The Kinetic Financial Solutions Blog

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

2007-12-07T04:00:00.000-08:00

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

2007-12-07T03:59:00.000-08:00

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

2007-12-07T03:55:00.000-08:00

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

2007-12-07T03:53:00.000-08:00

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

2007-12-07T03:07:00.001-08:00

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

2007-12-07T03:05:00.000-08:00

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

2007-12-07T03:01:00.001-08:00

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

2007-12-07T02:54:00.000-08:00

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

2007-12-07T02:52:00.000-08:00

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

2007-12-07T02:51:00.000-08:00

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

2007-12-07T02:50:00.001-08:00

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

2007-12-07T02:49:00.000-08:00

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

2007-12-07T02:48:00.000-08:00

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

2007-12-07T02:47:00.000-08:00

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

2007-12-07T02:46:00.001-08:00

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

2007-12-07T02:45:00.000-08:00

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

2007-12-07T02:44:00.001-08:00

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

2007-12-07T02:43:00.001-08:00

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

2007-12-07T02:38:00.000-08:00

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

2007-12-07T02:29:00.000-08:00

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

2007-12-07T02:28:00.000-08:00

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

2007-12-07T02:26:00.001-08:00

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

2007-11-12T03:28:00.002-08:00

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

2007-11-12T03:28:00.001-08:00

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

2007-11-12T03:27:00.001-08:00

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

2007-11-12T03:26:00.001-08:00

House Prices fell in October

2007-11-12T03:25:00.000-08:00

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

2007-11-12T03:24:00.002-08:00

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

2007-11-12T03:24:00.001-08:00

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

2007-11-12T03:22:00.000-08:00

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

2007-11-12T03:21:00.000-08:00

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

2007-11-12T03:20:00.000-08:00

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

2007-11-12T03:19:00.000-08:00

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 Â£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 Â£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

2007-11-12T03:18:00.001-08:00

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

2007-11-12T03:04:00.000-08:00

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

2007-11-12T03:03:00.000-08:00

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

2007-11-12T03:02:00.000-08:00

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

2007-11-12T03:01:00.000-08:00

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

2007-11-12T03:00:00.000-08:00

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

2007-11-12T02:58:00.000-08:00

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

2007-11-12T02:57:00.000-08:00

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

2007-11-12T02:56:00.000-08:00

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

2007-11-12T02:55:00.002-08:00

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

2007-11-12T02:55:00.001-08:00

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

2007-11-12T02:54:00.000-08:00

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

2007-11-12T02:53:00.001-08:00

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

2007-11-12T02:52:00.001-08:00

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

2007-11-12T02:47:00.000-08:00

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

2007-11-12T02:46:00.000-08:00

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

2007-11-12T02:45:00.001-08:00

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

2007-11-12T02:44:00.001-08:00

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

2007-11-12T02:43:00.001-08:00

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%

2007-11-12T02:42:00.001-08:00

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

2007-11-12T02:41:00.001-08:00

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

2007-11-12T02:37:00.002-08:00

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

2007-11-12T02:37:00.001-08:00

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′

2007-11-12T02:36:00.001-08:00

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

2007-11-12T02:35:00.001-08:00

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

2007-11-12T02:34:00.000-08:00

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

2007-11-12T02:33:00.000-08:00

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

2007-11-12T02:32:00.000-08:00

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

2007-11-12T02:31:00.000-08:00

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

2007-11-12T02:30:00.000-08:00

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

2007-11-12T02:29:00.000-08:00

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

2007-11-12T02:28:00.000-08:00

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

2007-11-12T02:27:00.000-08:00

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

2007-11-12T02:26:00.001-08:00

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

2007-11-12T02:25:00.002-08:00

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

2007-11-12T02:25:00.001-08:00

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

2007-11-12T02:24:00.001-08:00

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

2007-11-12T02:22:00.000-08:00

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.”

Growth in remortgages as purchases decrease

2007-10-29T02:55:00.000-07:00

This month’s best buy mortgage tracker from Hamptons International Mortgages shows that as a proportion of all lending, home purchasing dropped nearly 12% in the last six months.

Purchases fell by nearly 5% since last month, while home remortgages, have risen by nearly 9% since March and have increased almost 10% since August.Lack of confidence in the market in light of the Northern Rock crisis in August been suggested as a key factor leading to the decline in home purchase this month and potential homemovers may now be choosing to remortgage their existing properties

Government urged to support BTL

2007-10-29T02:54:00.000-07:00

The Building Societies Association (BSA) has called on the Government to support the buy-to-let sector in its response to the Housing Green Paper.

The report notes the buy-to-let market now accounts for around 10% of the mortgage market.It states: “[Buy to let] plays an important role in increasing the range of tenures available, and plays a particularly important role in housing young professionals unable to afford to buy but also unable to access social housing provision. As such we believe that Government should seek to support the buy to let sector and allow it to prosper.”

The Council of Mortgage Lenders has also published its response, urging the Government to simplify the current range of “confusing” low-cost home-ownership schemes.

HIPs on hold

2007-10-29T02:53:00.000-07:00

The full Home Information Pack (HIP) roll out has been put on hold due to market conditions.

The volatility currently being experienced in the mortgage market has had a bearing on the planned HIP roll out, which has now been pushed back until the market stabilises again.

Speaking at the Association of Home Information Pack Providers’ (AHIPP) annual conference, the Rt. Hon. Iain Wright, Parliamentary Under Secretary of State for Housing and Planning said that this volatility was the only reason for postponing HIPs once more.

“This news will also be welcomed by the many Home Inspectors and Domestic Energy Assessors who are ready to support the final phase of implementation. With over 7,000 trained and accredited, we now look forward to this critical next stage where, at last, the real benefit of HIPs will be felt and real reform can begin.”

Northern Rock faces MP scrutiny

2007-10-29T02:52:00.000-07:00

Northern Rock’s executives are to face the Treasury Select Committee to analyse what exactly went wrong.

The bank’s chief executive, Adam Applegarth, is likely to bear the brunt of an extremely tough grilling over Northern Rock’s business model and its actions following crisis talks with the Bank of England (BoE)

Mervyn King, head of the BoE has already faced the MPs’ hard line of questioning over the BoE’s actions in the matter.

Northern Rock’s reputation has been irreparably damaged by the events over the past month. It is in dire need of a complete rebrand before it begins to regain consumer confidence.

The failure of its business model was the catalyst for the crisis - leaving it very much in the line of fire for today’s questioning. This is because most of the money it raised for mortgages was raised through the wholesale credit market - primarily by selling the debt on in the form of bonds.

Over two thirds of its mortgage products have been pulled in the wake of the crisis, with its market value plunging by 60 per cent.

Fixed or Discount Rates?

2007-10-29T02:51:00.001-07:00

Whilst the non-conforming sector of the market continues to be flooded with rising rates and tightening criteria, the prime market is reacting to the stable base rate and falling swap rates with fixed and variable products levelling off at very similar prices.

“The mortgage market has fallen into a lull - the volume of rate changes has fallen dramatically and very few providers are launching any products to differentiate themselves. Fixed rate deals no longer come at a premium, and can sometimes cost less than a discounted deal.

“With surprising variable rate increases of late, combined with the more important reduction in fixed rates, there is little or no difference between the cost of a fixed rate or variable rate.

“With falling rates comes increased demand and benefit to be had from variable products - a variable rate may seem more attractive than it has done over the past couple of years.

“While swap rates rose, lenders were reacting immediately, but now that the shoe is on the other foot and rates are falling, it seems lenders are more reluctant to reduce their rates than they were to put them up.

“Perhaps the levelling of cost between fixed and variable rates is not what Alistair Darling wants to see. His solution to housing affordability sits strongly with encouraging long term fixed deals. With the difference in cost now not even a consideration when choosing between a fixed or variable deal, it’s an ideal opportunity for borrowers to choose a deal based on their individual needs and predictions of future rate changes.

“However should any external influence hit the market, particularly with a rate change, the scales will tilt and this equilibrium is sure to be short lived.”

Changes for tenant on benefits to impact landlords

2007-10-29T02:49:00.001-07:00

Implementation of the Government’s new Local Housing Allowance (LHA) for recipients of the existing Housing Benefit (HB) will have implications for landlords who provide privately rented accommodation to people on benefit.

In the majority of cases the LHA will be paid to the tenant, who will take over responsibility for paying rent to the landlord. This represents a significant change from the existing procedure whereby HB can be paid direct to the landlord.Part of the Welfare Reform Act 2007, the LHA has been introduced in a small number of pilot local authorities and will be rolled out nationally from 7 April 2008.

