18 February 2008
lers of residential property in England and Wales hiked their asking prices by an annual 5.8 percent in February, a survey showed on Monday, despite a glut of properties on the market and forecasts for a slowing economy.
February's acceleration in asking price inflation is the first since October, property Web site Rightmove said, after the annual rate hit a two-year low in January of 3.4 percent.
The pick-up in annual price growth goes against the grain of most house price surveys which have been showing a marked cooling in the market. Most economists expect house prices to fall this year by as much as five percent.
Houses are remaining on the market an average of 93 days, compared to 78 days at this time last year, Rightmove said, covering mid-January to mid-February.
The report noted that the introduction of a requirement to provide Home Information Packs has meant less one and two bedroom properties on the market, distorting prices upwards.
The average asking price in February was 237,856 pounds, a 3.2 percent increase on the previous month. The survey's monthly data is not seasonally adjusted, and the report notes sellers traditionally up prices at the beginning of the calendar year.
The Bank of England has cut interest rates fifty basis points since December to 5.25 percent, but increasing evidence of an economic slowdown has reduced the likelihood of further cuts in the near future.
"The interest rate cuts have no doubt given some sellers headier hopes," Rightmove's Miles Shipside said. "These are likely to prove unwarranted, given the higher level of existing property that is already on the market and the length of time that it has been there," he said.
(Reuters - Reporting by Alastair Sharp; Editing by Ruth Pitchford)
11 February 2008
House prices rose slightly in December but failed to prevent annual growth sliding to a 13-month low, official figures show.
The average price of a UK house during the month was £219,591 compared with £218,662 in November - a rise of 0.4%, the Department for Communities and Local Government (DCLG) said.
But annual house price inflation dipped to 9.1% in December, its lowest level since November 2006, and down from 9.7% in the previous month.
It was the second consecutive month that the DCLG'S annual growth rate fell, and the drop provides the latest evidence of a slowdown in the housing market.
Last week, Britain's biggest mortgage lender Halifax, which uses more recent data, said house prices held firm during last month and that the annual rate of growth also continued to fall.
The DCLG figures showed that average UK house prices were lower in December than in September and October.
Ed Stansfield, property economist at Capital Economics, said the data confirmed the market cooled "sharply" in the last months of 2007.
He said: "Over the previous five Decembers, prices have risen by an average of more than 1% month on month. The annual inflation rate fell to 9.1% in December, down from 12.4% in the summer.
"Thus the data simply confirms that the market cooled sharply in the final months of last year."
Mr Stansfield said last week's interest rate cut from the Bank of England - taking rates down to 5.25% from 5.5% - would not have a marked impact on housing market confidence as not all mortgage products would be cheaper due to scarcity of funds.
The Press Association
11 February 2008
average December house price was £219,591, up from £218,662 the previous month.
The figures from the Department for Communities and Local Government also show annual house price inflation was 9.1% in December, down from 9.7% in November.
In London annual house price inflation was 13.5% down from 14.5% in November.
The capital also had the highest average house price in December at £340,631, while the North-East had the lowest average house price at £151,085.
The average house price paid by first-time buyers in December was £166,734, whereas for home movers it was £245,522.
National press reports have indicated that some of London's most upmarket areas, such as Mayfair, Chelsea and Notting Hill, previously thought to be immune from a house price crash, have seen prices drop by as much as 15% since last summer.
08 December 2007
h 2007 drawing to a close, house price forecasts are a hot topic. Most lenders say that prices will continue rising, if at a slower pace than in recent years, but the International Monetary Fund reckons we could be facing a price drop similar to that seen in the US. Ed Stansfield of Capital Economics says the key factors point to a downturn. However, Stuart Law of property investment experts Assetz dismisses these concerns.
Ed Stansfield, property economist, Capital Economics. UK house prices are set to give back some of their gains, with a 3% decline next year and the same in 2009, as higher interest rates and the credit crunch create a property market squeeze. Buyers who would have been approved previously will begin to find it much harder to obtain a mortgage. We have seen house price falls in the US, Ireland and, more tentatively, in Spain and France. I think it's likely that the UK could be next.
