Property and equity still finding favour

IT IS that time again, when predictions for the year ahead are coming in thick and fast. Every fund manager with access to a computer has been e-mailing out their forecasts for stockmarkets in the year ahead. Mortgage providers too have been spouting forth about the prospects for the UK’s housing market in the coming year.

But where does this leave the investor? Which will be the star performer in 2004? Of course there are far more investment options than simply equities or property. But these are historically popular choices.

Halifax said it expects house price growth in Scotland to be 12 per cent in 2004 - which would add about £12,000 to the value of the average house in Scotland - while even the most optimistic of managers only expects the UK stock market to rise by "high single digits".

So in the next 12 months the experts are again predicting that property will outperform equities, as they have for the last four years, as the chart shows.

Interestingly, over the longer term there is very little to choose between these two asset classes. To mark the 20th anniversary of the launch of the FTSE 100 index, HBOS has calculated that while the FTSE 100 has risen by 330 per cent since its launch, house prices have risen by 333 per cent over the same 20-year period.

Not much difference at all, despite the efforts of each sector to persuade us otherwise.

Payback time

CREDIT providers, along with the watchdog set up to police them and the government department supposed to regulate them, all came in for a roasting this week when the Treasury Select Committee published its report into the UK credit industry.

Scathing is an understatement. John McFall, chairman of the committee and MP for Dumbarton, said the industry had served consumers badly. He also warned the DTI not to dither in bringing its proposed Consumer Credit Act into law.

McFall said he wanted a single definition on Annual Percentage Rate (APR) to be adopted as a matter of urgency, and he also wants to get rid of what the committee held to be deliberately obscure and opaque practices that kept consumers in the dark about the exact cost of borrowing.

It is hard to see how anyone when faced with the reality - that even a modest credit card balance could take up to 44 years to pay off if only the minimum requested each month was paid off - would not redouble their efforts to pay down debt, at the very least starting to pay off more than the minimum requested from their credit card company.

But not all providers are to be hauled over the coals. Nationwide was praised by the committee for its fair treatment of cardholders. Unlike some of its rivals, the building society ensures that when spending on a card attracts different rates of interest, it is the balance with the higher rate that is paid down first.

And it has already put the US-style summary box proposed by the Treasury committee on its credit card literature, ahead of the agreed industry deadline of April 2004, and this week announced it will add the boxes to its current account literature.

The box outlines rates and charges, making it easier for consumers to find all the key features of a current account. Nationwide is calling on its Big Four bank rivals - which between them have 39 current accounts - to follow suit.

Not good enough

CONTINUING the theme of consumers getting a raw deal, extended warranties - or rather the companies that sell them - also came in for heavy criticism as well this week. However, the OFT sadly did not follow up its tough words with tough action.

Despite describing many extended warranties as "unfair, uncompetitive and expensive", the OFT has decided to allow sales staff in electrical retailers to continue to bombard customers with dire warnings of what will happen if shoppers do not take out an extended warranty to protect their new toaster.

Even shoppers who refuse the extended warranty at point of sale subsequently face being inundated with letters, again offering them this cover, when the automatic manufacturer’s guarantee comes to an end.

Just exactly how toothless the OFT’s newly-tightened rules on how extended warranties can be sold by retailers can be clearly seen by the fact that Dixons - which makes around 40 per cent of its profits from sales of these policies - saw its share price rise almost 5 per cent on the news.

Anyone buying a major electrical appliance in time for Christmas should remember that most come with an automatic one-year manufacturers guarantee.

And companies such as British Gas and Direct Line and some insurers offer homecare schemes which cover - and replace - a number or all household electrical appliances for considerably less than the cost of one extended warranty.

Consumer champion

THERE was one tiny glimmer that at least one of the bodies established in part to protect consumers’ financial interests is at last beginning to find its teeth when City watchdog the Financial Services Authority handed down a £675,000 fine to insurance group Friends Provident.

Although the size of the fine barely dents the profits of a company that made a £305 million operating profit last year, it is significant as the fine was levied because of the abysmal way in which Friends was deemed to have treated its customers, specifically those who had complained about the possibility of being mis-sold endowment policies.

A friend for consumers at last.