Property Investment

Writing in his blog at www.charcol.co.uk Boulger said: “No doubt the reason Andrew Lilico, chief economist of Policy Exchange, which calls itself a think tank, chose to issue his paper forecasting Bank Rate would rise to 8% in 2012… is that in the August silly season when real political news is thin on the ground it is much easier to grab some headlines by publishing an outrageous forecast than when senior politicians are around to rubbish such forecasts. Policy Exchange must be desperate for some publicity!

“Only last month Policy Exchange published a report questioning many of the assumptions in a book entitled Spirit Level. I have no idea whether the criticism was justified but the interesting point is that its report was entitled “Beware False Prophets,” a title which could more appropriately have been given to the report it published this week.

“You will all remember that Gordon Brown abolished boom and bust (ahem!). What Policy Exchange is forecasting for the next 4 years is much worse than boom and bust – roller coaster would be a more appropriate term.

“Mr Lilico forecasts a double dip next year and claims we have had several double dips since the mid 1950s, but he is making up the definition of double dip to suit his purpose. The conventional definition of a recession is 2 consecutive quarters of negative GDP but all the double dip examples Mr Lilico gives involve only one quarter of negative growth following the initial dip and subsequent recovery. Other economists take the view that 2 more quarters of negative growth are required for there to be a double dip.

“He forecasts Bank Rate will rise to 2% by the end of next year and then shoot up to 8% in the following year on the back of a rapid increase in inflation caused by the Bank of England massively increasing its quantitative easing programme next year to counteract the double dip recession he forecasts next year.

“If Bank Rate was to increase by 6 percentage points, i.e. a 300% increase, from 2% to 8% in the space of only 12 months property prices, both residential and commercial, would collapse on the back of the inevitable massive hike in mortgage rates.

“Arrears and repossessions would escalate rapidly and bank balance sheets would again come under huge pressure as a result of the massive write offs they would have to provide for on their property loans. Chances are the some of the weaker banks would again have to be rescued by the Government, assuming it had the appetite to do so and could afford to.

“The Bank of England of courses realises this would be the consequence of increasing interest rates by so much so quickly and so it will not happen.

“Mr Lilico is getting his excuses in early for being wrong – the paper says:

“I could well be wrong in all kinds of ways:

• we might not have a double dip, so they may raise interest rates materially in the second quarter of 2011 instead of holding them below 2% throughout the year as I expect.
• we may have a double dip and they might lose control of deflation, with prices falling dramatically through 2011 and 2012 instead of rising.
• inflation might go much higher than the sorts of numbers I’ve suggested.”

“There is no reference in this paper to economic events outside the UK. Mr Lilico appears to think that the UK operates in a vacuum, whereas more bad economic news this week from the USA has pushed gilt yields and swap rates to new all time lows, with 5 year swaps now down to a new all time low of 2.03%.

“If Mr Lilico is prepared to put his money where his mouth and is proved right he could make a fortune as his views are so extreme. The logical approach for someone with his expectation of how the economy will play out would be to sell any property owned, rent one’s home and invest the resulting equity in out of the money gilt put options, which are a low priced highly geared investment giving the right, but not the obligation, to sell gilts in the future at around today’s price.

“Although it might be considered that the high inflation he forecasts would be good for property prices this is only true in the long term. In the short term the huge hike in interest rates to try to control the jump in inflation would be a much more important influence on property prices.

“Only after a few years of high inflation when borrowers had adjusted to the higher interest rates could property prices be expected to start rising again, but it would be from a significantly lower base.

“Even that assumes that the banks would by then have repaired their balance sheets sufficiently from the very sizable new bad and doubtful debts they would have incurred to again become active in the mortgage lending market.”

Nationwide is reducing rates by up to 0.20 per cent on selected remortgage products.

The rate cuts will improve the competitiveness of Nationwide’s remortgage range and the average cut will be 0.15 per cent.

The remortgage product range from Nationwide will include the following:

Two-year fixed rate reduced by 0.19 per cent available at 3.39 per cent (up to 70 per cent LTV)

Three-year fixed rate reduced by 0.09 per cent available at 4.09 per cent (up to 70 per cent LTV)

£896 product fee

£99 booking fee (payable upfront and non-refundable)

No standard valuation or standard legal fees

New customers can borrow up to 85 per cent LTV

Two-year fixed rate reduced by 0.19 per cent available at 3.79 per cent (up to 70 per cent LTV)

Two-year fixed rate reduced by 0.19 per cent available at 4.29 per cent (70-75 per cent LTV)
No product fee
£99 booking fee (payable upfront and non-refundable)

No standard valuation or standard legal fees
New customers can borrow up to 85 per cent LTV

Andy McQueen, divisional director for mortgages and general insurance at Nationwide, said: “We are reducing rates by up to 0.20 per cent across our range of products which is great news for customers seeking to remortgage. For example, our two-year fixed rates are now particularly attractive, starting from 3.39 per cent for customers wanting a mortgage of up to 70 per cent of the property value.”

The news, which will see the reduction come into force from Monday next week (23rd August), comes just days after the lender reduced mortgage rates across its entire range.

The move takes the mortgage application fee for purchase customers down from £250 to £99, and is one of the many ways in which Northern Rock plc is trying to make improvements to its products and services.

The purchase range, which includes both fixed rate and tracker products, as well as buy-to-let, is designed to appeal particularly to first-time buyers and those with lower deposits.

Commenting, Anth Mooney, marketing director at Northern Rock plc said, “This reduction to our mortgage application fee is great news for customers who are looking to keep their purchase costs low.

“There are lots of elements involved in buying a new home and this is one way Northern Rock is helping to keep things as straightforward and affordable as possible for our customers.”

It follows recent data released by the National Landlords Association (NLA) showing a fifth of private-residential landlords had tenants in rent arrears during Q2 2010.

Whilst one-third of landlords had never sought to end a tenancy, the survey found 23.3% had because of anti-social behaviour by tenants.

Landlords reported that in 57% of possession cases the tenants took less than three months to move out, while 81% of cases were resolved within five months.

David Salusbury, chairman, NLA, commenting on the research results, said: “Gaining possession can be very costly for landlords, especially when it is related to rental arrears. Many landlords have mortgages to pay on top of the expense of gaining possession.

“One-third of landlords have reported paying between £250 and £1,000 to have tenants removed. This amount is often compounded by late rent payments.”

This is according to Susan Drakeford, licensed conveyancer at Adams & Remers. The new legislation requires the owners of a property intended to be a House of Multiple Occupancy (HMO) to apply for planning permission for change of use.

Drakeford believes that property owners may want to consider waiting till September for further clarification by the new Government on whether this scheme will be changed to give individual authorities the choice as to whether planning permission is required.

Commenting, she said: “A HMO is defined as a property where 3 or 6 unrelated individuals share basic amenities. This doesn’t include properties where the owner and up to two lodgers live. There are also other exemptions. The change requires the owner of the property to apply to their local authority for planning permission if they want to turn it into a HMO for 3-6. However the new Government has indicated it would like individual local planning authorities to decide whether planning permission is required.”