If we look at the slowdown in the economy and the housing market that happened back in 2004/2005, the key factors are worse now. Affordability is worse, as we've had continuous house price growth since that slowdown, and we have higher interest rates. So with the economy poised to slow, the downside risks to the housing market are greater.
Add to that tightening credit controls, rising repossessions and the most buoyant part of the market - London - having the rug pulled from under it, and we have a more problematic year or two ahead than most housing market forecasts suggest.
We can see a period of gradual decline in prices over a series of years, but there's a huge reticence in the market to forecast the end of the boom because past experience suggests you need a negative macro-environment to tip the market over the edge. But the experience of the US, where the housing market is much weaker than might be expected based on recent economic performance, suggests that might not always be the case.
Stuart Law, chief executive, Assetz
The IMF's comments are completely flawed as there is no basis for prices going backwards. How can the UK housing market be over-valued and houses unaffordable when people are still paying and prices are still going up?
I expect property prices to rise by around 5% next year, due to the strong fundamentals of undersupply and falling interest rates. The Government forecasts that 4.4 million more people will be living in the UK by 2016, and house builders will not be able to supply enough property to meet that demand, defending robust house prices and even driving them up further.
House prices drop when interest rates go through the roof, but that scenario doesn't look very likely at all. Inflation is always a risk, but oil prices don't have the same impact they used to and over the long term inflation is very much under control. The other factor said to cause prices to fall is the prospect of a recession, but all the economic fundamental indicators are
positive. There is nothing visible that is going to cause a serious recession in the UK or globally. Even if the US went into
something of a recession, the global nature of the market means the UK isn't as tied to the US as it used to be.
Finally, the buy-to-let market is helping to hold up the housing market and rents are rising more than they have in years. Yes, repossessions are increasing, but those properties are being bought by investors. While these sales are at lower prices, people who don't need to sell are not discounting.
29 November 2007
Signs Of House Prices Cooling
House prices have seen their fastest fall in more than 12 years, according to the Nationwide building society. The cost of an average home fell 0.8% this month - the first decline since February 2006 and the
biggest drop since June 1995 - after a 1.1% rise in the previous month, the lender said.
That took the annual rate of growth down to 6.9%, its weakest since August 2006, from 9.7% in October.
"November 's data confirms that the housing market is indeed cooling," said Fionnuala Earley, Nationwide's chief economist.
"Poor affordability, weaker house-price growth expectations and the effect of earlier increases in interest rates have all affected demand in the market."
After years of strong growth, the housing market is expected to slow sharply over the next few months as lending conditions tighten and first-time buyers find it increasingly harder to afford anywhere.
The Nationwide is predicting house prices will stay unchanged for most of 2008 - but some financial markets meanwhile, have been predicting a fall of as much as 7%.
"Looking forward, it is clear that there are uncertainties in the market," said Ms Earley.
10 October 2007
ITAL GAINS TAPER RELIEF
"From April next year I will withdraw the capital gains tax taper relief, and in its place there will be just one rate of 18 percent -- one of the most competitive single rates of any major economy. I am also proposing measures to combat income shifting, vehicle excise duty evasion, and tackle the exploitation of National Insurance exemptions."
10 October 2007
House prices fell at their fastest pace in two years in the three months to September and the outlook for sales was its weakest in 4-1/2 years, as interest rate worries put people off investing in property.
The Royal Institution of Chartered Surveyors' house price balance for September fell to -14.6 from a downwardly revised -3.3 in August to reach its lowest since September 2005, RICS said on Thursday.
Enquiries from potential buyers fell for the 10th month in a row and at the fastest rate since March 2003 and surveyors' confidence about the sales outlook was also the lowest since then. The outlook for prices was the most depressed since May 2005.
