25% of summer sub-prime mortgages would now be declined
A quarter of all specialist and sub-prime mortgage applicants who were accepted for a home-loan in August 2007 would not be accepted in October 2007, according to ‘sub-prime’ loans company The Mortgage Lender.
David Titmuss, managing director of The Mortgage Lender, said: “A mortgage taken out in August (this year) by a customer in our sector - people who have a poor credit history - will now cost from £60 to £200 a month more.
“Lenders are also tightening up on ‘affordability’, which is calculated from disposable income. With the higher rates, even fewer people will get a mortgage - that is above and beyond the 25% of applicants who already do not meet lending criteria.
“We believe that the potential impact upon the economy may be considerably more than most commentators have stated. Firstly, more and more people will go into debt management and IVA. There will certainly be even more home repossessions, and the overall result will be a fall in house prices as the money to buy them simply contracts.”
Top 10 reasons to keep a tenant’s deposit and take a good inventory
With the introduction of the government’s Tenancy Deposit Protection scheme this year there is an even greater reason for landlords to organise professional inventories, according to the Live Letting Exchange, a residential lettings organisation.
The company has identified the most common reasons why landlords may deduct some of the holding deposit from their tenants. The top ten most common reasons are as follows:
1. Broken furniture, such as chair and table legs
2. Small items of furnishings missing such as crockery, cutlery or mugs
3. Torn and loose carpet fittings
4. Dirty kitchen appliances in particular fridges, cookers and washing machines
5. Stained carpets mainly from wine, or cigarette burns
6. Overgrown gardens, which have not been maintained
7. Marked walls
8. Broken windows and cracked mirrors
9. Loose roof tiles
10. Broken curtain rails
Richard Churchill, director of Live Letting Exchange, said: “Since the introduction of the scheme, the inventory has become a much more vital document. If the landlord wants to charge a tenant they need evidence to prove the condition of the damaged item at the start of the tenancy. At Live Letting Exchange we have seen an increase in demand for professional inventory reports by competent clerks with an eye for detail. Their observations and recordings ensure that landlords and tenants are treated fairly reducing any disputes.”
UK Housing market to cool rapidly next year
The UK housing market will cool substantially into 2008, with an almost one in three chance of an annual fall in prices at some time over the next 12 months, according to a recent poll by Reuters that questioned 22 analysts at banks, investment firms and research organisations.
The expected 2.2% rise for next year is half that found in a similar survey taken in April, in results that indicate that the latest spurt in a decade-long housing boom could be fizzling out following five interest rate hikes.
However, analysts say house price inflation will average 9.3% this year, compared with 7% predicted in a poll taken in April. All of the 18 economists that answered the question said that British housing was overvalued, with a median 15% divergence from fair value, up from 12.5% in April. The range stretched from just 5% to 30%.
Edinburgh Airport underground plans scrapped
Ambitious plans for an underground rail station at Edinburgh Airport have been scrapped. The Scottish Government said the £650m Edinburgh Airport Rail Link, known as EARL, would be too expensive and that the money could be better spent elsewhere.
Proposals for a new airport ‘parkway’ station on the Edinburgh-Fife line and a new loop on the Edinburgh-Glasgow line were instead outlined. Transport Minister Stewart Stevenson said the scheme would achieve intended goals more quickly and at a third of the original price.
Stevenson told the Scottish Parliament there was no way for the EARL project to proceed and said the new plans set out an ‘ambitious, credible and deliverable alternative.’
The plan includes an airport station at Gogar on the Fife railway line, to allow easy access to the airport. Stevenson said the government also intended to build a rail link between both the Fife and Edinburgh routes to Glasgow, known as the ‘Dalmeny chord’, allowing trains from Scotland’s two largest cities to stop at the new airport station.
The savings from EARL, said the minister, would be invested in improving rail services, including a planned electrified rail network between Edinburgh and Glasgow and routes up to Dunblane, Alloa and Cumbernauld.
One in four young working households priced out of housing market
New research compiled for Hometrack has revealed that just under a quarter, 24.3%, of young working households have little chance of accessing home ownership in their local housing market. High house prices and rising interest rates are increasingly limiting access to the housing market with some of the worst affected areas in the South West of England.
The research also sets out new analysis that highlights how the cost of renting is cheaper than buying. The report, Can’t buy: Can rent – the affordability of private housing in Great Britain, has been written by Professor Steve Wilcox of the University of York, using Hometrack data on house prices and rental levels.
The findings present a comprehensive and detailed analysis of the state of housing affordability across every local authority in Great Britain and builds on earlier analysis conducted for the Joseph Rowntree Foundation between 2002 and 2005.
The report presents an analysis of affordability measures including; local house price to income ratios and the affordability of private rented housing. The analysis of house price to household income ratios is based on the average price of a 2/3 bedroom home.
At a regional level it shows the highest ratio is in London (5.08:1) closely followed by the South West (4.84:1) and the South East (4.67:1).
