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Following intervention by George Bush, the head of the US Federal Reserve has hinted that a drop in interest rates may be on the cards for America soon.

There is real concern in the US that the sub prime housing problems could tip the country into recession, forcing many lenders out of business and increasing the turmoil in the financial markets.

Whilst the economy in the USA might seem disconnected from our every day lives in the UK, a reduction in American interest rates will be good news for Brits for the following reasons:

• If America’s economy moves into recession, it could trigger a recession world wide so by averting recessionary pressures in the US, we could be spared the pain of reduced growth in the UK.
• Greater stability in the US financial markets will also help reduce jitters in other finance markets worldwide. Recent falls in stock markets could be reversed as the fear of recession recedes.
• Reducing interest rates in the US could present an interesting dilemma for the Bank of England as the US dollar will fall in value against sterling. Whilst great for those travelling to the USA, UK manfacturers will struggle even more to sell their goods to American customers as they become too expensive because of the strength of the pound against the dollar. If the Bank of England raise UK interest rates in their battle against inflation, the pound will strengthen even more against the dollar, harming UK manufacturing. A fall in US interest rates will make it harder, though not impossible, for the Bank of England to raise interest rates in the UK to rise.

So as long as inflation doesn’t rise if interest rates stay where they are, a cut in the cost of borrowing in the US could be welcome news for us Brits.

Much as I has suspected from the number of houses that are proving difficult to sell in my area, house price growth is slowing down across the country.

The Nationwide, in its latest press release about the property market, points out that annual growth in house prices is slowing. The annual rate of growth fell to 9.6 percent during the last year, whereas it was 9.9 percent during the year to July.

Note that the Nationwide is not saying that house prices are falling, they are just not increasing as fast as they were.

Citing the impact of the latest interest rates and importantly the expectations of lower house prices as some of the main reasons for this slow down, the Nationwide is not, as yet, blaming the credit crunch issues as a major factor in the housing market.

That we are now starting to anticipate lower house prices is crucial. Financial markets are driven by sentiment and if enough of us believe that prices are going downwards, there will be less buyers and guess what happens? The house prices do go down until buyers feel confident to dip their toes in the water again.

So where are we in the cycle of house prices at the moment?

To my mind now is not the time to invest in property, unless you really have to. Are we at, or even slightly beyond, the peak of the market? Quite possibly, although some areas are still growing in demand, and sellers are still asking high prices.

I feel now is the time to reduce your debts - particularly your mortgage - and to save. With higher interest rates saving becomes more attractive.

Credit card companies are sneaky. Just when you thought they were tamed by the Office of Fair Trading who forced them to reduce their default fees, we learn today that card issuers are increasing their charges in other ways, according to a report by Which.

One of the main ways that credit card companies are increasing their charges is with balance transfers. Transferring your balance from one card to another (the so called rate tarts) used to be a great way of juggling your debts without incurring transfer fees and enjoying long interest free periods.

Not any longer. Some credit card companies, such as LloydsTSB, for example, will now charge you up to 3 percent of the balance transferred to them. This means if you transfer £5,000, you may now incur a transfer fee of £150.

There are less obvious charges to be wary of too. Inactivity charges are perhaps the worst. You may even be charged £35 per year for not using your card. So if you manage your money well and only have a credit card for occasional or emergency use, then you better chose your credit card carefully.

I personally dislike credit card cheques and the way that they are marketed. Charges for these are rising too, so be careful if you feel tempted to pay with one of these. Barclaycard, for example charge 2.5% fees for credit card cheques.

I understand that credit card companies aren’t charities and need to make a profit, but it seems that we all need to be aware of, and consider carefully, any charges that may not be obvious at first glance.

Credit card suppliers operate in a highly regulated industry and have to state what charges and fees you will incur, however if you have followed some of the links in this post, you will see that only careful reading will prevent any nasty surprises when you receive your monthly statement.

The news that people are hardly saving any money doesn’t surprise me. As interest rates have been low for quite a few years now, there has almost been a dis-incentive to save and a real temptation to do the opposite - to borrow as much as you can.

Apparently 20 percent of us don’t bother to save at all, and another fifth only save a small amount each month and that is for things like holidays. Living for the moment is great, after all you can’t take a stash of money to the grave with you, but it would personally make me uneasy if I wasn’t building up even a small amount of capital.

