Bank of England Reduces Bank Rate by 0.25 Percentage Points to 5.5%

News Release

The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.

Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow. Forward-looking surveys of households and businesses suggest spending is moderating, broadly in line with the projections contained in the November Inflation Report. But conditions in financial markets have deteriorated and a tightening in the supply of credit to households and businesses is in train, posing downside risks to the outlook for both output and inflation further ahead.

CPI inflation was 2.1% in October. Higher energy and food prices are expected to keep inflation above the target in the short term. Although upside risks to inflation remain, which the Committee will continue to monitor carefully, slowing demand growth should ease the pressures on supply capacity, bringing inflation back to target in the medium term.

Against that background, the Committee judged that a decrease in Bank Rate of 0.25 percentage points to 5.5% was necessary to meet the 2% target for CPI inflation in the medium term.

London house prices fall 0.6% in October

According to the Land Registry’s latest house price index, London house prices have fallen, compared with a relatively flat market in England and Wales. October’s Land Registry House Price Index showed house prices in London fell by 0.6%, following a 1.3% gain in September, while the overall English and Welsh market demonstrated a slight increase of 0.1%, well below the 0.7% average monthly increase recorded over the last 12 months. The average house price for England and Wales is now £184,346, while in London the figure stands at £351,039. At the same time, annual house price inflation also eased during October, dropping to 8.1% down from 8.7% in September.

A third of mortgage holders could be in trouble

A study by consumer research group Mintel has shown that up to one in three, or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the US sub prime crisis, and the tougher lending climate it has created. “The focus over the last few months has very much been on sub prime borrowers, but they are only the tip of the iceberg,” said Toby Clark, a senior finance analyst at Mintel. The group claims that 9% of British mortgage holders were classed as sub prime, while a further 24% were non-standard and relatively high risk because they had irregular incomes.”In today’s more conservative lending climate, the unconventional financial situation of these homeowners means that they will now face higher repayments and increased lenders’ fees when remortgaging or moving house,” Mintel said.

Two thirds go to friends and family for advice

Two-thirds of people in Britain are using their friends and family to recommend financial advisers, claims Birmingham Midshires. According to its research, when seeking advice with finance, 63% use personal recommendations, 44% look for Government regulation and 38% go by the years of experience the adviser has. Tim Hague, managing director of mortgages at Birmingham Midshires, claimed that using an independent financial adviser is vital to navigate through the hundreds of products on the market. “While it is good to get a steer from friends or family on where to go for financial advice, their financial needs may have been very different,” he explained. According to Mr Hague, seeking a specialist IFA will be beneficial for a consumer as they are more qualified to meet their exact needs.

Mortgage arrangement fees double in two years

Latest Moneyfacts research has revealed that the average mortgage arrangement fee has almost doubled during the last two years. Figures from November 2005 showed an average flat arrangement fee at £441. Today it stands at £827, with a massive 9% of prime deals now charging a percentage fee. “Thousands of borrowers coming off a two year fixed rate will be bracing themselves for higher interest charges, with the best deals over 1% higher than in 2005. But they will also need to prepare themselves to pay much higher fees, with the average fee rising 100%.” The use of percentage fees has become more common, with 9% of all prime mortgage deals charging a percentage fee ranging between 0.2% and 3.5%. “Unfortunately too many borrowers still focus their initial attention on getting the best rate, without taking full consideration of the true cost of the deal,”

JC Flowers tries to derail Virgin bid for Rock

JC Flowers tries to derail Virgin bid for Rock

JC Flowers, the US private equity firm, made a last-ditch bid yesterday to wreck Sir Richard Branson’s takeover of Northern Rock after it signalled possible increased payouts for shareholders as part of a revised offer. The move is likely to heighten tensions between the three main bidders for the bank and the Treasury, which is thought to be keen on a quick sale to close the door on the politically and financially embarrassing episode. Sources close to Flowers said attempts to sit down with Treasury officials this week had proved fruitless, despite promises from the government that all takeover proposals would be examined. The Treasury denied last night that it was reluctant to engage in talks with the Flowers team. “We stand ready to have discussions with any bidder that meets the principles we set out,” it said. Flowers, which was founded by the former Goldman Sachs partner Chris Flowers, has threatened to walk away from the deal unless ministers get back around the negotiating table within the next few days.
[The Guardian page 42 - 1.12.07.]

Bank deputy hints at interest rate cut

Interest rates could be cut next month to counter the turmoil affecting markets, a Bank of England official said yesterday. Deputy Governor Rachel Lomax said she feared the financial crisis could trigger a fall in property prices. Despite voting for rates to remain at 5.75 per cent earlier this month, she said she would be willing to cut rates to combat the “credit crunch” caused by the collapse of the American mortgage market. Banks have been “hoarding” money rather than lending because they face major losses on portfolios of defaulting US mortgages, she said.
[Daily Mail page 8 - 23.11.07. Also reported in The Daily Telegraph page B5.]

HIPs get full roll-out

The controversial Home Information Pack (HIP) scheme is set to be rolled out for all properties across England and Wales from 14 December, the Government has announced. Housing minister Yvette Cooper said: “HIPs and EPCs are already helping consumers to save hundreds of pounds off their fuel bills and are cutting search costs too. All home buyers will be able to benefit from energy efficiency advice, with those receiving low green ratings of F and G especially targeted for support and grants to make improvements to cut their costs and carbon emissions.” Jeff Smith, chief executive of HIP Payment Services said: “Today’s announcement will be greeted with much enthusiasm and relief from the industry, which has been tirelessly campaigning for HIPs to be fully extended across the whole market since their extension to three bedroom homes back in September. With HIPs fully rolled out across the market, they will finally be able to bring about the many benefits they were initially designed to achieve; a faster, more transparent process which will aid a more informed buying decision.”