RICS said the prospect of tighter borrowing criteria as a result of recent turbulence on financial markets was mainly to blame for the slide in demand, which, along with five Bank of England rate hikes made it even more costly for people to buy.
The introduction of Home Information Packs -- new regulations on people selling houses -- was also having a dampening effect, although a house price crash could be averted as the economy was in robust shape.
"A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant," said RICS spokesman Jeremy Leaf.
"The combination of rising interest rates, the introduction of HIPs and volatility in the financial markets resulting in tightening of lending criteria, has certainly affected the confidence of buyers and sellers."
Still, the survey showed housing supply remained tight and the sales to stock ratio, regarded by some economists as a more reliable indicator of housing market conditions, increased to 38.4 percent from 37.7 percent in August, above its long-run average.
Reuters - Fiona Shaikh
27 September 2007
LONDON (Reuters) - House prices rose 0.7 percent in September, but that still took the annual inflation rate down to its lowest in nearly a year, the Nationwide building society said on Thursday.
September's gain came after a rise of 0.6 percent in August, confounding forecasts for a dip to 0.4 percent.
On the year, however, house price inflation eased to 9.0 percent from 9.6 percent in August -- the slowest rate since last October. The average house price stood at 184,723 pounds.
The figures corroborate other recent property surveys that suggest house price inflation is cooling in response to the Bank of England's five interest rate hikes in the last year.
Nationwide said the recent turmoil in financial markets did not appear to have had any impact on the property market this month, although it could soften further out as lenders were set to tighten conditions in response to a rise in market rates.
"The longer-term effect will undoubtedly be to take some of the froth out of the market," said Nationwide Chief Economist Fionnuala Earley.
A crunch on global credit markets sparked by banks' worries about their exposure to risky loans propelled interbank interest rates to multi-year highs as institutions became wary of lending to each other.
Lender Northern Rock, which specialises in high loan-to-value mortgages and at bigger multiples of salaries, was the first major victim of the crunch, which forced it to seek emergency funding from the Bank of England and prompted thousands of savers to withdraw their deposits.
Nationwide's Earley said such loans were set to become more expensive.
"The message from lenders is clearly that from now on, risk must have its price. As a result, highly leveraged borrowing will remain less attractive and lending volumes in this segment may decline."
06 August 2007
House prices are set to soar by 40 per cent over the next five years, according to a report.
The National Housing Federation said the average home will be worth £300,000 by 2012.
The group warned that the price of the average home in England was now £206,594, nearly 11 times average earnings, with prices pushed up as supply continued to drop even further behind demand.
But despite the fact that owning a home is increasingly being pushed out of reach of first-time buyers, the NHF said a house price crash was unlikely to happen.
It added that house prices had risen by 156 per cent since labour came to power in 1997, but during the same period average incomes had gone up by just 35 per cent.
Research carried out for the group by Oxford Economics found that by 2012 the average cost of a home in London will have soared from its current level of £318,864 to £478,300.
In the South East, the average property will cost £392,900, while in the East they will have reached £340,200.
Even traditionally cheaper regions such as the North West and Yorkshire and Humberside will have average house prices of more than £200,000, while homes will cost just below this level in the North East at an average of £187,200.
It said that in Kensington & Chelsea and South Buckinghamshire, house prices were already more than 20 times local average incomes, and there are now only seven areas across England where the cheapest homes cost less than four times average local earnings.
Unsurprisingly, it found that social housing waiting lists grew by 57 per cent during the past five years to 1.6 million households, the equivalent of around four million people.
The group said its study reinforced the need for the Government to act on its recent pledge to build an additional three million homes by 2020.
Federation Chief Executive David Orr said: "Our report shows that continuing house price rises and the resulting housing crisis are set to stay with us for a long time.
"Our projections show that house prices will break the £300,000 barrier by 2012. Home owners may see this as good news, but it carries a sting in the tail.
"A growing number of parents will find themselves subsidising their sons' and daughters' mortgages. And, across the country, more and more people are going to find themselves priced out of the property market - and struggling to find a decent home."
