According to a report out today from the Joseph Rowntree Foundation, the gap between the rich and the poor in the UK is as wide as it has ever been for the last 40 years.  In a damming indictment of UK society, it seems that while there are benefits coming through for the poorer of society, these are being dwarfed by the increasing wealth of the richer (heavily property based over the last couple of years).

While the above news in itself is disappointing to say the least, the fact that there are actually more poorer people, i.e. those living on less than the governments proposed minimum income, is an even more disturbing finding.  The report also highlighted a major change in the breakdown of social areas, with many of the richer moving out of the inner cities, into the suburbs, leaving the poorer to chase low value accommodation in run down inner city areas.

How has this happened?

It is common knowledge that in a rising economy it is the richer who benefit more as they are able to invest for the future.  The situation does change somewhat in recessionary times, when the richer may well be pulled back into line, with many over extending their investment portfolios.  However, it is the constant erosion of the benefit state which has perhaps hit the poorer harder than ever, the sub standard increases in the state pension, continuous means testing, the reduction of tax benefits for the poorer and the rising cost of living for all of us.

Will the situation level itself out?

Unfortunately it is the richer of society who hold most of the power when it comes to investment, when it comes to powerful positions of employment and very often the vote which the parties are fighting over at election time.  It will take a long term sustained effort by the authorities to rectify the situation, an effort which will be expensive and time consuming.  Whether they are up to the task remains to be seen.

As surprising as it may seem, the US stock market has hit a new all time high, against a backdrop of a creaking economy, an over extended housing market and the lowest levels of savings per member of the population for a long time.  So what really is driving the markets, and why?

There are a number of factors which are currently driving the markets which include :-

Corporate Activity

The US corporate sector is currently going through a period of major reorganisation, with many companies becoming the subject of takeover approaches or merger offers.  This has led to a highly speculative attitude from investors, who are determined not to miss out on the “next big deal”.  As price valuations get pushed to the limit, there are many investors who will suffer large losses in due course. 

If each corporate rumour where to occur, we would be seeing takeover and mergers everyday for the next year, and this is just not possible.  As some stage there will be a realisation that share valuations are being pushed to the limit, and it is just not viable for many to be valued so highly.

Feel Good Factor

Many American citizens have seen a major increase in the value of their properties over the last few years, with more and more “releasing equity” from their homes to further extend their investment portfolios.  This has led to a rush of new money into the market, which has squeezed prices higher and higher, with echoes of the 1987 crash - over exuberance and irrational investor behaviour.

Conclusion

There are now real concerns that the market is being primed for a major fall at some stage in the not too distant future.  Recent figures from the economy showed that retail spending fell sharply last month, a move which was discounted by many still chasing the next big takeover.  US average debt is growing, savings rates are at there lowest for some time and many home owners are struggling to cover their rising mortgage payments -  a recipe for success?

According to the National Association of Realtors, the internet is a great way to market property and it helps most homebuyers find a new home.  Your online property listings should be treated like gold and you should create a website with at least basic features to meet your prospect’s expectations from you.  You could be drawing the prospects in for a look if you take it a step beyond what everyone else is doing with their listings. 

The Basic Elements

Your image should be featured prominently with your address and contact info.  You should have your logo and contact link on your each page of your website.  If you want to have a graphic on your home page, a good idea is to use an image of an attractive view or local feature that is representative of your selling and buying area or expertise

Features that Bring your Prospects In

Your basic navigational link titles could include home, services, property search, buyers, sellers, free reports about your selling and buying area, a sign up for the newsletter and client testimonials.  Other helpful tools for prospects include buyer’s hot list, relocation help, mortgage calculators, mortgage forms and other calculators. 

Free Reports Bundle

You can bundle your community related information into a free reports section that covers businesses and industry, business districts, culture, events, family oriented districts, future development, park information, school reviews, shopping, weather and other local information that you think your clients would want to know about. 

Prospects should be able to Search for, View and Sort Listings

Your property link should lead visitors to your listings, property exterior and interior images and related information.  Allow visitors to search for a property that matches their lifestyle and needs.  Categorize your listings by price range, city, state, home type, building type and foreclosure, etc.  Prospects also want to match homes to their lifestyles.

