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.

Government set for CGT U-turn

It is understood the Government is set to perform an embarrassing U-turn on Capital Gains Tax (CGT), by giving up to £100,000 in tax relief for small businessmen when they retire.

Chancellor Alistair Darling had been condemned by business organisations, including the Confederation of British Industry and the Institute of Directors, following his decision to implement a standard rate of CGT and remove taper relief.However, following extensive lobbying he will bring back a system of retirement relief for when businessmen sell up and retire. It is understood up to £100,000 will be exempt from tax on the sale.

Mortgages PLC cuts staff by 20%

Mortgages Plc has had to feel the brunt of its parent company’s astonishing financial losses, and has been forced to make redundancies across the board.

It has been confirmed 20% of the company’s workforce, which numbers 325 in total, will be made redundant.It is also understood all employees had a three line whip to attend regional meetings this morning, when the redundancies were announced.

Merrill Lynch, which owns Wave as well as Mortgages Plc in the UK, reported last week a net loss from continuing operations for the third quarter of $2.3bn. The global investment giant also confirmed the departure of its chief executive Stan O’Neal yesterday.

The announcement today will be a massive blow to the UK financial services sector, as fears of a severe set-back for the securitization model look set to become a reality.

Peter Beaumont, deputy chief executive of the specialist non-conforming lender, said: “Mortgages plc, in common with most non-conforming lenders, has had to rein in its new business activities until such time as confidence is once again restored in the marketplace. Reduced new business volumes mean that our operating costs also need to be cut back. However, I would like to stress that Mortgages plc remains committed to the UK mortgage market.”.

Flats and terraced houses are favoured most

Paragon Mortgages has revealed that flats and terraced houses are the property types most favoured by buy-to-let investors. On average, flats are the most popular property type amongst investors, making up 46% of the average landlord’s portfolio. They are then followed by terraced houses, which account for 34% of the average portfolio. John Heron, managing director of Paragon Mortgages, says: “Small terraced houses, flats and maisonettes are all popular rental property types amongst certain tenant groups, such as young professionals and students, particularly in busy cosmopolitan areas. In places where there is proven demand for this type of property, landlords can command high rents and attractive yields.”

Housing measures proposed by Government

A drive to deliver more affordable housing by bringing empty homes back into use has been announced by Housing Minister, Yvette Cooper.

The measures, which form part of the government’s plans to deliver three million more homes by 2020, include extra cash for communities doing most to support more homes in their area.The Minister set out the announcements in a consultation on the Housing and Planning Delivery Grant which gives a £510m pot to support councils and communities who are working to deliver new homes.

Yvette Cooper said: “We want to give more support to communities and councils who are doing their bit to deliver the extra housing needed, including bringing more empty homes back into use.”

Growth in consumer credit gathers pace

Consumer credit grew in September at its highest rate in nearly two years, according to official data showing that the dislocation in financial markets has yet to put credit card-wielding shoppers off their stride. Although interest rates for riskier unsecured lending have risen sharply since the start of the credit squeeze, net consumer credit rose £1.4bn last month, the biggest increase since January 2006, and net credit card lending rose by £300m. The pick-up suggests higher borrowing was one factor supporting last month’s strong retail spending, although it also follows a period of greater austerity as lenders clamped down after a wave of personal insolvencies.

Repossessions ‘to hit highest rate since 1991′

The number of repossessions could reach their highest level for more than a decade next year, according to forecasts. The Council of Mortgage lenders predicts the number could rise by 50 per cent from 30,000 this year to 45,000 next year, as homeowners are affected by rising interest rates and the global credit crisis. This would be some way off the dark days of 1991 when repossessions hit 75,000, but it would be the highest level for 13 years. Michael Coogan, the director general of the CML, said: “The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago.”

Transparency rules to blame for bank run

European Commissioner Colin McCreevy has said that the UK’s rules on transparency were to blame for the run on Northern Rock last month. Giving a speech in Dublin, he slammed UK regulators for gold-plating transparency rules, which led to investor panic and the first British bank run in over 150 years. He said regulators would be wise to learn from the crisis and should adjust rules regarding transparency, saying it was often beneficial for issues affecting the stability of major financial institutions to be carried out behind closed doors. Mervyn King, Governor of the Bank of England, criticised UK transparency rules at a Treasury Select Committee hearing in September, saying that he would have preferred to make a loan to Northern Rock in secret.