David Salusbury, chairman of the National Landlord’s Association (NLA), said could lead to less security for landlords as it could lead tenants falling into arrears. He added: “This leaves open the possibility that the tenant may be tempted to use the money for something else and not pay their rent. This might be because of other pressing financial needs. Ultimately that could threaten the security of their home.”

Virgin in talks to take over Northern Rock

2007-10-29T02:48:00.001-07:00

Virgin Group is reported to be in talks to form a consortium with Northern Rock.

The company is said to be discussing with a group of Middle East and US investors about forming a consortium which would inject funds into the bank in return for a controlling stake, according to the national press. The company could make a statement today about its intentions.If the talks are successful, Virgin will take over the day to day running of the business and incorporate it under its Virgin Money brand which offers mortgages, credit cards and insurance services.

RICS report housing market slowdown

2007-10-11T03:40:00.000-07:00

The housing market is slowing down at the fastest rate in more four years, according to the latest results from the Royal Institution of Chartered Surveyors (RICS).

According to its monthly market survey, house prices have fallen for the second month in a row, promoting fears of a downturn in the market. The survey shows new buyer enquiries have dropped for the tenth consecutive month, it also shows 14.6% of chartered surveyors reported a fall rather than a rise in prices.

CML response to BOE rate hold

2007-10-05T03:05:00.000-07:00

Responding to today's MPC decision to hold interest rates at 5.75%, the Council of Mortgage Lenders says that the hold was widely expected but that a cut in November remains the most likely prospect.

Michael Coogan, CML Director General, commented:

"We did not expect the Bank to cut rates today, but we do hope for and anticipate a cut in November. Even this is not a certainty though, so borrowers should continue to plan for rates at or around current levels. Pricing in the mainstream market is stable, and fixed rates have started falling recently, but there is still uncertainty about how long it will take for stable funding to return to the sub-prime market. In the meantime, borrowers in this sector are facing tighter criteria and higher rates, although the availability of funding does seem to be improving."

Housing Market uneffected by turmoil

2007-09-28T02:00:00.000-07:00

The UK’s housing market has appeared to shrug off the credit crunch, reports Nationwide.

House prices experienced another gain in September, however the trend growth of house prices is now the lowest since July 2006, with credit conditions now clearly tightening for leveraged borrowers.

Fionnuala Earley, Nationwide's chief economist, said:

"House prices recorded a reasonably strong gain of 0.7 per cent between August and September. Despite this increase, the 12-month rate of house price inflation came down to 9.0 per cent, as we are now entering a period during which house prices gains were particularly strong in 2006.

“This brought the average price of a typical UK property to £184,723. The 3-month on 3-month rate of price growth - often the smoothest indicator of underlying momentum - slowed from 2.0 per cent to 1.6 per cent, the lowest level since July 2006.

“Overall, house prices defied the gloomy predictions of some recent headlines, but their underlying growth is still on a decelerating trend.”

She said the financial turmoil has dampened hopes that the crisis will blow over quickly, with higher wholesale funding costs leading to a credit price reassessment in the mortgage market.
Earley continued: “As expected, this has not had an immediate impact on house prices, but the longer-term effect will undoubtedly be to take some of the froth out of the market.

“Over the last year, borrowers who have wished to extend themselves to the limit have been able to do so relatively cheaply in comparison to more restrained borrowers. While some lenders are still willing to extend loans with little or no deposit, such products are now more expensive, reflecting the extra risk involved.

“The difference in rates available on 95 per cent loan-to-value ratio (LTV) fixed rate mortgages and their 75 per cent LTV equivalent soared in August. The average market rate for a 95 per cent LTV 2-year fixed rate mortgage was 0.45 percentage points higher than the rate on a 75 per cent LTV equivalent in August, compared with only 0.29 percentage points in July and a low of 0.23 points in April.

She urged intermediaries and borrowers alike to heed the warning that risk must always have its price. Earley also predicted that highly leveraged borrowing will remain less attractive and lending volumes in this segment may decline.

Looking to the future, specifically the fallout this will have on interest rates, she advised: “The re-pricing of credit risk and the tightening of lending criteria is only one side of the credit crunch story. Events of the past two months now appear to mark a clear turning point in the interest rate outlook.

“Sentiment has changed significantly as the potential adverse economic impact of the credit crunch has been acknowledged by the MPC. The likelihood is now that we will see a cut in base rates early in 2008, which is good news for mainstream borrowers and those coming off fixed rate deals.

“The more dovish outlook for base rates is beginning to be reflected in swap rates – falling swap rates are an indication that upward pressure on mortgage pricing from the base rate environment is receding, at least in the short term.

“This implies that for mainstream borrowers with good credit quality and lower LTVs, credit conditions have not deteriorated as much as the headlines may suggest. It also suggests that payment shock for borrowers who need to re-mortgage in 2008 may not be quite as large as previously anticipated.”

Kinetic Financial Solutions

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Women in Property

2007-09-24T08:29:00.001-07:00

An overview of the Bradford & Bingley’s survey of 1,000 women in property

1 Research by Bradford & Bingley has revealed that female property investors are just as ambitious and switched on as their male counterparts, showing themselves to be master multi-taskers.

2 The survey of 1,000 women consolidated their position in the property market, showing over three-quarters of those questioned, or 76 per cent, successfully hold down day jobs in addition to managing their investment portfolios.

3 Alongside this, 42 per cent of women have taken on much of any renovation or improvement work needing to be done to a property themselves.

4 This broke down further, with 35 per cent of women already having taken on improvement or renovation work, and 7 per cent who have and would do it again.

5 Yet, while 90 per cent of female property investors deal personally with trades people, 48 per cent of these felt that trades people quoted them higher prices purely because they are a woman.

6 Despite such hurdles, 26 per cent intend to invest in further properties within the next 12 months.

7 The research was commissioned to mark the launch of Bradford & Bingley’s Property Woman of the Year Awards, which recognise the success of women in the property investment market.

8 A third of women in property were 30 years of age or under when they bought their first investment property, the study indicated.

9 This bucked the national average of 34 years old, Bradford & Bingley’s research into women and the property investment market stated.

10 According to the research, 21 per cent of women in the property investment market were over the age of 50 when they bought their first investment property.

11 Bradford & Bingley suggested that age, as well as gender, was no barrier to property investment.

12 According to the women in property investment report, 59 per cent of those questioned cited investment potential as a key motivator to buy a property.

13 47 per cent indicated that property was viewed by them as a pension replacement.

14 Looking at the financial rewards of property investment, of those questioned, 10 per cent of women made £50,000 or more when they sold their investment properties.

15 9 per cent earn £10,000 a year or more on their property investments, Bradford & Bingley’s study indicated.

16 Fiona Fullerton, who owns several investment properties to the value of over £2million, said: “Women are taking control by buying and renovating properties and are being hugely successful at it. Many women have strong business sense and when combined with an innate ability to multitask and a key eye for design, it can often create a winning formula.”

17 Fiona Curtin, buy-to-let expert at Bradford & Bingley, commented: “The last few years have seen a huge growth in the number of women investing in property.”

18 All statistics quoted were taken from Bradford & Bingley’s survey into women in buy-to-let, commissioned through YouGov.

19 YouGov conducted the survey between 22-29 August 2007 on a sample of 1,025 female property investors.

20 The Bradford & Bingley survey into women and property investment and development was conducted online, with all data unweighted.

Kinetic Financial Solutions
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Mortgage Rates of the Week

2007-09-24T08:15:00.000-07:00

Mortgage of the week 24 September, 2007

Short Term Fixed Rate

The Nationwide is offering a two year fixed rate deal, at a rate of 5.78%, reverting to the standard variable rate for the remaining term of the mortgage, currently 7.24%. The overall cost for comparison is 7.4% APR. An Early Repayment Charge is payable if you repay all or part of the mortgage during the fixed rate period. There is a valuation fee of £295 and an arrangement fee of £999.

Long Term Fixed Rate

The Nationwide is offering a five year fixed rate deal, at a rate of 5.98%, reverting to the standard variable rate for the remaining term of the mortgage, currently 7.24%. The overall cost for comparison is 7.1% APR. An Early Repayment Charge is payable if you repay all or part of the mortgage during the fixed rate period. There is a valuation fee of £295 and an arrangement fee of £599 that can be added to the loan.

Short Term Discount or Tracker

The Nationwide is offering a two year tracker scheme at the Bank of England base rate minus 0.27%, equating to 5.48%, reverting to the standard variable rate for the remaining term of the mortgage, currently 7.24%. The overall cost for comparison is 7.30% APR. An Early Repayment Charge is payable if you repay all or part of this mortgage within two years. There is a valuation fee of £295 and an arrangement fee of £599 that can be added to the loan.

