Action planning

Endowments

Further falls on the stock market can only worsen the outlook for mortgage endowments. Legal & General announced increased penalties last week for people wanting to cash in their policies. Some insurers had already done so and more may follow. A further downgrading of official investment projections by the Financial Services Authority cannot be ruled out, increasing potential mortgage shortfalls. The maximum rate of growth the FSA allows insurers to predict is 8 per cent a year. Don't ignore potential shortfalls.

Action: Homeowners should consider converting part of their loans to repayment mortgages to start repaying debts. Alternatively save in a tax-free cash Isa which can be used to pay off the shortfall.

Consider using savings to repay parts of the mortgage; with returns on shares falling and interest rates on savings at record lows, debt repayment is one of the best forms of investment.

It makes little sense simply to increase your endowment premiums to cover the shortfall.

It is usually unwise to surrender an endowment; but if you want to bale out, consider selling on the second-hand market. Increased exit penalties are also reducing values in this market. Adviser Baronworth offers a trawling service to search the market. Tel: 020 8518 1218.

Mortgages

Interest rates are at an all-time low, and economists expect them to stay that way for the next year. People with mortgages and other credit should take advantage of this by paying off as much as they can as soon as they can.

Action: Discounted mortgages cost less than 5 per cent now. Shop around for a good rate, and consider rolling your more expensive debts - personal loans and credit cards - into your mortgage to help your cashflow.

Get a free quote on how much you can save from London & Country Mortgages (0800 373 300).

Do not continue paying off these debts over the full mortgage term: overpay your loan each month, or repay lump sums when you can.

Consider mortgage payment protection insurance, which pays your mortgage if you can't due to illness, disability or unemployment. Be careful about choosing a policy. This type of cover is usually expensive, at between ?4 and ?6 a month for each ?100 of monthly mortgage payment covered and contracts often contain loopholes.

You can save a lot by reorganising your credit cards.

Capital One (0800 952 5252) offers'lifestyle cards' with an initial zero rate for purchases, rising to 12.9 per cent after six months. Balance transfers made during this time cost 6.9 per cent until the debt is paid off.

Pensions

Even before last week's renewed downturn analysts were warning of growing deficits in some of the largest 'final salary' occupational pensions schemes.

Employers may have to pay more and they could ask staff to raise their contributions.

People with personal pensions and employers' money-purchase schemes are directly exposed. Those invested in with-profits funds are shielded to some extent.

Action: Prepare to save more and perhaps delay your retirement. If you are in a final salary scheme, ask what will be done if the fund runs into deficit.

If you have a money purchase pension and are within a few years of retirement, check the arrangements for switching from shares to cash. If you have control over this it may be wise to postpone selling share-based funds until prices recover. Adviser Torquil Clark warns against turning all of a pension to cash in one go.

If you have a pension mortgage to pay off a loan and give an income in old age, you may face shortfalls. Look at paying some mortgage debt.

Mutual funds

The message for investors in mutual funds - unit trusts and Oeics, or open-ended investment companies - is to sit tight.

Financial advisers and fund managers are urging investors not to rush into selling up for fear of recession and market slumps. Fund manager M&G says: ''In previous moments of crisis, markets have frequently bottomed soon after. It follows that we should avoid reacting overhastily.'

Fidelity says the strongest rises in equity markets tend to happen immediately after a sharp drop. On average markets recover by 9.8 per cent a month after the trough in a bear market, and by 26.2 per cent over a year.

Action: Equities should be regarded as long- term investments. Jason Hollands, of Best Invest, even recommends buying more: 'It takes courage to start investing when you are sitting on losses. But the key to successful long term investing is to buy low, sell high. if you are a long-term investor, don't be fazed. Keep your eyes on the horizon and, if you have spare money, consider feeding some of it into the market in the coming months.'

Bonds

Bonds come in many forms. Distinguish between those that put capital at risk - including corporate bonds; high-income bonds dependent on the growth of stock market indices; with-profit bonds; and distribution bonds - and those that return capital in full, the most common being guaranteed income bonds.

All could be affected by current market conditions, but for different reasons. One issuer of guaranteed income bonds, Countrywide Assured has temporarily pulled out of the market because of the turmoil.

Bonuses on with-profit bonds are likely to come under pressure and more investors could face exit penalties for early withdrawal. Last week Co-operative Insurance imposed a charge on its with-profit bond for the first time.

The outlook for corporate bonds and corporate bond funds is uncertain; yields could go up but this would increase the risk of capital loss because it signals a lack of confidence.

Action: Bonds tend to be sought by people seeking income. But it may be unwise to rush into a decision until markets have had time to settle. Beware any bond offering double-figure interest unless you are prepared to lose capital.

Property

Most housing market commentators were expecting an autumn slowdown in the housing market anyway.

It is too early to say whether the increased likelihood of recession will prick the price bubble. Milan Khatri, economist at the Royal Institution of Chartered Surveyors, says the cuts in interest rates now expected will help the market. But the critical factor is unemployment levels. Figures released last week showed a slight increase.

Action: Think twice about stretching your finances to take on a big mortgage. Buyers may find it easier to bargain down a price, although much depends on local conditions. Anyone who does not have to move may want to delay until its is clear how quickly the market is slowing. A survey of estate agents by the RICS in August found agents reporting some levelling off.

Property is continuing to attract interest from people wanting to invest outside the stockmarket. This could help underpin prices but anyone entering this market now needs to be aware that prices may have peaked. Look in areas of high rental demand. Bradford & Bingley estate agents say national hotspots include High Wycombe, Horsham, Middlesbrough, Southampton, Hove and Caversham.