Wednesday, 27 May 2009

Making the news

I mind someone telling me about one of the big Scottish broadsheets and how the same journalist wrote articles that appeared under different names to give the impression the business desk team was bigger than it actually was. The practical consequences of this became apparent when I read some articles about stuff I actually knew about.

The one that sticks in the mind involved an executive who had failed to deliver a high profile project the chief executive was taking a personal interest in. The executive was accordingly taken aside and told to piss off. This was reported later on in a newspaper article that instead paid tribute to the executive’s many, many achievements then waxed lyrically about their desire to pursue new career opportunities closer to family and friends. The journalist had simply cut and pasted from a press release.

He or she did so because they were presumably struggling to produce 3 different articles under 3 different names at the time and saw this as an open goal. Besides who would complain? The employer’s reputation was intact as was the executive’s which meant the journalist only had two more articles to write to meet that day’s deadline. Result! Except this example illustrates the mutual dependency that exists between journalists and corporate PR departments and the clear scope this has created for routine misrepresentation.

Thank god for the BBC then, that licence fee funded independent cultural giant! Except when I was looking at its business section today I read the following “top business” story headline – “Uncertainty 'keeps borrowing low'”. Does it? I’d best read on then what with us being in a credit crunch an'all.

The article started in bold with the British Bankers’ Association (BBA) assertion that “Uncertainty over UK householders' financial position is dictating their low levels of borrowing” and that this was evidence of “The "safety-first" policy of householders”. Despite this there was no need to worry because mortgage approvals had already stabilised. Then a spokesman from the mortgage broker Coreco offered some sage words of advice –if you’re about to come off an existing mortgage deal, DON’T just move onto your lenders standard variable rate. This “wait and see” approach could “prove very costly” because “the general consensus is that fixed rates are as cheap as they are likely to get”.

Shite. The BBA is the Banking industry’s mouthpiece and as independent of them on matters like this as my arse is of me after a kebab. Mortgage lending has collapsed because high risk lenders are closed to new business, foreign lenders have left Britain and those that are left have hacked back mortgage loan to values to the point where the average borrower typically now needs savings equal to a year’s worth of their gross salary to buy a house compared to the 5 to 10 grand people put on their credit cards before the credit crunch.

The fact the housing market collapse has been driven by supply-side constraints is why government is asking banks for commitments to lend money. But, what’s the point of that then if people have now adopted a safety first policy the BBA might say. But, that’s shite that is because mortgage lending has already stabilised despite every economic indicator and forecast getting worse i.e. if its safety first mortgage lending would still be falling.

So what we have is a BBC top story that blithely cuts and pastes from a BBA press release written in response to government intervention that also tries to recast supply-side constraints on mortgage availability as a matter of consumer caution. Quoting from mortgage brokers though is just insulting. Besides giving them a licence fee payer paid platform on which to publicise their brand they get the chance to dish out advice that essentially encourages people to get a new mortgage deal NOW. So OK why blame a dog for barking given mortgage brokers make their money selling mortgages. But, is there a general consensus on the future direction of mortgage rates? Mebbe if you’re polling fuckwits there is, but as the future availability of credit will be heavily influenced by what happens to secondary markets and the shape of these is currently being debated by global financial regulators, anyone that can claim there is a consensus when the latest word from the FSA is we’ll only start talking about things in more detail in September, by definition doesn’t know what they’re talking about.

So what we have here isn’t a top business story unless by that you mean

1) Uncritically providing a platform for a pressure group intent on influencing public perception of it's members and government policy

2) Handing over some free publicity to a salesman who clearly doesn’t understand the market he operates in.

But, hey ho in an age where its about being first with the story, first with the volume and first with the headcount reductions because with everyone now expecting free news on tap 24/7 no-one can afford journalists, its perhaps only to be expected.

Alternatively, introducing a policy whereby every comment by a spokesman or pressure group is prefaced with a clear statement of how they are funded and/or make their money would be a quick, easy and obvious response. It’d also be fun. Back in the 1970s the Glasgow University Media Group made its reputation largely by recording the adjectives news organisations routinely associated with trade unionists then pointing out what they took for granted as being common-sensical and objective was actually biased. Hence industrial correspondents (remember them?) talked about militant trade unions rather than just trade unions. Because updating this by say tagging the word git to the phrase mortgage broker might cause offence, we could use an FSA mortgage sales regulation style instead. Fer instance, any quote from say the BBA included in a BBC article or news report is prefaced by a statement that clearly sets out the vested interest involved. And some context might help as well.

So fer instance, the top story discussed here would instead read something like this -

“The BBA is the banking industry’s trade association in Britain. It is wholly (1) funded by the banking industry and has the primary objective of furthering the interests of banking organisations trading in Britain(2). At a time when government has sought to secure commitments from major high street lenders to lend money to customers in exchange for unprecedented levels of support the BBA has just issued a press statement claiming that it is actually uncertainty over UK householders' financial position that is driving the historically low levels of borrowing now being seen”

Comparable statements could similarly be used in relation to statements issued by PR companies, lobbyists, company spokespeople and so on i.e. the vested interests actually get spelled out. I’m sure all concerned would appreciate the transparency.