Long Term Discount or Tracker

The Norwich & Peterborough is offering a five year discounted scheme at 2.15% off its standard rate, equivalent to a current rate of 5.59%, reverting to the standard variable rate for the remaining term of the mortgage, currently 7.74%. The overall cost for comparison is 7.1% APR. There is an early redemption penalty upon repayment of this loan up to the end of the discount period. There is valuation fee of £220 and an arrangement fee of £599 that can be added to the loan.

Cashback

The Abbey is offering a five year tracker mortgage at the Bank of England base rate plus 1.54%, currently 7.29%, with a 5% cashback on completion. The overall cost for comparison is 7.9% APR. There is a requirement to repay the cashback on early repayment of the loan within the incentive period. There is a free valuation and no arrangement fee.

Buy to Let

Mortgage Express is offering a two year tracker buy to let deal at the Bank of England base rate minus 0.66%, equating to 5.09%, reverting to their standard variable rate, currently 7.5%, at the end of the period. The overall cost for comparison is 7.7% APR. An Early Repayment Charge is payable if you repay all or part of this mortgage during the first two years of the loan. There is a valuation fee of £354, while the arrangement fee of £2500 can be added to the loan. There is no guarantee that it will be possible to arrange continuous letting of the property nor that the rental income will be sufficient to meet the cost of the mortgage.

Remortgage

For those looking to remortgage, the Bank of Ireland is offering a discounted mortgage until the 30th September 2009 at 1.85% off its standard variable rate, equating to a current rate of 5.99%, reverting to the standard variable rate of 7.84% for the remaining term of the mortgage. The overall cost for comparison is 7.8% APR. An Early Repayment Charge is payable if you repay all or part of this mortgage during the fixed rate period. This mortgage offers a free valuation, free legal work and no arrangement fee. Your existing lender may impose penalties if you switch your mortgage to a new lender.

Lifetime Tracker

The Norwich & Peterborough is offering a lifetime tracker deal at the Bank of England base rate plus 0.24% for the full term of the loan, currently equating to 5.99%. The overall cost for comparison is 6.3%. There is no Early Repayment Charge on this loan, but there is a valuation fee of £220 and an arrangement fee of £499, which can be added to the mortgage.

100% Mortgage

Mortgage Express is offering a fixed rate deal at 6.25% until the 31st October 2009, reverting to the standard variable rate for the remaining term of the mortgage, currently 7.75%. The overall cost for comparison is 7.8% APR. An Early Repayment Charge is payable if you repay all or part of this mortgage during the discount period. There is no valuation fee, but an arrangement fee of £1499 that can be added to the mortgage.

Capped Rate Mortgage

Accord Mortgages is offering a tracker mortgage at a current rate of 6.04%, capped for three years to a maximum rate of 6.29%, reverting to the standard variable rate for the remaining term of the mortgage, currently 7.75%. The overall cost for comparison is 7.7% APR. An Early Repayment Charge is payable if you repay all or part of this mortgage during the capped rate period. There is a valuation fee of £260, and an arrangement fee of £995 that can be added to the loan.

Figures based on £150,000 purchase price or value and £100,000 repayment mortgage over 25 years. All figures are subject to revision, but current at time of going to press.

Your home may be repossessed if you do not keep up repayments on your mortgage. In certain circumstances Kinetic may charge a fee for arranging your mortgage. A typical fee could be up to 0.5% of the loan arranged.

Kinetic Financial Solutions
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Lending into retirement

2007-09-24T07:37:00.000-07:00

With signs that the FSA is to focus on advised mortgages going over into retirement

These days, people are carrying ever larger debts later into life. It is now increasingly common to see new mortgages arranged with terms that stretch beyond borrowers' planned retirement ages.

On the face of it, this is an alarming trend, so it is not surprising that the FSA recently investigated how lenders meet their obligation to assess borrowers' ability to afford the mortgage beyond their retirement. The FSA reported some examples of good practice from lenders who evidently take this obligation very seriously. For example, some lenders' application systems automatically ask for additional affordability details, whenever the requested term goes beyond normal retirement age.

But the FSA's findings also highlighted some poor practice examples. These include making no attempt to assess affordability during underwriting – and then adding clauses to offer letters, warning clients they should be happy that they will be able to cope with payments after they retire; not considering affordability unless clients are due to retire in less than five years – on the grounds they will probably have remortgaged to another lender by the time they retire; and relying on brokers to vouch that clients will be able to afford the mortgage after retirement – without bothering to ask them what criteria they use to reach this conclusion.

So what issues does this raise for mortgage intermediaries and why does it matter? For a start, lenders can be expected to take a closer interest in post-retirement affordability, now the FSA has made its expectations clear. It is also highly likely the FSA will soon get around to looking at whether advisers are carrying out proper assessments on the affordability of mortgages that carry on past retirement age.

Mortgage advisers are not expected to carry a crystal ball around when assessing affordability. But advisers do have a duty to consider future events that they should be aware of at the time they give their advice, and this will impact on a client's ability to repay. An obvious example is when the adviser knows the borrower is due to retire halfway through the mortgage term. Common sense dictates income is likely to fall significantly at that point.

In practice, assessing affordability beyond retirement is often impossible in any meaningful way. In some cases it is possible to predict roughly how much income clients will have in retirement, such as people who have been members of public sector final salary pension schemes all their working lives, and who are only a few years away from retiring. But, in most cases, mortgage advisers will not have any real idea what their client's post-retirement income will be. In this situation, advisers really should not be recommending a term that goes beyond that point.

Kinetic is seeing more interest-only mortgages being taken out by people who have already retired – for example, to fund purchases of holiday homes. Odd as it may seem, these cases are often safer for advisers than those involving people who are currently working, but who are due to retire during the term. If clients have already retired, their retirement income is a known fact, so the adviser can carry out an affordability assessment in the normal way. For clients with a good retirement income, but who need to raise capital, an interest-only mortgage can be a viable, and cheaper, alternative to equity release products.

The message is simple. Advisers should ensure that they are looking after their clients' interests, and their own, by fully documenting any advice, particularly when it relates to sensitive issues such as mortgages running into retirement.

Kinetic Financial Solutions
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The Ripple Effect

2007-09-22T02:48:00.001-07:00

The global financial markets have taken something of a battering in recent months, headed by the non-conforming crisis affecting the US market.

US lender Countrywide Financial recently laid off 12,000 staff and predicted that business levels would drop by 25 per cent in the coming 12 months, while American Home Mortgage (AHMC) filed for bankruptcy in August, citing market turmoil as the reason for their closure.

The problems in the US stem from the differences in the economies, with the US market dominated by an over-supply of housing and a different approach to mortgage lending. Until the recent crisis it was commonplace for borrowers to be able to obtain 100 per cent self-cert offerings, with so-called ‘ninja’ loans – no income, no job or assets, also valid, up to 98 per cent loan-to-value (LTV) exacerbating the crisis.

The regulatory situation is much weaker in the US and the crisis has forced a number of lenders into administration and also led to increased tension in the wider financial market, resulting in a ‘global credit crunch’. The White House was also forced into action, with President Bush introducing tax breaks for home owners struggling to meet mortgage repayments, and launching a programme of limited federal aid for refinancing to stem the non-conforming crisis.

He also moved to quell growing discontent with the US financial services sector, and in an effort to reassure borrowers indicated that the US economy was strong. “Recent disturbances in the non-conforming mortgage industry are modest, modest in relation to the size of our economy,” he said. However, it has been closer to home that much of the uncertainty has come from.

An adverse impact

Despite many market analysts suggesting that the US market drop would not impact the UK market, it has become clear over recent weeks that the UK sector has been adversely impacted, with Northern Rock the most high profile ‘casualty’ so far. While most lenders have reined in their product offerings and re-adjusted their products, particularly in the non-conforming sector, others have stepped back from the market all together.

Lenders have re-adjusted their products and criteria on a weekly, if not daily basis, reining in the LTVs, tweaking the rates and restricting the borrower criteria to promote a more stringent lending procedure in the face of increased market adversity.

Market opportunities

Over the past 12 months, many lenders realised the growing opportunity within specialist sectors – namely buy-to-let and non-conforming.

With statistics indicating that borrowers who, through financial defaults, debts or bankruptcy are forced to choose a non-conforming product are continuing to increase, it came as no surprise to see lenders, including recent entrants db mortgages and Alliance & Leicester (A&L), enter the fray in 2006. Statistics from the Council of Mortgage Lenders (CML) backed up this statement, reporting that the number of mortgages in arrears of three months or more at the end of June 2007 rose to an estimated 125,100.

The number of properties taken into possession in the first six months of 2007 rose by nearly 18 per cent compared with the previous half-year, and nearly 30 per cent compared with the first half of 2006, the CML stated, which equated to around one in 840 mortgages ending in possession in the first half of 2007. As a result, it was no surprise that lenders began dipping their toes into the non-conforming sector.