30 July 2007
Along with the huge amounts of stress and emotion you can expect when you move home, you also need to prepare to spend huge amounts of money. And not just on gallons of tea and biscuits for the removal men.
Yet British people are compulsive house-hoppers and neither the huge costs nor sanity meltdown incurred can deter us from our quest to climb the property ladder. Gluttons for punishment, the average Briton moves home between three or four times in a lifetime, latest research from Abbey Mortgages shows. Abbey has calculated that, excluding property prices, Britons looking to get on the property ladder could spend the equivalent to £54,400 in today's money moving home during their lifetime. That's 2.3 years worth of annual salary based on the current average UK wage - enough to buy a two bedroom Finca in the Costa del Sol or a brand new one bedroom apartment in the centre of Bordeaux.
Looking at the fees charged by lawyers, estate agents, financial advisers, removal firms and stamp duty, added to the money spent to get their property in a 'saleable condition', homeowners said they'd forked out £16,000 on average at their last move. Based on these figures Abbey estimates that in 2006 alone Britons spent a combined £28 billion to up sticks.
Nici Audhlam-Gardiner, Head of Mortgages at Abbey, said: "It's no secret that moving home is an expensive business - in fact, I'm sure it's one of the reasons why people don't move that often. But it's astounding when you consider just how much it amounts to over a lifetime. With the average Briton expecting to spend over two years annual average salary just meeting the costs of professional fees and stamp duty of their three or four moves, homeowners clearly need all the help they can get."
Drew Wotherspoon of John Charcol, urges anyone moving or buying their first home to look out for hidden costs: "Buyers tend to get caught up in the excitement of choosing a new home and run the risk of paying the price financially by not ensuring they get the best value from their mortgage. If you're willing to bargain over fixtures and fittings it also makes sense to look at the other ways you can get a better deal when you move. As a mortgage will be, in the vast majority of cases, the most expensive commitment, borrowers should start here."
Early Repayment Charges (ERCs) are a part of most mortgages, but some have more favourable terms than others. Some only have ERCs during the initial competitive rate, whilst others have overhanging ERCs which lock a borrower in whilst still paying a lender's Standard Variable Rate. "There is virtually no need for any borrower to have to accept overhanging ERCs with the competitive nature of the UK market and the number of deals available to consumers," says Wotherspoon. "Taking a mortgage where there are only ERCs within the initial, favourable term makes sense for most borrowers but it may be a good idea for some to have no ERCs at any time. You are likely to pay a little more in interest for the privilege, but it can be the right decision for those who need the flexibility of not being tied in."
Exit fees come under a variety of names including administration charges, sealing fees or deeds-release fees. They tend to be around £195-£295 but this figure is rising as lenders look to recoup lost revenue from competitive rate pricing. It may not seem like a huge sum of money in the scheme of things, but these charges have seen an unnatural rise over the last three years and are a clear sign of lenders simply making money out of the consumer. Wotherspoon advises that at the very least you should make sure you are aware of what the fees are on your deal.
If you cannot provide a large deposit, watch out for higher lending charges (HLCs). They are applied by lenders, usually on loans over 90% loan to value, who view these borrowers as a greater risk because they haven't shored up their borrowings with a down payment. "First time buyers don't need to put up with Higher Lending Charges anymore," says Wotherspoon. "Lenders are now coming out with some great products for those wanting to borrow as much as 100%.
Solicitors and surveys are both essential in the home buying process but some people often forget to add them into the cost of moving and receive both a surprise and very unwelcome bill when they can least afford it. The average homeowner needs to factor in £500 in solicitor's fees and as much as £900 in surveys costs if you want a full structural survey.
With thanks to Sarah Modlock
30 July 2007
It may seem remarkable, nearly a quarter of people movin house do not consider the impact of not having their mail re-directed leaving them wide opento the risk of identity theft and fraud.