There is further grey area around the legislation for a property where more than six individuals will live as the control limit of 6 persons defines the scope of the new class 4 planning category.

Drakeford continued: “Many landlords I have spoken with are still unaware of the proposals to change the rules again.

“At the moment the government is holding a consultation process for interested parties in September. This will be put before Government with any changes coming into force on 1 October 2010. Anyone who is planning a HMO or planning to turn a HMO back into a single dwelling should at the moment apply to their local authority for planning permission which costs £350 or hang on till 1 October to see if the rules change.”

There will be two different propositions under the new structure including an appointed representative model and one for advisers who want to sit under the Linx FS umbrella as registered individuals.

The new regional network will still be known as Linx FS and the firm said it will offer its members a more competitive pricing structure at a time when other networks are increasing their costs.

Bob Hope, director at Linx FS, said: “We are exceedingly pleased with PTFS as our choice of network partner as they mirror our core values of integrity and ‘can do’ attitude. This alliance allows Linx to grow to our planned 100 advisers and offer a very secure framework for our members.

“The feedback we have received during this transition has been positive and we’re very grateful for the fantastic support of our members.”

The past three years have been turbulent across the globe, but things have been tougher for the UK mortgage industry than most.

Brokers have been hit hard with conservative estimates from the Association of Mortgage Intermediaries suggesting that 20,000 of you have fallen by the wayside since the 9th August 2007 when the funding markets closed their doors and lenders started shutting up shop.

Those working at lenders also suffered fallout as funding dried up, new lending ceased and staff were sitting twiddling their thumbs.

Kensington chopped 65, Paragon lost 62, Platform shed 65, edeus was forced to let 30 people go, Mortgages PLC swung the axe through 20% of its work force and Wave said goodbye to 26 staff. All in a few months.

Heads also rolled at the top with Merrill Lynch, which owned both Mortgages PLC, Wave and provided financial backing for edeus, seeing its chairman and chief executive Stan O’Neal thrown over.

Bear Stearns went bust, Lehman started to wobble in early 2008, axing staff but continuing to lend under Preferred and Southern Pacific Mortgage Limited brands until it was left to topple by Wall Street’s finest in October that year.

Packagers didn’t look likely to survive the crisis with Praxis, which later went into administration, c2 Group and MD Nationwide all culling staff in a wild attempt to survive.

Kensington was bailed out by South African bank Investec just in time to scrape through the crunch intact but it was still forced to pull out of sub-prime lending in November 2007, and ceased lending altogether shortly thereafter.

Rooftop, Mortgages PLC, Future Mortgages, Home Funding, Victoria, edeus – all kings of the boom years lost their ways in 2008 with many winding up operations or sitting in a finance-free limbo.

By the close of 2008 the non-bank lender had all but disappeared from the market. edeus went pop in October 2008, morphing its business into due diligence firm Exact after being forced into administration. Checkmate has rebranded into Portillion, but is still waiting for its FSA lending permissions to come through.

Gross mortgage lending fell from £362,758 billion in 2007 to a paltry £143,633 billion in 2009. The Council of Mortgage Lenders estimates gross lending for 2010 to be in the region of £160 billion, but it has already announced that the market is tracking below that level, and its estimates may need to be revised down.

“Until things get better in the funding markets,” has been a ubiquitous phrase, heard muttered in the death throes of many a lender and those in the industry today say the funding gap remains the spanner in the works preventing the mortgage machine getting back into gear.

The new products include a 2-year buy-to-let tracker remortgage offering an initial rate of 3.99%, with a £1,999 fee, up to 60% LTV.

For its corporate range, there will be a new 2-year tracker mortgage offering an initial rate of 2.45%, with a £999 fee, up to 60% LTV. There is also a new exclusive 2-year tracker 60% LTV mortgage for PMS and Sesame at 2.35% with a £999 fee.

The rate on its 2-year fixed rate 60% LTV mortgage in its corporate range is also being reduced by 0.05% to 3.19%.

Buy-to-let borrowers remortgaging can access a 2-year tracker at 3.99% (4.0% SVR, 4.8% APR), 60% LTV, with a £1,999 arrangement fee until 30 November 2012.

More than 20 cases with a value of £96 million were reported – compared to the same period during 2009, where there were 18 cases worth just £24 million. The whole of 2009 saw a total of only £77 million.

Mortgage fraud accounted for over half of all fraud committed against the financial sector in this period. One of the biggest cases was worth £50 million, involving two solicitors who were charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty, while an estate agent was jailed for six years after attempting to pull off a £2 million mortgage fraud after stealing the identities of two homeowners.

Hitesh Patel, partner, KPMG Forensic said: “The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate.

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

The Committee’s latest inflation and output projections will appear in the Inflation Report to be published at 10:30am on Wednesday 11 August.

The minutes of the meeting will be published at 9.30am on Wednesday 18 August.

Money set aside to cover bad loans fell from £13.4bn to £6.5bn.

Lloyds said the first half of 2010 was a significant milestone for Lloyds Banking Group as the group returned to profit.

It added: “Despite the challenging economic environment, the core business performed strongly and we continued to see positive momentum across all the key income lines.”

The bank, 41% owned by taxpayers, also said it was “well positioned to deliver strong financial performance over the coming years”.

The Lloyds share price is now about the same level it was when the government took its stake in Lloyds and it appears to be on course to hit gross lending targets set by the government as part of the conditions of the bail-out.

Lloyds said it had lent £23.7bn to businesses during the first half year, against a target of £44bn for the year to the end of March, and £14.9bn in new mortgages, against a target of £23bn.

However, net lending figures, which take into account not just money loaned out, but money repaid as well, paint a slightly different picture.

“[Lloyds'] total net loans to all households and businesses have dropped 1% to £368bn, and it is charging more for that credit relative to what it pays for funds,” said the BBC’s business editor, Robert Peston.

Lloyds boss Eric Daniels told the BBC the reason for the flat net lending was the fact that businesses and consumers were looking to pay down debt rather than increase their debt levels further.

“We are ahead of our lending commitments, [but] customers are behaving very prudently. Credit is available,” he said.

The consumer price comparison website said yesterday morning that nine out of 10 mortgages were available direct to consumer only – a claim disproved shortly after the company released its press statement.

Following backlash from the intermediary market and media, Moneysupermarket withdrew its claim and issued an apology, but the damage had been done, and Dev Malle, sales and marketing director at Personal Touch, has since pulled the plug on Paaleads, the broker lead generation firm owned by Moneysupermarket.

Malle said the retraction by Moneysupermarket yesterday was “too little too late”, adding “it is not the first time they have misjudged the intermediary community and I am somewhat shocked.”

He also expressed disappointment with Moneysupermarket for not considering the impact on the broker community fully enough.

He said: “Clearly they have their own agenda and we need to trust and work in partnership with organisations to provide support and service to our community of advisers.

“We have therefore taken the difficult decision to serve notice on the corporate relationship we have with Paaleads and remove them from our lead generation panel.”

Dean Jones, head of Paaleads.com, said the firm was communicating with all of its clients to reiterate its commitment to the broker market.