While the previous 12 months had perhaps seen lenders cautious in their approach, following formal regulation of the mortgage market by the Financial Services Authority, the 12 months that followed led to a market diversification, particularly among lenders. Lenders realised that the prime market could not generate enough of an income stream and began to look at opportunities in other sectors, mainly near-prime and buy-to-let. However at the time, established lenders in the non-conforming field, including Kensington Mortgages, stressed the need for lenders not to entertain the idea of a ‘quick buck’, suggesting that those operating in the non-conforming sector had to be in it for the long haul.

This seems to have come back to bite Northern Rock, which had to obtain emergency funding from the Bank of England, and it is only now in the market conditions we are currently experiencing that the UK sector has undergone a ‘mini-crisis’, with Bill Dudgeon, managing director at db mortgages, suggesting that the UK market was ‘currently in intensive care.’

A rock and a hard place

Due to its lending strategy, Northern Rock has felt the pinch more than most. While most lending institutions rely on customers making deposits into savings accounts to help their balance sheets, the Northern Rock strategy places a large emphasis on its mortgage business. Unlike other banks, Northern Rock raises most of its money by borrowing from other financial institutions – a strategy that has become harder following the global crunch, with Northern Rock unable to obtain funding from US institutions. Indeed, speculation has hinted that potential bidders for the organisation from other lenders and banks had found funding to acquire the lender difficult in the current financial climate. In a statement, Adam J Applegarth, chief executive of Northern Rock, admitted that the non-conforming crisis had led the lender to reassess its strategy and place in the market.

He said: “We are seeing extreme conditions in global liquidity, which have impacted on world markets. As a result, we have taken prudent action to rein back our lending until markets normalise. Against that background it is inevitable, albeit disappointing, that our profits will be affected. We remain focused on prime lending in the UK mortgage market and our credit quality remains robust. "The support of the Bank of England through this facility reflects a recognition that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book. In these extreme times we are pleased to have a high quality asset base and remain confident in the excellence of our strong customer franchise, our efficient business platform and our well-known brand.” Following this move consumers moved quickly to withdraw their money out of the organisation, at a speculated rate of £10,000 per second.

Over the weekend, it was predicted that Northern Rock had seen borrowers take out an estimated two billion pounds, despite the lender, the FSA and the government reiterating to borrowers that their money is safe. Callum McCarthy, chairman of the FSA, said: “The FSA’s judgement on Northern Rock is that we believe it is solvent, meets all capital requirements and has a good quality loan book. We are clear it should continue to be open for business. “More generally, it is important to remember that the UK banking industry has entered this period of severe market turbulence after several years of very strong market conditions which have helped it build up healthy balance sheets and strong capital positions. “The FSA remains confident about the industry's ability to withstand current market pressures.

We are in constant dialogue with firms to ensure that they are vigilant with regard to potential risks and continue to carefully monitor developments.” McCarthy added: “To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business. It is open for business and it can continue to receive deposits and allow customers to make withdrawals.” Michael Coogan, director-general at the CML, added: “The Bank of England would not have provided the loan to Northern Rock if it had concerns about the quality of the lender’s own business. “All lenders are facing funding pressure at the moment, and what they need is a return to more normal market conditions as quickly as possible. We welcome the Bank’s intervention and confirmation that it is keeping a close eye on the situation.”

However, despite the government, the lender and the regulator all calling for calm, the last time that a bank required ‘bailing out’ from the Bank of England was 1973, and it is to be expected that consumers will fear the worst. Indeed in a BBC Newsnight programme, a number of Northern Rock borrowers suggested that they did not believe the government, following years of ‘spin.’ While Gordon Brown has undoubtedly made moves away from the ‘spin era’ of Blair and Alastair Campbell, many remain wary of government pledges.

Lies, damn lies, and statistics

Despite Chancellor Alastair Darling calling for calm, it is clear that many consumers simply do not believe the government. This is perhaps the most worrying aspect of the affair, and the government will have to act fast to restore faith. While the previous decade has seen economic growth, spearheaded by Gordon Brown’s tenure as Chancellor, his move to Prime Minister has coincided with the ‘worst financial crisis in a generation’ according to some.

Lending strategies and the role of the FSA are undoubtedly under scrutiny as a result of this ‘credit crunch’ and has suggested that it plans to make changes to the current bank deposits rulings. FSA chief executive, Hector Sants, admits the plans in place need to be re-examined in light of recent market changes. “There have been a number of factors affecting confidence, but it is clear that investors are aware of the limitations of the scheme and, in the light of events, it would be right to look at it again.” For borrowers, it is clear that a certain amount of concern is gripping the market – with Northern Rock forced to open its doors earlier to cope with the demand – and the industry must do the best it can to quell this concern. However with pragmatism key to many borrowers outlook, it came as no surprise to see other lenders seeing drops in their share prices.

While Northern Rock was the most severely hit, with shares at one point down 40 per cent, A&L and Bradford & Bingley also experienced marked drops, although all of the lenders concerned reported a subsequent re-adjustment of share prices, with A&L shares dropping by over 30 per cent, before realigning itself. An A&L spokesperson also confirmed that it had seen no increase in branch activity and did not expect its business model to be overly stretched, because of the different lending model it has in place.

Although A&L relies on mortgages for a proportion of their business, the strategy in place differs from the Northern Rock plan. A statement by Bradford & Bingley also moved to allay fears over its lending policy, despite the lender experiencing a fall in share prices of over 10 per cent. A B&B spokesperson, said: “We are a well-funded company with a broad funding base of retail savings allied to a cost-effective secured funding programme. Earlier this Summer we pre-funded by completing a £2.5 billion master trust securitisation and a £2.5 billion covered bond issuance.”

Quick to ask questions

In the market environment it is clear that the government, the regulator and lenders will all be under fire for their strategies. Conservative leader, David Cameron, has been very quick to question the government’s strategy and commitment to the financial sector, and consumers have expressed their own worries over the market, which will undoubtedly remain for some time.

The government needs to ensure that it keeps the public fully informed of the moves being made, and the FSA may, as a result of recent market movement, become a more prominent figure for consumers. It is up to the industry to learn from this recent turbulence, and make sure the ripples that have been caused by the market tumoil do not have a lasting effect on what has been one of the most stable economies in the world.

Kinetic Financial Solutions

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Mortgage lending slows down in September

2007-09-21T02:07:00.001-07:00

Gross mortgage lending by banks, building societies and specialist lenders fell by 6% in August compared with July, to an estimated £32.2 billion from £34.1 billion, according to the Council of Mortgage Lenders. This was 3% down on the £33 billion figure for August last year. The figures are not seasonally adjusted.

The lending figures published today relate to a period when the current wholesale funding pressures being experienced in the market were less pronounced. During September, a number of lenders have withdrawn lending products, amended their lending criteria, or re-priced their deals. Not all the re-pricing has had the effect of increasing the cost to the consumer; some lenders have reduced the rates on their fixed rate mortgage products.

It is too soon to say with accuracy what September lending volumes are likely to show, although initial indications suggest that lending remains robust. The reduction in available funding could in due course translate through to a reduced supply of lending, although the Bank of England's most recent interventions to support liquidity in the interbank lending market may help to restore the availability of funding more quickly than would otherwise have been the case.

Commenting on the data and the current situation,

CML Director General Michael Coogan said:

"Lending fell slightly in August, but was still at very high levels. We see no obvious decline in consumer demand, although some decrease in the supply of lending is being experienced in the short term as a result of the problems lenders face in raising wholesale funding.
"The events of the past week have shown us how very quickly situations can change.

Even after the good news on inflation falling back, the Fed's rate cut, and the Bank of England's support for 3-month funding, it is not a given that the Bank will follow suit on cutting rates. It makes sense for consumers to continue to plan for rates at or about their current levels for the foreseeable future - we are not out of the woods yet."

Kinetic Financial Solutions

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CML propose changes to APR

2007-09-21T01:58:00.001-07:00

CML Housing Finance Issue 06
2007 September 2007

Mortgages - informing customer choice

The Annual Percentage Rate (APR) is currently the standard measure for comparing the costs of loans, and one that must be disclosed to borrowers. A key assumption that underpins the APR calculation is that loans will be held until maturity. But, in today's intensely competitive market, most mortgages are repaid after just a few years, and this means that APR information can often be irrelevant or confusing. This paper proposes a new interest rate measure - the Dynamic Annual Rate (DAR) – that presents cost information across a wide range of different mortgage products in a simple and effective way.

The DAR differs from the APR in two key respects: it is calculated for any period of time for which the loan may be kept (rather than only the full term as in the APR); and it takes into account all payments and charges, including any early repayment charge and exit fee, over the period for which the mortgage is held. DARs contain a lot of information, and can be used to show how the true cost of a mortgage varies over time.

