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Are House Prices Finally Being Slashed?

by Sarah Halloran

Throughout 2012, we’ve seen property prices fluctuate but the overall trend seems to be one of minor falls, depending on which set of figures you read. One point that many industry experts keep raising is the reluctance by sellers to bring down their asking prices but statistics released this week suggest that this situation may have changed.

Property website Zoopla has found that the number of houses that have sold for less than their original asking price is now at its highest level for nine months. However, the figures in financial terms may be very significant.

Of those properties sold, Zoopla reveal that 37% have had their asking price cut at least once while the average reduction is 7.6%, which in turn equates to an average drop of £19,000.

Traditionally, the summer is a quiet period for the market as a whole but those one-off events have also had an effect. It’s therefore thought that sellers have accepted the need to drop their prices in order to combat the further slowdown caused by the Olympics and the Queen’s Diamond Jubilee.

“Activity levels tend to fall over the summer months as holidays delay the buying process,” said Zoopla’s Nigel Lewis.

“With the recent bad weather and the extended jubilee bank holiday, the rise in proportion of price reductions is a signal that sellers have been doing everything they can to try and tempt those buyers still in the market.

“Once the distractions of summer holidays and the Olympics are gone buyers will once again be able to focus attention on their property search, and this should bolster confidence among sellers.”

Meanwhile, regional variations differ greatly but in regards to the overall market, it’s being claimed that the summer’s events are having little effect in some parts of the country. London based Estate Agent Marsh and Parsons claim that their own sales for the period of the Olympics – 27th July to 12th of August were up by 23 per cent compared to the same period in 2011.

“While many potential buyers were glued to their TVs and seats at venues rather than out viewing homes, London’s housing market didn’t grind to a halt by any means,” said Marsh and Parsons’ Peter Rollings.

“The traffic chaos and logistical problems feared in the run up to the Games thankfully failed to materialise, and a corps of committed buyers moving with urgency actually took advantage of quieter streets to secure homes.”

These figures are among the most interesting to have been released so far this year but were the boost in sales at this particular Estate Agents really down to quieter streets or are reduced asking prices about to have a marked effect on the property market as a whole?

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FTB Borrowing Recovering After ‘See-Saw’ Year

by Sarah Halloran

Figures relating to mortgage lending and the property market as a whole have been affected by a number of unusual factors this year. Firstly, there was a late rush to beat the stamp duty ‘holiday’ on properties priced up to £250,000 and the subsequent summer lull was exaggerated by major public events – namely the Queen’s Jubilee and the Olympics.

However, figures released today by the Council of Mortgage Lenders (CML) suggest that lending in June 2012 was boosted by the return of many first time buyers to the market but does this mean we can expect a settled period for the remainder of 2012?

The CML confirmed that lending to First Time Buyers (FTB’s) stood at its highest point since July 2010 – excluding the solitary month of March 2010 when the property market saw a late rush to beat the stamp duty reintroduction.

Paul Smee, Director General of the CML welcomed the news but said that he expected further fluctuations in the market. Concern over the Eurozone crisis continues and the statistics have yet to see any impact from this year’s Olympics.

“Lending figures have see-sawed in the first half of the year and we may see more fluctuations in the coming months,” Mr Smee said.

Many property professionals are pleased to see FTB’s return to the market in such numbers but insist that more has to be done to make first time property purchases more accessible.

“It’s good news that ending the stamp duty concession appears not to have held first-time buyers back permanently, but they still need as much support as possible,” said Charles Haresnape, managing director at Aldermore Residential Mortgages.

“It will be good to see more lenders participating in NewBuy and offering schemes to help borrowers who are struggling to find a deposit.”

The Mortgage Advice Bureau confirmed that their own figures were largely in line with those released by the CML but they also predicted an uncertain period ahead.

“MAB’s own figures for May reflect those released by the CML,” said Brian Murphy, head of lending at the Mortgage Advice Bureau.

“However, we expect external factors to play a major part in activity levels in the next few months, with activity levels to continue to fluctuate.”

