Never a lender or a borrower be

Question from the Ask Owen Facebook group asked :-

Hi Owen,
My gran always used to say “Never a lender or a borrower be”, it seems pretty wise now…although it’d be useful if the banks weren’t all living by that maxim now.

Owen Replies:

I think lending and borrowing is OK for banks (that is what they are there for after all). It is when they started getting involved in all kinds of risks and liabilities which they did not properly understand that things went wrong!

I think the key point here, to use a gran-style phrase, is that banks should “stick to their knitting” in future!

Regards
Owen Woodley
Deputy CEO
Moneyway

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Billing and Other Taxing Issues

Dan on the Ask Owen Facebook asked :-

Hi Owen,
I’ve been working for a variety of agencies this financial year (9 or 10) and I was wondering if you know what the situation is regarding tax.

I had a £20k job for the first 2 months and have been doing odd bits of work ever since, so I’m guessing I might be due some money back. Is there any way I can speed this process up (last time I was in a similar situation it took 18 months to come through).
Thanks, Dan

Owen Replies:

Not my area of expertise, Dan, but it is definitely worth you getting some proper advice. You need to investigate how best to bill for your time in future as well.

Regards
Owen Woodley
Deputy CEO
Moneyway

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

One Penny Mortgage and a Potential Opportunity

James on the Ask Owen Group Blog asked :-

I read in the news about that couple who’ve ended up paying 1p a month on their mortgage (and they only pay that because it’s the lowest number the bank’s computers can handle)….that sounds great but surely they needto be saving that money to pay it off the equity on the house.
 
I know we are meant to take the cash from all these rate cuts and go out and spend, spend, spend but surely getting your house paid off should be a priority.

Regards
James

Owen Replies:

James – I thought exactly the same thing when I read that story. What a great opportunity to drive the size of their mortgage down much more quickly. I have personally put up my mortgage repayments recently to take advantage of these uniquely low rates.

Regards
Owen Woodley
Deputy CEO
Moneyway

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Question about savings and investments from our Facebook group

Newcomer Dan Fry posed a tricky question on our Facebook group this week

So given that the interest rate is so low what are the best options for pensions and savings. Obviously I’m not expecting you to come up with a fool proof risk free option, it’s just that at the moment I have a cash ISA and a stakeholder pension and I’m sure I could probably be doing more with my savings.

Sorry, I am going to have to duck this one for legal reasons! You really need to get some proper advice from a regulated independent financial advisor who will assess your needs and, crucially in this marketplace, your appetite for risk! In addition to that, you will need to make some guesses as to the likely length of the recession and, therefore, how long interest rates are likely to stay at current levels. I think “guesses” is the operative work there, because very few experts agree on what the interest rate environment might look like in a couple of years time.

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Question on family finances

We received the following question from Whit last week :

My mom has been retired for a while and my dad just got laid off in his late 50s. I’m a senior in college and I’m really worried about my family’s financial situation, as I’m the only person in the family right now with a job. With a plain ole English degree, and little experience, how am I going to support my parents, and my ailing grandparents, and also try to start a life of my own? I keep reading articles and blogs about just generally not spending exuberantly and saving more than you spend and I’ve been doing that, but the tides have suddenly changed and I don’t think that it’s going to be enough.

Owen Replies : That is really tough for you and I am so sorry you have all that worry. It is no scrap of comfort but you are not alone. This is going to sound a bit crass, but you can only do what you can do and you can only operate within whatever means your income provides. I don’t know where you live, but governments are doing just about everything they can (some would say too much) to get the economies moving again and to generate new jobs so whilst unemployment is pretty certain to increase in the UK over the coming months, it looks unlikely to get up to the level of the early 1980s. My usual advice to people is that if you don’t have enough money to go round, the worst thing you can do is to put you head in the sand and hope the problem will go away. Much better to front it out with your bank or whoever you owe money to and ask them to help. The very best of luck with it all.

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Question on the government’s car industry initiative (updated again)

We had a comment from Alex on our Facebook group last week, he asked

If the government were to bring in a car loan guarantee scheme how would it work, I mean how much potentially would it cost? And would they have the say over what was a risky debt?

It’d certainly help a big industtry and secure jobs but are we not just re-establishing the problem we had in the first place…the potential for unsustainable debt?

Owen replies “Desperate times call for desperate measures, Alex, and I think that is what this one is. If you look at the major car manufacturers in the US – Ford, Chrysler and GM – they are all saddled with an unsustainable cost base and working practices which so heavily protect the employees that the businesses are simply uncompetitive in a global economy.

