House Price Spy Blog

The Bank of England has just announced (Today 12:00 GMT) that mortgage interest rates have been slashed by a huge 1.5% to 3%. While we all expected a cut similar to last months (0.5%), this move comes as a surprise to everyone within the finance industry.

Gordon Brown has taken moves to ensure that any cut will be passed onto customers rather than consolidating lenders positions, and measures will be taken to promote re-growth in the mortgage market in the next quarter

This month’s drop in rates comes hot on the heels of disastrous figures for the economy with production and sales down just in time for the retail industry’s busiest time of the year, Christmas.

This is the largest drop in interest rates since 1981 and means it’s a great time to consider moving your mortgage or re-negotiating a better deal.

House Price Spy can help you make the most of this change with their Remortgage Section of the site. There are unbeatable deals to make sure you beat the Credit Crunch! Re-mortgage with House Price Spy!

BBC 1 had an hour long show about the financial crisis, that started as a ‘credit crunch’ and has seen banks and financial institutions fall like dominos starting with Northern Rock and taking in Halifax/Bank Of Scotland and Bradford & Bingley. Gordon Brown came out of this show really badly, they interpolated footage of him talking at high level finance dinners talking up the top financial institutions with disastrous figures on the present state of the eonomy.

The New Labour success story was built on ‘growth’ which now means voodoo economics, lending chains with no firm foundation and bankruptcy. The FSA (set up to regulate the industry) also dont come out of this show with pass marks, the only excuse they can come up with seemed to be that they ‘paid the best wages to attract the best candidates’ so anything that happened was not their fault!

3 things need to be looked into:

Similar companies should not be able to let to each other in a haphazard fashion.

Lending should have some solid basis ie not be sold on as an asset from company to company and have something to guarantee it.

There should be strict rules about what can be lent rather than leaving it up to the conscience of the lender, especially for business and ‘buy to let’ commerical borrowers.

It’s clear that most of the ‘growth’ in the last 10 years will evapourate with business finance being withdrawn and property prices going back to previous levels.

A couple of things in the Panorama show were just wrong, the main guy said something along the lines of ‘anyone who wanted to have their house price go up is at fault’, the average borrower does not have control over lending between City institutions or the way they regulate themselves. Also someone from the press said that the press had simply ‘reported what was happening’, if the press had not made the most of the Northern Rock people would have not withdrawn millions and it may not have had to get sold off cheap starting a chain of bad debt.

The Bradford & Bingley are the latest lender to have severe problems, being bought out by the UK government and Spanish group Santander (who bought the Abbey)

Bradford & Bingley were heavily involved in the Buy To Let market lending billions in recent years. With this market being one of the hardest hit by the lending crisis it was only a matter of time before they hit problems. As we know many people saw ‘Buy To Let’ as being a safe and lucrative way of freeing cash and steady earnings, with huge numbers of flats and other properties being on the market.

Riding a wave of success can be a risky situation, with developers and landlords thinking that the boom would never end and lenders happy to profit. Now we are all paying the price of saturation of the renting market, crazy lending and even competition between banks.

With so many lenders being amalgamated (think Lloyds TSB Halifax BOS) we cannot expect the good deals of 2006 2007 that made us change bank or open additional accounts.

With so many (often poor) new property developments across the country the demand for rented accommodation will be checked. This will of course see a rise in the numbers of property for sale at lower prices.

Three of the beggest mortgage lenders in the UK have raised their mortgage rates. Never reticent in passing on losses to customers the ‘big three’ have increased their rates by around 0.35%, adding around £600 per year to the average UK mortgage. Where the ‘big boys’ go the others will follow.

This comes in the same day as it was announced that reprieved lender Northern Rock were withdrawing many of their products including: Silver Savings, Silver Savings 30, Business Reserve and all Fixed Rate Bonds. As with the last announcement other lenders will follow suit and withdraw many of their services and products. Only last year I opened an attractive bank account with Abbey giving 6%, seems like a waste of time now!

As mentioned in a previous blog, the people who I feel really sorry for are the the ones who took out mortgage products or exorbitant loans and now find those products withdrawn and either having to sell up (at a loss) or forfeit their home.

I also hear that the government have decided to raise the guaranteed savings value from £35,000 to £50,000 which seems correct. This will deter people from rushing to withdraw their savings at the first sign of trouble, along with the media hype this is one of the reasons why we are in this situation. Any sign of trouble we rush to withdraw savings even thought they are guaranteed, this was the worst financial storm in 18 years and no UK major institutions went down.