Overall, it’s impossible to identify any pattern in the figures released by the CML but it has to be a positive aspect to see FTB’s returning to this level. The future may be uncertain in the short term but longer term benefits should be attained by making it easier to make that first step onto the property ladder.

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Mortgage Price War takes an unexpected turn

by Sarah Halloran

Fixed rate mortgages had dominated market news in recent weeks as HSBC, Nationwide and Santander had slashed their rates and offered products under 3% for the very first time. In an unexpected twist however, one of those key products has now been withdrawn.

HSBC’s five year fixed deal was released just four weeks ago but the bank has announced that it is being removed from the market. The 2.99% fixed offer was the first of the sub 3% products to emerge and was therefore responsible for starting the price war, but as of the 16th August, it is no longer available.

While the mortgage was the lowest fixed rate to hit the high street, it did require borrowers to find a minimum 40% deposit in order to secure the deal. Santander, Nat West and Nationwide were swift to follow with differing rates and terms and while the deposit requirements had still to be lowered sufficiently to help the majority of first time buyers, the moves were welcomed.

HSBC have insisted that this was always likely to be a limited time offer and that the product has been withdrawn simply because all of the funds allocated to it have been lent out to home buyers.

“It was designed to bring in business – we knew it would be popular,” a spokesperson said.

Reaction to the news has been mixed but some mortgage brokers have highlighted the fact that while the price war may have grabbed the headlines, it was irrelevant for first time buyers along with many others.

“While a mortgage rate war has broken out in recent weeks, with five-year fixes in particular falling to record lows, these are available only to those with sizeable deposits of at least 40pc,” said Mark Harris of SPF Private Clients.

“First-time buyers with modest deposits continue to pay a premium on the rate, even though they can least afford it. For example, the best five-year fix for a buyer with a 5pc deposit is at 5.99pc from Leeds Building Society.”

David Hollingworth of London and Country Mortgages added,

“Despite improving rates the mortgage market remains constrained and so meeting credit scoring requirements can still pose problems.”

Meanwhile, there are no suggestions that other lenders are going to follow HSBC’s lead and withdraw their lowest fixed rate products from the market. HSBC themselves still offer fixed rates starting from 3.29% so while this is another story that’s taken more than its fair share of column inches, it seems to have little effect on the majority of potential borrowers.

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Students Hit Hardest By Rent Increases

by Sarah Halloran

Recent reports have claimed that the cost of renting has increased across the board but there may be a nasty shock in store for those who have just got their A level results. While the private rental sector has shown increases of 4.3% over the last 12 months, students are now facing rises of up to 25%.

The Royal Institution of Chartered Surveyors (RICS) have claimed that the rise in demand and the increase in private rental charges are down to the scarcity of mortgage products and the situation is only likely to continue in the same manner for the foreseeable future.

In fact, surveyors predict that a similar rise of around 3.9% in rental costs will follow over the course of the next calendar year as the mortgage market continues to be difficult to access.

“While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords,” said Peter Bolton-King, residential director at RICS.

“However, it is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.

“These barriers to homeownership need to be addressed alongside the shortage of new stock coming to the market.”

Meanwhile, a further survey has shown that while a student’s weekly rent has risen by 2.4% in the same 12 month period, some areas of the UK have returned increases of around ten times that figure.

The organisation, Accommodation for Students has shown that rents in the North of the country have jumped by alarming rates and they have revealed a 25% increase in Hull over 12 months while Lancaster and Durham have recorded rises of 24% and 20% respectively.

According to Simon Thompson, co-founder of Accommodation for Students, the rises tend to be greater, depending on how desirable the local college or University might be.

“A key factor in determining student rents is the desirability of attending some universities, Mr Thompson said.

“That puts pressure on the accommodation available and, hence, the charging of higher rents. Winchester, Durham, Lancaster, Exeter and Newcastle come into this category.”

In addition, Oxford and Cambridge have experienced obvious increases while the cheapest place for students to rent in the UK is Glamorgan, with an average cost of just £46.00 a week.