Price hopes scaled back as house sales slow

Price hopes scaled back as house sales slow

People struggling to sell their houses are offering more discounts and some are turning to auction houses in hopes of a quicker sale as a slowing property market forces them to scale back price expectations. Asking prices have been cut on 10 per cent of properties on the market in November, whereas just 5.8 per cent of stock had been discounted in the same month last year, according to a Lehmans analysis of data from the Spicerhaart group of estate agents. Results from recent auctions - where sellers are usually keen to strike a deal fast - suggest more properties are remaining unsold after failing to reach their reserve prices in the sale room, while some auction houses are reporting an influx of new customers who have failed to sell their property through estate agents. “The auction results that we have been tracking suggest that a substantial gap has opened up between the price that buyers are willing to pay and that which sellers are expecting to achieve,” said Alan Castle, economist at Lehmans.

Rental income at record high

Rental income at record high

Strong tenant demand for rented accommodation has pushed the average rental income generated by landlords to a record high, according to Paragon Mortgages’ October Buy-to-Let Index. Average rents hit £11,066 during the month, 10.2% higher than a year ago. Yields have continued to remain steady at 6%, while total annual returns on a property purchased 12 months ago averaged 15.5%, up from 14.2% in September. John Heron, Paragon’s director of mortgages, says: “Much of the recent negative media comment on the buy-to-let sector has confused genuine well-researched buy-to-let investment with property speculation. There is solid and growing demand for decent, affordable rented homes in all parts of the country, but it is essential landlords purchase the type of property that meets tenants’ needs and expectations.”

Two thirds of sub prime deals gone in six months

Two thirds of sub prime deals gone in six months
According to new research by Moneyfacts, two thirds of non-conforming products have been pulled from the market within the last six months. Julia Harris, mortgage analyst at Moneyfacts said: “Just over six weeks ago Moneyfacts’ research revealed a 40 per cent overall drop in the number of residential and buy-to-let products available since the market peaked in July. Since then, the prime markets have shown signs of recovery, with increased activity from providers and signs of innovation returning. However, since our last report in October, a further 20 per cent of sub prime residential products have been withdrawn and a staggering further 62 per cent of sub prime buy-to-let deals have disappeared, taking the overall total reductions since July to 63 per cent and 89 per cent respectively.”

House prices too high for graduates

More than half of graduates from the past 10 years have not been able to buy their own home. Just 44 per cent of them are on the property ladder, according to research published yesterday by Scottish Widows bank. Seven out of 10 graduates who have not yet bought a property said prices were the biggest barrier. The average graduate also owes £10,586 in unsecured loans and on credit cards. Among those who have bought their own place, 72 per cent had to take out a joint mortgage with a partner, friend or relative. But 69 per cent admitted they would be unable to afford to buy out the other person if the arrangement turned sour.
[The Daily Telegraph page 12 - 23.11.07.]

Kensington pulls out of sub prime

Kensington pulls out of sub prime

In a response to the continuing financial turmoil caused by the credit crunch, Kensington Mortgages has pulled its entire sub prime mortgage proposition. Intermediaries will have until the end of today, Friday 23 November, to submit cases for any of the lender’s adverse products. Ian Giles, director of marketing at Kensington, said: “There has definitely been a further tightening of funding in the last week or two. There is just no current appetite from investors for adverse credit portfolios.” Mr Giles said that Kensington would now focus its attention on its prime business as there was still funding available for whole loan sales of prime assets.

Credit crunch hits high street as sales fall

Credit crunch hits high street as sales fall

There were signs that the credit crunch has hit the high street as figures showed yesterday that retail sales fell in October for the first time in nine months. The high street has so far escaped almost unscathed from the turmoil that has caused people’s loans, mortgages and credit cards to cost more. But figures from the Office for National Statistics showed that shops were starting to feel the pain for the first time, with sales volumes falling 0.1 per cent, despite a fourth successive month of discounting from retailers. Analysts had been predicting a modest rise as shoppers - encouraged by the cold snap - start to look for winter coats, boots and early Christmas presents.
[The Daily Telegraph page 19 - 16.11.07. Also reported in Daily Mail page 97, The Times page 58, The Guardian page 27, The Independent page 51 and Financial Times page 5.]

Debt crisis set to worsen next year, says CSA

Debt crisis set to worsen next year, says CSA

According to the Credit Services Association (CSA), which represents the debt collection industry, the UK debt crisis is set to worsen in 2008, with as much as £24.3 billion worth of debts to be passed on to the debt collection industry. The CSA says that £22.7 billion will be collected in 2007, and next year’s figure could even top the £24.3 billion predicted. “Over-indebtedness will be accelerated by more fixed rate mortgages becoming variable at higher rates, and access to new credit becoming harder,” a CSA spokesperson said. “Consumers are tightening their belts against the background of a credit squeeze. Access to credit is becoming increasingly difficult as lenders tighten their lending scorecards.”