He said: “While I can’t comment on individual client relationships, we are speaking to all of our broker partners to reassure them that we’re committed to the intermediary market and it remains an important part of our mortgage strategy.”

Mark Graves, development director at LSL Property Services and who is currently involved with network First Complete, said he “completely understand[s] why Dev Malle made the choice to cut Paaleads” from his panel.

Graves, who has rival generator Leadbay on his panel, believed the press statement from Moneysupermarket was ill-conceived.

He said: “Moneysupermarket was effectively having a pop at the hand that feeds its subsidiary, Paaleads. They’ve scored an own goal here.

“I think the time has also come when we all need to understand we’re on the same side. We can’t have one part of the industry having a go at another part because we all have a vested interest in making sure the industry survives. It was crazy making a statement like that without checking the facts.”

Upswing at Leadbay

Grant Stevens, managing director at Leadbay, said his firm had already seen an upswing of people inquiring for leads in the past 24 hours since the Moneysupermarket blunder was reported.

He added: “We think brokers always need to be the heart of the business in the mortgage industry – in all my time in the industry more than 60% of mortgage business has gone through intermediaries and often significantly more than that.

“A mortgage is also a product which needs advice. My problem with price comparison sites is that they’re commoditising things that can’t and shouldn’t be commoditised. While the ability to compare prices is good, I fundamentally believe everyone should have advice with something as big as a mortgage.”

Yorkshire Building Society has launched two new best buy mortgage deals for people who need to borrow up to 90 per cent of the value of their home.

For those who would like a little extra help with the initial costs of their mortgage, similar products are also available at 5.19 per cent fixed for two years or 5.89 per cent fixed for three years. Both products carry a £495 fee and include a free standard valuation and free legal service for those buying a property, or free standard valuation and £250 cashback for those looking to remortgage.

Tom Girling, product manager for mortgages said: “Both our two and three-year fixed rate deals offer fantastic value to borrowers who have a 10 per cent deposit – an area of the market where only a handful of other lenders are currently striving to offer competitive deals.

“At the Yorkshire, we’re trying to help as many people as possible obtain a mortgage and offering fixed rate loans to borrowers with a 10 per cent deposit is just one of the many steps we have taken to diversify our product range. However, by ensuring we only offer fixed rates in this area we can make sure our borrowers have piece of mind when it comes to their mortgage payments whether they are looking to buy their first property or remortgage.”

Barclays has reduced rates on its Woolwich mortgages (80% LTV) by up to 0.21% and at the same time has introduced a drop lock facility for all new mortgage customers.

The key reductions across the 80% LTV range include a cut of 0.21% on a two year fixed from 4.59% to 4.38%, 0.10% reduction on the three and five year fixed rates (three year 4.89% to 4.79% and five year 5.49% to 5.39%).

At the same time a lifetime tracker at 80% LTV is being introduced at base plus 3.38% with a £999 application fee.

The drop lock facility will be available to all new tracker and offset borrowers with Barclays. It will allow people who opt for a tracker or offset mortgages to switch to a fixed rate in the future without incurring an early repayment charge.

Andy Gray, head of mortgages for Barclays, said: “With speculation this week that UK interest rates are set to stay at record lows until 2014, the drop lock facility provides customers with peace of mind that they can go into a low tracker rate now and switch at a point in the future when they need greater security.”

This is the second rate reduction in a row for 80% loan to value deals and will be welcomed by those with smaller deposits.

It also follows on from the announcement last month that Barclays is offering mortgages at 90% lending for customers buying a new Bovis Homes property. The deal for consumers purchasing from Bovis Homes is maintained at a rate of 4.99% for two years.

All fixed rate mortgages revert to a lifetime tracker rate at base plus 2.49% after the fixed rate period.

Property Renovations Ely Ltd

DUBLIN City Council says it has been “inundated” with applications for a rent-to-buy scheme for 91 apartments in Rialto, Glasnevin and Finglas. The scheme, launched on Tuesday, attracted “hundreds” of calls, according to a DCC spokesperson. “At one stage there were 64 callers in a queue for information,” he said.

While some developers have offered units on a rent to-buy basis, DCC is the first local authority to do so, he said. The scheme allows the renter to agree a fixed price at the outset and then rent their home for a maximum of three years. If they buy during the time around 80 per cent of what they have paid in rent is taken off the price. Renters move into a furnished unit and keep the furniture if they decide to buy. Successful applicants will be taken from the council’s affordable housing list which currently has 3,000 names.

Property Renovations Ely Ltd

But experts say axing the scheme would put thousands at risk of being turfed out on the street.

The Department for Communities and Local Government said today that the Mortgage Rescue Scheme would suffer spending cuts as part of a wider review into mortgage support schemes offered by the government, and the Autumn Spending Review would decide the future of the scheme.

The news comes on the same day as a study of arrears and possessions showed that the number of people losing their homes could spiral over the coming years, with a worst case scenario of 175,000 out on the street in 2012 if unemployment peaks at 11.4% in 2011.

The report from Professor John Muellbauer and Dr Janine Aron of Oxford University said repossessions are likely to hit between 40,000 and 60,000 per year while the Council of Mortgage Lenders’ latest forecast is that there will be 53,000 repossessions in 2010.

The Oxford report also shows that the combination of greater tolerance from lenders and government schemes on offer has had a notable effect in helping homeowners stay in their homes.

But housing minister Grant Shapps announced this morning that on top of the spending cuts to the MRS the Homeowners Mortgage Support Scheme, which has only helped 34 people since its launch in April 2009, will be axed at the end of the financial year.

Eric Stoclet, managing director of Crown Mortgage Management, said: “Cutting back on the Mortgage Rescue Scheme is bad news for homeowners who get into financial difficulties. For many servicers, the Mortgage Rescue Scheme has been an important tool in helping to prevent borrowers in arrears from losing their homes during the economic downturn – and in providing options for those who cannot sustain a mortgage.

“With large-scale redundancies anticipated, particularly in the public sector, it is also likely that more households will feel financial strain and more homeowners will struggle to meet their mortgage payments. At this pivotal stage, it is crucial that the government maintains the scheme when it carries out its forthcoming spending review.”

In September 2009 the MRS developed a “Fast Track Team” to help fast-track cases from referral to completion. A central case management team takes referrals direct from lenders and ‘strips down’ the processes to the bare essentials to speed up process times and increase volumes.

As at December 2009, the Fast Track team had taken over 750 referrals direct from lenders, with the BBC stating that another 1,849 applications are ongoing by the end of March this year.

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Property Renovations Ely Ltd

Today’s consultation paper forms the first follow up to the Mortgage Market Review discussion paper published in October 2009. Consultation on these proposals will close in November 2010.

Reflecting the FSA’s enhanced consumer protection strategy and intensive day-to-day supervision, the proposed changes aim to ensure all lenders get back to the basics of responsible lending and that problems are prevented before they can develop or get out of control, according to the FSA..

Some of the key proposals include:

• Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay;
• Requiring verification of borrowers’ income in every case to prevent over inflation of income and to prevent mortgage fraud;
• Extra protection for vulnerable customers with a credit-impaired history.