Mortgage approvals at two-year low

According to data from the Bank of England, mortgage approvals fell to a two-year low in September, but unsecured lending rose by its biggest amount since the start of last year. The Bank said that the number of loan approvals for house purchases fell to 102,000 last month, from a downwardly revised 108,000 in August. That was exactly as forecast but was the lowest since July 2005. The data tallies with a growing body of evidence that the housing market is starting to slow in response to higher borrowing costs and tighter lending conditions. “We think there will be plenty more downside in the coming months which will lead to a sharp fall in house price inflation further down the road,” said Alan Clarke, economist at BNP Paribas.

Land Registry posts fall in house price inflation

The Land Registry has reported the annual pace of house price inflation had fallen from 9.4% to 8.7% in the year to September. London, which has shown the strongest price growth, was down to just 1.3% in September, compared with 1.5% in August. Across England and Wales, the average price for a property rose by 0.4% to £183,896. Among different types of property, flats and maisonettes enjoyed the sharpest rise in prices, while semi-detached houses saw the slowest price growth, although the difference was fairly small. Howard Archer, chief UK economist at Global Insight, said: “The figures fit in with the story that the house market is cooling. I would expect to see the annual inflation rate come down further in the coming months.”

House prices fall in October, reveals Hometrack

According to property information group Hometrack, house prices fell by 0.1% during October as higher interest rates and falling confidence continued to impact on the market, the first time house prices had fallen for two years. It also added that the drop followed two months of stagnant growth, while the annual rate of house price inflation had also fallen to 4.4%. Richard Donnell, Hometrack’s director of research, said: “The fall in prices over October is not unexpected. After several months of weaker buyer confidence, falling levels of demand and declining sales volumes, prices were bound to be affected. We expect further small price falls in the months ahead, but these are likely to remain limited as there remains no evidence of any increase in the supply of homes for sale.”

House prices down says Hometrack

House prices fell by 0.1% in October, the first price fall for two years, according to the latest national housing market survey from Hometrack.

The decline in October follows two months of zero growth with the annual rate of growth falling back to 4.4%. Average prices were down by between 0.1% and 0.2% across all regions except for the West Midlands where values remained unchanged.The survey found weakness in demand and market activity has led to a rise in the average length of time a property is on the market from a recent low of 5.8 weeks in May to the current 7.4 weeks. In addition, estate agents nationally have reported buyers are achieving 94.3% of the asking price, down from 94.8% last month.

Richard Donnell, director of research at Hometrack, said: “The last time we saw a similar fall in demand was back in 2005 but this was accompanied by a sizable increase in the supply of homes for sale. This is currently not the case and as a result we expect headline price falls to be relatively limited in the run up to Christmas and the New Year.”

BoE warns of lessons to be learnt

The Financial Stability Report published today by the Bank of England (BoE) will look at the recent financial turmoil - analysing past lessons and future prospects.

The Bank said that the continuing deterioration in US sub-prime mortgage markets exposed vulnerabilities in the valuation and distribution of risks within the global financial system. In turn, this led to disruptions to some of the largest and most liquid markets in the world, including the money markets.

That has affected banks in all advanced economies, as risks have flowed back to their balance sheets and funding pressures have intensified, and in the UK led to Northern Rock having to turn to the UK authorities for liquidity support.

The Bank says that while it is too early for a full assessment, some lessons are already clear including the need for improved management of liquidity; more transparency in the composition and valuation of structured products and banks’ exposures to off balance sheet vehicles; and better stress testing and contingency planning. In the UK, the authorities also need to strengthen their crisis management arrangements.


Actions in these areas and the strong capital position of UK banks should help restore confidence as risk is re-priced. There have been signs of recovery in some financial markets, though a return to earlier conditions of under-priced risk would be undesirable.