At a local level, the analysis reveals that there are forty areas with a house price to income ratio higher than 5.50:1. The least affordable authority is identified as Kensington & Chelsea, with a house price to household income ratio of 9.23:1. In addition a further eight London authorities have ratios in excess of 5.50:1.
The report also identifies the proportion of young working households who are unable to access the property market in their local area at the lowest level – the so called Intermediate Housing Market (IHM). The analysis shows that, nationally a quarter (24.3%), of young working households are unable to purchase property at the lowest level in their local housing market.
Regionally the South West has the greatest proportion of young households priced out of the market (34.0%) followed by London (31.5%) and the South East (30.2%). Scotland is the most affordable area with 15.8% of young working households priced out of the market.
Government scraps controversial PGS
Chancellor Alistair Darling has announced that the Government is scrapping the Planning Gain Supplement (PGS) and replacing it with an alternative system.
The Government has proposed a planning charge, similar to the so-called roof tax already operated by councils such as Milton Keynes to replace the PGS (a tax on the uplift in value of land following a planning consent).
Yvette Cooper, housing minister, said: “These provisions will empower local authorities to apply standard planning charges for all new development in their areas to support infrastructure delivery.”
The charge will apply to both residential and commercial developments, and is expected to be a set amount per dwelling or per square metre of space. Payment will be made by the developer to the local authority. The tariff system will operate alongside section 106 agreements.
Planning charges will include contributions towards regional infrastructure. Cooper said the system would capture more planning gain, preserve incentives to develop and make the planning process simpler.
CML welcomes increase in inheritance tax threshold
The Council of Mortgage Lenders (CML) has welcomed the Chancellor’s increase of the inheritance tax threshold for the estates of married couples which was announced in the Government’s pre-budget statement.
Michael Coogan, CML director general, said: “With the estates of married couples now exempt up to £600,000, rising to £700,000 by 2010, the effect is broadly the same as if the Chancellor had fully indexed the inheritance tax threshold for the effect of house price movements since Labour came to power, which would have resulted in an exemption threshold of £608,600.”
House prices are falling, says RICS
According to the Royal Institute of Chartered Surveyors (RICS), house prices have fallen for the second month in succession in the UK, excluding London and Scotland.
Around 14.6% of surveyors reported a fall in prices, up from August’s figure of 3.3%, which is the fastest decline since September 2005 when 19.4% reported prices decreasing. The largest price falls were reported in East Anglia, Wales and in the Midlands. Smaller falls were reported in the South East, South West, Yorkshire and Humberside and the North West .
Surveyor confidence in both sales and prices has deteriorated further, reaching their lowest levels since March 2003 and May 2005. This is being driven by interest rate increases and related financial markets issues.
In addition new buyer enquiries have also declined for the tenth consecutive month and at the fastest pace since March 2003. Around 51% of surveyors reported a fall than a rise, which is up from 39% in August. Five interest rate increases since August 2006, and tightening mortgage lending criteria is weighing further on buyer affordability.
Jeremy Leaf, RICS spokesperson, said: “Although house prices continue to fall, the underlying economy remains strong. A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant.
“The combination of rising interest rates, the introduction of Home Information Packs and volatility in the financial markets resulting in tightening of lending criteria has certainly affected the confidence of buyers and sellers. As a result, some would-be buyers are turning to the rental market whereas others, conscious that the next move in interest rates is now likely to be down rather than up and market meltdown is highly improbable, are seizing the opportunity to negotiate with more flexible vendors in a less competitive market-place.”
More freedom and lower costs when renting
Many Britons are remaining in the rental sector, whether they can afford to purchase a home or not, because of the freedom and lower costs involved, says the Association of Residential Letting Agents (ARLA).
The association has said that it expects the sector to increase its market share from 11% of all UK housing to 15% over the next 10 years because of such trends, adding that on the whole renting had proved itself to be cheaper for most Britons.
ARLA noted that 900,000 Buy-to-Let mortgages had already been taken out in the UK, making up around a third of the private rented sector.
10% of Brits own second UK property
According to Nationwide Building Society, 10% of those questioned own a second property in the UK, and a further 14% would consider buying a second property in the UK.
The most popular reason for owning a second property was for buy-to-let purposes (55%). Almost one third (32%) of people purchase their second home for personal use, and 7% let out their second property as a holiday home.
Two thirds (66%) of those without a second property claimed a lack of finances would prevent them from purchasing a second home.
The most popular place to purchase a second home is in the South East of England (17%), followed by the South West (14%).
Nationwide senior economist, Martin Gahbauer, said: “Purchasers of second homes - be they for personal use or to let out - are an important source of housing demand and have probably helped push up prices in many areas of the country. However, current market conditions may have an impact on this part of the housing market.
“While second home buyers will often be able to draw on large house price gains from the past decade, this advantage is not available to local first time buyers, who face challenges in their attempts to get on the housing ladder. One must not forget, however, that second home buyers also make important contributions to the local economy through their support of local businesses.”