Going a Step beyond with Property Listings and Content

Your content in your listings and free reports should make people feel like they know the community.  Boost reader interest to your listings and newsletters by adding interesting facts and trivia about your selling area.  You will engage an emotional response from potential prospects who might want to live there.  Give a building or area a colourful history by telling old stories about it and promote a property by commenting on its convenient features.  For the reader’s sake, visualize the family who could live there and how they would fit into the community. 

Stand out from the Crowd and Get Noticed

People will love knowing little facts about your area and this type of knowledge can make a place feel comfortable.  This will make your information stand out from the crowd on your website and in your newsletter.  Make your page available to anyone who could be interested in your content and you are widening your area of influence.  The more useful and interesting your content is, the more visitors you will get to your page.

If you are looking at buying a home you want to get the best interest rate possible. In order to do this you need to know the current interest rates and where they are forecasted to be in the future. As of July the fixed rate mortgage interest rates have increased but only by approximately half a percent.

There are reasons behind this rise of interest rates. That’s because inflation is increasing. Consumers are confident in the economy and they are out buying clothing, electronics, and the like all the while groceries and the like are increasing in price. Since consumers are confident in the economy and prices are increasing thanks to bad weather, wars, ethanol production, and the like it is sure that the grocery stores will pass the buck to the consumers. So, expect to see prices going up all over the place because that’s what happens with inflation.

When the economy is unexpectedly stronger and inflation is higher then you can expect mortgage rates to increase as well. That’s what has been happening over the last few months and the reason behind the sudden rise in interest rates.

As interest rates increase the housing market will slow down a bit because mortgage companies begin to make it harder for individuals to get a home loan and harder to refinance existing loans. When interest rates are down it seems like anyone can get a home loan. It sounds kind of crazy but that’s just the way it goes. And who would expect for the mortgage sector to work in a logical manner anyway? Regardless of the interest rates on the rise homeowners aren’t too concerned, at least not yet anyway.

In fact, the majority of homeowners believe that if they wanted to sell their house they could do so at their asking price. In addition, the majority of homeowners plan on improving their home in some way over the next year as well. So, American homeowners are confident in the economy and are not concerned about inflation or increasing interest rates. Again, at least not at the moment. Then, with all this confidence in the economy why are so few people planning on buying homes in the next five year?

Approximately 25% of consumers plan on buying a home in the next five years. That’s not very many! So it appears the economy is functioning on consumes buying small things and not the big things like homes. This results in investors getting a little anxious. Things in the economy aren’t working out like one would anticipate so what happens?

Investors start getting worried. If the economy can’t be forecasted with forecasting software then investors start worrying over their investments. When investors worry interest rates go up. That ‘s just the way it is and that is exactly what is happening right now.

Mortgage rates are pretty much the same they were last year this time and they have been on the rise for two months now. So, where are interest rates going? Forecasters anticipate that interest rates will rise throughout the summer and then start going back down again. Of course, anything could happen but it’s not forecasted that interest rates will continue to rise much more than the next couple months before going back down again.

There are quite a few benefits and rules that you should know about Roth IRAs, especially if you are considering using a Roth IRA for your retirement savings. The Roth IRA came about in 1998 as a direct result of the 1997 Taxpayer Relief Act. The great thing about a Roth IRA is that there are no deductions for the contributions that are made since the earnings are tax free upon withdrawal, that is as long as still meet the requirements. Another benefit offered to Roth IRA owners is that certain withdrawals avoid the early distribution penalty and once age 70 ½ is reached the need to take minimum distributions is eliminated.

For those interested in using a Roth IRA for their retirement funds it is important to realize that the biggest benefit of all is that all the money saved for retirement is done so completely tax-free. This is a huge benefit when you withdraw the money. However, the disadvantage is you don’t get a tax deduction for your contributions to your Roth IRA. That’s the trade off but it is worth it in the long run for many.

However, it’s not the best decision for some people. Keep these things in mind when making a decision. When do you plan on withdrawing the money from the Roth IRA? At this point in time what tax bracket do you anticipate you will be in? And finally, before the withdrawal date arrives what do you anticipate you will earn? Considering all of these factors will help you decide if the Roth IRA is for you. But, if you are like the majority of people it will be. The reason a Roth IRA is better than a traditional IRA is that it contains after tax money. If you are able to contribute as much as possible to the fund then you will be taking advantage of your money for retirement.