Credit crunch has hit 25% of mortgage transactions

Credit crunch has hit 25% of mortgage transactions

According to new research by GE Money Home Lending, one in four mortgage transactions handled by UK brokers has been adversely affected by the credit crunch. Since the crisis hit the global banking market in September, some 87% of all brokers have felt the consequences, with lenders withdrawing products at short notice or changing lending criteria or pipeline dates. “During these challenging times there will inevitably be changes to ranges with shorter notice periods, but communication is key and lenders should endeavour to give brokers reasonable notice of alterations in product ranges and changes to pipeline dates,” said GE Money sales director, Duncan Berry. “Brokers are not a naive bunch, so have a realistic attitude when it comes to lenders changing ranges in the current market.”

Unemployment rose over the summer

Unemployment rose over the summer

The number of unemployed people in the UK increased by 6,000 between July and September to 1.67 million, figures from the Office for National Statistics (ONS) have shown. There was also a fall of 9,900 in the number of people claiming unemployment benefit to 824,800. The total employment level was 29.22 million, up 69,000 on the previous three months, and up 178,000 on the same period a year ago. Average earnings also rose by 4.1% in the three months to September compared with a year ago. Excluding bonuses, however, overall average earnings rose slightly less than expected, up 3.7% in the three months to September against forecasts for a 3.8% increase. The figures will bolster the view that the Bank of England is in no hurry to cut interest rates

Barclays reveals £1.3 billion loss

Barclays reveals £1.3 billion loss
Barclays revealed that it has written down £1.3 billion of assets because of the turmoil in the mortgage and credit markets, and has warned that the crisis is far from over. Barclays’ investment arm, Barclays Capital, made a £800 million write-down in October and a £500 million write-down in the third quarter of the year. The write-down was less than feared, and the bank said that Barclays Capital’s profits were higher than last year. “Today’s extensive disclosure demonstrates the strength and resilience of our performance during the year and in particular during the turbulent month of October,” said Barclays chief executive John Varley. But Bob Diamond, president of Barclays Capital, warned that the group has an ongoing exposure to the sub prime market. “The issues in sub prime are deep,” Mr Diamond said. “The leverage is severe and will take one or two years to work its way out.”

Large increase in remortgages over past six months

Large increase in remortgages over past six months

As the market slows, more homeowners are choosing to remortgage than move up the property ladder. Figures from the Spicerhaart Financial Services monthly survey have shown an increase of over 35% in remortgages since April, with 24% of borrowers now remortgage customers. “The increase in borrowers choosing to remortgage their property is largely due to the tightening of the purchase market as a result of the credit crunch,” said Steve Cox, operations director of Spicerhaart Financial Services. “Consumers coming to the end of fixed rate deals have contributed to the shift as they look to secure competitive deals, of which there are plenty of opportunities.”

House prices fell for third month in a row

House prices fell for third month in a row

According to the Royal Institution of Chartered Surveyors (RICS), house prices fell for the third month in a row and at their fastest pace since July 2005. RICS claim that 22.2% more chartered surveyors experienced a fall than a rise in prices, and inquiries from potential buyers fell for an eleventh straight month. Surveyors were also more pessimistic about the price outlook than at any time since April 2003. “Past interest rate increases combined with a tightening in mortgage lending conditions have prevented many would-be buyers from getting on the housing ladder,” the RICS statement said. RICS said sustained weakness in demand was resulting in greater stocks of unsold property and looser market conditions. The ratio of completed sales to the stock of unsold property fell from 38.3% in September to 35.7%, its lowest since May 2006.

More house buyers pull out at the last minute

More house buyers pull out at the last minute

As many as a third of house buyers are pulling out of purchases at the very last minute after getting cold feet amid fears of a property slump. According to mortgage broker John Charcol, there has been a rise of more than 50% in the number of purchasers dropping out in the last six months alone. Jeremy Leaf, a spokesman for the Royal Institute of Chartered Surveyors (RICS) said: “Six months or a year ago, roughly 80% of deals went through, but that figure has fallen to typically 60%. People have become worried about price levels and are afraid that if they go ahead today, the property will be worth less in a few months’ time.”

Inflation rises above Government’s 2% target

According to the Office for National Statistics (ONS), the UK’s inflation rate stood at 2.1% in October, higher than September’s 1.8% and above the Government’s 2% target. The main upward pressures on the Consumer Prices Index (CPI) came from rising food and petrol prices. The largest downward contribution to the change in the CPI annual rate came from gas and electricity bills which both fell slightly this year as a result of the continued phasing in of tariff reductions. The Retail Prices Index (RPI) inflation rose to 4.2% in October, up from 3.9% in September. The main factors influencing the RPI were similar to those affecting the CPI. Many analysts now believe that the rise in inflation reduces the prospect of the Bank of England cutting interest rates this year.

HSBC staff to go

Daily Mail
HSBC staff to go as sub-prime crisis bites

HSBS is wielding the axe again as the aftershocks from America’s home loans crisis reverberate across the banking industry. The banking giant said it would cease trading repackaged American mortgages and slash 120 jobs, 20 of them in London. HSBC’s foray into the US sub-prime loans market led to its first ever profit warning this year. In September it said it would slash more than 750 jobs at its Decision One unit, which packaged up sub-prime loans and sold them on. It also ceased buying debt from other banks. The appetite for high-risk debt has evaporated as mortgages advanced to families who cannot afford payments default at record rates.
[Daily Mail page 91 - 9.11.07. Also reported in The Independent page 54.]

