New Housing Minister Needs To ‘Hit the Ground Running’

The big news for housing this week came with the cabinet reshuffle that saw Grant Shapps moved from housing minister with Mark Prisk taking his place. Mr Prisk, the Conservative MP for Hertford and Stortford has been told in some quarters that he has a daunting task and that he must address many industry issues without delay.

The Home Builders Federation (HBF) has been particularly vocal in the wake of Mr Prisk’s appointment as it raises concerns above the future for new builds in the UK. Earlier this week, Steve Turner who is Head of Communications at HBF urged the government to put pressure on the country’s banks to increase their overall lending.

“There are ways that the government can help but ultimately we need to see the banks lending more money – it is exactly the same as for mortgages,” Mr Turner said.

Those comments came after claims that development finance represented the biggest obstacle to sustained home building and not planning policy as many believe.

On the HBF website however, the federation goes even further in putting their point across as they urge the new housing minister to ‘hit the ground running’. The HBF claim that at present, we are building homes at the slowest rate since the 1920’s and that we are only providing half of the country’s overall requirements.

The HBF go on to state that they are looking for the coalition government to address what it calls a severe lack of mortgage credit and development finance. Amongst other issues, the federation has also asked that funding is maintained for the FirstBuy scheme which has been responsible for 10,000 new homes in the UK.

It all adds up to a daunting task for the new incumbent – a fact which the HBF acknowledge.

“We welcome Mark Prisk to the role. Whilst he has an unenviable intray, it is clear that he understands the scale of the job in front of him with his background in the sector,” said Stewart Baseley, executive chairman of the HBF.

“We hope he will offer some radical ideas to transform the current housing and planning systems and tackle the housing crisis, providing economic growth and jobs, and strengthening communities across the country.  In his previous role he undertook some positive work to reduce regulation, a commitment his Government has also made with regards to housing and something we hope he will now deliver on.”

The federation go on to welcome Mr Prisk and while the size of the issues facing the housing market as whole are a significant task, the questions that relate to new home builds are obviously going to take up a major proportion of the new Housing Minister’s role.

Labour slams government over ‘unscrupulous letting agents’

Letting agent rip offs are under the spotlight once again after new findings from Shelter released this week. In a survey of 5,000 tenants, the organisation found that 23% claimed that they had been unfairly charged by an agent at some point for contract renewals, repeated credit checks and even for viewing a property.

The poll found that the most common complaint was in regard to ‘administration’ – a term which covers a wide range of charges and tends to average at around 14% of the tenant’s property charge. In some cases, this amounted to a non-refundable, one-off fee of up to £540.00.

Typically, a 10% charge would then be applied for an initial credit check and further 8% fees levied for contract renewals. Incredibly, charges for repeated credit checks of up to £150.00 were made while some tenants were even asked to pay £100.00 simply for viewing a property.

“It’s scandalous that some letting agents are creaming off huge profits from the boom in private renting by charging both tenants and landlords fees that are totally out of proportion to the service they provide,” said Kay Boycott, Director of Campaigns, Policy and Communications at Shelter.

Jane Ingram, who is president of the Association of Residential Lettings Agents (ARLA), acknowledged that standards needed to be raised and pointed to her organisation’s repeated requests to the coalition government.

“Standards in the lettings industry do need to be raised. That’s why we have long-called on the Government to act swiftly and introduce a robust licensing system designed to protect consumers,” she said.

The figures have led to an attack on the government by the Labour Party who accused the coalition of standing by and doing nothing while the crisis deepens.

“Unscrupulous lettings agents are ripping off tenants by charging them fees they didn’t know they would face, and exploiting landlords and tenants alike by failing to protect the money they hold for them,” said Jack Dromey MP, the Shadow Housing Minister.

Mr Dromey went on to underline the effect these charges in having at a time when many families are struggling to cope financially.

“As the growing housing crisis and double dip recession put the one million families in the private rented sector under pressure, this is the last thing they need,” he added.

Shelter also found that some agents were double charging their fees to both landlords and tenants while some renters asserted claims that they feel vulnerable in the current climate.

Calls for the government to act are increasing and the only certainty is that this situation will only be repeated until action is taken.

Shop Around to Beat the Base Rate Rise

There was more bad news for homeowners and potential property purchasers alike when Santander announced an increase to its Standard Variable Rate (SVR) last week. That increase was, in percentage terms, quite significant with the rate changing up to 4.74%.