The student and private rental markets are completely different entities but both sets of figures show us that the advantages in the current climate are firmly with the UK’s landlords.

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Concern Over Rise in Equity Release

by Sarah Halloran

Everyone has heard about the bank of Mum and Dad but there are fears that first time home buyers are skipping a generation and looking to their Grandparents for help with funding their purchase.

These concerns have arisen after reports that the sale of Equity Release products has soared in the six months from January to June of this year. The increase equates to a rise of over 10% from the same period in 2011.

During the first half of 2012, the Equity Release Council report that some £424 million was freed up with 31% of those surveyed stating that the money was to be distributed among their loved ones. With young first time buyers struggling to raise a deposit in order to get onto the property ladder, much of this money is being utilised in this way.

Dr Ros Altman, Saga’s Director General put the issue in blunt terms when she stated that the elderly are living longer and their grandchildren are having to wait longer for their inheritance as a result.

‘The last thing you want as a grandparent is for your children and grandchildren to be thinking, “When is granny going to pop off so I can get my hands on the house?” She said.

Among the concerns expressed by some observers is the theory that many who enter into the schemes are not fully aware of the process and how it works. While the debt involved is only repaid upon death, the outstanding amount can double every eleven years.

With that in mind, the Consumer Credit Counselling Service has advised the elderly to consider their own futures and the potential issues involved before entering into any Equity Release scheme.

‘While equity release to help children or grandchildren get on the property ladder or pay for their education can be gratifying for many, it can be a huge burden for others,’ a spokesman said.

‘There are a lot of costs associated with getting older, and it is crucial that these are factored in to any decisions about equity release.’

Andrea Rozario, director general of the Equity Release Council concludes by asking anyone currently considering an Equity Release product to take independent advice before making the final decision.

‘Advisors are incredibly important when it comes to equity release as not only will they help the consumer to decide if equity release is right for them, but also make sure that they are getting the benefits they are entitled to,’ she said.

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Nationwide Reports Biggest Property Plunge in 3 Years

by Sarah Halloran

The start of any new month brings a fresh batch of property statistics and first out of the blocks are the Nationwide with claims of significant falls in house prices. In fact, the Society reports that property figures are falling at their fastest rate since 2009 and the trend looks set to continue for the remainder of 2012 at least.

Nationwide’s survey reveals that the average price of a home in Great Britain now stands at £164,389, a fall of over £1,000 from the June figure of £165,738. That represents a drop in percentage terms of 0.7% and this is the fourth month out of the last five that overall property prices have decreased.

It was also reported that mortgage approvals were at their lowest point since 2010 and Nationwide claim that the gloomy picture is firmly down to the current recession.

“The weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy,” said Robert Gardner, Nationwide’s Chief Economist.

“The UK recession intensified in the three months to July, with the economy contracting by 0.7% quarter on quarter.”

The Society also went on to point the finger at contributory factors such as the wet summer and the Queen’s Diamond Jubilee, but suggested that these were only minor issues and shouldn’t be blamed in isolation.

“This disappointing outturn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter,” Mr Gardner added.

Elsewhere, property experts have met the news with resigned acceptance while it is forecast that property prices could ultimately end up falling by as much as 3%.

“The soft news on the housing market is coming pretty thick and fast at the moment,” said Howard Archer of IHS Global Insight.

“The Nationwide data reinforce our belief that house prices are headed lower over the rest of 2012 and very possibly beyond in the face of limited activity, low and fragile consumer confidence, muted earnings growth and relatively high unemployment.

“We expect house prices to end up losing at least 3% from current levels.”

Nationwide have also been in the news recently for releasing what some are heralding as the ‘cheapest ever mortgage deal’. After HSBC introduced a fixed rate product of 2.99% in July, Nationwide went on to trump this with a 2.95% deal.

However, the qualify criteria for both products is very strict and as such, neither are likely to kick start the mortgage approval market on their own. In turn, property prices could be set to maintain their downward spiral for some time to come.