They allow straightforward cost comparisons between mortgage products over any period that a borrower is likely to hold them for. The DAR approach could also help borrowers better understand how future changes in interest rates would affect the costs associated with different mortgage products and when product switching would be worthwhile. DARs offer several potential advantages over the APR, and may help advisers satisfy their Treating Customers Fairly requirements by providing information to borrowers that is easily understood, clear, fair and not misleading.

A new measure of mortgage value

The market for domestic mortgages is highly competitive. A large number of lenders offer a vast range of products, including fixed-rate, initial discount, tracker and cashback mortgages. And within these groupings, there are further significant variations in such things as interest rates, set-up charges, cashback or introductory discount incentives and early redemption charges.

Authors Frank Chacko Consulting Actuary, Grant Thornton Editor Bob Pannell Head of Research, CML

In theory, such choice provides the opportunity for borrowers to select the most suitable product for their needs. However, increasing product complexity means consumers often have a poor understanding of the mortgage product they purchase despite the wealth of information given to them. In particular, it is arguable whether or not borrowers are able to make an informed choice as regards to comparative value.

Under the Financial Services Authority's (FSA) Principle 6 for businesses, all regulated firms including mortgage advisers, are required to 'treat customers fairly' (TCF). Whether or not customers understand the product, the obligation is on advisers to communicate costs clearly and fairly. Firms are also obliged to ensure that any advice provided to their customers is suitable. Closely aligned to this obligation is Principle 7, which requires firms to provide information to their clients in a way which is clear, fair and not misleading. It is not clear how the obligations under TCF (that require firms to communicate price information in a way that is clear, fair and not misleading) can best be met by using the tools currently prescribed. The measure that supposedly helps with the comparison of mortgage costs is the Annual Percentage Rate, or APR.

But the APR is of limited value for mortgage comparison purposes because most loans typically last for less than five years. In this article, we present a new approach to presenting mortgage cost information - the Dynamic Annual Rate. The approach offers a simple and effective way to evaluate the true cost of a mortgage, how costs vary over time, and how they compare with other mortgages. First, though, we consider the APR and its shortcomings. Problems with the APR The APR historically arose from the need to compare costs on hire purchase and other short term loans. It effectively produced an average rate of interest over the full period of a loan, so allowing consumers to compare in advance the relative costs of loans which had differing interest rates, fees and other charges.

The formula specifically excluded allowance for default charges and, by implication, the fees payable on early redemption, because it assumed borrowers kept the agreement and held it for the full term. A simple example of the APR may be useful. For a four year loan where 4% applies for the first two years and 6% applies for the second two years, the APR would be roughly 5% per annum, reflecting the average rate of interest applying over the four year period of the loan.

The same principles apply if the loan carries initial charges - we calculate an average rate of interest which treats the initial charges as an addition to the interest rate spread over the full term. For short term loans, the APR works well and represents a very helpful standard measure. It is a simple measure; it is relevant since the majority of such loans are held for the full term; it provides a valid measure for comparing different loan costs. Furthermore, its extension for long-term products such as mortgages was reasonable when mortgages were generally held for long periods.

Mortgages - informing customer choice

However, over the last thirty years mortgage products have changed considerably and today are far more complex than they were in the 1970s. Consumer behaviour and the role of intermediaries have also changed significantly, with far greater emphasis on product switching and value for money considerations. In recent years, around half of all mortgage sales have been remortgages. Therefore, even though the majority of mortgages are taken out with original maturities of 25 or more years, they are often kept for just a few years. Over time, the APR formula has remained fundamentally the same, despite its underlying assumptions not remaining entirely valid in the environment of more complex products and very different consumer behaviour.

The main issue that arises is whether a measure that provides the average rate of interest over the full period of a mortgage, say 25 years, is useful when mortgages today last for far less time. Furthermore, because of the short period for which many mortgages are held, the early repayment charge (ERC) is a significant item of cost for many borrowers, but it is not an item that features in the APR formula (by definition). As a result, the APR – a piece of information that must be disclosed to borrowers – measures costs over a time period that is irrelevant for the vast majority of borrowers. It is this aspect which lies at the heart of the problem: the average rate of interest charged over the period most mortgages are typically held, such as four or five years, generally bears little relation to the APR calculated over 25 years

A new approach - the Dynamic Annual Rate

The new approach proposed in this article is similar in some ways to the APR, but differs in important respects. First, instead of forcing the term used in our calculation to be fixed as the maturity term of the mortgage, it is calculated for any time period up to the mortgage term. Secondly, allowance is made for all the charges and payments relevant for the period, including the early repayment charge. As a result, the equivalent average annual interest rate can be illustrated over the range of time periods for which a mortgage is likely to be held – we call this the Dynamic Annual Rate (DAR). The DAR, therefore, is a continuous measure that can be read off for any time period the consumer thinks they may keep the mortgage for.

Kinetic Financial Solutions
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Bank of England Cash Injection

2007-09-19T09:05:00.000-07:00

BoE cash injection to boost markets

19 September, 2007

The Bank of England (BoE) has announced it will inject £10bn into the UK money market. These funds will be auctioned off next week, in an attempt to bring three-month inter-bank interest rates down – even though the Bank previously stated that it was not its job to lower three-month rates. Another key feature of this move on the part of the BoE is that banks will be allowed to use a wider range of assets than usual as collateral, including mortgage debt.

The Council of Mortgage Lenders (CML) has welcomed the decision. Michael Coogan, director general, said: "This support should enable 3-month funding costs to reduce and get back to more normal levels. This is good news for lenders and for their customers, particularly those with mortgages linked to LIBOR for whom hefty increases in payments were looming."

Following the excessive increases in the London Interbank Offered Rate (LIBOR) over the past few weeks which have seen it climb above both the Base Rate and the emergency lending rate of 6.75 per cent – however it dropped overnight in response to the cut in US Federal rates. Banks have been loathe to lend to other banks as a result of the recent instability within the global markets and thus the problem escalated until it reached a head last Friday with Northern Rock’s announcement.

Ian Kernohan, economist at RLAM, commented: “This represents a U-turn on support for money markets and so when faced with the risk of a collapse in confidence, all talk of moral hazard has gone out the window. As every parent knows, it’s all very well to talk tough, but if you don’t follow up your credibility is damaged.”

Kinetic Financial Solutions

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Nationwide Housing Market Report

2007-09-19T07:27:00.001-07:00

The Nationwide House Price Report 8 September 2007

1 The Nationwide House Price Report has revealed that, while house price growth rose by 0.6 per cent during August 2007, the annual rate continued to moderate, falling to 9.6 per cent from 9.9 per cent in July.

2 The report showed a typical property cost an average of £183,898 in August, £16,177 more than one year ago.

3 While the US non-conforming crisis has caused turmoil in the international financial markets, Nationwide said it was unlikely to have a significant additional effect on the rate of house price growth in the UK in the short term.

4 However, the report said the dependence of the UK economy on financial services posed a longer term risk.

5 Nationwide stated it still expected house price growth in 2007 to come close to the middle of its forecasted range of between 5 and 8 per cent.

6 It said the expected slowing of the market would result from three factors: weaker affordability; the effect of higher rates and inflation on consumers’ pockets; and lower house price expectations.

7 Fionnuala Earley, Nationwide’s group economist, said: “While it has taken some time for these factors to bite, there are now clearer signs of slower demand in the market.”

8 She added that the stock-to-sales ratio predicted a continued slowing in the annual rate of house price inflation.

9 It was felt that the long-term severity of the fallout from the US non-conforming debacle on the housing market would depend on the length of time it takes for market jitters to abate.

10 Nationwide said a prolonged financial market downturn would be uncomfortable for the overall economy.

11 It added such a downturn would not only affect investment bankers, but would also have negative knock-on effects for legal, accountancy and other professional services that have benefited from the structured credit boom.

12 Earley said that the impact on London property prices could only be negative compared to the current situation, particularly at the top end.

13 However, employment generated from Olympic and other infrastructure investment along with supply issues would remain positive factors.

14 She stated that the overall extent of any damage to economic growth and the housing market would depend on the length of the credit crunch and the response by the Bank of England.

15 The August Inflation Report suggested a rise in the Base Rate to 6 per cent was inevitable, but this is now in doubt.

16 The Bank’s forecast of inflation did not predict a drop below the 2 per cent target at any point over the next two years, even with rates rising to 6 per cent. Yet, inflation fell to 1.9 per cent in July.

17 Added to this was the suggestion that the economies of the UK’s main European trading partners were weakening alongside a likely slowdown in the US.

18 The Monetary Policy Committee (MPC) had been using the strength of global and eurozone growth as an factor to support its tightening campaign.