"It's no surprise almost half of all cases of ID theft in the UK happen at a previous address - people are handing fraudsters everything they need on a plate," says MyCallcredit director Alison Nicholson. "Moving is stressful enough already without having to deal with the impact a fraudster can have on your life. If you don't sort out your post, documents which can identify you, and your credit file, you could be in for months of misery where you are turned down for credit and can't even sign up for a new mobile phone," she warns.
How to do it
1) Get your paperwork in order and shred any documents you're not going to move with you.
2) Check your credit file online to see what information is held about you.
3) Inform lenders of any unused credit facilities that can be closed.
4) Check for old catalogues you've used to buy things in the past and inform the supplier that you are moving.
5) When you get to your new home, register on the Electoral Roll at your new address immediately.
6) Make a list of every financial company you deal with and inform them of your change of your address.
7) Contact the Royal Mail and arrange for your mail to be re-directed to your new address for a year. This will also give you a chance to cancel anything you don't want and send your new address to anyone you have forgotten.
8) Consider registering free with the Mailing Preference Service. They will ensure your name is removed from direct marketing lists at your previous address.
23 May 2007
Consumers made a record number of complaints about estate and letting agents last year, the industry's body annual report showed on Wednesday.
The Ombudsman for Estate Agents (OEA) received 8,472 complaints about the conduct of its members from property buyers, sellers and tenants during 2006, an increase of 41 percent on 2005.
But, at the same time, the body's membership grew 52 percent to 7,666 estate agent offices.
Ombudsman Christopher Hamer said: "When viewed against the number of house sale transactions in a year -- frequently quoted at 1.2 million -- the number (of complaints) is still thankfully small."
The Ombudsman can recommend member agents pay compensation of up to 25,000 pounds per case when it finds in favour of the complainant.
A total 586 cases were referred for formal review and resolution during 2006 -- an increase of 18 percent on the year.
The OEA adjudicated on 489 of them, of which 297 -- 60.7 percent -- were upheld.
"Although this figure is much reduced by comparison with the situation three years ago, really this is still too high given that the complaints have already been through the agents' internal grievance procedures," said Hamer.
"Agents should be following the standards laid down in the code of practice so that complaints are not necessary."
The majority of awards (181 in total, or 61 percent) fell into the 100-499 pounds category. Only five were of 3,000 pounds or above.
Most complaints concerned maladministration and estate agents' commissions.
By Jennifer Hill
You can avoid all of this by using OWNER SELLING DIRECT to sell your property.
20 May 2007
When preparing to move home, most sellers are keen to do all they can to increase the appeal of their property and maximise the amount they can ask for it. However, contrary to popular belief, investing in home improvements does not offer a cast-iron guarantee that you will increase your home's value.
Many improvements will add to the saleability of your property, and boost the price you achieve, but careful consideration is needed as others could even reduce your chances of a sale.
According to recent research from Direct Line Home Insurance, we have spent more than £154 billion on DIY jobs that have actually lowered the value of our homes.
So what should you do to make your home more likely to attract interest - and offers - from buyers?
The good news for cash-strapped sellers is that relatively inexpensive changes can make a big difference.
On a pound-for-pound basis, for example, redecorating is probably the cheapest way to improve saleability. But the right paint job - generally in neutral colours that will appeal to everyone - can add up to 10% to the final value of your home.
Small touches such as window boxes and hanging baskets will also add colour and make a home look cared for, while covering worn sofas and chairs with large throws in a neutral colour will prevent potential buyers noticing them when they look round.
Other tips include clearing out clutter to make your home seem more spacious, staying on top of general household maintenance such as replacing broken light bulbs and showing the full value of your storage space by keeping cupboards, the basement and attic tidy too. Finally, make sure the house number or name can be seen from the road, and that your doorbell works.
If you have a bit more money to spend in the hope of increasing your home's value, it is important to make sure that any improvements are appropriate to the character of the property. Stained glass, picture rails and original skirting boards in period properties should rarely be replaced with modern ones, for example.