Car manufacturing in the UK does not have quite this problem, but even so, these are all businesses which have to radically change if they are to survive in the long term. A bit of short term Government aid, whether £2bn or $20bn, will not solve those underlying problems. To your question, there is not much detail on Mr Mandelson’s scheme yet, but most of the car industry think that it will make little or no difference to anything I’m afraid.”

The debate continued over the Facebook Wall. Ian Wilson added his question

I don’t suppose there’s any reason you’d know but exactly how hamstrung are they by european rules when coming up with these bailouts?

The banks seemed to get aid no problems but the car industry bailout seems to be bound up with red tape.

and Owen responds “You raise a really interesting point which I think we will hear a lot more about over the coming months. The fact is that the problems with banks have been so serious and, crucially, so enormous in terms of their potential impact on the world economy, that the usual rules for governing state protectionism have been temporarily thrown out of the window.

The problems in the car industry, to be blunt, will not have the same impact as the banks so the potential for bending the rules is less. Having said that, I think the “red tape” you talk about is more to do with the fact that this is a scheme which even its designers are not quite convinced about yet.”

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Unemployment poll

We are interested in finding out just how widespread the problems in the job market are, we’d be grateful if you could fill out our latest survey.

Many thanks for your help

George from Insiders View joins the debate on MoneySavingExpert (updated)

Owen,
I’m not surprised to hear these criticisms of Martin Lewis. Whilst I try to take an objective view in these matters, it is important that followers of MoneySavingExpert and Martin Lewis understand what is going on.

Martin Lewis is surrounded by controversy on the slightly hidden areas of the web as people have realised that he has made a fortune from his affiliate site. Whilst I commend his business acumen, he presents himself as a consumer champion when in fact it’s clear he offers products that generate the greatest revenue, not those that are the best.

Regards
George from Insiders View

The fact that someone is making money from recommending products does not in itself mean that the advice is flawed, but it certainly does mean that people should take a much closer look at what is being recommended…!

Owen, I’m not suggesting all his advice is flawed. What I am suggesting is that he ‘recommends’ (cf. the FSA) products that have less to do with value or efficacy and more to do with profit.

A man with your experience and history should know the ramifications of banking recommendations. Particularly with Martin Lewis’ latest IceSave debacle (for which he has cunningly received little bad press)
George

George – I do agree with you. All I am saying is that at the end of the day, individuals have to take responsibility for the decisions they make with their own money, whether on borrowing or saving/investing (or anything else for that matter). My personal view is that there is plenty of regulation to protect individuals from bad advice and people have to look beyond that advice, wherever it comes from, and take into account the motivations which may have prompted the recommendations made. Of course we must protect vulnerable individuals, but I think we have enough of nannying already…!

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Baroness Vadera’s “Green shoots”

Owen, what was your take on the Baroness Vadera “Green shoots” controversy. Faux-pas or “politician in Gives-a-straight-answer shocker!”?

For me the media and The Conservatives seemed to got jump all over it far too readily…the last thing we need at a time like this is everyone behaving like a nuch of schoolkids.

Regardless of the word she used do you think there is light at the end of the tunnel for 2010?

Chris

Chris – to be quite honest, I did not think it was a terribly clever thing to say at a time when so many people are losing their jobs. She said that she was referring to the launch of the various Government initiatives to help sort things out but in my view, it is too soon to know whether these initiatives will have help or not.

To answer your question about when this will all end, I think pretty everyone is agreed that we are going to be in recession until at least the first half of 2010 and that in the meantime, things are going to be really tough. You would have to guess that it will be late 2010 before things start to improve although I am an optimist by nature and I think Obama’s election will at least have some rejuvenating impact as the next few months go by.

Owen

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.

Question about banking and nationalisation

Owen

The govement have 59% share in Northern Rock yet they still dont seem to have any influence. This seems to be happening in all bansk the govenment have a slice in – so why cant the government get the banks to start lending.

Chris.

Owen Replies : There is a fairly simple answer to this one, Chris… On the one hand, the Government want to get lending moving, but on the other hand, the Government regulator, the FSA, is telling banks to be prudent and to protect their balance sheets so that they do not get into further difficulty. The shareholders of the banks, whether Government shareholders or private shareholders, would expect exactly the same.

Prudence for a bank, in a recession, means being much more careful about who you lend to so there is a real dilemma in all of this. My view is that the Government loan guarantee schemes now being proposed are the only way to get things moving, but don’t expect it to happen overnight.

Ask Owen is about providing impartial financial advice for those concerned about managing their money. The country is suffering a serious economic decline and with people concerned about increasing costs of living and fuel bills, teamed with worries about job losses and house repossessions, it is a daunting time; so if you have a question to Owen fill in the comment box below and he will answer.