19 Given these factors, together with the softer tone the last MPC minutes reflected, Nationwide believes rates will now remain at 5.75 per cent.

20 Earley said: “The Bank’s reluctance to intervene in the markets in the same way as the Fed and the European Central Bank suggests that at the moment it is fairly sanguine about the lasting effects of the credit crunch. The longer the squeeze continues, the more likely it is to have a dampening effect on the economy and hence the outlook for house price growth next year.”

Kinetic Financial Solutions

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First Time Buyer Report

2007-09-19T07:19:00.000-07:00

Bradford & Bingley’s First-time Buyer Report

1 Figures from the fourth annual Bradford & Bingley (B&B) First-time Buyer (FTB) Report has revealed that FTBs’ housing wish list is topped by two-bed properties with good transport links.

2 B&B said that FTBs appeared to be eschewing the idea of living near the bright lights of pubs and restaurants in their hunt for the ideal starter property.

3 The study, undertaken by YouGov, questioned 1,456 FTB adults and showed that 68 per cent of respondents said having a property with a minimum of two bedrooms was their top priority.

4 For 55 per cent of those with a smaller budget, having a property with at least one separate bedroom, as opposed to a studio or bed-sit, was an important requirement and came second on the wish list.

5 The study showed that 40 per cent of those surveyed were moving further out of their town or to a different town to be able to afford their first property.

6 B&B said it was no surprise therefore that 46 per cent of those questioned said that it was essential to have good transport links close to their chosen property.

7 This was particularly so for Londoners, who listed having good transport links as their number one priority, taking 78 per cent of the FTBs’ vote.

8 For those who drive the extra distance to work, good parking also came high up on the list for 46 per cent of people, taking joint third position.

9 ‘Having a nice garden’ came in at number five in the wish list, garnering 35 per cent of the vote.

10 A garden was followed by ‘choosing a home in a specific road or location’ for 31 per cent and ‘having a home in good decorative condition’ for 25 per cent.

11 The study showed that women were much more concerned with having a nice garden than men, polling at 40 per cent and 28 per cent respectively.

12 The proximity to bars and restaurants came low down the list, with just 13 per cent of the vote, missing the top 10 and featuring at number 13.

13 When it comes to family ties, FTBs showed they were willing to cut them when making their first step onto the property ladder.

14 Living close to family and friends only just featured in the top 10, coming in at number eight with 23 per cent.

15 Family was just ahead of ‘low council tax band’. For women living close to family was of greater importance than it was to men, at 26 per cent and 19 per cent respectively.

16 For 4 per cent of FTBs there was no other criteria other than just being the owner of their very own home.

17 Gus Park, director of intermediary sales at Mortgage Express, B&B’s specialist lending arm, commented: “Buying your first home is probably the largest financial commitment that an individual can make. Therefore it’s important to get it right.”

18 He said making a wish list was an ideal way for FTBs to work out exactly what their priorities were when searching for a home and highlighted the criteria they would be happy to compromise on.

19 Park added they were surprised but reassured to see the majority of FTBs approached the property search sensibly, opting for properties with a number of bedrooms, good transport links and nice gardens.

20 Park said: “These properties are perfect for selling on when the time eventually comes to make the next step up. Proving that, no matter how strong the desire is to own one’s own home, it is important not to rush into buying the first affordable property on the market and to keep in mind your ultimate goal of owning the ideal home.

Kinetic Financial Solutions
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For more information on buying your first home visit us at http://www.kinetic-fs.co.uk/
or if you would like to find out more about 100% mortgages click here.

This week in the press

2007-09-17T05:10:00.001-07:00

The news this week is not good reading for many of us in the mortgage market, and it seems the back-to-work blues after the long Summer holiday have hit home early.

You can’t escape the news of the US non-conforming crisis in the press. This time we have the news in MA that Barclays has been forced to call on the Bank of England’s emergency funds due to a ‘technical breakdown’ in the UK clearing system. With LIBOR running at 6.8 per cent as I write, you can probably understand how technical things are getting.

The crisis is reported to be hitting jobs in the banking sector, according to FSA, as the liquidity crunch hits home, while we have seen sweeping criteria changes from the likes of GMAC-RFC and Mortgages plc. MM has been talking to some prime lenders who believe they will also start to feel the impact as the credit crunch forces them to tighten criteria even to consumers with clean credit records.

While the non-conforming market is still trying to find some solid ground, there is some disturbing news in MS. The Royal Institute of Chartered Surveyors has reported repossessions are up 32 per cent in Q2 this year compared with Q1, and estimates the total number for 2007 to be 45,000 – a 50 per cent rise. No surprise really, as those people who need to re-finance quickly are struggling to find a lender willing to help.

Housing and repossessions

MI is reporting Alliance & Leicester research that claims 63 per cent of brokers would welcome more regulation. This time it is the buy-to-let market, which, if you believe the Council of Mortgage Lenders’ data, is still growing. The market is worth £38 billion, but just the ‘let-to-buy’ element of the business is currently in a regulated environment. Articles in both FA and MM are both predicting house price falls – one stating by as much as 30 per cent in some areas of the country.

This again is based on the US, where they have seen homes fall in value by 18 per cent in the past 12 months amid warnings from a former US Treasury Secretary that they are heading for a recession. On the positive side, July lending was up by 12 per cent at £21.3 billion according to the BBA, reflecting the high levels of remortgaging taking place at the moment, while the average first-time buyer (FTB) now has get a mortgage £108,000 – up from the £36,000 they had to secure 10 years ago to get onto the property ladder. Compare this to the FTB’s average income; in 1996 it was £17,300, now it stands at just under £34,000. You can see why affordability is key to lending in this market.

Fraud

The discovery of the Thamesmead fraud also gets plenty of column inches, especially with the size of the potential profit to be made out of the illegal activity. With figures of £4 million being banded around as the amount of money to be made, it’s easy to see why this activity is so attractive to the criminal element. There are calls to improve the information brokers receive to help them spot fraud much earlier in the process.

Finally, as we see the extension of Home Information Packs in England and Wales extended to three-bed properties, there is plenty of comment about the value of Energy Performance Certificates (EPC). Research in MI indicates that a third of us would be influenced by the EPC in the pack in our purchase decision. Further research by Halifax suggests half of us want to live in detached houses with one in five preferring a new build property and 30 per cent in the country.

Kinetic Financial Solutions

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More news on house prices

2007-09-17T05:03:00.001-07:00

Information contained in the Home Asking Price Index has supported fears that the country's housing market is spiralling into trouble. Findings from Home.co.uk's Home Asking Price Index have shown six out of nine regions in England registered a drop in asking price in September. The asking price of homes in Greater London are falling fastest of all, by 1.2%, with the overall drop for England and Wales sitting at 0.4%. This equates to a loss of £1,030 in a single month for the average homeowner, while the average London property lost £4,208.

The recent international market upheaval seems to have been the catalyst for triggering this much-anticipated tipping point, as fear of default has forced mortgage lenders to price out sub-prime buyers with additional risk premiums. “With wage inflation falling, interest rates rising, and house prices surging up for over a year, a correction was inevitable, The housing market now looks to be changing rapidly to favour buyers over sellers.” UK mortgage lenders were earlier criticised by a Financial Services Authority report in July for not properly checking the creditworthiness of homebuyers they were lending to.

But this warning about irresponsible lending came far too late to avert a problem that has been growing for years – one which is estimated by the FSA to affect 8% of the mortgage market. The sub-prime fall-out for UK house prices could be very serious, with fewer buyers able to raise finances and demand falling further. We could also see a negative effect on supply. An increasing number of heavily indebted borrowers being forced to sell may trigger a further sell-off from property speculators wishing to reduce their debt burden as capital gains can no longer be made.

The report concludes that until the balance between buyers and sellers is restored, house prices will continue to slide. A cut in the Bank of England base rate could give some temporary respite to homeowners but that could let inflation off its tight leash and land the economy in much deeper water.

Kinetic Financial Solutions
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Latest on Northern Rock

2007-09-17T04:05:00.001-07:00

Northern Rock’s shares have fallen sharply after the lender was forced to obtain emergency funding from the Bank of England. The shares plunged in value by 32 per cent overnight, after the Bank of England became 'lender of last resort', offering Northern Rock unlimited funding. The turbulence currently being experienced in the wholesale markets has hit the lender hard and industry experts have voiced fears that it may end up going bust.

However Northern Rock has stated that they currently remain solvent, although it admitted that its 2007 profits will inevitably take a hit. Northern Rock’s chief executive, Adam J Applegarth, said:

“We are seeing extreme conditions in global liquidity, which have impacted on world markets. As a result, we have taken prudent action to rein back our lending until markets normalise. Against that background it is inevitable, albeit disappointing, that our profits will be affected. “We remain focused on prime lending in the UK mortgage market and our credit quality remains robust.

