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Thursday, November 27, 2008

Will cutting rates be beneficial for the public?

By Chris Clare

As the credit crisis deepens and more people are feeling the real impact as credit becomes more difficult to obtain, the focus on interest rates has never been greater. 12 months ago, only those connected to the financial services industry were aware of LIBOR and its importance in the marketplace. Today LIBOR is discussed in living rooms and pubs throughout the country with many of these discussions fueled by news reports on television.

The nation is now aware that LIBOR, the London Inter Bank Offered Rate reflects the actual rate at which banks borrow money from each other and is accepted as an accurate barometer of how global markets are reacting to market conditions.

The rate is calculated by the British Banking Association (BBA) which takes the lending rate from 16 different contributing panels. They then disregard the top and bottom 4, concentrating on the middle average 8 rates. The average of these becomes that day's LIBOR rate.

Over the last twelve months the difference between the LIBOR rate and the Bank of England base rate has been substantial and it has also been acknowledged that the period of this variation is also longer than ever before. There has recently been a drop in the rate with a 1.065 percentage reduction on Friday 7th November giving a rate of 4.496% (its lowest point since April 2004), reflecting a slashing of the interest rate by 1.5% to 3% by the Bank of England. The pressure has been put on the financial institutions to pass this on to the general public, not only by the government, but also by the media. With this in mind, many of the leading banks are following the Bank of England's lead.

But there would appear to be several things that have been overlooked in the rush to pass on the perceived benefits of the drop in the base rate.

A reduction in interest rates to existing customers is very welcome. However from the bank's perspective this can have a detrimental effect on arrears performance. As borrower's payments are reduced this will automatically increase arrears percentages; for example a borrower who has a monthly payment of ?350 and is say ?300 in arrears, is currently 'off the radar'. However, should the monthly payment be reduced due to a rate cut to ?280 the borrower is now in excess of one month in arrear. This will be replicated throughout the collections process as those accounts that are one month move to two, two to three etc culminating in more accounts reaching the stage where they are referred to solicitors for litigation proceedings to commence.

Banks who wish to lend to other banks at the LIBOR rate will be looking at the performance of the borrowing bank's mortgage book. This will inevitably have slipped with the decrease in rates, and will of course only slip further as more cuts happen in the future. As a result, banks will become more unwilling to lend out as the possible risk of lending increases, which will in turn be detrimental to the LIBOR rate.

There is another way that banks achieve funding for their daily dealings. Income from their loan books and retail deposits are also used for mortgages and loans. This is how some banks have been able to keep afloat during the recent crisis and it is indeed true to say that the competition that now exists for investments is every bit as intense as it was for mortgages just a few years back.

Banks will also face the situation where they will earn less money on their existing borrowers if the interest rate drops, but they will still have to aggressively seek new investment. Due to decreased profits the banks will take more time to recover from the crisis. If the LIBOR rate remains higher than the base rate then it will follow that the financial institutions main target for investment will focus on the retail sector. This creates a situation where only a substantial decrease in the LIBOR rate, that is to say in line with the base rate, will attract the banks away from the area of retail investment.

It has to be said that one good thing to come from the government proposals is that it has been a big confidence booster. But it is worth bearing mind that although the mood is slightly more upbeat of late, the drop in the interest rate and the injection of cash will also herald unforeseen problems as it aims to provide a solution to the problem. And, just to prove the point, as I write this the LIBOR rate has started to climb again.

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Where Would You Choose To Live--Toronto Or Winnipeg?

By Dane Masters

This is a true story of a family that relocated from Toronto to winnipeg, some three years ago. Real estate was booming in Toronto. So people opting to sell their houses ensured a tidy sum for themselves! When our family decided to sell our town home, prices were sky high; we ended up with a reasonably good profit margin. More than that actually, since we were able to shell down hard cash for a wonderful four-bedroomed house in Winnipeg. The new house is large and exhibits character, plus demands no mortgage. Though parting from friends and family was difficult, the change was well worth it!

Coming to the house itself, the property seemed almost double in size with a sprawling house in the center! If one could speculate how much such a house would have fetched in the Toronto real estate market, probably $300,000. And if it was renovated and placed in a popular location, the sale would have been close to $500,000. We had to shell out just $65,000 for this house as it needed some repairs. But with the estate prices going up by 20% year after year, should we decide to sell it, our profits are going to multiply manifold! Yes, a few repairs had to be carried out; some are still pending. Our plans include installing a brand new hardwood flooring for the entire living area. Whatever it may be, these are just minor problems, considering the size of the house and how less we paid for it!