A period of tighter credit conditions, especially for higher-risk borrowers, should be expected. But in the short run the financial system in the advanced economies remains vulnerable to further adjustments, whether in the credit markets which have been most affected to date or, for example, in the equity or commercial property markets.

John Gieve, deputy governor for financial stability, said: “A repricing of risk was due especially in credit markets. But the speed and ferocity with which that adjustment disrupted core markets and institutions internationally had not been anticipated by firms or authorities.

“There have been signs of recovery in recent weeks but some markets are still illiquid and the financial system remains vulnerable to further shocks. Some important lessons need to be learned by both financial institutions and authorities on liquidity risk management, valuation of complex instruments, disclosures of risk positions and on crisis management.”

RICS Housing Market Survey

Twenty things you need to know about the Royal Institution of Chartered Surveyors’ UK Housing Market Survey

1 A report into the UK housing market by the Royal Institution of Chartered Surveyors (RICS) has revealed that house price growth remained negative for the second month in succession.

2 14.6 percent more chartered surveyors reported a fall than a rise in house prices, down from 3.3 reporting in August, the survey indicated.

3 This represented the fastest decline since September 2005, when 19.4 percent of chartered surveyors reported a fall than a rise.

4 Surveyor confidence in both sales and prices deteriorated further, reaching their lowest levels respectively since March 2003 and May 2005.

5 New buyer enquiries declined for the tenth consecutive month, RICS suggested.

6 This represented the fastest pace since March 2003.

7 51 per cent more chartered surveyors reported a fall than a rise down from 39 percent in August.

8 RICS cited that the five interest rate increases since August 2006, and tightening mortgage lending criteria was weighing further on buyer affordability.

9 New instructions declined for the fourth consecutive month at the fastest pace since June, the RICS study showed.

10 21 per cent more chartered surveyors also reported a fall than a rise in new instructions to sell property.


11 The ratio of completed sales over the last three months compared to the stock of unsold property on the market increased to 38.4 per cent in September from 37.7 per cent in August, the RICS study indicated.

12 Scotland saw the strongest price growth, RICS reported in its analysis of the market.

13 According to the report, the largest house price falls were reported in East Anglia, Wales and in the Midlands.

14 Smaller falls were reported in the South East, South West, Yorkshire and Humberside and the North West.

15 Commenting on the findings, Jeremy Leaf, spokesperson at RICS, said: “Although house prices continue to fall, the underlying economy remains strong. A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant.”

16 Leaf added: “The combination of rising interest rates, the introduction of Home Information Packs and volatility in the financial markets resulting in tightening of lending criteria, has certainly affected the confidence of buyers and sellers. As a result, some would-be buyers are turning to the rental market whereas others, conscious that the next move in interest rates is now likely to be down rather than up and market meltdown is highly improbable, are seizing the opportunity to negotiate with more flexible vendors in a less competitive market.”

17 RICS’ housing market survey is the longest running monthly survey of house prices in the UK, collecting data since January 1978.

18 The survey is cited by the Bank of England’s Monetary Policy Committee at its monthly interest rate setting meetings.

19 RICS covers all aspects of property, construction and associated environmental issues. It has 140,000 members globally and represents, regulates and promotes the work of property professionals throughout 121 countries.

20 RICS is governed by a Royal Charter approved by parliament, which requires it to act in the public interest. It is also a professional regulatory body approved by government (HM Treasury).

Serious flaws in government housing plan

The three million homes the government has pledged to build will do little to ease the climbing demand for properties, according to the NHPAU.

The National Planning Housing Advice Unit (NHPAU) has said that even if extra homes are built, affordability will remain an issue as England heads for a housing crisis.

The South West, South East and East will be the worst hit in terms of affordability, with the NHPAU estimating that the areas could become worse than London.

To help tackle this growing problem, the NPHAU has said that regional authorities will need to ensure that their delivery plans increase the level of housebuilding across the whole country. It has however welcomed the government’s ambitions for increased housing.

It has estimated that 270,000 extra homes will need to be built each year until 2016 to address the problem - more than quarter of a million more than the government’s current target figure for 2020.


Housing Minister Yvette Cooper said that some councils are being difficult about the issue of building new houses: “Some of them say they don’t want more homes in their area, and the problem with that argument is that it’s just not fair - every other area needs to do its bit.