The support of the Bank of England through this facility reflects a recognition that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book. “In these extreme times we are pleased to have a high quality asset base and remain confident in the excellence of our strong customer franchise, our efficient business platform and our well-known brand."

Chancellor Alistair Darling, added: ""Northern Rock can draw on [the funding] when it requires, but it means it can carry on trading, people can use their accounts in the normal way, they carry on making their mortgage payments in the usual way, Northern Rock will be able to carry on its business."

The industry has this to say

Bank of England Responding to its decision to step in and provide ‘unlimited’ funding for Northern Rock should the situation require it, the Bank of England released a statement which said:

“The decision to provide a liquidity support facility to Northern Rock reflects the difficulties that it has had in accessing longer term funding and the mortgage securitisation market, on which Northern Rock is particularly reliant. “In its role as lender of last resort, the Bank of England stands ready to make available facilities in comparable circumstances, where institutions face short-term liquidity difficulties.

“This facility will be available to help Northern Rock to fund its operations during the current period of turbulence in financial markets while Northern Rock works to secure an orderly resolution to its current liquidity problems.”

CML The Council of Mortgage Lenders (CML) remained optimistic, with director general Michael Coogan commenting: "Consumers need to understand that the problem for lenders generally at the moment is in raising funds, not in lending quality.

"The Bank of England would not have provided the loan to Northern Rock if it had concerns about the quality of the lender's own business. "All lenders are facing funding pressure at the moment, and what they need is a return to more normal market conditions as quickly as possible. We welcome the Bank's intervention and confirmation that it is keeping a close eye on the situation.

FSA The Financial Services Authority (FSA) has said that: “Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book.”

BBA The British Bankers' Association (BBA) has advised borrowers not to fear the worst in a statement released on Friday: “Northern Rock is a sound and safe bank and there is absolutely no reason for either mortgage customers or savers to worry.

“All Friday’s announcement from the Bank of England, Treasury and the Financial Services Authority means is that Northern Rock has had to make alternative arrangements to meet its normal everyday short term borrowing requirements.

“The British banking system is carefully regulated and overseen which ensures that all banks operate safely and prudently in the interest of their customers.”

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Northern Rock offer the following products:

FSA sets precedent in approaching GMAC-RFC

2007-09-14T06:09:00.000-07:00

The FSA has set a market precedent by approaching a lender to ask them to place consumers’ mortgages in the wake of Victoria Mortgages entering administration.

Victoria announced on Monday it was entering administration, and said GMAC-RFC had agreed to look at cases in its pipeline that were due to complete imminently.

Julie Gaskin, corporate relations manager at GMAC-RFC, said the regulator had approached it two days before the news was made public to discuss it helping consumers that would be affected by Victoria’s collapse. She said:

“We were contacted by the FSA over the weekend to discuss whether we would be able to help a certain amount of people who were due to complete in the next three days. Its main concern was that borrowers in that position were the innocent parties, and so we said we would help.”

Sue Anderson, head of external affairs at the Council of Mortgage Lenders, said while the previous regulator for building societies had followed the same approach to protect consumers, the current situation was unusual. She commented: “I do not know with respect to the newer lenders what the market norms should be. No doubt other lenders will say why was it [GMAC], and not us, but there is always an element of that. It is the reuglator’s job to ensure an orderly environment.”

Matthew Wyles, group development director, echoed Anderson’s sentiments the regulator had done its duty in protecting consumers, but hinted other lenders had been approached to help, adding: “We should not assume the FSA only spoke to one lender.”

Robin Gordon-Walker, spokesman for the FSA, said while the decision to approach GMAC had been taken by “very senior figures”, the regulator would not discuss why it was chosen, as it did not want to comment on individual firms.

Kinetic Financial Solutions

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House price growth turns down

2007-09-14T02:43:00.000-07:00

Demand slowed sharply in August, with the fallout significantly affecting house prices.

This is the first time since October 2005 that prices have seen such a dip, and 1.8 percent more Chartered Surveyors reported a fall rather than rise in house prices, down from 10.8 reporting a rise in July.

Demand also continues to weaken as rising interest rates weigh upon buyer affordability.
This trend is most prevalent in the West Midlands, the North West and East Anglia. However, London is yet to be affected by credit market turmoil and remains the region with the strongest price growth in England.

New Buyer enquiries declined for the ninth consecutive month and at the fastest pace since August 2004, with potential buyers remaining cautious as the effect of interest rate rises filter through.

In addition, new instructions to sell property fell for the third month in succession. Confidence in household finances remains strong and vendors remain under little pressure to sell. The stock of unsold property on surveyor’s books declined with levels down ten percent on year ago levels.
Significantly the number of four bedroom houses on the market have declined by 51 percent on year ago levels, possibly pushed by the August deadline for Home Information Packs (HIPs).

RICS spokesman, Ian Perry, said: “Potential house buyers have become far more cautious as they wait and see what affect interest rate rises will have on household finances. Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step to far.

“The market will soften further, going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target. HIPs have reduced the number of four bedroom family properties coming onto the market, making family homes even more difficult to purchase.”

Kinetic Financial Solutions

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Northern Rock's Shares Fall

2007-09-14T02:29:00.000-07:00

Northern Rock’s shares have fallen sharply after the lender was bailed out by the Bank of England.

The shares plunged in value by 24 per cent overnight, after the Bank of England became 'lender of last resort', offering Northern Rock unlimited funding.
The turbulence currently being experienced in the wholesale markets has hit the lender hard and industry experts have voiced fears that it may end up going bust. However Northern Rock has stated that they currently remain solvent, although it admitted that its 2007 profits will inevitably take a hit.

Northern Rock’s chief executive, Adam J Applegarth, said: “We are seeing extreme conditions in global liquidity, which have impacted on world markets. As a result, we have taken prudent action to rein back our lending until markets normalise. Against that background it is inevitable, albeit disappointing, that our profits will be affected.

“We remain focused on prime lending in the UK mortgage market and our credit quality remains robust. The support of the Bank of England through this facility reflects a recognition that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book.

“In these extreme times we are pleased to have a high quality asset base and remain confident in the excellence of our strong customer franchise, our efficient business platform and our well-known brand."

Industry reaction

As the industry wakes up to a media frenzy surrounding Northern Rock’s financial plight, Michael Coogan, CML director general, commented: "Consumers need to understand that the problem for lenders generally at the moment is in raising funds, not in lending quality.

"All lenders are facing funding pressure at the moment, and what they need is a return to more normal market conditions as quickly as possible. We welcome the Bank's intervention and confirmation that it is keeping a close eye on the situation.

"Ultimately, the Bank of England would not have provided the loan to Northern Rock if it had concerns about the quality of the lender's own business.

Kinetic Financial Solutions

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Mortgage Lending Slows in July

2007-09-12T08:52:00.000-07:00

The number and value of mortgages taken out by both home-buyers and those remortgaging fell in July, according to the Council of Mortgage Lenders. But lending not accounted for by house purchase or remortgaging (primarily made up of further advances and buy-to-let) rose to its highest-ever value - £7.8 billion - and accounted for 23% of the total, its highest ever proportion.

There were 94,000 loans for house purchase totalling £14.8 billion in July, and 92,000 remortgage loans totalling £11.5 billion.

The number of loans to first-time buyers fell by 7% from June to 32,400, and the value fell by 4% to £4.4 billion. Affordability for first-time buyers continued to worsen, with the typical first-time buyer income multiple rising to a record 3.39 in July, up from 3.37 the previous month and 3.23 a year earlier. First-time buyers taking out loans in July typically committed 19.7% of their income to pay their mortgage interest.

Fixed rates maintained their popularity in July, accounting for 79% of house purchase and remortgage loans. But the appetite for fixed rates may be on the wane if people believe that rates have now peaked.

Michael Coogan, CML Director General, commented:

"A slight fall in lending between June and July has emerged for the third year in a row, so of course we cannot read too much into a single month's figures. But the long-anticipated slowdown in the housing and mortgage markets may now be beginning to materialise.
"Last week's MPC decision to hold rates was exactly as expected. Both market conditions and sentiment are coming off the boil, and affordability is ever more stretched, but consumers should not expect any immediate easing in the financial pressures they face."

Kinetic Financial Solutions

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Property rents are on the up

2007-09-12T08:43:00.000-07:00

Strong tenant demand pushes rents

Paragon, RICS and ARLA have confirmed that tenant demand is still growing strongly.

On the back of a slowing housing market, the research has shown that higher borrowing costs and the uncertain outlook for house prices have been the catalyst within the private rented sector.

However Paragon have said that this increased level of demand is creating an upward pressure on rents.