According to some experts we should all have at least three times our monthly salary stashed away in case that “rainy day” does decide to visit us. As the average salary is around £25,000 in the UK, that means we should be striving to build our savings to at least £6,000.

I’m all for that level of saving, even though £6,000 doesn’t actually buy that much, unfortunately. But this news about savings published today chimes with the article on Money High Street about overpaying your mortgage, that we published yesterday.

With interest on mortgages being more costly than interest earned from savings accounts, particularly when you consider tax reductions on savings account interest, it makes real sense to start over paying your mortgage, once you have built some savings and have paid off all credit card debts.

To my mind not saving now will cause you real problems in the future - perhaps when you are earning less through retirement, changes in circumstances or a reduction in salary. At least you will have built up a valuable pot of capital that can grow, if invested sensibly. You could always treat yourself to a nice holiday from it later on, without having to borrow the money.

I was interested to read about a couple using Ebay to sell their home, which seems like a great idea.

With conventional estate agents charging at least one percent plus VAT to sell your home, many people are turning to the Internet in search of an effective, but far less costly way of finding a buyer.

The House Network, for example, only charges £398 + VAT in total for the marketing of your property that leads through to a sale, and they use major property portals such as Right Move to find buyers for you. The advantage of the House Network charges is that they are the same irrespective of the value of your house, so it could only cost £467.65 to sell a £1,000,000 house!

Selling on Ebay is far cheaper, though you don’t get the benefit of marketing on Right move, which is becoming one of the major destinations for buyers looking for property.

Ebay will only charge an insertion fee of £35 plus an additional £2 fee for setting a reserve price. So for a total of £37 you can advertise your property to the millions of Ebay users. By setting a long enough auction, prospective buyers could visit the property and even get it surveyed.

Actually, if you think about it, if the seller had prepared a home information pack too, showing local authority searches and ownership details, this could be a real benefit to bidders who haven’t got time to conduct these searches themselves during the duration of your auction.

What a lot of people don’t realise is that Ebay does not charge property sellers a final value fee, so in fact it can be cheaper to sell your home costing hundreds of thousands of pounds than, say, a car or expensive luxury item.

Don’t make a mistake, though, and place your house advert on Ebay without a reserve price as you would be legally bound to sell your house for £1 if that was the highest bid. Ouch!

Its not just houses that are for sale on Ebay. Other property items such as plans for self build houses and land for sale can also be found.

It is amusing though when you see house sellers struggle with delivery options - “pick up only” seems the favoured description. The mind boggles about that!

So if you are selling a house and the estate agents fees don’t appeal, then you might find that vital buyer on Ebay. You still need to abide by the legal aspects of house sales such as conveyancing and HIPs, but it could save you a fortune.

The news that Northern Rock will be increasing the interest rates on their fixed rate sub prime loans soon may not seem important to you at the moment, unless you have an impaired credit history and fall within the sub prime market.

However it is not just Northern Rock who are increasing their sub prime rates - other lenders such as GMAC and Kensington Mortgages are also raising their costs for sub prime borrowers.

What we are seeing is the effect of the credit crunch that I mentioned a few days ago, spilling over from America. Lenders are becoming more reluctant to loan to the sub prime market in the USA and it seems that some lenders in the UK are following them too.

So it’s starting to become more difficult for people with credit problems to borrow money, and it is often these people who need to remortgage or arrange debt consolidation loans to help get their finances back on track.

The trouble is that people are still borrowing, and today we learn that for the first time total national debt now exceeds the total national earnings.

So as we borrow more, but then struggle to repay our debts, we find that the costs of consolidation is becoming prohibitive. This can create a downwards spiral leading to severe debt problems and the risks of needing an IVA or filing for bankruptcy.

I’ve painted a bit of a bleak picture here, but we don’t want to see what is happening in the US mortgage market over here.

I see the move by Northern Rock and the other lenders as a warning. Lenders who once welcomed people with credit problems, are now changing their tune. If they don’t want to lend to those with debt problems, we all should consider whether high levels of debt is sensible.

When I heard about home information packs (HIPs) being extended to 3 bedroom houses on Radio 4 news last Friday lunchtime. I had to chuckle.

I wasn’t chuckling about HIPs affecting more house sellers (far from it), but it was the fact that the newsreader actually said “Home Improvement Packs” when reading out the news item.

I understand this error as I’ve had to stop myself typing “improvement” rather than “information” many times recently.