  The tough new proposals, published in the consultation paper, form part of a major review by the FSA into the UK mortgage market and are based on detailed analysis of past lending decisions, looking at the causes of arrears and repossessions since 2005.

• The FSA found that:

  46% of households either had no money left, or had a shortfall after mortgage payments and living costs were deducted from their income;

LoveMoney.com has today issued a list of its top BTL fixed rates followed by its top BTL variable rates, as follows:

Lender; Term; Rate; Maximum loan-to-value; Fees.

The Mortgage Works, One-year fixed, 3.99 per cent, 60 per cent, 2.5 per cent of advance.

The Mortgage Works, One-year fixed, 4.99 per cent, 80 per cent, 3 per cent of advance.

BM Solutions, One-year fixed, 5.05 per cent, 75 per cent, 2.5 per cent of advance.

The Mortgage Works, Two-year fixed, 4.99 per cent, 70 per cent, 3.5 per cent of advance.

The Mortgage Works, Two-year fixed, 5.79 per cent, 80 per cent, 2.5 per cent of advance.

Leek BS, Two-year fixed, 4.58 per cent, 60 per cent, £995.

Godiva Mortgages, Three-year fixed, 5.30 per cent, 60 per cent, £1,749.

The Mortgage Works, Three-year fixed, 5.49 per cent, 80 per cent, 3 per cent of advance.

Woolwich, Three-year fixed, 5.49 per cent, 60 per cent, 1.25 per cent. of advance.

Coventry BS, Four-year fixed, 5.60 per cent, 60 per cent, £1,749.

Leeds BS, Five-year fixed, 6.29 per cent, 70 per cent, £1,549.

Clydesdale Bank, Five-year fixed, 6.99 per cent, 80 per cent, £999.

Lovemoney.com’s top BTL variable deals are as follows…

The Mortgage Works, One-year tracker, 3.24 per cent (Base rate + 2.74 per cent), 60 per cent, 3.5 per cent of advance.

The Mortgage Works, One-year tracker, 3.44 per cent (Base rate + 2.94 per cent), 70 per cent, 3.5 per cent of advance.

BM Solutions, One-year tracker, 4.35 per cent (Base rate + 3.85 per cent), 75 per cent, 3 per cent of advance.

The Mortgage Works, One-year tracker, 4.49 per cent (base rate + 3.99 per cent), 70 per cent, 2.5 per cent of advance.

Principality BS, Two-year tracker, 3.64 per cent (Base rate + 3.14 per cent), 60 per cent, 3.5 per cent of advance.

BM Solutions, Two-year tracker, 4.10 per cent (Base rate + 3.60 per cent), 60 per cent, 3 per cent of advance.

The Mortgage Works, Two-year tracker, 4.14 per cent (Base rate + 3.64 per cent), 70 per cent, 3.5 per cent of advance.

BM Solutions, Two-year tracker, 4.60 per cent (Base rate + 4.10 per cent), 75 per cent, 2.75 per cent of loan.

Halifax, Two-year tracker, 4.79 per cent (Base rate + 4.29 per cent)
75 per cent, £245 + 1.25 per cent of advance.

BM Solutions, Three-year tracker, 4.99 per cent (Base rate + 4.49 per cent), 75 per cent, £0.

Cheltenham & Gloucester, Three-year tracker, 4.99 per cent (Base rate + 4.49 per cent), 60 per cent, 2.5 per cent of advance.

Cheltenham & Gloucester, Three-year tracker, 5.29 per cent (Base rate + 4.79 per cent), 75 per cent, 2.5 per cent of advance.

Property Renovations Ely Ltd

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

The minutes of the meeting will be published at 9.30am on Wednesday 21 July.

Property Renovations Ely Ltd

House prices fell for the third month in a row during June as the housing market recovery showed further signs of faltering, according to the Halifax.

The average price of a home fell by 0.6% during the month to £166,203, following a 0.5% slide in May and a 0.1% decline in April, the lender said. However, prices in the second quarter were largely unchanged compared with the first three months of the year. They are also 6.3% higher than a year ago and 7.5% above their April 2009 trough.

Martin Ellis, housing economist at the Halifax, said the house price data was in line with his expectations. “This pattern is in line with our view that house prices will be broadly unchanged over 2010 as a whole,” he said.

“A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year. An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices. The low level of interest rates, however, continues to support housing demand.”

Last week, Nationwide said the price of a typical UK property increased by 0.1% in June compared to the previous month, but the rate of increase has slowed markedly from 0.5% in the previous month. It concluded that the annual rate of house price inflation dropped from 9.8% to 8.7% in June, making the typical house price £170,111.

Commenting on today’s figures Howard Archer, chief economist at IHS Global Insight, said: “The third successive drop in prices reported by the Halifax adds to a recent flurry of soft data on the housing market and stokes our relative pessimism over the housing market.

“Indeed, we increasingly suspect that house prices will be only flat over the rest of this year. We had previously thought a small rise was possible.”

Property Renovations Ely Ltd

As of the 30th of June 2010 the FSA began the new full regulatory regime for the sale and rent back sector.
The new format is said to be an extension and strengthening of the existing interim regime, which has been in force since June 2009.

This supports the recommendation made last year by the Office of Fair Trading (OFT), following a market study which found that sale and rent back deals had the potential to cause serious harm to homeowners who are often already in a vulnerable position.

All firms with permission under the interim regime must re-apply, and have their application approved under the new tighter regulations, in order to continue regulated sale and rent back activities such as advising on, entering into, or arranging a sale and rent back agreement.

The FSA’s aim is to ensure protection for the consumer through the Financial Ombudsman’s scheme and to make sure anyone considering sale and rent back is aware of the risks and other possible alternatives. Governing all the regulations is the idea of Treating Customers Fairly.

Under the new Sale and Rent Back rules, firms must make any tenancy agreements fixed for five years in order for consumers to have better security of tenure and are prohibited from using high-pressure sales techniques and cold calling, exploitative advertising and the use of emotive terms, such as ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’.

Lesley Titcomb, FSA director responsible for the mortgage sector, said: “With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter controls were vital.

“Sale and rent back is often used by those who want to sell in a hurry to stay in their home, and so it is vital that they are better protected during what is usually a difficult period financially.”

The number of players in the sale and rent back sector has been reduced dramatically from the pre-regulated days when estimates ranged from 1,000 to 3,000.

Approximately 80 firms were on the interim register and now that full regulation has been introduced the early indications are that the number of authorised firms is in single figures.

One of the first companies to achieve authorisation under the new regime, DFB Housing Solutions, the specialist provider to the intermediary market, spoke out about the new regulation. Daniel Lowerson, a partner of DFB, said: “We fully support the FSA’s stance, which we feel marks another big step forward for the sector and confirms sale and rent back’s status as a legitimate and valuable financial product for a range of consumers.

“DFB Housing will be continuing to promote the benefits of SRB to financial intermediaries, debt professionals and mortgage companies.”

For intermediaries, under the new regulatory regime they will still be able to introduce clients to regulated sale and rent back providers, if they feel they may benefit from more information about sale and rent back opportunities.