“This is an issue that faces us right across the country now. Every community in the country now does need to do more to support more housing. We have an ageing, growing population, more people living alone.

“We also have to take account of the need to improve the quality of housing, make sure they’re planned sustainably, that we’ve got infrastructure in place.

“You can’t just look at the quantity, you’ve also got to look at the quality as well, and that’s why we’ve set the target we have to make sure that the homes that we build can be sustainable for the future as well.”

Financial education insufficient for young people

The experts argued personal finance classes for educating children and teenagers in sensible and practical money management skills needed to be in place in order to avert a debt crisis.Anne Kiem, head of external affairs at the IFS school of finance said: “We must educate young people about things that engage them, such as mobile phone tariffs.”

Poor energy rating doesn’t deter buyers

Legal and General has said that, while buyers may heed the advice contained within the Energy Performance Certificate (EPC) component of Home Information Packs (HIPs), they will not be dissuaded from purchasing their home of choice if it scores poorly. A mandatory part of the controversial packs for properties with three or more bedrooms, EPCs rate a property based on its energy efficiency on a scale of A-G. The Department of Communities and Local Government recently said that most homes currently receive an E grade, but Legal and General has said that no seller is going to lose out as a result of this just yet. “The EPC makes homeowners more aware of how investment in energy-saving measures saves money in the long run and gradually this will translate into action,” commented Legal and General director of housing Stephen Smith.

JC Flowers eyes Northern Rock

JC Flowers has stepped up efforts to take control of Northern Rock - putting together a management team in preparation for a possible future deal. The US Private equity firm said it would appoint Paul Myners the former Marks and Spencer chairman as chairman of the bank and has lined up other key executives for other board roles. The news could kick off a bidding war for the UK bank after a consortium led by Richard Branson’s Virgin Group came forward with an offer earlier this month. There have been reports that JC Flowers had set aside £15bn to buy Northern Rock, the first major UK bank to be brought to its knees by the knock on effect of problems in the credit markets on the back of the US sub-prime crisis. Other ‘big players’ assembled by JC Flowers to run the bank if its offer was successful, include former Alliance and Leicester CEO Richard Pym and Hugh Scott-Barratt of ABN Amro.

PPI providers not treating customers fairly

Bank customers are set to take on the financial industry once more, this time over payment protection insurance (PPI). Figures from Which? reveal the insurance industry makes some £5 billion a year from PPI and as many as 7.5 million policies are sold each year. However, there are fears that consumers are being pressured into buying PPI, not having policy exemptions fully explained, or buying products they do not need or cannot claim on. “The right PPI can provide valuable protection for consumers, but they are entitled to expect that they will be treated fairly by firms when they buy it,” said Clive Briault, FSA managing director of retail markets. “They must be told how this product works, what it covers, and how much it costs. At the moment, too many firms are not meeting these requirements.”

Assetz reports a £1,200 fall in property prices

Assetz House Price Watch, which monitors the five major UK house price indices, shows an average of 9.9% annualised growth for the twelve months prior to September. This is a 1% decrease on the rate of growth from August (10.9%) and a 1.6% increase since September 2006. The average house price in September 2007 is £212,751, down from £213,954 in August. This shows a fall of £1,203 in the value of the average property in the last month.”While the annual rate of growth has slowed this month, and monthly house price growth has fallen for the first time since our index began, this fall was marginal, suggesting no immediate cause for alarm and I would anticipate a return to monthly house price growth to be reported in next month’s index,” said Stuart Law, chief executive of Assetz.

BBA reports a weak September

The British Bankers’ Association (BBA) has warned that borrowing rates were weak across the UK throughout September. According to the BBA, gross mortgage lending was 3% higher last month than in September of last year, but on the same comparative basis there were 12.1% fewer mortgage deals approved this year than last. David Dooks, BBA director of statistics, said: “Lower amounts of new mortgage lending and fewer loans approved for house purchase signal a weaker outlook for the mortgage market, particularly if loan supply reduces in the aftermath of the recent financial markets difficulties and borrowing costs remain at current levels.”