UK Mortgage Rates and Mortgage Approvals – April 2010 Update

Today I present two regular charts that unfortunately give me little information this month about what could be occurring in the housing market. They show the UK markets just treading water for the month. The first shows the monthly interest rate of UK resident banks and building societies sterling standard variable rate mortgage to households (not seasonally adjusted) and highlights that for this data set rates remain at near record lows at 4.05% for March 2010 (actual low was 3.82% in April 2009). This is static compared to the previous month.

Australia, UK and US government 10 year bond yields – April 2010 update

I continue to monitor the 10 year government bond yields of three countries (Australia, United Kingdom and the United States) to try and understand when interest rates on savings and mortgages may start to rise with my datasets shown in today’s chart.

Australian Property Market (Alternate Data) – February 2010 House Price Update

The Brisbane and Australian Eight Cities (Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Darwin & Canberra) House Price Index published by the Australian Bureau of Statistics (ABS) catalogue 6416.0 suits my requirement to track Australian house prices as part of my retirement investing strategy.  It however seems to have two flaws. Firstly the housing data is only published quarterly and secondly this housing data is then published over a month after the quarter ends.

Are we back to blowing asset bubbles already?

Last week saw Alan Greenspan interviewed as part of the Financial Crisis Inquiry Commission. The Times reported that during this interview “Mr Greenspan denied his policies encouraged the type of risky lending that spurred the financial crisis. The long-time Fed Chairman - whose reputation has been deeply undermined by the crisis - denied low interest rates and loose regulation had encouraged lenders and borrowers to take ever greater risks."

Where is the economic recovery?

I keep hearing in the news about how fragile the economic recovery is that we are currently seeing. I don’t know about you but I don’t see any economic recovery. What I am currently seeing is nothing more than a mirage that has been caused by massive fiscal stimulus by governments borrowing money (or as I like to think of it, stealing money from the future generations) that they didn’t have or worse by printing money (quantitative easing etc). I am yet to see any evidence that would make me think we are seeing a genuine recovery.

An appropriate quote for how the economy should be managed

MoneyWeek every week publishes a series of quotes. In this week’s issue one of these particularly leapt out at me. In my opinion it really sums up how the UK government (or for that manner any government) should manage the economy and highlights how far away from this philosophy we are today.

The Bank of England shows their hand – UK Bank Rate held at 0.5%

The Bank of England this week held interest rates at 0.5% for the fourteenth month in a row. I’ve been speculating over the past few months at what the Bank of England are up to but I’m now convinced I know the strategy of the Bank of England and unfortunately it’s not their officially published Monetary Policy Framework of keeping to the Government’s inflation target of 2%. It’s clear that’s not the strategy when the Retail Prices Index (RPI) is running at 3.7% (annualised 3 month RPI is 4.8%) and the government set Consumer Price Index (CPI) is running at 3.0%.

Investing mistakes I’ve made – contango and exchange traded commodities (ETC’s)

Since I took full responsibility for my retirement investing strategy I’ve made some mistakes that have cost me money. I’m also sure that going forward I’ll probably make some more. What however is key for me is that if I make a mistake I never make that same mistake again. Over the coming months, if I get time, I will try and share some of these mistakes with you so that you can do your own research which hopefully might even save you some money. The first of these was not understanding how exchange traded commodities (ETC’s) work plus also not understanding the concept of contango that is associated with many ETC’s.

Buying NS&I Index Linked Savings Certificates

As I highlighted here National Savings and Investments (NS&I) today released a new issue of both 3 and 5 year Index Linked Savings Certificates. I’ve made use of this and invested around 4% of my retirement investing low charge portfolio into the 3 year 20th issue of these certificates by transferring some cash holdings. This new issue is paying index linking + 1%. This now means that I have 19.6% of my retirement portfolio invested with these tax efficient certificates.

2010 Quarter 1 Retirement Investing Portfolio Review

Edited 06 June 2010: I have found more exact data allowing me to determine benchmark returns to the day. I have therefore updated the data in this post to reflect this. As the blog has developed I have also changed the method used to calculate the returns as I have learnt more accurate methods. I started with:
- [assets at end of period – assets at start of period – new money entering portfolio] divided by [assets at start of period],
- then used the mid-point Dietz which was a more accurate method,
- and now use Excel's XIRR function for anual returns. If it is not a full year I then adjust XIRR by the PRR (Personal Rate of Return) = [(1+XIRR Annualised Return)^(# of days/365)]–1.
Apologies for the confusion but I'm learning here too.
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The first quarter is over so it’s time to benchmark my low charge retirement investing portfolio against a simple Strategic Asset Allocation that anybody could implement in next to no time. It’s a basic stock/bond asset allocation with the stocks portion being represented by the FTSE 100 total return (capital & income) index and the bond portion being represented iBoxx® Sterling Liquid Corporate Long-Dated Bond Index total return (capital & Income) index.

My Current Low Charge Portfolio – April 2010

Buying (New money): Since my last post I have continued living frugally and saved 81% of my net earnings and pension salary sacrifices. Total new money entering my retirement investing Low Charge Portfolio was around 1.5%. These were allocated as follows: 69.5% to cash, 4.6% to UK equities, 6.4% to international equities, 1.2% to index linked gilts and 18.3% to UK commercial property. This money was invested both outside of any tax wrappers and also within a pension.