Property Renovations Ely Ltd

New warnings have been issued by a major accountancy firm that Landlords are at risk of Tax investigations.

Over the past couple of years we have regularly warned that HMRC (The Tax Man) is targeting Landlords. Whilst we believe that the Revenue is entitled to all the Tax it should correctly collect we have been told time and again how Landlords feel that the Revenue are effectively using bullying tactics to extract more Tax from Landlords.

The latest warning from accountants UHY Hacker Young concerns Capital Gains Tax, but with the Government pledged to raise £16.1 Billion from Tax Investigations there seems to be little doubt that many more Landlords will be called to explain their Tax Returns.

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The “Classic Bridge” is where clients wish to buy a property before selling their existing one and require money to bridge the time gap.

Where clients have little cash to put into the purchase, but equity in their existing property, charges can be taken over both properties.

However, bridging loans encompass far more than the Classic Bridge.

Other uses of Bridging Loans:

1. Probate cases – to pay the Inheritance Tax owed on an estate, following which the estate property can be sold.
2. Divorces – to release equity in the family home to allow a partner to buy a new home pending the sale of the existing home.
3. Downsizing – mature borrowers may be downsizing and need to complete on their new smaller dream home before their current home is sold.
4. Auction purchases – to enable investors to purchase at auction and because of the speed of bridging, to regard themselves as cash purchasers – even attempting to acquire properties before the auction.
5. Capital raising – to assist with the completion of a purchase before other “locked up” funds become available.
6. Buy to let – bridging provides an opportunity to snap up properties and arrange long term financing later.

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The British Bankers’ Association says it’s too early to say how yesterday’s announcement from the G20 leaders that forces banks and building societies to hold more capital in a bid to stave off another credit crisis will affect mortgage lending.

Brian Mairs, spokesman at the British Bankers Association (BBA), said it was too early to say how the announcement would affect UK mortgage lending.

He told Mortgage Introducer: “We have to remember that the G20 summit is a meeting of very different economies all trying to reach a common agreement for a range of economies with different rates of recovery.

“Leaders have to balance the need to stabilise banking systems with economic recovery, and they know they can’t hamper the banks because they are the main engine of recovery for most economies.

“In the UK, since the start of the credit crunch, banks have already had to double the capital they hold, and British banks also hold a greater proportion of capital than many other countries at the G20 meeting.

“We will need to wait to see the details of this decision before assuming any impact on UK mortgage lending.”

The G20 communiqué stated: “The amount of capital will be significantly higher and the quality of capital will be significantly improved when the reforms are fully implemented.”

Paul Broadhead, director of mortgage policy at the Building Societies Association, said the announcement was not a surprise, adding: “It could undoubtedly restrict lending in the UK but following the implications set out in Basel regulation, we have been expecting greater capital ratios and the necessity of quality capital.

“We would say that the process has to be carefully managed. There is only a finite amount of capital in the market and if lenders have to hoard it, it will impact on the amount available for new lending.

“Together with the repayment dates looming for the Credit Guarantee Scheme and the Special Liquidity Scheme we have to face we’ll see some constriction of the mortgage market.”

The G20 statement also said that “existing public sector capital injections will be grandfathered for the extent of the transition” which is set to be by the end of 2012.

Broadhead said the BSA would like further clarity that this would not mean the continuation of an “uneven playing field” for state-owned banks and building societies.

He added: “Building societies have been struggling with competition because the cost of funding for state-owned banks has allowed them to compete aggressively on pricing. We would be concerned if that was to continue.”

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Commenting on the monthly national housing survey for June, Richard Donnell, director of research at Hometrack, said:

“Over the last four months the supply of housing for sale has grown three times faster than demand. The June Hometrack survey showed a decline in new buyer registrations across six out of ten regions.

“And in three regions – London, North West and East Anglia – this is the second month that there has been a fall in new buyer demand.

“Following strong market conditions over 2009, demand started to falter over the first quarter of 2010 – a trend that has continued with June seeing a modest 0.1% increase in new buyers.

“Market sentiment has been coming under mounting pressure, firstly with the run up to the Election and more recently with concerns surrounding the economy. Last week’s emergency budget only added to the uncertainty with confirmation of both spending cuts and tax increases.

“It comes as no surprise that measures of consumer confidence have dipped in recent months. Indeed we expect demand for housing to slow further as seasonal factors come into play and households consider the implications of the Budget on their finances and on the economy in general.

“The growing supply/demand imbalance spans the country and under normal market conditions this would typically result in a downward pressure on prices. However, while the proportion of the country registering higher prices continues to shrink – 11% in June, down from 25% in February – very low transaction volumes are exacerbating the scarcity of housing for sale and this is acting as a support to prices.

“The latest survey shows continued growth in sales being agreed – up 2.8% in June – albeit off a low base. As long as agents see sales still taking place, there is no real impetus to reduce pricing.

“Cash buyers and those purchasing with small mortgages continue to account for a sizable proportion of the market, a situation that is unlikely to change in the coming months. The proportion of the asking price being achieved remains flat at 94.3% as does the average time on the market (8.4 weeks).

“Despite our view that demand is set to weaken in the coming months, price falls are only likely to feed through once sales volumes start to fall back.

“ It is when this point is reached that prices will need to adjust to a level where volumes can be maintained. The reality is that the scale of any price falls is likely to be limited – particularly in the current low volume market.

“Looking further ahead, it is higher interest rates that pose the greatest potential threat to the market especially against a backdrop of fiscal tightening.

“In a low interest rate environment, scarcity and low turnover can support prices in the short term, but higher rates are likely to be the catalyst for a material change in housing market conditions.”

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This will prevent landlords and second home owners from flooding the market with properties to avoid the higher rate.

Lower rate tax earners will continue to pay a flat rate of 18%. Entrepreneurs will see their capital gains tax payable at the lower rate of 10% on the first £5 million of income, a rise from £2 million where the threshold currently kicks in.

In his emergency budget speech this afternoon Chancellor George Osborne said: “One of the most chaotic areas of tax that the new government inherited from its predecessor is the capital gains tax regime.”

He added that Capital Gains Tax allowed and even encouraged exploitation of tax avoidance. “Some of the richest people in this country have been able to pay less tax than the people who clean for them,” he told a packed House of Commons.

He said it was therefore “right” that CGT should rise to create a fairer tax system, adding that the new rates are a balance of “fairness, simplicity and competitiveness”.

He told the House: “Low and middle income savers who pay income tax at the basic rate make up over half of all capital gains taxpayers. They will continue to pay tax on their capital gains at 18%. From midnight, taxpayers on higher rates will pay 28% on their capital gains.

“I have also decided that the Annual Exempt Amount for capital gains tax will remain at £10,100 this year and will continue to rise with inflation in future years.

“I am acutely aware of how important it is to protect the incentives to succeed in business and to innovate. So to promote enterprise, the 10% capital gains tax rate for entrepreneurs, which currently applies to the first £2m of qualifying gains made over a lifetime, will be extended to the first £5m of lifetime gains.

“I asked the Treasury to examine what would happen if we had increased the rate much further beyond 28%, and their dynamic analysis showed that this would have resulted in smaller total revenues.”