In this positive environment, investors expect to grow the size of their portfolios over the next year by 5%, from 11.5 to 12.1 properties, according to Paragon’s latest survey of landlords. In value terms, they expect the average portfolio to be worth £1.5 million in 12 months’ time.
In addition, RICS have found that rents are growing at record levels, with surveyors expecting particularly strong tenant demand into the autumn as first-time buyers delay property purchase. Nearly a third more chartered surveyors reported a rise in tenant lettings with 20% more landlord instructions compared with 8% in the previous quarter.

This view is confirmed by ARLA, whose quarterly survey of letting agents today reveals that tenant demand outstrips supply in all areas of the rental market, with a knock-on effect on achievable rent levels, which have risen in all parts of the country. Paragon’s latest Buy-to-Let Index shows average rents rising at an annualised rate of 12.7%, to reach £10,914.

There is broad agreement that buy-to-let is a beneficiary of a softer housing market, as would-be homebuyers defer house purchase and find themselves competing with migrants, students and first jobbers, among others, for a finite supply of rented homes. The private rented sector continues to expand steadily to meet this growth in demand for accommodation and landlords add to their portfolios in the knowledge that tenant demand is buoyant and rents continue to rise.

Kinetic Financial Solutions

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Is an interest only mortgage right for me?

2007-09-11T07:28:00.000-07:00

The very mention of interest only will draw differing responses, depending on who you are talking to. Prima facie it looks like interest only has a public relations problem in some quarters. However, the subject does deserve a thorough examination, especially as sales of interest only mortgages appears to be increasing.

The signs of increasing popularity have attracted the attentions of the Financial Services Authority (FSA). Interest only is seen as a possible issue and as such is firmly on the regulator’s radar. Plus there has been some negative comment in the consumer press, which does not help consumer confidence.

Consumers need to be confident that the product they have purchased works for them in the short term and will be durable in the longer term. This is where brokers can drive home their advantage by conducting regular reviews of the customer’s needs as circumstances can change. That last thing we need are worried and confused customers.

As with many things one size does not fit all and cases need to be looked at on an individual basis.

Regulatory starting point

Back in 2006 an audit recorded 23,200 mortgages where there was no record of the repayment vehicle. MCOB 11 makes it a clear requirement of lenders to consider a customer’s ability to repay before they enter into a mortgage contract. Plus the FSA has made it clear that for interest only mortgages it expects lenders’ policy to be expanded to include a further three things: how the lender checks the strategy of the customer to repay the mortgage; the plausibility of the customer’s strategy; and how this is taken into account in the affordability calculation. For both lenders and intermediaries, this is pretty unambiguous. This poses some questions for brokers. The level of client documentation, the factfind and notes of client preferences are essential. Good standards of record-keeping is a recurring theme in file reviews conducted by the regulator.

The circumstances surrounding interest only are viewed with such gravity that the FSA published a detailed research report in December 2006. The report was based on 856 telephone interviews conducted between 4-26 September 2006. The sample showed variation across a number of characteristics, demonstrating that holders of interest only mortgages were not a group with similar characteristics. Variations were found in terms of their age, income levels, loan-to-value (LTV) ratio and the size of the loan. A significant minority of borrowers had no idea or definite plan on how they would pay back the capital they borrowed. A large proportion of these borrowers admitted that dealing with finance was best left to the experts, and many had taken an interest only mortgage because it was recommended to them by a professional.

The majority of borrowers who had an interest only mortgage but no repayment plan indicated they did have a recognised repayment plan or other strategy in place to pay back the loan. However, in a number of cases the credibility of this repayment strategy may be open to question. The ability to meet repayments and other commitments is a consideration for mortgage holders; one in five respondents said they would struggle to meet other financial commitments if interest rates rose by one percentage point. A high proportion of respondents had a correct understanding of an interest only mortgage and the majority had a reasonable understanding of the associated risks. All in all, a bit of a mixed bag but not the disaster than some were predicting.

A broken link

Part of the problem is that the link between interest only and other products has been broken. I am not advocating the sale of mortgage endowments, but the policies were actually attached to the lender via the legal process of assignment. With the choice and flexibility in investment products, this link is broken. That flexibility is a two-way street – great in some respects but with drawbacks in others. There is an element of risk attached to stock market-linked investments, so the customer’s attitude to risk is an essential ingredient in the product choice.

Level of information

The key to successful sales of interest only mortgages is the level of information that the customer is provided with – not only through the sales process but the entire life of the mortgage. The customer must be in full possession of the facts and that they need another vehicle to repay the capital at the end of the term. This needs to be reinforced via the annual statement and reminder letters.

One of the fears is that there will be a raft of customers calling at the end of their mortgage term querying why their capital has not been repaid. With the levels of information provided, this seems like a very remote possibility. Talk of a future huge mis-selling scandal is wide of the mark.

Suitability is a far trickier issue. Customers come in differing shapes and sizes. What about the self-employed individual with variable income flows? In this situation, interest only could be a very good option with the client making capital repayments when it suits their individual circumstances. Young professionals are another example, with the possibility of rapid salary increases.

What is more difficult is the vexed issue of affordability. With house prices at an all time high, affordability has never been more stretched. The temptation is that customers could be stretching affordability by using the interest only option.

There is evidence that cases are being submitted citing the sale of the property at some future date. Where the lender’s policy allows it, these cases should carry further safeguards.

Final analysis

Interest only is a further example of the far-reaching flexibility in the UK market. It is an invaluable tool for brokers recommending a truly flexible approach in managing a mortgage. It is true that the regulatory background has tightened, but this is only prudent. It is worth recalling that interest only amounts to about 25 per cent of all new mortgages. The fact is that the ‘one-size fits all’ approach does not work with interest only. With the enhanced levels of information being provided through the life of the mortgage and at the application stage, the customer has little reason to plea ignorance. It is worth reiterating that good record-keeping for lenders and brokers is fundamental in the whole process.

Kinetic Financial Solutions

unbiased advice, exceptional service

Buy Now... Pay Later

2007-09-11T04:23:00.000-07:00

This week, it was revealed that Britons have accumulated so much personal debt that the total sum will exceed the gross domestic product (GDP) for the first time in UK history. In a report prepared by accounting consultancy firm Grant Thornton, it was revealed that personal debt in the UK now stands at £1,345 billion. In contrast, GDP for 2007 is expected to peak around £1,333 billion.

It will take the UK until January 2008 to produce enough goods and services to meet the amount of personal debt that Britons have incurred. The debt has been accumulated largely through borrowing on credit cards, taking out loans and overdrafts or obtaining mortgages on a property. Fortunately, most consumer debt is secured and can be repaid over several years, otherwise we would be technically bankrupt,

Buy now, pay later

"Britain's huge level of consumer debt is symptomatic of the country's well-established buy-now-pay-later culture.

We can no longer generate enough GDP to cover the amount we owe." The credit culture is something that a number of commentators have picked up on and a significant proportion have blamed both the ease of access to credit and media promotion of a glamorous lifestyle as seemingly enjoyed by celebrities and the rich and famous. In a recent Virgin Money survey, three out of four women respondents said they aspired to, and indeed felt under pressure to attain, the perfect looks and designer wardrobes of the various celebrities who dominate the glossy magazines, internet and television.

Could a remortgage help to simplify your debt?

She's got to have it

This has led to the average adult female in the UK spending around £713 a year on designer clothing, accessories and grooming in an effort to live it large like the celebrities do. Over the past year, British women have spent a combined £830 million on designer bags and shoes, £873 million on hairstyling and extensions and an incredible £262 million on tanning treatments. Spending money on aspirational whims is something that has come in for criticism from Lee Berry Director of Kinetic Financial Solutions says that "people need to make better decisions". This is particularly true, he added, when it comes to borrowing more money to pay off debt - something an alarming number of people do. Borrowing more money to pay off debts can seem like an attractive option. After all, it usually consolidates the existing debts and allows for one straightforward monthly payment. But there is evidence to suggest that a lot of people who go through debt consolidation continue to spend on credit - sometimes even using their consolidation loan to do so. You need to see consolidation as a new beginning and not as a reason or excuse to borrow more.

Many more lenders saying no to IVA

Another thing that borrowers may want to consider is the fact that lenders appear to be taking a harder line on entering into Individual Voluntary Arrangements (IVAs). These have become increasingly popular in recent years, as they allow the borrower to make an arrangement to repay a proportion of the debt over a fixed time and have the rest written off. Lenders are becoming concerned that IVAs are being perceived as a soft option to bankruptcy, according to Debt Action. It can no longer be assumed that they will automatically agree to enter into one and anyone who assumes that they will is "heading for trouble", the advisory service warned.

Could a Secured Loan could help to simplify your debt and save you money each month?

Kinetic Financial Solutions
unbiased advice, exceptional service.

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.