastest period of shrinkage is over. But there are serious risks – both global and intrinsic – that this comes out worse than they think.

Here’s the problem. QE, together with the 680bn guarantee for the bad assets of Lloyds Group and RBS, has begun to turn banking around. But there is scant growth in lending to individuals – and loans to companies are still shrinking.

And so the Bank’s main target on QE – expanding the money supply – is, well, off target. Growth of broad money (M4) has slumped and continued to slide even after the Bank started printing money. That’s because while money makes its way from the BoE to the banks, it does not make its way in sufficient quantities into the pockets of borrowers or businesses.

Let us put it brutally: to save the banks the real economy’s recovery is being delayed and perfectly healthy companies sacrificed. The governor of the Bank told me today this was more or less inevitable – we’ll be discussing with politicians whether there are alternatives.

On top of all this there is a political variable: the Bank’s growth projections today are based on the Labour budget figures. If, as the Conservatives have indicated, they rip these up and tighten faster there will be question marks over the growth projections.

Today’s unemployment figures only tell half the story of the jobs market: pay freezes, short time and hyper-flexible work practices are contributing to the rapidity of recovery – but also to the permanent hit to economic demand that will dampen economic growth for the first half of the next decade.

This is a major sign that the Bank is erring on the side of caution to make sure the recent encouraging signs are nurtured and shows how fragile the lending market is.

The main issue with the whole QE concept is that we may not be able to judge the full effects of the project for a while yet, as the Bank of England themselves states, “the results of the exercise will not be known until at least nine months from the start of the plan, which began in March this year”.

For many, however, it is hard to believe that we could be coming out of the recession so quickly, whatever the latest data suggests. During all recessions there seems to be a “false dawn” period before a further slump and some commentators point to the fact that because the financial industry has been propped up artificially by the taxpayer, once this runs out we will see a further fall.

However, these latest statistics seem hard to ignore. Halifax, Nationwide and the Land Registry all suggest house prices are rising again, the service sector is reportedly growing at its’ fastest rate for 18 months, and even industrial production rose unexpectedly from May to June.

In the mortgage market we have seen the tentative return of foreign banks, house builders are reporting a new wave of buyers purchasing off-plan again and London estate agents are getting excited again.

Meanwhile economists continue to argue about the shape of the recession, with a U shape or a W shape being the main contenders. I believe we will see a perverse combination of the two, or as a learned friend said a “W shape written by a lazy man” – a slight improvement, a slight fall, and then the growth. The main issue is that the economy is still standing on capricious grounds and any issues could have a larger effect than normal.

Whatever happens next, most people agree the worst is now behind us, and we can now at least begin to move forward albeit cautiously.

The overriding feeling was that most had had an optimistic and relatively successful June, but we have seen this before. A terrific month late last year was followed by the cliff fall that was the collapse of Lehman’s’ which is now seen as a massive faux pas by those who allowed this to happen.

The point is that the next few months, certainly over the traditionally quieter summer period, are going to be tough for many in the industry. Lenders are still battening down the hatches, see Abbeys ever-tightening criteria, and interest rates on products continue to edge upwards as lenders appetite to lend is still subdued at best.

The confusion around house prices continues as the latest Halifax property survey shows a decline in June, albeit a small one and following a large rise in May, of 0.5%.

With no one expecting any change in the Bank Base Rate this year the only real decision for the MPC is whether they will extend the policy of Quantitative Easing. I believe they will at least apply to use up the remaining amount initially set out, and may well look for a further extension of funds.

The positive news is that almost everyone seems to believe we have now reached the bottom, and whether or not we bump around the sea bed for a while, which is highly likely, a feeling that we have seen the worst is welcome.

I still believe the rest of this year remains tight, especially for mortgage brokers, as lenders continue to ignore pleas of sanctuary and split the market. To this end we all need to concentrate on getting our own houses in order.

It is interesting to hear that some commentators like to pass comments on things they clearly do not understand.