Osborne also said he considered in great detail the options presented for introducing tapers or indexation allowances, and concluded that the complexity and administration involved would have been “self-defeating”.

Mr Osborne said the changes made mean that:

- the capital gains of the majority of taxpayers are protected;

- the UK has a top rate that is in line with our international competitors;

- the UK system is kept simple and easy for any taxpayer to understand;

- and there is a reduction in the incentive to convert income to capital gains.

He added: “It is revealing that the great majority of the almost £1 billion of extra receipts we expect to see as a result of this change will come from additional income tax payments. I believe this is the right way to reform the taxation of capital gains.”

David Whittaker, managing director of broker Mortgages For Business, said: “While adjusting the threshold for CGT will raise more revenue this change affect more people than a straight hike in rates. But whichever option the government decided upon we knew the negative impact on the UK’s entrepreneurs and investors would be felt deeply.

“By increasing CGT the government is taking money out of the economy. In the property market the liquidity pool is still relatively parched. A healthy property market tends to mean a healthy economy. But by taking more cash out of the pockets of these investors the government is threatening to stunt the growth we expected to see in 2011.

“The rise in CGT combined with the income tax landlords already pay on rent means a double blow for these investors. They’ll be left asking what they did to deserve such punishment. Professional property investors will now have to work much more efficiently in order to maximise the amount of money they are able to take home from their portfolios.

“Maximising allowances and ensuring rental income is as tax neutral as possible will go a long way to help achieving this. Landlords will need to assess their portfolios thoroughly in order to realise where they can offset further and minimise the amount they have to shell out to the tax man.”

But Stuart Law, chief executive of Assetz, pointed out that Osborne’s Capital Gains Tax increase to 28% remains lower than the rates the market had three years ago, of up to 40%, before Labour introduced the 18% rate.

He added: “This move is not likely to have a negative impact on the UK property market as speculative investors are unlikely to sell off their buy-to-let property once this new tax rate is introduced at midnight tonight. Professional property investors are generally looking at the long-term benefits and see the importance of the regular income rather than short term capital gains.”

And Paul Hunt, managing director of Phoebus Software said: “Bringing Capital Gains Tax completely into line with income tax rates would have made property investors much more cautious about expanding their portfolios so it’s good it didn’t go up the whole way; although a lot of vested interests will still complain over the coming weeks. But with the deficit to tackle, property investors couldn’t hope for much more.”

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In today’s emergency budget, Chancellor George Osborne said: “The years of debt and spending make this unavoidable.”

The House of Commons erupted on hearing the news and the Speaker had to call order, saying members should show “a little more restraint”.

Osborne went on to say: “This single tax measure will by the end of this parliament generate over £13 billion a year of extra revenues. That is £13 billion we don’t have to find from extra spending cuts or income tax rises.”

Everyday essentials such as food and children’s clothing, as well as other zero-rated items like newspapers and printed books, will remain exempt from VAT over the course of this parliament.

In line with the increase in the main rate of VAT, the higher rate of Insurance premium will also rise from 17.5% to 20%, while the standard rate will increase from 5% to 6%.

Paul Hunt, managing director of Phoebus Software said: “The 2.5% increase in VAT is good news for two reasons. First, to an extent, VAT is a tax of choice. Second, after the initial increase in prices, it may help to control inflation on certain goods as people will buy less of them.”

Property Renovations Ely Ltd

While the FSB understands that this is an emergency budget for emergency times and that difficult decisions have to be made to tackle the debt, it has urged the Chancellor to temper this with measures which will inspire confidence in the future and allow businesses to innovate, grow and employ.

There is a distinct possibility that VAT will be increased. If this is the case, the FSB urges the Government to recognise that a decision on timing is vital for small firms’ cashflow. The move to reduce VAT to 15% in 2008 cost the average small business £1,500 in administration alone.

Small businesses do not have the financial buffers available to be able to absorb an increase in VAT as big businesses do. The FSB has urged the Government to include a sunset clause which would allow small firms to plan for the eventual reduction and send a strong message that while tax increases are necessary in the current climate, that this Government is a low tax administration.

The FSB also opposes any major increase in the Capital Gains Tax (CGT) for businesses and entrepreneurs as it would stifle long-term investment in small firms. The FSB believes that CGT on business activity should remain at 18% and a generous taper relief be reintroduced to help savers and long-term investors.

A fifth of small firms believe that National Insurance Contributions (NICs) and PAYE taxes are their biggest obstacle to growth. Given this, the FSB is arguing that while it is important that the Government cuts the deficit, something that over 90% of FSB members agree with, it must not be at the expense of the recovery or mean a hike in taxes for small businesses.

To encourage small firms to employ staff and grow, the FSB urges the Government to go beyond the Conservative manifesto proposal to cut employer NICs for new companies only. The need to pay NICs should be negated for existing firms in addition to start-ups.

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The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

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Estate agents Spicerhaart Corporate Sales, which compiled the research using its own data, said this was due to the property being attractive to first time buyers and investors looking for chain free properties.

In April, the average time taken for a possessed property transaction to complete from the day of possession was 106 days, 23 days quicker than a year previously.

The time from possession to market was nine days in April, and from possession to exchange 100 days, compared to 122 in May 2009.

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Countrywide has announced it plans to reimburse all clients, upon completion, for HIP orders that have taken place in the seven days before the HIPs announcement.

In addition, all clients that have taken marketing advice on a property sale from Countrywide since the 1st January 2010 will be offered a free EPC if they put their property on the market before 31st May 2010.

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Home Information Pack duties are suspended with immediate effect from 21 May 2010. This means that homes marketed for sale on or after this date will no longer require a Home Information Pack. However, Energy Performance Certificates are still required.

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But this welcome decline gives no cause for complacency as a large number of households, who are just coping, still remain vulnerable to shocks that may arise from the economic uncertainty ahead.

Repossessions as a proportion of all mortgages remained steady at 0.09% in the first quarter, the same proportion as in the previous quarter and down from 0.12% in the first quarter of 2009. The number of repossessions was 9,800, down from 10,600 in the previous quarter and 13,200 in the first quarter of 2009.

The proportion of mortgages in arrears also fell. The total proportion of loans with arrears equivalent to 2.5% or more of the mortgage balance was 2.38%, down from 2.52% in the previous quarter and 2.81% in the first quarter of 2009. The number of loans in arrears was down from 206,800 at the end of the first quarter of 2009 and 196,400 at the end of last year to 186,300 at the end of the first quarter of this year.

However, the fall was more marked in the lower arrears bands than among those with more substantial arrears, where the reduction was only very modest. This suggests that low interest rates and relatively stable employment have been helping to prevent new households falling into difficulty, but that many households with more entrenched problems are still struggling to restore their financial position and repay arrears. This debt overhang will require careful management over an extended period.

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The Mortgage Works launched an 80% buy to let mortgage today so will the days of 25% discount deals soon be over? It is very likely that Birmingham Midshires will also follow suit very soon so this could be your last opportunity to buy deals at 25% discounts.