Santander claim that the rate change will add around £26 a month to a £100,000 mortgage but insisted that it had no further plans to increase the SVR again. The rise will affect all existing Santander customers along with those acquired from other providers with the exception of Alliance and Leicester. It’s thought that the move will see an increase in monthly payments for a ‘few hundred thousand customers’.

“For the last three years the amount it costs us to provide mortgages and the rates we offer our savings customers have been increasing, despite the base rate remaining static,” a Spokesperson for Santander said.

“Additionally, the cost of running a bank in the UK has increased dramatically through a combination of increased liquidity, capital and funding requirements,” the company added.

Santander have, however, been accused of profiteering by some who have deemed the increase unnecessary. It’s been suggested that this was a profitable area for the lender and they have merely increased their SVR in order to take further advantage.

Mark Harris of SPF Private Clients said that this was ‘profiteering, pure and simple’.

“The move puts its SVR towards the upper end of the scale when compared with other big lenders such as Halifax, Woolwich and Nationwide,” Mr Harris added.

Following the increase, advice has come from many quarters, urging those affected to shop around. For those in a variable rate mortgage with no penalties for settlement, such a move could bring monthly payments back to more affordable levels.

“Any homeowners worried about their mortgage payments should make sure they do their homework to make sure they get the best deal possible to suit their needs,” said Michael Ossei of financial comparison site uSwitch.

Mr Ossei also warned that further hikes in the SVR from other lenders were likely.

“This latest increase should serve as a warning that mortgage payments could go up at any time and with very little notice. If you are enjoying lower mortgage payments at the moment it may be worth overpaying, or putting aside the extra cash you’re saving while rates are so low. And although it may be another year or more before the base rate rises, the only way for mortgage rates to go in the long term is up,” he concluded.

Are House Prices Finally Being Slashed?

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 – 27^th July to 12^th 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?

FTB Borrowing Recovering After ‘See-Saw’ Year

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.

Nationwide Reports Biggest Property Plunge in 3 Years

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.

What Do You Need to Get on the Property Ladder?

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.

Who Takes the Blame for the Slow Mortgage Market

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.

UK Rank Third in Europe for Costly Housing

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?

Affordable Homes Scheme Set to Fall Short

The Governments Affordable Homes campaign, launched in 2011, was designed to get Britain’s home builders moving to provide the supply to meet a considerable demand. However, reports released by the National Audit Office (NAO), suggest that the scheme may fall some 50% below its intended target.

The plan had looked to deliver 80,000 new properties by the end of 2015 but the NAO are not only suggesting that the numbers may be nearer 40,000, they also suggest that due to financial issues, providers may not be able to keep to their agreement and charge 80% of market rent.

The plans, announced in 2010, left little room for negotiation and manoeuvre at the time,

“There are key risks including the fact that more than half of the homes are planned for the final year, with no room for slippage,” said Amyas Morse, Comptroller and Auditor General.

“The final judgment on the success of the programme will depend on how well these risks can be managed between now and 2015.”

Under the programme, different organisations had set themselves up as housing providers and these included local housing associations, local authorities and private companies. The main problem, as identified by the NAO seems to lie with those providers struggling to raise adequate finance to fund the project.

“Some have had to offer additional collateral, generally in the form of assets rather than cash, to lenders because of using financial derivatives to reduce their interest rate risk,” the report claims.

“A survey by Baker Tilly in 2012 found that 63% of registered providers who responded are now considering alternative funding other than traditional banking sources, the most popular being corporate bonds.”

Margaret Hodge will chair the public accounts committee that will examine the report and she indicates that the government will not explain at this stage as to just how many tenants are likely to be affected.

“The department has scrapped the target rent guidelines for this programme, leaving vulnerable tenants increasingly dependent on housing benefits and increasing the welfare bill by £1.4bn,” she said.

“The department has refused to be transparent about just how many tenants will be affected and by how much.”

Margaret Hodge went on to suggest that the scheme would have to be more transparent if there was any hope of it being completed on time.

“My committee will want officials to regularly and transparently update their assessment of the costs and benefits of the programme so that we can hold them to account for the social and financial consequences of their decisions, particularly in light of changes to the welfare system,” she concluded.