Savers have no idea how much interest they earn

Savers have no idea how much interest they earn

According to the Post Office, 30% of savers do not know how much interest they are earning on their savings. It also reveals widespread apathy over savings, with 42% of savers having always held savings with a single firm and not searching the market for better rates. The best rate is the prime reason people opt for a current account, cited by 42%, but 39% of savers have no idea whether their rates have risen with the Bank of England base rate. “There is a stark contrast between the number of people who say they look for the best interest rate, but have never changed providers,” said Richard Norman, head of savings at the Post Office. “Be it loyalty or apathy, if people haven’t kept an eye on their rate they could be missing out hugely.”

Mortgage Holders too Loyal

Mortgage holders ‘too loyal’

A new survey by online mortgage firm mform has found that out of the 2,044 mortgage holders polled, 13% of those whose products expire simply take the new deals they are offered, and 14% do not extend their search boundaries beyond their existing lender. In all, 40% have never switched mortgage provider, while 25% have switched once, 15% twice and 16% three times or more. As a result, Eamonn Rice, chief executive of mform, has accused mortgage holders of being too loyal. “Loyalty should be rewarded but the millions of mortgage customers who have never moved lender are potentially paying a massive price for not searching the market,” Mr Rice said. “The mortgage industry complains bitterly about so-called ‘rate tarts’, but the reality is that two out of five borrowers are far too loyal to their lender.”

Mortgage Holders too Loyal

Mortgage holders ‘too loyal’

A new survey by online mortgage firm mform has found that out of the 2,044 mortgage holders polled, 13% of those whose products expire simply take the new deals they are offered, and 14% do not extend their search boundaries beyond their existing lender. In all, 40% have never switched mortgage provider, while 25% have switched once, 15% twice and 16% three times or more. As a result, Eamonn Rice, chief executive of mform, has accused mortgage holders of being too loyal. “Loyalty should be rewarded but the millions of mortgage customers who have never moved lender are potentially paying a massive price for not searching the market,” Mr Rice said. “The mortgage industry complains bitterly about so-called ‘rate tarts’, but the reality is that two out of five borrowers are far too loyal to their lender.”

House Prices fell in October

House prices fell 0.50% in October

According to the Halifax, house prices fell by 0.50% in October, taking the annual rate of house price inflation down from 10.7% in September to 8.9% and the average house price to £197,248. Halifax expects annual inflation to decline further over the next few months as the strong monthly house price gains during the autumn of 2006 drop out of the year-on-year comparisons. Activity too, is declining. Mortgage approvals to fund house purchases fell by 6% in September and new buyer interest fell for the tenth consecutive month. “The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity,” said chief economist Martin Ellis.

Call for warnings on Buy to Lets

Moore Blatch, the repossessions litigation specialists, has called for the advertising and promotion of buy-to-let mortgages to carry the same risk warnings as other forms of investment.

As buy-to-let is also an investment, Moore Blatch is concerned that investors may seek legal redress if they were not advised the buy-to-let transaction was liable to fluctuations in returns.With falling rental yields and certain properties and locations suffering particularly badly, some investors may seek legal redress if they believe that they were not fully informed of the dangers of the transaction.

Paul Walshe, head of lender services at Moore Blatch, said: “We believe buy-to-let investment should be subject to the same regulation as other forms of investment; people should be aware of the risks involved when investing any sum of money, and buy-to-let is no exception.”

Brown urged to keep King

Financial Times
Brown urged to keep King

The majority of bankers and economists support the reappointment of Mervyn King for a second term as Bank of England Governor, a Financial Times snapshot of opinion suggests today. The emerging consensus is that although he made mistakes, the errors were not sufficiently serious for the Government to - in effect - sack Mr King. The straw poll came as Gordon Brown’s official spokesman yesterday delivered a vote of confidence in Mervyn King, whom he described as “a first-rate Governor of the Bank of England”. One former member of the Monetary Policy Committee bucked the general trend by arguing Mr King had lost the confidence of the City to the point where the Governor “should read the tea leaves and announce he doesn’t want a reappointment”. But another said: “I don’t see why he should be sacrificed. Most of the antis tend to have a vested interest.”
[Financial Times page 2 - 08.11.07. Also reported in The Independent page 11, The Times page 49 and Daily Mail page 81.]

www.kinetic-fs.co.uk

MPC Split

Times MPC split over need for rate cut

The dilemmas facing the Bank of England over today’s interest rate verdict are starkly emphasised this morning by sharp divisions among The Times Monetary Policy Committee over how borrowing costs should react to the fallout from the global credit squeeze. In a split vote, three of the nine members of the expert Times panel call for the Bank’s MPC to move quickly to cut interest rates by a quarter-point today to stave off the toll on an already weakening economy from tightening lending conditions. However, the six-strong majority of The Times MPC see little need for immediate action, with some giving warning that a cut in base rates today would court accusations that the Bank is bailing out irresponsible financial institutions over lax business practices. Divisions are also clear among the six Times experts calling for the Bank to hold rates today, with three of the panel conceding that an early cut in rates is likely to be needed, even if it should not come this week.
[The Times page 53 - 08.11.07.]