Toronto prices have shot up so much that people who want to buy a house have to shell out $250,000! Others have to forget about settling in a nice neighborhood or a place with good amenities, the condition of the place, etc. They can only live in town homes or condominiums. The house could be in any condition--the price would not change. The real estate listings of the city of Toronto therefore prove to be quite mind-boggling for someone who is not prepared for it!

Imagine the thrill of living in a place where commuting to and from office is peaceful. No gridlocks to battle through, no evidence of road rage. Anyone who wants to live here can afford a house since it is only $100,000. There are umpteen houses to choose from, in a variety of neighborhoods. If you wish to put up new windows and high efficiency furnaces along with your fixer-upper, Manitoba Hydro offers loans at low interest rates. So there is no need to worry. The town homes and condominiums up for sale demand a maintenance fee; but this is only a fraction of what one would have to pay in Toronto.

Winnipeg truly has something for everyone. Our housing prices blow Toronto real estate costs out of the water... and that's just the beginning.

We have now made Winnipeg our home, probably for good. Yes, we miss our friends and family, but we still find ways to keep in touch and see each other on a regular basis. Our family is much happier with our slower pace, the kids love having so much space to run around, and we feel like we've made a smart decision for the long run.

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Foreclosure Law: Know It Before You Sign

By Michael Geoffrey

Before buying a home, read the fine print of your contract so that you are aware of the details. This is especially true if you are purchasing a home with a subprime loan. If you can't make your loan payments and you face foreclosure, you will want to have already become familiar with foreclosure law.

According to foreclosure law, you will have a set amount of time to leave your home if you can't afford it. If you ever find yourself in this position, you will be better off if you already know your rights by reading your loan agreement before signing it.

Subprime Mortgage Lending

Due to their inability to continue paying for their homes, many people have been foreclosed, a sad fact which the media has reported on. These foreclosures are often a result of lenders who offered subprime mortgages that they claimed would help their clients to own their own home and live out the American dream.

These same lenders often claim that good credit is not important, that anyone can get a low interest rate. The loans that such unscrupulous lenders offer, however, only have a low introductory interest rate. In just a few short years, those interest rates skyrocket, a fact which people would know if they would only take the time to read the fine print of their loan agreements. When interest rates go up quickly and unexpectedly, many individuals find themselves unable to pay their loan and thus are foreclosed on.

Notice to Vacate the Home

Foreclosure law states that a homeowner will have to vacate the premises of their home within a set period of time after they have failed to pay their home loan payments. When payments are not made, the bank or other lending agency with whom you took out your loan will inform you of the date by which you must leave your home if you cannot make your payments. The police will get involved if you refuse to leave by the set date. In many cases people are being forced out of their homes because they did not take the time to read the details of their loan agreements and were not able to afford their payments after the interest rate went up.

You can protect yourself from foreclosure by doing all you can to make sure you will be able to pay back your home loan. That way you will be able to stay in your home without worrying about losing it to foreclosure. The Internet is a useful tool for individuals who would like to learn more about foreclosure. You can read people's personal experiences with foreclosure as well. If you want more information, speak to a lawyer who works with foreclosure law.

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How To Leverage Web 2.0 To Get Top Rankings

By Brian Armstrong

You may have heard about social networking or social media marketing. These are basically websites that you can use to give people information about your site and do so in a way that you can targeted traffic back to your site. The best way to learn this social marketing is to actually do this yourself on your site.

The first step to any of this is to get your website blog post completed or your article done or any page on your website ready for your target audience. Once the page itself is done and ready to be "bookmarked". This is a simple process of adding links back to your page.

Once you're ready to go with your blog post or article, you'll need to setup new accounts with the social bookmarking sites you can find on The advantage of using a service like this is that you'll be able to bookmark your articles or blog posts with one main website instead of having to repeat the process and visit multiple websites with each bookmarking process.

There are a few different components to these bookmarking sites that you'll need to consider. The first thing that you'll be prompted with is the title. Ideally this title is going to have your main keyword phrase in the title itself. However, the title should match the title of the blog post or article.

Your description is one of the more important things you'll include in these bookmarks. The main reason is because the description is usually what is going to get those clicks back to your website. This means your description should have a strong call to action that gets you clicks.

The url or web address that you're prompted for should be relatively self-explanetory. In any case, you need to make sure that you're using the web address of the exact blog post instead of just the main domain name of the website.

The tags are a vitally important part of the process because not only will your tag page get ranked for the "low hanging fruit" keywords, but it will also get ranked for the more competitive keyword phrases. Several of these bookmarking sites have a lot of authority in the eyes of the search engines which means that their tag pages have the ability to rank well, especially when you use the less competitive keywords as your tags.