(1) The latest BBA annual report refers to what it does not it’s funding unfortunately, so perhaps they aren’t wholly funded by banks.

(2) What the BBA says is “The British Bankers’ Association is the voice of banking and financial services. We work with governments, regulators, media and the users of banking services to help build in the UK a world-beating banking industry within a competitive global market”. Except, that’s poncy self-serving wank that is.


  1. Thank you for your kind words sir, sorry I don't have a name to refer to here.

    Just thought I would pick you up on a couple of points. The world is full of opinions, and especially in these times they vary dramatically, but it does not mean that an opinion is wrong just because you happen to disagree with it.

    I am an independent mortgage and financial adviser, I am not just a salesman and I like to think I understand my industry which I have been a part of since the early '90's.

    My honest opinion, shared by many and disputed by many, is that fixed rates are indeed as low as they are likely to go. Bank Base is not going down any further and lender margins at present dictate that unless competition dramatically changes lenders will not want to reduce their rates further.

    My point is generally aimed at those who took out mortgages a couple of years ago at 75% LTV or above. Are the rates going to be that much better in the near future, or is the downside of a potential rate hike in 12 months time a greater risk? Property prices will probably take much longer to recover, and lenders much longer to get competitive again at 90%+ LTV, than it will take for rates to go up.

    So if you can fix at historically low and affordable rates now, or risk not being able to remortgage at all in the near future because your LTV has increased beyond lenders acceptable levels due to falls in house prices, why would you not?

    Why leave yourself at the mercy of a lenders variable rate which, let's face it, they will be quick to raise as soon as they can, meaning that mortgage payments will go from being affordable to being uncomfortable?

    My job is to put those questions out there for people to discuss, I don't mind if people disagree with me, and I have evidently succeeded as your blog suggests.

    A journalists job is to present a story from a source and to provide comments around it. Exactly like you have done here, although just presenting one argument.

    If it relates to mortgages and property why would you not get a comment from someone who works in that industry. You make some great points and have allot to say, and write eloquently so perhaps you should offer your comments to the BBC under your own name.

    Seriously thank you for your comments, blogging like this is a very valuable tool and it would be great if more people offered their opinions like this. I am happy to be slagged off for my opinions, not that I do not understand my market.

    Feel free to look up my own blog and you will see I am not the typical mortgage salesperson!


    Andrew Montlake

  2. Andrew

    Ta for taking the time to comment and my apologies for the sweeping generalisations.

    I agree there’s no right or wrong about matters like this, but there is good and bad. Sure it doesn’t look like base rate is going to fall any lower so by definition the only way is up (in due course). However, (1) base rate isn’t really the point right now it’s LIBOR, which could go lower depending on assessments of bank solvency and confidence in bank liquidity, things that are arguably already improving. (2) It’s also a question of bank access to wholesale funding and their ability to sell on debt e.g. will we ever see securitisations again. (3) There’s the risk appetite/credit policy issue and the relatively recent hack back in LTVs that is keeping more and more people out the market, but could also change in due course and (4) the eventual regulatory response to the credit crunch and what this means re: the cost/availability of credit and future asset price growth.

    Given these very significant unknowns its quite plausible to envisage base rate starting to rise in say 12 months time by however many 25bps, but mortgages actually being cheaper and more readily available than they are today because LIBOR is down, its possible to sell on debt once more (to an institution other than the Bank of England) and LTVs have crept up. My point was simply to emphasise the unknowns, which strike me as important qualifications worth explicitly attaching to any comment on the future direction of mortgage rates. Moreover, due to their significance re: the cost of credit and the volume available I'm personally sceptical about the worth of any mortgage rate commentary that doesn’t take them into account. To my mind theres nothing wrong with saying I don't know.

    As for taking out a new mortgage personally I think retail banking customers are routinely underestimated by well most commentators really (but must 'fess up to some bias here as my views are influenced by blethers with corporate bankers). Are the fixed rates available today really that great given the upfront fees that dropping onto a standard variable rate avoids? Personally, I’m not sure and if getting a new deal from a new provider involved a fresh valuation of a house I’d bought say 3 or 4 years ago at 75% LTV I would be more than a bit scared about the prospects of getting a decent deal because of whats happened to house prices and the margin thats emerged between say a 70% LTV mortgage rate and one thats 80%+

    But, anyway with lenders and standard variable rates my personal opinion is that we are in uncharted waters due to the part nationalisation of key mortgage lenders. But, let’s be very clear government wants some quid pro quo in exchange for the support its providing. Its just what this is isn’t public knowledge at a time when the terms of the APS are being renegotiated. My own view is that a blind eye is being turned to current mortgage costs and credit policies as (a) part of a broader negotiation process and (b) because it is helping to recapitalise banks without explicit government intervention.

    If you can find any evidence that the BBC internet person actually engaged with the comments made as opposed to just cutting, pasting and summarising then please pass on.

    Ta 2xs