Property Renovations Ely Ltd

Conservative
Amend the recent Planning Use Classes Order
Abolish Home Information Packs
Keep Energy Performance Certificates
Give every home up to £6,500 worth of energy improvement measures, with more for the hard to treat homes

Labour
Bring in written tenancy agreements
Free and impartial advice service for tenants
Set up a National Landlord Register
Reform Housing Benefit payments
Introduce minimum insulation standards

Liberal Democrats
Quality private rented housing for those who need it
Introduce a national home insulation programme
Scrap Home Information Packs
Keep Energy Performance Certificates

Property Renovations Ely Ltd

The UK inflation rate rose sharply to 3.4% in March from 3% the month before, official figures have shown.

The rise in the Consumer Prices Index (CPI) inflation rate was greater than analysts had expected.

Retail Prices Index (RPI) inflation, which includes housing costs, also rose sharply to 4.4% in March from 3.7%.

The CPI inflation rate is the measure targeted by Bank of England interest-rate setters, while RPI is often used as a benchmark in wage negotiations.

Higher air fares

Higher petrol prices were an important factor in rising consumer prices, the Office for National Statistics (ONS) said.

Petrol prices have been rising because of the relative strength of the dollar and higher refining costs, as well as the increasing price of oil.

The price of oil hit 18-month highs at the start of April.

The continuing impact of the rise in VAT, which went back up to 17.5% in January, and the effect of flat gas bills relative to this time last year, when they fell sharply, also contributed to the spike in inflation.

The ONS said increasing air fares, especially on European flights, rising food and non-alcoholic drinks prices, and higher clothing and footwear costs also played a part.

Offsetting these were falls in the prices of second-hand cars, furniture and household equipment.

Low rates

Despite the sharp rise in prices, analysts expect the rate of inflation to fall again in the coming months, as weak economic growth and high unemployment dampen price rises.

The governor of the Bank of England, Mervyn King, has said that he expects inflation to fall back towards the target rate of 2% in the coming months.

Analysts therefore expect the Bank to keep interest rates low to stimulate growth. However, if inflation continues to rise sharply, the Bank’s Monetary Policy Committee may have to raise rates.

UK interest rates have been at the record low of 0.5% for 13 consecutive months.

The policy helped to bring the UK economy out of recession in the last quarter of 2009, when it grew by 0.4%.

However, if the CPI inflation rate remains above 3% in April, Mr King will have to write another letter of explanation to the chancellor.

Property Renovations Ely Ltd

National mortgage distributor and packager 3mc has welcomed the addition of a new first time buyer range from igroup.

Announcing the launch, Doug Hall, deputy managing director at 3mc, commented: “igroup has introduced a number of positive criteria and rate changes including the addition of a new first-time buyer range for specialist prime customers.”

Mark Snape, secured sales director at GEMHL, said: “We are delighted 3mc has enthusiastically welcomed the changes to our product range. As the mortgage market shows gradual signs of recovery we thought it the right time for some targeted changes, including an expanded product range, increased LTVs and further reductions in reversionary rates.

“We recognise that despite growing evidence of an upturn in the housing market it remains difficult for borrowers who do not fit the ‘high street’ norm to successfully apply for mortgages. Our new range being offered by 3mc will provide a potential route to competitive rates for those borrowers with limited options.”

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There is not enough rental property to meet consumer demand in the UK – and the situation is worsening, according to ARLA.

The Q1 research from the Association of Residential Lettings Agents (ARLA) shows that insufficient supply of good quality property means that the private rented sector (PRS) is struggling to meet demand. With the PRS picking up the slack from the housing market, ARLA believes that the next Government must focus on averting the sector from crisis.

“More than two thirds of our agents have seen demand outstrip supply across the country – there simply isn’t enough housing stock coming onto the rental market. The Government’s move to help first-time buyers by raising the Stamp Duty threshold was a step in the right direction. Now we need to see tangible measures to support the PRS,” said Ian Potter, operations manager of ARLA.

“Investors need to be treated as businesses, with proper incentivisation to invest in and refurbish older properties. This will improve standards, help the environment with improving insulation, and encourage much-needed investment to help get the market back on its feet.

Property Renovations Ely Ltd

New reseach shows that there are wide variations in the growth, or loss, of rental values across the UK. According to the website spareroom.co.uk rental values grew by as much as 11.3% and fell by as much as 13.5% over the last 12 months.

The town with the biggest growth was Stoke on Trent and the biggest fall was in Sunderland. What the research does show is a wide variation not just nationally but also locally. Average room rents in the north of England rose by 1.5% but only rose by 0.6% in the south.

The Top 10 biggest increases were:

The 10 biggest falls were:

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The committee also chose not to pump any more money into the economy through its quantitative easing programme.

With the election date now confirmed as May 6, analysts claim tinkering at this stage might be seen by some as politically motivated rather than economically.

It’s inevitable that the upcoming vote will have a key impact on the economy and the committee has already confirmed that next month’s base rate announcement, which was scheduled for the same day as the election, will be pushed back a few days.

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Despite low interest rates and signs of stability, 2010 will continue to pose some challenges for private landlords.

This is according to Landlord Assist, who says that whilst there are signs of optimism in the market, private landlords still face growing rent arrears caused by continued unemployment rates and the ongoing failure of the Local Housing Allowance system – whereby rent paid to cover housing costs is paid to the tenant, in the hope that they pass it on, instead of directly to the landlord.

In addition to facing rent arrears, landlords also continue to operate against a raft of administration and legislation in order to keep their properties let and the rents coming in.

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Alan Ward, chairman of the Residential Landlords Association, said the legislation will mean that buy-to-let landlords will have to apply for planning permission if they own properties where three or more of the residents are not related.

“This is just the worst fears,” he stated. “It is social engineering because planning law has never been about who can live where – it is always about the use of the building.”

Mr Ward’s comments come as new research from PropertyEarth.net shows that three and four-bedroom houses are the most popular type of properties for buy-to-let investors.

The figures reveal that three-bedroom homes make up 57 per cent of all searches on the site.

When announcing the new law, John Healy, housing and planning minister, explained that the measure is hoped to combat the problem of substandard accommodation run by bad landlords

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Chancellor Alistair Darling has axed stamp duty on house sales under £250,000 for first-time buyers paid for by a rise in duty on homes over £1m.

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House purchase loans fell by more than three times the decline in remortgages in January, according to data released today by the Council of Mortgage Lenders.

This emphatically demonstrates the effect on the mortgage market from the end of the temporary stamp duty holiday in December.

There were 49% fewer house purchase loans in January than in December but only 15% fewer remortgage loans. However, the 32,000 loans for house purchase, worth £4.7 billion, were up from the low of 23,000 (worth £3.1 billion) seen in January 2009. Conversely, the 24,000 loans for remortgage, worth £3 billion, were down from 45,000 (£6.2 billion) a year ago. This is the lowest monthly level of remortgage activity – both by number and value – in eight years of available data.

First-time buyers recorded the largest drop among house purchasers, with a 54% drop (55% by value) from December to January, reflecting the fact that a high proportion would usually fall into the £125,000-£175,000 property value category and rushed through their purchase to complete in December.