These social bookmarking sites are a great way to get relevant links back to your sites and depending on which ones you use will have a very high "authority" in the eyes of the search engines. These sites can also help you generate a significant amount of traffic all by themselves. The majority of these sites also allow you to create profiles in which you can usually add links to whatever site you want to as well which will also help with the search engines and your overall traffic strategy.

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Iron Condor, The Day Traders Advanced Technique

By Walter Fox

Stock options and the Iron Condor are viable partners that benefit traders. Two vertical spreads, The Bull Put and Bear call have the same expiration. This widely adopted strategy puts them in the same category as many other forms of call spreads. Day traders adopt this technique as it allows for more options in their market

To learn to day trade, one must know the origins of the terms commonly used with this technique. The shape of the profit to loss graph is the derivation of the Iron Condor term itself. This shape closely resembles a bird with wide, spread wings, like a condor. The abirda itself consists of two partsa"the inner options, or body, which refers to the inner options, and the outer options, which refers to the wings of the acondora.

The "Iron" term originates from the position of the spread. The position is placed across the spot price of the underlying instrument. The underlying instrument consists of one vertical spread below and above the current spot price. Other acondora trading strategies have the same basic shape but these are played differently.

The Short Iron Condor and Long Iron Condor are two examples of trading options. Traders who practice buying and trading short options for the inner body are using the Short Iron Condor technique. This approach consists of trading and buying long options in contracts for the body strikes. This is called out of the money striking. Also, with the purchasing of long options, the trader will also be able to sell contracts for outer wing strikes.

The long Iron Condor approach varies slightly from the short Iron Condor technique. In this strategy to learn to day trade, the trader will buy long options contracts from the outer (wings) strikes. The trader then sells the options contracts for the inner (body) strikes. These strikes are out-of-the-money puts and calls, as observed in the short Iron Condor technique.

The Iron Condor approach has many advantages. One of the most important advantages is that the Iron Condor has the same initial and maintenance margin requirements as the requirements for a single vertical spread. This results in a potential profit from two net credit premiums.

Further transactions can be avoided by allowing the contracts to expire. Positioning the spot price in this fashion allows the underlying line to be between the inner strikes near the tail of the body (The inner body stike), or open contract.

Iron Condor's great benefits, is a technique that is commonly used in day trading today and taught to students in business schools across the country. With slight tweaks from other condor type trading techniques, The Iron Condor has greater advantages to advanced encounters where the buyer has multiple options opened up to an advanced trader.

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A Story About Signature Loans for People with Bad Credit

By Mark Richardson

I can think of fifty or seventy-five reasons a person might need to take borrow some cash for a short period of time. Think through this scenario - it's April 5th, and in just ten short days the government is going to be looking for a rather large check in the mail from you. Your previous fiscal year went better than expected, which is turning out to be both a blessing and a curse now that you're staring at your obscenely large tax burden.

You face one big challenge: in spite of the fact that you put in reserve the necessary funds for the government's bill, your tax account no longer has any money in it due to the fact that you and some associates took an unplanned vacation to Las Vegas. If only the government had sympathy toward your spontaneous lifestyle, you wouldn't have any stress right now. Unfortunately, they don't, and now you're going to have to get someone to lend you enough money to pay your taxes - or you'll be paying the penalty.

You have another obstacle between you and your on-time payment to the government - you have terrible credit. See, that all goes back to the time you bought a brand new Dodge truck because the dealer made you an offer you couldn't refuse, so you financed the whole thing in spite of the fact that there was no way your meager income would cover the payments. You were soon several months behind, and before you knew it the repo man was taking your shiny rig away to be sold at auction.

And now you face quite the dilemma - the government wants its money, your cash reserves are empty, and tax day isn't getting any further away. But it doesn't have to be a total loss - you can borrow the money you need, but it's going to take some creativity. You can find signature loans for people with horrible credit.

Let's establish the definition of a signature loan, but I suppose it's not too hard to understand. A person can go to a lender, put your name on an application, along with your address and some other personal information, and end up carrying out the money to get you through the week. Although it seems easy, it's not really going to be so simple.

How much money do you make? Any intelligent bank will want to know that your earnings are at least triple the amount of your loan amount. In the face of a sub-600 Fico score, big paychecks will soothe the worries of a skittish lender.

Another prerequisite to loan approval may be your demonstration to the bank that you can provide them with some valuable, sellable collateral to secure the loan. Nothing could make the bank feel more secure than knowing they can sell your car or your jewelry if you decide not to make payments. Of course the best advice is not to give something you'll actually miss if the lender ends up selling it.

If you can convince the bank you're not a major loan risk, you'll end up getting the loan and surviving the day. Next time you should probably be more prudent about the use of your emergency cash reserves and your tax planning. Don't let your financial situation become a vicious cycle!

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