Personal Finance: Little room for mortgage cuts

LAST WEEK'S base-rate cut was the reduction that passed most of us by. A puny thing of just 0.25 per cent, we were told that it was hardly worth responding to.

So mortgage cuts were difficult to find. The TSB was the exception with 0.19 per cent, which would not boost most borrowers' funds by enough to get a haircut.

In the past, building societies have belittled cuts of 0.5 per cent and have said a full percentage point would have to be forthcoming before it was worth cranking up the administrative machinery to put a rate change into effect.

But that's not the whole story.

Building societies have two simple sides that have to be kept in some sort of balance - borrowing and lending.

They can now do as much as 40 per cent of their lending from funds raised on the money markets. But with the beady eye of the Building Societies Commission on them, they dare not venture above 30 per cent without good reason. Otherwise, lending has to be financed through the savings lodged by the public.

And the public are not captives. National Savings and the banks can obviously provide temptations on the interest rate front. But with rates so low, equities are also providing competition.

The yield on the FT-SE 100 index is now 3.46 per cent, not a million miles away from the rates on offer at societies.

And in spite of the lurching ride the stock markets have provided this week, depositors are being tempted by unit trusts, investment trusts and shares.

So societies hardly dare to cut their savings rates even further. And if mortgage rates are to fall, a cut in savers' rates will surely follow.

Another argument advanced to justify the societies' resistance to further rate cuts is that the continuing trough in the housing market is caused not by interest rates but the more intangible 'confidence'.

There are plenty of reasons to back away from home ownership or wanting to stretch to a larger mortgage. Ask those who have suffered negative equity, or whose jobs do not look too safe.

And there is no longer inflation - that friend of the property-owning classes in the 1980s - to unwind any foolish moves.

The question that remains is whether another tiny cut (perhaps timed to coincide with the higher taxes due in April?) will push societies to put more cash into borrowers' pockets, or whether this really is the bottom, and the next move will be up.

UNDISCOVERED billions are lying inches from our grasp, the body that promotes independent financial advice would have us believe.

Laziness, poor tax planning, failure to claim social security benefits and, of course, lack of financial advice means that pounds 12bn is going begging, we are told.

Premium bond prizes, matured life policies and forgotten shares lie awaiting an owner, and pensions are forgotten about.

Most of these missed millions could be tidied up by a little diligent searching through old paperwork.

I'm sure more people lose out on money through failing to notify their change of address than could be recovered through taking ordinary financial advice.

IMAGINE being able to write 'BA Financial Services' after your name. No joke. The University of Hertfordshire is planning a three-year degree course on the marketing and selling of financial services.

While it is not difficult to make a case for improving the standards of those currently selling financial services, it does seem like tackling the issue from the wrong end.

Surely if the whole business is to have any glimmer of intellectual respectability, it should be viewed from the needs of the individual or society - not those of companies to sell, sell, sell.