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What Do You Need to Get on the Property Ladder?

by Sarah Halloran

A recent survey carried out by RightMove on behalf of the Guardian has underlined just what First Time Buyers (FTB’s) currently need in order to take that vital first step onto the property ladder. Essentially, it’s claimed that those requirements amount to three key ingredients – a degree, a partner to share the costs and benevolent relatives who are prepared to help.

Over 5,000 FTB’s took part in the survey which found that one in four would be seeking assistance from their parents in order to fund a deposit. However, 53% of those surveyed claimed that they would be funding their purchase alone.

Overall, 38% of those surveyed were educated up to degree level and 30% held some form of postgraduate qualification. While the survey took in respondents of all ages, it was found that, of those between the ages of 25 – 34, 41% held a degree.

The findings were intended to underline just how difficult it is to get on the property ladder as house prices have risen beyond income increases in recent years. In addition, the perception is that lending criteria has made it increasingly difficult to obtain a mortgage but do these results really back those claims up?

You could reverse the headline to suggest that three in four respondents weren’t seeking financial assistance from their parents and for some, the fact that over half of FTB’s surveyed are buying a property alone is a significantly high figure.

Earlier this month, RightMove produced another survey of FTB’s which they claimed had provided some positive results as those buyers came to terms with the economic downturn. The findings revealed that of those looking to purchase a property within twelve months, three in ten were FTB’s and this was the highest level for almost three years.

Reacting to the news, Rightmove’s Miles Shipside said,

“The results come as a welcome surprise, hopefully this three year high in intending first-time buyers will come to fruition.”

“The property market needs this upward trend in first-time buyer activity to continue as first-time buyers perform an essential role at the bottom of the property market food chain. “

Mr Shipside also added a warning that the future for FTB’s was far from certain but, on the face of things, there are two sets of conflicting reports from the same source in the same month. Alternatively, perhaps this just emphasises that there are times when statistics can be viewed in two separate ways.

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Who Takes the Blame for the Slow Mortgage Market

by Sarah Halloran

The property market as a whole was expected to slow down considerably this summer as the UK headed into a season of celebrations. With the Queen’s Jubilee followed quickly by the Olympics, it was predicted that sales and mortgage enquiries would be subdued, in keeping with the typical reaction to these types of events.

However, as the Jubilee fades and London 2012 approaches, another factor is being blamed for the lack of mortgage enquiries in recent weeks. The wet weather that has blighted much of this summer so far has been cited as the main reason for a significant drop in approved mortgages for home purchases in June.

Figures released this week by the British Bankers’ Association (BBA), claim that those approved home loans fell by 11% in June to 26,269 from the previous month. Meanwhile, the met office indicate that this was the wettest June recorded since 1910 so are those two sets of statistics related?

The BBA’s report blames the wet weather along with a host of other factors besides,

“June’s approvals numbers were affected by the Diamond Jubilee celebrations, Euro 2012, and the wet weather,” the BBA said.

“Paying off loans or overdrafts and building up deposits is the current consumer ambition,” David Dooks of the BBA added.

Mortgage activity as a whole has been slow since March and gross lending of £7.2 billion in June was also comfortably below the six month average. While no single factor can be held wholly responsible, those major events combined with appalling weather have all been factors and the prognosis for the near future is by no means encouraging.

“The ongoing eurozone crisis, which has stepped up a level in the past week, will continue to undermine consumer confidence and encourage buyers and sellers to sit on their hands until there is significant improvement,” said Mark Harris of SPF Private Clients.

“Any recovery in the housing market remains a long way off.”

As far as the ‘holiday effect’ is concerned, with the Jubilee over and the Olympics about to get underway, could we see an upturn in mortgage lending in the coming months? The wet weather has also abated and although the long range forecast is mixed, it seems unlikely that we will be returning to the torrential downpours seen throughout May and June.

Those events may soon be behind us but as Mark Harris from SPF Private Clients pointed out, there are considerably more factors affecting the mortgage market besides the weather.