Like how a team of like minded managers, brokers and administrators, frustrated and ignored for a long time and with no controlling rights in their last company, form their own company without the majority of the previous owners and be mentioned as a Phoenix! Especially when some of them also belong to one of the biggest groups of creditors in the last business and are out of pocket.

Perhaps these people should concentrate on justifying their own independent advice to consumers and keeping their own staff happy.

We all need to concentrate on how we work together as an industry. As I mentioned on Twitter the other day, these events remind me that there are some great and wonderful people in our industry, who I thank for their continued messages of support.

Together we are strong and continue to stand up for the rights of the consumer.

They are going to investigate in-particular, “the sharp rise in repossessions and the chronic shortage of affordable home loans for first-time buyers”.

Brilliant. Is that really the best that the Government can come up with? A cross-party committee of MP’s wagging fingers at bankers and telling everyone what they are doing wrong whilst they try to keep their latest expenses form under wraps!

More worryingly, the question that really should be asked is do they really still not understand what is going on and what the real issues are?

As far as repossessions are concerned, yesterday we saw the Fitch report which suggested that 15% of prime home loans were in negative equity. As someone who took out a 90% remortgage at the height of the market you can add me into that stat! To be honest it was actually a calculated move as I believed if I did not release the equity then I would not be able to for a while!

Anyway, where was I? Oh yes, while on first glance the Fitch report makes grim reading for many homeowners across the country, the key is not to panic. Yet.

Firstly, the current negative equity predicament is not the unmitigated disaster it could have been if interest rates were still at 2008 levels. Also, negative equity is only a problem if you have to move or remortgage, and for many homeowners they are not in this position and can hopefully ride out the storm and wait for prices to rise again.

The blow of falling prices has been lessened by many people also seeing their mortgage payments fall dramatically in the last nine months. Homeowners can still take advantage of low rates and try and pay off a large chunk of their mortgage while payments are so affordable.

For example, if you have an interest only mortgage, you should look, if you can, into converting to a repayment mortgage in the short-term, making sure that your lender will let you switch back to an interest only mortgage if rates start to rise quickly. This means any negative equity positions won’t be as pronounced if capital is being paid off.

The real issue will come in a few months time, when rates rise again, before house prices have had a chance to pick up dramatically. That is when I expect to see the repossession figures rise again, and all those people who did not fix in when they had the chance begin to kick themselves.

Whilst we all battle with the mundane tasks of trying to earn a decent living, others are battling for basic human rights.

I know some will say you are not meant to mix these blogs with anything other than professional work issues, but I disagree. I have never been a conformist and for me the point of blogs is to be honest and speak about whatever is on your mind. I believe people appreciate honesty and want to be communicated with, rather than sold to.

Saying all this, perhaps I should question a few things. Like why are lenders rates really rising? My colleague Rob Gill has done an excellent piece on why the cost of funding has increased which you can read here, but can lenders really confirm the margins they are making on each deal. Brokers have to confirm the commission they make on a mortgage loan so why can’t lenders also detail it? Just an average will do.

Also, why do lenders not offer brokers the same products you can get directly through their branch network? In fact why do they even not like brokers introducing the business to them even without any payment? Is it so they can prop up an antiquated branched based system and cross-sell products without independent advice that may be more expensive than a decent broker could offer?

If you want to be really cynical, is it just a move by lenders to try to reduce the power base of brokers? As agents for our clients, we constantly question, demand better service, innovate and push lenders on our clients’ behalf. Try going direct to a lender like HSBC and many will complain about tedious levels of service.

Alternatively, as trust in brokers is high at the moment, whilst we all know where trust in banks is at, is this a way of trying to redress the balance? Accusing brokers of not recommending products we are not allowed to sell anyway?

I know I am playing devils’ advocate here, but sometimes it is hard to just blindly accept the “just passing the cost on gov” argument, and I empathise with the lenders more than the majority. I understand the issues they face and how hard many are working within these institutions to make things better.

Today, however, I feel like asking these questions, although they are insignificant compared to questions being asked in more serious situations.