Those planning to take on home improvements themselves should also beware of expensive mistakes as botched DIY jobs can significantly reduce the value of a property.
Search for a property for sale
Laying cheap wooden flooring is the most commonly committed DIY crime. Around a third of bungling DIY enthusiasts find to their cost that budget parquet isn't a hit with prospective buyers, while knocking through walls may provide additional space but will also mean fewer rooms, which could devalue the property.
For homeowners planning to employ builders to complete major renovations, one of the main considerations is whether the change is in keeping with other properties in the area.
It almost never makes sense to improve a house to the point where its desired sale price is more than 20% higher than other houses in the immediate neighbourhood.
And while putting in a swimming pool may seem like a good idea, not everyone will see a pool as a positive. As well as the running costs, potential buyers with small children may in fact see it as nothing more than unwanted worry.
There are building works that can raise the value of your property of course.
An extra bathroom should keep its value, as long as it is not built at the expense of a bedroom and can add 5% to the value of your home, while a garage can add a further 5% and will almost always recoup the investment.
Lofts, especially those that add an extra room and maybe even a separate bath or shower room, can boost the overall value by 10%, as long as they are well done. And central heating system replacement may be expensive, but it can be vital to holding up the sale price of your property.
Again, however, the location of your property will have a major impact on the added value of renovations such as these.
A spokesman for Halifax estate agents said: "The value home improvements will add depends entirely on the type of property and what you are doing to it. For example, if you are adding a loft conversion to a three-storey house in London, where space is at an absolute premium, you could add as much as 25 per cent on to the value of the property.
"However, the increase will be much lower if you are adding it on to a typical property on a housing estate, for example, where land and property prices might not be at such a premium."
It is also worth remembering that major improvements, such as replacing a kitchen or bathroom, rarely pay off fully in the near term. Figures show that even the most appropriate major renovations are unlikely to return their full cost if a house is sold within two or three years.
When it comes to home improvements more likely to actually dissuade potential buyers, plastic double glazing is one of the worst offenders. On all but the most modern homes it will almost certainly knock thousands off the value, although secondary glazing inside existing windows may add to the appeal of a period home.
New carpets are also a no no as they generally add nothing to the value - unless the previous carpet was in a terrible state. In this case, property experts advise buying the cheapest possible carpet in a neutral colour.
Readying your home for inspection by potential buyers is not the only challenge, though. The next step for those looking to get the most out of selling their homes is to make sure they get the best possible deal from their estate agent.
The Office of Fair Trading advises sellers to approach several agents, negotiate on fees and ask for them as a monetary sum, rather than just as a percentage of the sale price. It also warns homeowners against automatically choosing the agent giving the highest valuation as an inflated price could well mean your property takes longer to sell. Sell your home today for less.
17 March 2007
House prices are rising faster than they have in more than a quarter of a century. Reports show that in London there are more than 100 people chasing each property, this has created a sellers market and the asking price is routinely met. There has never been an easier time to sell your home yourself.
This explosion is expected to spread across the country with certain hotspots in the North bracing themselves for a property boom.
15 February 2007
LONDON (Reuters) - House price inflation eased to its slowest in seven months in January in a sign that three hikes in borrowing costs may be cooling the property market, a survey showed on Thursday.
The Royal Institution of Chartered Surveyors said its house price balance fell to 28.0 in the three months to January, the weakest reading since last June, from 36.6 in December.
The balance was still above its long-run average of 21, helped by a lack of supply and a booming market in London and southeast England, but RICS noted less interest from buyers and waning confidence about future prices and sales.
New buyer enquires in England and Wales fell for the first time in nearly two years as a 75 basis points rise in interest rates since last August made it more expensive for buyers to move up or get into the property market.
"The Bank of England's hawkish activity has deterred some buyers who have started to hesitate before taking the property ladder plunge," said RICS spokesman Jeremy Leaf.
Still, the figures may provide some relief to Bank of England policymakers who have been surprised by the resilience of the housing market to rising interest rates and subdued earnings growth.