Bank of England Hold Rates

Bank of England expected to keep rates on hold
Despite signs of slowdown in the housing market and weak consumer confidence, most analysts predict the Bank of England’s Monetary Policy Committee (MPC) will keep the base rate on hold at 5.75% today. Although the most recent inflation data showed the Consumer Prices Index (CPI) remaining unchanged in September at 1.8%, below the Government’s 2% target, food prices are increasing and global oil prices have hit record highs. “The series of weaker data and survey evidence over the past few days has significantly shortened the odds that the Bank of England could decide on Thursday that a pre-emptive interest rate cut is justified to reduce the risk of a sharp UK economic slowdown,” said Global Insight chief economist Howard Archer. “We still favour the Bank to leave interest rates unchanged on Thursday, but there is likely to be a very lively debate within the MPC and the vote could well be very close.” However, most analysts predict the Bank will cut rates to 5.25% in two stages by mid-2008 in line with signs that UK economic growth will cool slightly next year.

£2,000 fee the norm for a fixed rate

The Daily Telegraph
£2,000 fee the norm for a fixed-rate mortgage

Banks are charging home buyers ever-higher fees for taking out a mortgage, according to research undertaken for The Daily Telegraph. Customers wishing to fix their mortgages after five interest rate rises in the past 12 months could be faced with an “unpalatable” arrangement fee of £5,000 or higher. Fees have risen by more than 50 per cent over the past two years, from an average of £495 to £774. Moneyfacts, the financial research house that carried out the survey, says there are now 137 mortgage deals in the market that charge £1,995 or higher one in seven of all mortgages. This is in sharp contrast to two years ago, when only one deal charged more than £1,000.
[The Daily Telegraph page 9 - 6.11.07

Graduates, give your debts the third degree

The Daily Telegraph
Graduates, give your debts the third degree

Half a million students will leave university over the coming week with more than just a degree to their name. A significant number will be graduating with debts of more than £13,000. For many, their debt problems are just beginning. Many graduates find their financial situation worsens as they start work. Not only do they have large debts to service but many have to find additional money to fund a new place to live, clothes for work and travelling expenses. But the average starting salary for graduates last summer was just £13,860. Graduates may still be celebrating the end of their finals, but they face the sobering prospect of getting to grips with their finances and managing these debts. It may seem an uphill task, but those who started university last year face a mountain in comparison.
[The Daily Telegraph page 2 - 6.11.07. Also reported in The Times page 23, The Guardian page 2 and Financial Times page 3.]

Northern Ireland tops the house price growth table

A new study from Halifax Estate Agents has shown that Bradford has outperformed all other English cities in terms of house price growth in the last five years, but Northern Ireland dominates the wider UK rankings. Price growth in Bradford has totalled 131% over the past five years, compared with the 188% increase seen in Armargh in Northern Ireland. In addition, the three other cities in Northern Ireland of Newry, Lisburn and Londonderry make up the top four in the list, with Bradford sitting in fifth. “Many cities have benefited from urban regeneration programmes that have seen the wide scale redevelopment of old industrial areas and canal side warehouses into residential properties,” said Halifax chief economist Martin Ellis. “The strong performance of smaller cities, in particular, highlights that homebuyers are looking for attractive places to live in which also offer good transport links, easy commuting and convenient shopping.”

First time buyers increased their share of market

First time buyers increased their share of market.

According to The Fair Investment Company, first time buyers have increased their share of the mortgage market in the past few months, despite the overall number of mortgage enquiry figures falling over the same period. The proportion of first time buyer enquiries regarding mortgages stood at 56% in January, February and March, but this rose to 74% during August, September and October. The study also found that more new buyers are also showing an interest in 100% mortgages, up from 77% in the first quarter to 92% in the third. “Britain’s love affair with the property market is far from over,” said Fair Investment director James Caldwell. “Our figures suggest that, while overall there have been fewer mortgage enquires since the first quarter of 2007, first time buyers are still keen to seek out a deal and are fully prepared to opt for 100% mortgages if it means getting their own home,” Mr Caldwell added.

UK economy strong enough to weather the storm

Chancellor Alistair Darling has warned that securing a loan will become more difficult in the coming months due to the credit crunch, but believes the UK’s economy should be able to weather the storm. Speaking on BBC Radio 4’s Today programme, Mr Darling said: “I think banks will be more cautious about their lending and indeed when it comes to revisiting some of the more foolish lending in the US sub prime market that’s no bad thing. As I said before, people should be cautious about lending money if they can’t be sure they would get that money back. Because of what has happened, there is bound to be more caution in relation to lending.” Mr Darling went on to explain that the prospects for growth in the UK economy were good and that its momentum was strong enough to see it through the crunch.

CML responds to repossession data

The Council of Mortgage Lenders (CML) has responded to Ministry of Justice figures for court actions and repossessions.

The data released this morning shows a very stable picture in the third quarter, after a small fall in the number of court orders compared to a year ago.

While MoJ figures report the number of actions entered and orders made, the CML has asserted that its half-yearly figures are the only regular source of information that relate to actual possessions of properties in the UK - the next set is due to be published on 8 February 2008.

The last set of figures published by the CML reported that the number of properties taken into possession in the first six months of 2007 was 14,000.

The recent CML housing market forecasts for 2008 estimated the number of repossessions to total 30,000 (0.25% of all mortgages) in 2007, and 45,000 (0.38% of all mortgages) in 2008.

The CML also pointed out that its figures are historically lower than those from the MoJ due to substantial differences in the sets of data.