I’m not the only one though.

See how many other sites make this error with this Google search for home improvement packs

There are quite a few respected sites in that list, including a Communities and Local Government press release!

Variable rate mortgages are being chosen by many people now instead of fixed rate mortgages. In fact 55 percent of mortgages taken out in July were for variable rate mortgages.

When interest rates rise, most people feel safer with a fixed rate mortgage, but of course this can become a liability when rates start to fall. So this news about the popularity of variable rate mortgages points to the fact that an increasing number of borrowers feel that interest rates have peaked.

This confidence is being mirrored by some mortgage lenders at the moment. The Nationwide, for example, will be reducing some of its fixed rate mortgages slightly from August 23rd. Also the cost of long term inter bank loans is reducing slightly too, illustrating that the money markets are not anticipating further interest rate rises.

There are actually benefits to variable rate mortgages and perhaps more borrowers should at least consider them when chosing a mortgage.

Here are a few benefits you may not have thought of:

• No arrangement fees
• No overpayment penalties
• No lengthy early redemption periods and penalties
• Benefit instantly from falls in interest rates, (but instantly pay more when rates rise)

In a word, taking out a variable rate mortgage gives you flexibilty.

This means that you could always switch to another type of mortgage such as fixed rate or tracker if interest rates change significantly, however there may be arrangement fees and other costs associated with these types of mortgages.

Remember that you must always seek professional advice about the best mortgages for your needs and financial situation. I am just stating my opinion in this post.

House prices in Chelmsford, the main town in my area, seem to be static at the moment and I’ve noticed that a lot of houses that have been been on Right Move for at least three months, are still unsold. Some houses in Chelmsford that had sold are now back on the market again.

So in this part of Essex, at least, we are seeing a general slowdown in house prices and sales.

Of course August is a slow time of year as many people go on holiday, but as we reported on Money High Street yesterday, house prices in London have actually fallen in August and that is the first time that has happened for a year.

Couple that with news about the number of first time buyers falling too and it isn’t difficult to see a trend appearing. For the next few months, at least, we will see almost zero growth in house prices.

Some will probably be gloomy about this, but I think it is actually good news for all of us as the Bank of England can also see the cooling property market. Their strategy of turning down inflation by increasing interest rates looks like it is working. Hopefully they will delay, or even cancel, another interest rate rise and that would be good news, except for those with more savings than borrowings, of course.

It is important for major builders to be aware of economic and market trends so the news that Persimmon is still upbeat about the property market should calm the fears of people fearing a crash in house prices. Maybe, they are right to feel confident, though, as they will benefit from Gordon Browns plans to build 3 million homes over the next 12 years.

So we shouldn’t be too upset if the value of our homes don’t increase for a while. At least we won’t be paying more for our mortgages.

I rate Dell computers quite highly. Although they may not be the most sexy PC’s available, I’ve always found them to be reliable with pretty good performance. I particularly like their warranty and support plans, and on the very few times that I have needed hardware repairs, Dell have always worked hard and quickly to rectify any problems.

So all in all, in my opinion, Dell computers (including their excellent servers) are a good bet.

There is something to be very wary of, though, and that is their shipping charges, which are a complete rip off.

I need a new laptop and saw that Dell had some great offers at the moment. I was just about to place an order with them, but almost fell off my chair when it came to viewing the shopping basket on their web site.

£60 (£51 + VAT) for the shipping costs of a laptop!

This is about 8% of the total purchase costs, including three year on site hardware warranty. How can Dell justify such high shipping costs?

So I did a bit of investigation on their web site. I specified out a Poweredge PE6800 tower server and then added it to my cart.

Now this server weighs 55.39Kg (122 lbs). Its a 6U form factor and is a two man lift. The shipping cost for this weighty beast is £57.68 (£49 + VAT)!

So Dell will charge you less to ship a 122lb server than a 5lb laptop!

Thinking about that excellent three year hardware warranty, I didn’t really want to buy a laptop from another supplier so I decided to phone Dell and negotiate away the shipping charge.

In my experience, Dell will always negotiate as long as you can substantiate your facts and are reasonable. After a bit of persuasion (me saying I’m going to buy a laptop today, so its either a Dell or another make), their sales woman reduced the overall system costs, thereby getting rid of their rip off shipping charge.

So buyers be wary. Those great headline deals on the Dell web site may be hiding unreasonably high shipping costs.

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