Other benefits of the Roth IRA is that there are no minimum distribution rules. So, if you can survive on other investments or savings after you retire then you are not required to withdraw your Roth IRA when you turn 70 ½. The result of this is that the money in the Roth IRA grows tax-free until it is withdrawn. Another benefit that Roth IRA users appreciate is the ability to take some early distributions without being penalized with any early distribution penalties. The overall benefit of the Roth IRA for retirement is that individuals are able to make contributions more easily and they are also able to withdraw money easily.

If you already have an IRA you may convert yours to a Roth IRA. Another way to do so is to contribute regularly to a Roth IRA. You must review the rules surrounding the Roth IRA before you are eligible to set one up, but many people are eligible and benefit considerably from contributing to a Roth IRA for retirement.

Buying a home is a dream come true for most Americans however there is a lot to keep in mind in the mortgage process. If you are a first time homebuyer then you can certainly be taken advantage of or at the very least make some mistakes that could cost you dearly in the long term. As a result you need to be aware of how to get the best home loan for your situation. There are actually quite a few different types of mortgages and being aware of all of them as well as corresponding interest rates will make you an informed consumer, which means you will more than likely save money long term as a result.

Tip #1 Interest Rates

Interest rates go up and down on a regular basis and you want to apply for a home loan when interest rates are on their way down, not up. This means you need to watch the market and be aware of what’s going on interest rate wise. Forecasts are completed on a regular basis to determine where the interest rates will be next month and even next year so you can easily determine when is the best time to buy a new home. Additionally, the type of home loan you apply for will affect the interest rate you are given. Your credit score also plays a big role in what interest rate you are given. So, what can you do in order to get the best interest rates?

You can apply for a home loan when interest rates are lower than usual, you may apply for a mortgage loan with a favorable interest rate, and you may also work to improve your credit score so you are considered a low risk borrower and offered a low interest rate. Interest rates can really add on lots of money to your home loan so it’s important to get as low a rate as possible.

Tip #2 Loan Term

Your loan term is another important aspect that will affect you financially. Most home loans are financed for 15 or 30 years. If you have a 15-year loan term your monthly payment will be higher but you will pay less in interest and you will pay your loan off in half the time. If you have a 30-year mortgage you will pay less each month but thousands of dollars more over the term of the loan in interest. If you can financially afford to pay more each month a shorter loan term is certainly worthwhile.

Tip #3 Type of Mortgage

The type of mortgage you apply for will also affect you financially. There are traditional mortgages, variable interest rate mortgages, and fixed rate mortgages. The best mortgage for most people is the fixed rate mortgage because monthly payments do not change for the life of the loan. Many people get starry eyed with variable rate mortgages because payments frequently start out small when interest rates are low but as soon as they change so does the monthly payment. This may result in a monthly payment that is hundreds of dollars more from month to month. These are dangerous mortgages and should be avoided.

These are just a few tips to help you make the right decision when it comes to your home mortgage.

A National Audit Office report which has been released this week shows that the Tax Credit System is losing up to £1 billion a year due to fraud and errors.  Those who have had the misfortune to get caught up in the never ending trail of paper, phone calls and differing advice will no doubt be unsurprised by the system.  There have been reports of multiple offers, each differing greatly in size, information missed, back payments reclaimed and so on, the list is endless.  However, the system plays a major part in assisting those less fortunate than many in society, so what can be done to make it work?

Unfortunately is seems that a mixture of bad training, a lack of communication and a computer system which is being pushed to the brink have all contributed to the problems.  It is therefore no surprise to find that the system has, and continues to be, a major target for the fraudsters and the mis-claimants.  By the time the authorities find out that they have a problem, and contact the fraudsters, they will be long gone with their payments cleared and buried away.

Bad debts have also been a major problem, but when you bear in mind that some over payments have only surfaced 4 years later, and they are paying out to the needy of society anyway, it comes as no surprise that many people are not in a position to pay funds back .  Figures show that of the £2 billion plus over payments from 2003-04, almost half has still be to recovered. 

The Treasury recently took over the day to day running of the system from the Inland Revenue, a move applauded by many, although just as many are yet to be convinced there will be any change in the level of performance - from an Inland Revenue which sent out inflated tax demands to over 1 million UK residents last year..

The Tax Credit system was a great idea which has been badly let down by the performance.  Quite how the government will be able to get the system back on track remains to be seen, and perhaps more importantly at what cost?

As more and more of the working population feel that they are being taken to the dry cleaners UK tax payers are finally beginning to fight back.