BoE Governor Mervyn King said on Wednesday that any moderation of house price growth would be a "welcome development" in helping to bring inflation back to its target.
The RICS survey also showed sales rose in January at their fastest rate since May 2004, with a balance of 29.8 per surveyor in January from 28.6 in December.
And the sales to stock ratio, considered by some analysts to be a more reliable indicator of housing market demand, rose from 43.1 in December to 46.2 in January -- the highest since June 2004, when the housing market boom was at its peak.
14 December 2006
House prices are expected to jump 7pc next year on the back of strong gains in London, according to the Nationwide.
Prices rose by 9.6pc on average in November
Prices in the capital are expected to rise 10pc next year, underpinned by City bonuses, although the biggest gains are expected in Northern Ireland with a 12pc rise earmarked. House prices in northern and central England are expected to rise more modestly, by around 3pc to 4pc.
Nationwide's last monthly house price survey showed prices across the country rose by 9.6pc on average in November.
Fionnuala Earley, group economist at Nationwide, said: "Momentum gathered in 2006 will flow into the early part of 2007 and this will be supported by a buoyant economy, stable interest rates and a continuing shortage of housing supply."
The mortgage lender expects double-digit rises at the start of next year but Ms Earley said: "Increasingly poor affordability and likely cutbacks at the Bank of Mum and Dad will cause the rate of house price growth to move back into single digits in the latter part of the year."
advertisementThe housing market has proved surprisingly resilient to the Bank's two increases in borrowing costs this year but Ms Earley said it may not withstand an unexpectedly sharp rise.
Financial markets are now pricing in a quarter-point rise in interest rates to 5.25pc early next year after news that inflation picked up to its highest rate in a decade last month.
14 December 2006
class="story">FSA sounds warning about interest-only mortgage loans
By Myra Butterworth
Homeowners have been warned by the chief financial regulator about taking out interest-only mortgages and relying on house price rises to pay off the debt. Almost a quarter of all new mortgages - or 500,000 of the 2m taken out in the last year - are on an interest-only basis, according to the Financial Services Authority.
In a report published yesterday, the FSA raised concerns about consumers, particularly those on lower incomes, who have "no idea" about how they plan to repay such loans. It said 10pc of consumers taking out interest-only mortgages had no idea or at best only a rough idea of how they plan to repay the loan they have taken out, while a further 5pc said they have a definite repayment strategy in place.
The remaining 85pc had a good understanding of the associated risks and had a repayment vehicle in place to pay off the capital eventually, according to the FSA.
advertisementInterest-only mortgages have proved to be a popular choice among borrowers as they are a means of keeping monthly mortgage payments lower than repayment mortgages. Most lenders recommend in their mortgage offers for an interest-only mortgage that the borrower should take out a separate repayment vehicle, but what that repayment vehicle should be is not normally specified. Traditional, repayment methods include an endowment policy or an Individual Savings Account.
In the report, the FSA challenged the suitability of some repayment vehicles, focusing on borrowers leaving it too close to retirement to switch to a repayment mortgage and others, with limited equity, whose plan is to sell their home.
The FSA announced it is to look into companies' responsible lending policies to understand how they cater for the interest-only market.
Clive Briault, managing director of retail markets at the FSA, said: "Consumers' repayment plans need to be realistic and robust. Consumers, should not, for example, assume that house prices will continue to rise at the rate seen in recent years."
Brokers have welcomed the FSA's findings, saying it is important for borrowers to be realistic about their repayment plans. But they add people on lower incomes may have no other option to get on the property ladder.
Jonathan Cornell, director of Hamptons Mortgages, explained that people working in the City are likely to take interest-only mortgages because they will be paying them off with lump sum bonuses. But it may be the only option for those on lower incomes, he said.
"It is a question of the lesser of two evils: should they take an interest-only mortgage or face renting for the rest of their lives?" he asked. "With house prices creeping up, it is better that first-time buyers get on the ladder and build up some equity, but borrowers still have to bear in mind that their debt will be outstanding at the end of the term."