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Labour Highlights Issues of ‘Rip-Off’ Letting Fees

by Sarah Halloran

The issue of an unregulated private letting industry has hit the headlines on a number of occasions in recent weeks and one of the problems faced by tenants has been highlighted this week by Labour’s Opposition Government.

Hilary Benn, the shadow secretary of state for communities and local government has spoken out over the high charges placed by letting agents and has claimed that some are genuinely ‘ripping off’ landlords and tenants. The numbers in question don’t just relate to commission charges as Labour are also concerned about fees for add-ons such as reference checking and sending renewal letters.

The Labour Party underlined their concerns amidst claims that in 2013, the numbers of homes rented out privately is set to exceed social housing for the first time and their findings suggest that agents’ charges vary to a huge extent.

The charges for reference checking range from a mere £10.00 all the way up to an unnecessarily excessive £275.00 while the charge for renewing a tenancy –  a process which involves sending an e-mail or a letter and asking for it to be signed and returned – varied from £12.00 right up to £220.00.

“What is actually £220 of cost in terms of administration if you had just to send an email, open an envelope, stick it on file?” Asked Mr Benn.

“That seems to me a rip-off. It’s a problem not just for tenants but also for landlords.”

Hilary Benn and his party have promised that they will look into ways in which caps can be introduced in the private sector and this is a move that has been widely welcomed by Landlords and Tenants Groups right across the country.

“Anyone can set themselves up as a letting agent, and then potentially abscond with hundreds of thousands of pounds of people’s cash,” said Ian Fletcher, Director of Policy at the British Property Federation.

“It is therefore counterintuitive that estate agents who handle relatively little cash are regulated, but letting agents who handle lots of cash are not.”

Labour has conceded that part of the problem lies in the fact that the levels of social housing weren’t increased when they were in power. As a result, more and more home seekers are turning to the private rental sector as they are unable to get on to the property ladder and into home ownership.

In the present day, the Labour Party recognise that the private sector is therefore meeting an urgent need and it seems set to press on with finding a solution to any excessive agents’ charges.

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UK Rank Third in Europe for Costly Housing

by Sarah Halloran

A recent survey has shown that families in Great Britain spend, on average, 40% of their annual income on housing costs and this means that those outgoings are the third highest in the whole of Europe.

In fact, only Denmark and Greece spend more on those expenses which would typically include the cost of renting or paying a mortgage together with other living costs. The report, delivered by Shelter also suggests that as many as one in six of those households are becoming increasingly overwhelmed with their payments which subsequently lead to higher levels of rent or mortgage arrears.

As a result, it’s claimed that the families who are worst affected are having to cut down on other household essentials such as food, petrol and clothing.

“These figures are the evidence that the UK housing market is deeply dysfunctional,” said Campbell Robb, Shelter’s Chief Executive.

“With so many families spending huge amounts of their income on their rent or mortgage, people will be making daily trade-offs between food bills, filling the car tank with petrol, and paying their housing costs.”

The survey took in 29 countries from across the continent and it found that Cyprus headed the right end of the table with just 2.5% of its families faced with unaffordable housing costs. Meanwhile, our nearest neighbours France revealed that around 5% of its population were struggling with housing bills – a figure that is three times better than in the UK.

One of the main contributors to high housing costs is the price of fuel which continues to rise. The 2010-11 UK housing survey showed that each household pays an average of £1152 a year in energy bills and the figures look set to climb. However, the suggestion that those families struggling to pay rent and mortgages maybe going without heat is even more worrying.

Many cheap energy tariffs have also been scrapped in recent months leaving the cost of fuel to rise further and place an increasing strain on overburdened families.

“This is not set to get better any time soon,” Campbell Robb added. “While the situation is bleak at the moment, a succession of governments failing to provide much-needed affordable homes means that the future facing our children and our children’s children is only set to get worse.”

Overall, it’s a gloomy picture being painted by the survey but can the coalition government rise to Shelter’s challenge and provide the affordable housing that is being widely called for?

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