The MoJ figures (covering only England and Wales) relate to court activity which may not result in a possession. Possession proceedings can be abandoned right up to the last minute, even after an order has been granted lenders will not enforce it if a satisfactory payment plan can be agreed with the householder. Lenders may use court proceedings to help ensure that households in arrears have a firm commitment to a payment plan designed to get them back on track

The CML figures relate to the whole of the UK, but to first charge lending only. They do not include possessions as a result of court proceedings by other secured lenders (known as second or subsequent charge lending). Occasionally several court proceedings may apply to the same individual, for example where different lenders holding the first charge and a subsequent charge seek an order from a court at the same time.

Consumers ‘not responsible’ for debt

Three-quarters of consumer believe they are not responsible for being in debt, a survey by credit reference agency Callcredit has found.

Bank of England figures show consumer debt has risen almost £1.35bn in the last month alone, while Callcredit’s survey of 2,105 adults, conducted in September by YouGov, found 75% of respondents believed they were not responsible for being overly in debt.Owen Roberts, head of Callcredit Consumer, commented: “Consumers need to look closely at their own borrowing habits and take control of their finances. Instead of worrying about who is to blame, as individuals we need take responsibility for our own financial wellbeing. My advice to people who feel that they are struggling with repayment commitments is to assess their debts by checking their credit report; they should then contact their lenders to discuss a suitable repayment plan.”

Consumers in the east of England were the most likely to take responsibility for affordable borrowing, with 22% saying customers should be held accountable for determining the affordability of their borrowing, while the figure fell dramatically to just one in ten for consumers in London.

Fall in home sales forcast

The Daily Telegraph
Huge fall in home sales forecast

Hometrack said it expected a 17pc plunge in the number of home transactions in 2008, as the market grinds to a halt. But it reassured homeowners that it did not expect prices to fall, factoring in a 1pc increase in the average property price during the year. It said it expected house prices to flat-line for the next 12 to 24 months. Director of research Richard Donnell said that, with homeowners stretched to almost record levels with their mortgage payments, house price inflation was already starting to flag. There was a risk that the slowdown would turn into a US-style slump, but it was more likely that prices would remain flat, he said. “The greatest casualty of the current slowdown will be property transactions rather than house prices,” he said. “Indeed, the next 12 to 18 months will be characterised by a general lack of housing for sale which will provide a support to pricing, although this will result in much greater price volatility within local housing markets.”

Number of Britons in work falls by 270,000

Daily Mail
Number of Britons in work falls by 270,000

The number of Britons in work has fallen sharply in the past two years, Whitehall figures have shown. Despite an economic boom that has created tens of thousands of jobs, the new posts are largely going to migrants. An estimated 540,000 foreigners have found work in Britain over the past 18 months. But at the same time the native workforce has shrunk by 270,000. The disclosure is a fresh embarrassment to ministers who have had to dramatically revise upwards the official figures on migrant workers. The latest numbers - given to MPs by Employment Minister Caroline Flint - show that since spring last year, 330,000 workers from Europe and 210,000 from elsewhere have found employment in the UK.

Interest Rates put the brakes on

The Times
Interest rates putting brake on economy

Retailing and manufacturing activity both slowed last month to their weakest pace this year, as consumers felt the pinch of higher interest rates and the strength of sterling took its toll of exports. Leading surveys of the high street and industry yesterday suggested that the economy is continuing to slow gradually. But indications that pricing pressures remain strong mean that the Bank of England is unlikely to react by cutting interest rates next week, analysts said. The CBI Distributive Trades survey showed that sales were below average in October for the third month in a row, with shoppers reluctant to splash out on autumn clothes ranges and seeking out bargain prices.

Increase in big loans

The Halifax has revealed that strong house price growth seen in the UK over the past few years is now contributing to an increase in the number of high-end mortgage deals being made in the UK. Over 88,000 homes in the country are now worth £1 million or more, and banking firm Investec has said that banks are beginning to offer more larger-size mortgages than they once were. “A lot of our clients have particularly complex circumstances, which is why we design everything on a custom-built basis,” said Investec spokesperson Andrew Arnott. “A lot of the products on the market aren’t available if the loan size is over half a million or a million pounds. It’s more specialist players that deal with those sorts of mortgages, so it’s more difficult for borrowers to find products right for them,” Mr Arnott noted.

Stark warning from Bank of England economist

Bank of England economist Charlie Bean has warned that the current turmoil in world financial markets could lead to a severe downturn in the UK. Given the recent run on Northern Rock, he warns that it is possible to envisage a sequence of events that generate a greater or more prolonged contractionary impact. “If households have to save more and borrow less, this could see less spending in the shops and a slower economy,” Mr Bean said. “The housing market could be particularly vulnerable as the supply of cheap mortgages reduces and banks become stricter with their lending.” With the Bank of England keeping inflation close to its 2% target, there is a danger that it could rise above this, which will prevent the Bank from lowering interest rates. “We cannot afford to relax on the inflation front,” Mr Bean insisted.

Right to Buy Scrapped

The Scottish National Party has brought an end to right-to-buy schemes in Scotland.

Nicola Sturgeon, the Deputy First Minister with control over housing, said it had served as a “disincentive” to councils to build houses, and its removal would boost the supply of houses.She has previously pledged to increase the housebuilding in Scotland from 25,000 homes a year to 35,000 by 2015.