Ray Boulger, senior technical manager at John Charcol, said: "Any repayment plan which does not involve a regular monthly payment by direct debit or standing order requires discipline, which will be a challenge for some borrowers. For these borrowers an interest-only mortgage may be dangerous."
08 December 2006
House price rise swiftest in 4 years
LONDON (Reuters) - House prices rose at the quickest pace in more than four years during the three months to October, a survey showed on Thursday, supporting evidence of a resilient housing market in spite of rising borrowing costs.
The Royal Institution of Chartered Surveyors said its house price balance rose to +48.1 in October from +45.7 in the three months to September -- the strongest reading since September 2002 and more
than double the long-run average of +21.
The sales-to-stock ratio, which economists say is a more reliable gauge of the health of the market, rose to +40.9 from +39.1 -- the highest ratio in over two years.
"Even after last week's interest rate rise, surveyors are still confident that the housing market will remain buoyant," said RICS spokesman Ian Perry.
"The market is unlikely to feel cold winds from high finance costs until mid-year at the earliest as economic conditions are favourable."
The RICS data chimes with other property surveys which have portrayed a robust market following August's interest rate rise to 4.75 percent, but analysts have said the market may flag next year after last week's rise in borrowing costs.
The Bank of England hiked rates to 5 percent -- their highest level in five years -- but did not make explicit mention of the buoyant house market when it gave reasons for the move.
In line with other house market surveys, the data show continuing disparity in regional house price growth.
RICS said the headline figure was boosted as London witnessed the fastest rate of house price growth since June 1999.
However, while parts of Britain have failed to keep up with surging headline rates of price growth, RICS said this could be starting to change, making it even harder for first-time buyers to get a foot on the property ladder.
"London continues to see city bonuses inflate the housing market beyond the accessibility levels of most first-time buyers," said Perry.
"(But) the rest of the nation is showing early signs of building up momentum as prices pick up in the laggard markets of the midlands and northern England."
rong>Who Needs a Home Information Pack Hip?
From the 14th December 2007 any property that is marketed for sale in England and Wales will need a Hip.
Can I market the property before I receive the Hip?
The Hip needs to be ordered when the property is first put on the market, at the moment and until 31st December 2008, you do not need to have possession of the Hip but must have proof that one has been ordered.
What's in the Hip?
In brief the pack contains:
An index (i.e. a list of the contents of the HIP)
A sale statement (summarising the terms of sale)
Evidence of title
Standard searches (i.e. local authority enquiries and a drainage and water search)
An Energy Performance Certificate (EPC)
Commonhold information (where appropriate)
A copy of the lease (where appropriate)
Do all properties need a Hip?
Most standard properties need a Hip but there are some exceptions,
You do not need a Home Information Pack for:
Properties where there is no marketing (e.g. sale to member of your family)
Seasonal and holiday accommodation
Mixed sales (e.g. shop with flat)
Right to buy and similar sales
Sales of portfolios of properties
Properties not being sold with completely vacant possession
Unsafe properties and properties to be demolished.
How do I order my Hip?
You can order your Hip via your authorised seller a Solicitor or Domestic Energy Assessor
What should I look for in a Hip provider?
Ideally the Hip provider you choose should have full indemnity insurance and subscribe to the PCCB code of conduct for Hips (Hip code). All Hips which comply with this Code will include the HIP Code logo and you can check whether a HIP provider subscribes to the Code by contacting the Property Codes Compliance Board or visit their web site at www.propertycodes.org.uk.
The HIP Code provides protection for homebuyers, sellers, estate agents, conveyancers and mortgage lenders who rely on the information included in a Home Information Pack (HIP) provided on residential property within England and Wales. It sets out minimum standards which HIP providers have to meet.
Though it is not mandatory the Provider should also be a member of the Association of Home Information Pack Providers AHIPP, to check your provider is registered visit the AHIPP web site at www.hipassociation.co.uk.