While it has never really been understood why the UK home owner has not moved towards longer term fixed mortgages of up to 25 years - as is common place on the continent - Gordon Brown hopes to change all of that.  The Prime Minister has announced plans to relax the borrowing rules for financial institutions, effectively allowing them to borrow more long term funds from the money markets.

But will it really make a difference?

There are hopes that by introducing long term, fixed rate mortgages, this should help to iron out some of the highs and lows of the property market.  In practice few are sure how this might happen, bearing in mind the US (where long term fixed rate mortgages are popular) is currently in the middle of a potential boom and bust housing market cycle.

The idea for long term mortgages has been mentioned on and off for many years, and while there are a few institutions who offer fixed rate deals up to 30 years in duration, these are few and far between, with a number of barriers to entry for the masses. 

Why have the banks not tried this before?

It is unfair to say that the banking sector has not attempted to introduce these offers in the past, but many believe that this was only “lip service”.  The facts are that the banks are able to adjust their profit margins with variable rate mortgages, often taking advantage of interest rate movements to increase their returns.

In the event of fixed rate mortgages becoming more popular, the ability and impact to change profit margins on a regular basis would be severely reduced.  Perhaps the banks are attracted by the security of fixed rate offers, then again maybe they see this as a way of losing control over their profit margins.

“The King is dead, long live the King” - in the words of an old saying.

Inflation is most definitely not dead, never has been and never will be.  There are periods in history where inflation has both ravaged economies throughout the world, as well as times where it has been under control for long periods. The UK has been fairly lucky in that apart from a couple of period where inflation got out of control (e.g. 1987, etc although even these periods only saw high single digit inflation) we have not suffered any where near the likes of Brazil, etc where historically they have seen inflation levels in the thousands of percent a month.

What is inflation?

Inflation is basically the factor by which assets, costs, services, etc will grow in any one given period. In the UK the current annual rate of inflation is just under 3%, which while a little way above the UK authority’s target of 2%, is not really a major concern at the moment.  However, if left unchecked it can easily get out of control - hence the recent rate rises by the Bank of England.

Does inflation really effect me?

Inflation effects us all in our everyday lives, at work and at home and has the potential to bring great joy or despair.  It will effect the price you pay for a loaf of bread, the cost of your home and many many more areas of society which you may take for granted.

Perhaps the largest effect inflation may have on the everyday consumer is at work, and the amount by which your salaries rise year on year - depending upon inflation.  In simple terms, if inflation has risen by 2% over a 12 month period, then your salary will need to rise by the same amount to give you the same spending power.  It is all to do with relative terms, and the effect they have on your spending power.

If you salary was increased by less than the rate of inflation, then in real terms the value of your income would be eroded and reduced - giving you less buying power.  On the other hand, if you were able to agree a salary rise above the rate of inflation (most unlikely!) then you spending power would increase in relative terms.

Is inflation all bad?

While we often talk about inflation in derogatory terms, it is an essential part of any economy.  If there was no inflation then manufacturers would not be able to justify rises in the cost of their products or services, resulting in no salary rises, etc, etc.  A little bit of inflation is good - too much can be very very bad!

Conclusion

Inflation has the ability to surprise everyone, and especially those who think it is dead and buried.  It is most definitely alive and kicking, and without due care and respect it can quickly ravage even the strongest economies of the world.

After a series of interest rate rises and a mass of cautious comments from the Bank of England interest rate committee, finally one of the major house building companies have expressed some concern about the future.  A recent profits warning by Bovis Homes saw over 10% knocked off the market capitalisation of the group, when they announced plans to pull back their expansion plans.

The chief executive,. Malcolm Harris, finally confirmed what many in the market have been thinking for some time - the number of people visiting new housing developments has fallen, and interest is starting to waver.  It seems that at last the recent rise in interest rates has forced a reality check for many, with mortgage payments as a percentage of total income expected to rise significantly over the coming weeks and months.

While the sector is still currently reaping the benefits of recent demand, it seems that the future is becoming a little more difficult to forecast.  The fact that companies such as Bovis Homes are looking to realign the number of homes they had hoped to build over the next 12 months, gives a strong indication of the market - and also shows that they feel prices may soften in the short to medium term unless the number of homes on offer is restricted. 

Now that such a major company as Bovis Homes have broken rank with the sector, and announced that the good times may be over for the time being, the stock market is set for a number of similar announcements from others in the sector.  Finally it seems as though common sense is prevailing, but how long will it last for?