Buy to Let Drop

Over half of buy-to-let investors are convinced interest rates will decrease over the next 12 months, with 64% believing the base rate has already peaked, according to Property for Life’s investor confidence tracker.

Over the next year, 54% expect a decrease in interest rates, with only 18% expecting an overall increase compared to 34% the preceding month. As a result the proportion of investors believing now is a good time to buy property has increased to 76% in October, up from 72% in September.David Austin, managing director of Property for Life, commented: “No matter what the critics say, the buy-to-let market remains buoyant. The belief among investors that the base rate has peaked appears to have led to an increased feeling of security, prompting a greater percentage to be confident that now is still a good time to buy investment property.”

Credit crisis hits Kensington as staff face redundancy

Kensington Mortgages is set to make redundancies across the business in light of recent credit market conditions.

The restructuring will result in around 65 redundancies from functions affected by lower business volumes and changes to the company’s operating model. It will also be increasing its level of automation in preparation for market recovery.The move is a response to the current lack of liquidity in the global capital market, which has forced Kensington to accelerate its move to a lower cost base.

Alison Hutchinson, chief executive officer of Kensington said: “We have said all along that we would make tough decisions. We must ensure the company has a business model that is robust until the market returns and which can thrive in the future, when we think the market will be quite different from the way it looks today. We have spoken to our distribution partners about these changes and we are moving quickly and decisively to shape a business that is ready for market recovery and able to deliver growth from a much wider platform.

“We will now begin a formal consultation process and will treat all our staff – whether they will be leaving us or staying – in a professional and fair manner. We will ensure that all leavers get the support they need to find new opportunities to use the experience and skills they have built up whilst with Kensington.”

Buy to Let Mortgage Advice

Buy-to-let investments have become increasingly popular in recent years, but some observers warn that the market is on the wane. A mortgage expert outlines the possible drawbacks of buy-to-let and gives some handy investment hints. The past few years have been a golden time for buy-to-let property investors. It had seemed as if no one could lose as the UK house price boom gathered pace. No surprise, when you consider the woeful performance of the stock market and the crisis gripping UK pensions. Money has to go somewhere, why not bricks and mortar offering a potentially tasty combination of capital growth and investment return? However, five interest rate increases since November mean that the days when you could buy almost any property and turn a profit may be over. In short, only investors who do extensive research and go through with the deal when the figures stack up will succeed. People looking to make a success of buy-to-let will have to be in it for the long term, with rental yield the bottom line and the possibility of capital appreciation an extra something special.

Off-plan woes

In recent times, buying a property off-plan - which means before it is actually built - has been seen as an easy way to get into buy-to-let. Hassle-free modern properties could be purchased off-plan and by the time they were actually built they would already be showing a healthy paper profit as a result of house price inflation. But this scenario no longer holds true and buying off-plan can, in some cases, prove a costly error. For one thing, new developments can be flooded with buy-to-let investors and when these properties come onto the market at the same time, they drive down rental yields. Many off-plan developers offer special discounts to tempt purchasers. Don’t fall for such developer incentives as some firms inflate the initial price so that they can offer headline grabbing discounts. Buying off-plan does have its advantages, for example the property will come with a structural guarantee. But the bottom line has to be does the deal stack up? What is your likely rental income and how much capital are you willing to have tied up in the property?

Mortgage hoops

Popular perception is that buy-to-let mortgages are hugely expensive and very restrictive. However, the interest rate available on a buy-to-let mortgage is generally not significantly higher than those on standard mortgages. For example, if a landlord chooses a variable rate mortgage they can expect to get anything from 0.64% to 1.25%, depending on the size of their deposit, above Bank of England base rate. Landlords also have a choice between interest only and repayment mortgages. But buy-to-let borrowers do have to jump through some extra hoops to satisfy mortgage lenders. For starters, buy-to-let mortgage lenders base their decisions on whether or not to approve a loan on the likely rental income from the property and not the applicants’ income. In order to secure finance, rental income needs to be at least 130% of the mortgage repayment and provide an annual yield of more than 8% of the mortgage. The applicant should also have a minimum 15% deposit and own a main residence. Lenders will often get twitchy if they are asked for a buy-to-let mortgage on ex-council property, a flat above a shop or in a high-rise block.

Research is the key

With the housing market showing signs of losing some of its fizz, anyone considering buy-to-let needs to be a savvy operator and do their research.

• It is more vital than ever that would-be buy-to-let investors keep tabs on the property locations that they are interested in.

• Look at local newspapers and community websites, after all a seller is unlikely to mention that they are moving out because of a wave of local burglaries.

• Don’t pay too much attention to promises of high rental yields by letting agents. It is a good idea to contact them first as a potential tenant, to help get to the truth about local market conditions.

• A little local knowledge can go a long way in buy-to-let investing. The most successful buy-to-let investors purchase property close to where they live.

• Take the décor into consideration. Poor decoration can take time and money to get right but it can mean that the property can be had at a bargain price.

• Always get a full survey done of the property, buy-to-let is a huge investment and not to be taken lightly.

As an Independent mortgage broker Kinetic Financial Solutions based in Essex is confident that we could find you the best rate. With access to over 75 lenders and exclusive rates via Mortgage Intelligence we could save you not only time but money too. Our Buy to Let team are all experienced investors themselves which gives you access to a wealth of knowledge about the things that could go wrong. Mortgage rates are available on a fixed, discount, tracker, libor linked or capped basis and after finding more about your needs we will be able to recommend the right scheme for you.