There were 11,300 first-time buyer loans, worth £1.3 billion, in the month, down from 24,800 (£2.9 billion) in December 2009, but still up from 8,600 (worth £900 million) in January 2009.

Commenting on the data, CML director general Michael Coogan said: “It was a quiet start to the year. Lending volumes in January were low, but we had predicted this would happen due to the end of the stamp duty holiday distorting December’s figures.

“When December and January data are taken together, they show little change in underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier. We expect lending over the coming months to remain weak as uncertainty over of the state of the economy and the upcoming election are likely to continue to hold back housing market activity.”

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The number of first time buyers actively looking to purchase a property in London has dropped off significantly in 2010, as a lack of affordability has hit demand, according to estate agent Marsh & Parsons.

In January 2009, first time buyers comprised 17% of new buyer registrations at Marsh & Parsons, but while there are plenty of buyers registering (over 2,600 so far in 2010), this number fell to 10% in January 2010 – and below one in ten in February. However, with so few London properties in the lower price threshold, the end of the stamp duty ‘holiday’ at the turn of the year has not played a significant part in this drop-off.

Between January 2008 and April 2009, house prices fell by up to 30% in some parts of London, and last year this improved affordability led to a large increase in demand from first time buyers, looking to get onto the property ladder. In August 2009, first time buyers made up almost one in five new registrations (19%), reaching a peak. However, strong house price growth in the capital since spring 2009 (up £39,602 or 13% on average) is now deterring growing numbers of first timers.

Peter Rollings, managing director of Marsh & Parsons, commented: “Central London may not be typical first time buyer territory, but it’s little wonder why. Mortgage lenders now typically require a 25% deposit from first time buyers, meaning they would need to put down over £84,000 to purchase the average London property – realistic for only the tiny minority with substantial parental assistance.

“The end of the stamp duty holiday has not had a great impact on demand, as so few purchases were eligible for exemption. The lack of homes priced below £175,000 meant only 13% of London transactions benefited from stamp duty relief in the first year of the holiday – and only 22% of these purchases were in Inner London boroughs. Higher average house prices mean London is the area where first time buyers are most in need of support and, if the government is serious about helping them, it must reintroduce the stamp holiday and – crucially – take into account the wide regional variations in prices.”

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The decision was widely expected by economists, who believe that any rise in the cost of borrowing could damage the UK’s fragile economic recovery.

Also as expected, the bank has not pumped any more money into the economy under its quantitative easing (QE) programme – for now at least.

Last month the Bank halted QE, having spent £200bn to boost the economy.

Figures released last week showed that the UK economy grew by 0.3% in the final three months of 2009, compared with an initial estimate of 0.1% growth.

But although the 0.3% growth in the final quarter of 2009 was stronger than previously thought, the Bank believes that continued economic growth is not yet guaranteed.

The October to December period was the first quarter of growth following six consecutive quarters of economic decline – the longest period since comparable figures were first recorded in 1955.

Inflationary pressure

Under QE, the Bank has bought assets in order to boost lending to businesses and individuals by commercial banks.

But the Bank has said that the full effects of QE will take more time to filter through to the economy.

Many analysts argue that banks have not in fact increased lending as the economy begins to recover. Banks in turn argue that businesses are looking to pay down debt rather than take out new loans.

The Bank must also be wary of the inflationary pressure caused by QE.

The latest inflation figures, released last month, showed prices rising by 3.5% in January, the fastest annual pace for 14 months. This compares with 2.9% the previous month.

As a result, the Bank’s governor, Mervyn King, had to write a letter to the chancellor explaining why prices were rising so quickly.

A letter from the governor is required if inflation is more than one percentage point above or below the government’s 2% target.

However, Mr King said that the rise in inflation was temporary, and was largely the result of the rise in VAT to 17.5% in January.

The government had reduced VAT to 15% to try to boost consumer spending.

Property Renovations Ely Ltd

One year ago this month the Bank of England ended six months of dramatic rate cuts leaving Bank of England Base Rate at a record low of 0.5%. But what has happened since?

Analysis from moneysupermarket.com shows the winners and losers from this static rate.

Hannah-Mercedes Skenfield, mortgage expert at moneysupermarket.com said: “Undoubtedly the biggest winners from the fall in interest rates have been those consumers who have been sat on standard variable rates (SVRs). Traditionally lenders’ SVRs have usually been higher than the deal that was ending so consumers would have to remortgage as a result. Now we have a situation where many consumers are sitting on extremely low rates and have no incentive to move. We have started to see SVRs starting to increase again, and rates for remortgaging starting to fall so for some consumers, now is the time to consider looking for an alternative deal.

“The losers have been those consumers who have little equity in their property or those who have been looking to get a foot on the housing ladder, particularly first time buyers. There have been some positive signs in the mortgage market over the last 12 months; we saw the number of available mortgage products fall below the 2000 mark in 2009 but we have seen a steady increase since with numbers in excess of 2,700 which shows that the recovery in the market is in place, although it is a way short the height of 2007 when there was over 30,000 products. In addition, those who are even able to access a deal with an LTV of 90 per cent will have found themselves paying a hefty premium for the privilege, often as much as 6.05 per cent.

“Lenders have benefited from a low LIBOR and after a period of inactivity they are starting to loosen their purse strings and pass on some of these benefits to consumers in terms of lower rates. Borrowers need to be wary though as some lenders have introduced products with low ‘headline’ grabbing rates only to charge high fees which make the mortgage less competitive compared to products with higher rates. There are some good deals in the market at the moment so borrowers should consider fixing before rates start to rise again.”

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First-time buyers in the UK are being forced into renting for a longer period than they would like, one expert has stated.

Alan Ward, chairman of the Residential Landlords Association, says that the recession has meant that fewer houses are being built and there is now a distinct lack of mortgage availability.

He states that many home loans are not available without a minimum 20 per cent deposit, which is forcing many first-time buyers into the rental market.

Mr Ward’s comments come in response to a recent report by Communities and Local Government, which found that the number of rental properties has increased by approximately one million since 2001, while home ownership has decreased.

And he expects this trend to continue for some time: “We expect rental demand to remain strong for the foreseeable future.”

The Association of Residential Letting Agents recently commented that there has been an influx of “reluctant tenants”, after a shift in property supply and demand.

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First-time buyers need to make sure that they save enough money for a deposit so that they are taken seriously in the mortgage market, one expert has advised.

Catherine Hearnden, director of MyMortgageDirect, says that the majority of home loan lenders still require a five per cent deposit and will not just hand out mortgages “on a plate”.

“If nothing is done by people themselves, they won’t expect to have put the effort in when paying their mortgage,” she states.

Ms Hearnden’s comments come in response to recent statistics from the British Bankers Association, which reveal that mortgage lending fell to a figure of 35,000 in January.

This is in comparison to the 46,000 home loans that were approved in the last month of 2010.

She believes that both the end of the stamp duty holiday and the nationwide ‘big freeze’ both contributed to this fall but adds that banks need to open up their lending criteria if the effects of this downward turn are to be alleviated.

According to the Council of Mortgage Lenders, gross home loan lending fell by 32 per cent between December and January to a decade low of £9.1 billion.