Today, our thoughts are with all those battling injustice, and especially with the family of Neda Soltan, the young women shot for no apparent reason.

So today, maybe stand up for something you believe is right, challenge something you have not had the guts to challenge before, question those who you believe are doing the wrong thing, give those in authority you believe are not acting for the greater good a hard time, respectfully of course. You may just find it liberating.

Today, we are all Neda.

Rob Henderson

The reason I mention this is because of something Hendo said later on in the evening when doing an entertaining half hour spot on BBC Radio 5 Live about the British & Irish Lions chances of actually winning the test series. As someone who actually pulled on the famous red jersey he should know what he is talking about, and he mentioned that in the first test at least, he would be happy to see them “win ugly”.

It seems to me that this phrase can apply to many at the moment. In tough conditions it is all about doing the hard graft, putting in the effort and trying to keep your head above water. I see a lot of this hard slog in our industry, more creativity, people re-inventing themselves.

When you really think about it, perhaps it is these times that actually push us forward, rather than being able to rest on our laurels in an easy market, the innovation that comes in the hard times provides the bedrock for future prosperity. The kick up the ass many needed to make the necessary changes to their working environment that perhaps they should have done ages ago.

It’s about little victories, inch by inch – if anyone knows Al Pacinos’ superb motivational speech to his American Football team in the film “Any Given Sunday” – well, that sums it up.

Hendo is right, before you can play a wonderful free-flowing game you have to earn the right. Sometimes you just have to win ugly, and those that put in the hard graft now, will be flying when things finally turn round.

This is something that many commentators as well as myself have been warning against for some time, but I think it is the scale of the changes that has surprised even those of us who expected it. Some lenders are increasing their fixes by around as much as 0.9%, which is a massive blow for many who are coming off low tracker rate products.

In a more worrying development we have seen at least one lender actually increase their standard variable rate even though there has been no change in Bank Base Rate as yet.

The real debate is over the fact that whilst lenders are blaming the increasing cost of funds, some commentators are now joining a growing dissenting voice that says lenders are taking advantage of the fact that competition is thin on the ground and, as demand is still high, they can charge higher rates whilst keeping supply low.

On a crude level, lender margins, as reported in one leading broadsheet, on the average 5 year fixed rate are now around 1.84%, which is a massive jump from average margins of 0.87% a while ago. 

The bigger picture here, is that these latest increases and the continued restricted supply in mortgages could adversely affect the wider economy and serve to derail the apparent recovery, which is happening much quicker than even the optimistic expected.

Even the notoriously apocalyptic predictions of Capital Economics have been reviewed, and instead of a 20% projected fall in house prices this year, they have now revised this to just 10%. I stick by what I said earlier in the year; overall we may see just a 5% to 7% further drop this year, certainly in London.

Many of our clients are still reporting that they are surprised at just how many offers at, or even above, asking price they are now getting on their properties, particularly on properties above the £1 million level, where the market seems to be particularly buoyant.

So, whilst lenders are poised to make themselves even more unpopular with the masses, not just causing the crises, but now being blamed for restricting the recovery, it is important to take a step back.

Things are still broke in the lending markets. The costs of funds, and perhaps more importantly the pressures put on lenders by the UK and European Authorities around Capital Adequacy ratios, and risk ratings, mean that it is not as simple as lenders purely extracting the proverbial urine.

I do think there is a degree of “advantage taking” by some lenders, but I do have some, maybe not sympathy as that is the wrong word, but understanding that it is not as clear cut as many believe.

This is a particularly complex crisis and lenders are not helped by authorities demanding more money is leant out on one hand, and making it more expensive and difficult to lend on the other hand.

At the risk of being accused of scare-mongering again, as I was last time I said rates are going to rise, I would really urge those that can fix now, to take that opportunity. Whatever the causes for the higher rates; cost of funds, government interference or simple profiteering, lenders will not be too quick to bring them down again. Especially when the next move in bank base, potentially as early as the end of this year, beginning of next, will be up.