Think mortgages…think kinetic

http://www.kinetic-fs.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.

Buying to Let

Buy to Let Mortgages are mortgages specifically designed for people who want to invest in the property market, purchasing one or more houses and letting them out to tenants. The Owner is then able to benefit from any appreciation in the capital value of the house itself. They are also likely to be able to maintain the property and meet much of the loan repayment from the revenue realised by letting. The buy to let phenomenon has driven house prices higher over the last few years while making a broader section of rental accommodation available.

Buy to Let Mortgages differ from what came before by specifically allowing the rental revenue to be considered as income when considering the ability of the buyer to meet the ongoing mortgage payments. Buy to Let mortgages are very similar to standard mortgages for property which the owner will inhabit. The percentage which the buy to let lender is willing to lend is likely to be restricted to 85% of the value of a property. The term of a buy-to-let mortgage is likely to be somewhere in the region of 5 to 45 years. Interest rates are also likely to be slightly higher than those which a standard mortgage agreement attracts.

When buying to let it is important to know the market in which you will be trying to let your property. It may be worth getting help from a letting agent who knows the areas' in demand and what the likely pitfalls will be. By planning carefully and purchasing wisely you ought to get a property which requires little maintenance and is attractive to tenants. Avoiding void periods, i.e. time between tenants where you receive no rental income, will be your primary concern once you have purchased the house on a buy to let basis. While not inescapable, you are wise to do everything you can in advance to minimise the likely length of these periods. Insurance is now available to cover buy to let contingencies, your provider ought to be able to provide you with information.

Many high street banks and building societies now offer a buy to let mortgage product. Independent mortgage broker will also be able to recommend mortgage arrangements which are not available on the high street and which will more perfectly meet your buy-to-let mortgage requirements.

As an independent mortgage broker Kinetic Financial Solutions based in
Essex are confident that we could find you the best rate. With access to over 75 lenders and exclusive rates via Mortgage Intelligence we could save you not only time but money too. Our Buy to Let team are all experienced investors themselves which gives you access to a wealth of knowledge about the things that could go wrong. Mortgage rates are available on a fixed, discount, tracker, libor linked or capped basis and after finding more about your needs we will be able to recommend the right scheme for you.

Think mortgages…think kinetic

www.kinetic-fs.co.uk

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Mortgage Advice in Rayleigh

If you are looking for mortgage advice in the Essex area then Kinetic are confident that we could help find a great mortgage or remortgage rate for you.Over the past few months there have been many changes in the mortgage market that have affected consumers ability to borrow money along with an increase in certain types of interest rates. Getting truly independent mortgage advice will ensure that you not only get the cheapest interest rate but your mortgage will cope with any changes to your life, such as moving home or taking a payment holiday. Our highly trained team of professional brokers are available to discuss your case over the phone or in the comfort of your own home. Call today for a free quotation on 01268 777257 or visit us at www.kinetic-fs.co.uk and apply online.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee charged for mortgage advice. The amount will depend on your circumstances but we estimate it will no more than 1% of the loan arranged. Kinetic Financial Solutions is an appointed representative of Mortgage Intelligence Limited which is authorised and regulated by the Financial Services Authority

Consumer Confidence at a 12 year Low

Research group GfK NOP’s has reported that consumer morale fell for a fourth consecutive month in October, with shoppers more reluctant to make major purchases than at any time since 1995. It confidence barometer fell to -8 in October from -7 in September, roughly in line with analysts’ forecasts. The fall takes the index to its lowest since March and suggests that higher mortgage payments and tougher credit conditions are forcing many shoppers to tighten their belts to weather the storm. GfK NOP also revealed that the climate for major purchases index fell to -5 from -3 in September. This measure, which was +6 in October last year, is now at its lowest level in nearly 12 years. “Low consumer confidence and an increasing reluctance to make major purchases do not bode well for consumer spending,” said Howard Archer, chief UK economist at Global Insight. “This is particularly worrying for retailers as the critical Christmas period looms.”

New Eco Housing proposals

Housing and Planning Minister, Yvette Cooper has confirmed that an ideas competition would be run to develop and set the design standards for ten new eco-towns.

She wants to engage leading creative thinkers on architecture, urban and landscape design and transport planning on proposals for the new developments of up to 20,000 homes.

CABE, along with RIBA and The Prince’s Foundation for the Built Environment, will assist the Government in the competition and establish a judging panel to assess the entries. The competition will focus both on the practical design ideas and the design and development process. A prize will be made available for the overall winner of the competition, as well as awards for specialist areas.

There will also be an opportunity for public involvement to judge eco-towns designs through a citizens’ panel. At the end of the competition, the best of the ideas and lessons learned will be drawn together in an exhibition and eco-towns compendium that will help inform the thinking of local authorities and developers taking forward proposals.

Cooper said: “We need to deliver the best eco-towns for the sake of the planet and the next generation. However, we don’t want each town to be the same, but to instead reflect the history, aspirations and character of each local area. This is why it is crucial that we involve local people and citizen juries are a great way of doing just that.”

The aims are to gather ideas from the best national and international thinkers in the fields of town planning, urban design, architecture, landscape design, transport and environmental planning on what an eco-town could and should try to achieve, and how the design and development process can support positive outcomes; and on the key design features that should be considered when designing an eco-town, eg regional and local identity.