If you are withdrawing all your savings to pump them into The Bank Of Ireland expect a lenghty wait!

In other news the US senate is set to approve $700 plans to backup stateside finance after a long fight.

I heard that Vladimir Putin (Russian PM) had joined the criticism of the US, how times have changed! It was only 20 years since the USSR crumbled and now they are telling everyone else how to run their country…I would still rather live in the US! The Russians have waited 20 years for that little dig.

You will have noticed your utility bills rising in the last 12 months, by 25% for Electric and up to 35% for Gas due to fuel shortage. It would be nice to take all the doubt away from where you are going to find this money from and how high the prices will go by fixing utility prices for a few years untill the economy is a bit more stable and indices like house prices and the stock markets are more stable.

Thats exactly what British Gas have done, they have fixed utility prices until 2012 . Imgagine the peace of mind knowing that you wont have a penny increase for the next 4 years!

British Gas are the most reliable provider of energy in the UK with the largest market share of any company across the whole UK due to their service, products and pricing. Save up to £200 per year when you get your combined Gas and Electric from the most trusted provider in the UK, British Gas!!!

With prices going up and earnings going down we could all do with a little hand occasionally, thats why this offer is sure to be so popular with people across the UK!

Cap your Energy bill untill 2012 with British Gas!

I see there was a property related article on the BBC site, which had an estate agent who offered house swop where you can trade your home for another one and ‘match make’ buyers to sellers like a property dating agency. A few months ago developers were potential housebyers to try new build houses for a weekend to see whether they were suitable or not. Both of these are preferable to the governments announcement of this week that they were going to spend billions of taxpayers money in raising the minimum level of 1% Stamp Duty to £175 rather than the previous £125.

See the whole clip at the BBC site

From the stats we have the average price in England is £230,000, which is the same as last year. The recent government action will give an average sale an extra £550 but average prices should have risen by from £10,000 to over £20,000 during the last year so this a drop in the ocean.

Last year - £230,000 - £125,000= £105,000×1%=£1050

This year - £230,000 - £175,000= £55,000×1%=£550

£550 is not enough to get the property market going, but by the governments figures will cost us billions. By my figures (and bear with me here):

There are an average 100,000 sales in the whole of the UK per month so 100,000×12 monthsx£550 Stamp Duty=£660,000,000 (£0.66 Billion) to give a tiny £500 help! How many council houses could you build for that Gordon?

Gordon Brown and Alistair Darling have made a move to quell the recent unrest about house prices and the apparently impending recession by giving every seller a year long boost. The previous lowest level where you paid Stamp Duty 1% Tax was £125,00, this has now been raised to £175,000. This will last for 1 year from Wednesday 3rd 2008.

Also announced today were measures to help people struggling with large mortgages with increased rates of interest by giving councils and Social Housing Landlords the power to pay off mortages while charging reasonable rents. This money will be found from previous funding and ‘brought forward’ to improve housing in the short term.

Conservatives and Liberals have condemned these measures as short-term solutions and as an attempt to save Gordon Brown from Election defeat or being ousted by his own party.

With the cost of living rising and the global economy facing the worst slump in 20 years, its unclear what Brown could do, the UK property market has been inflated for most of the 21st century and many people are seeing this as a sensible re-adjustment rather than a collapse in prices. People buying in popular areas will never lose much, however builders and speculators may lose out in the medium term.

Where will Gordon Brown be finding the money to pay for this? Millions of pounds will have to be found from somewhere, since someone like me (who bought property last year) wont be moving in the near future I am not keen to fund others just to boost the number of properties sold and artificially raise prices. The government also announced that households earning under £60,000 will get ‘interest free’ loans to fund property.

The latest property figures have confirmed what we all know, sales are down to pre-1990 levels and desposits are up to an average of £37,000. Mortgage lending is down by 65% on figures for July 2007.

This is not of course great for first time buyers and those on low incomes who are already on the property ladder, usually you would have said that the government would offer support to get more people back buying property and spending money but with the present financial crisis you wont hold your breath! The London Olympic bid will be a huge expense and I am sure there are quite a few world leaders relieved to have that multi billion pound burden to bear in the next few, lean, years.

Another point made by the BBA was that reposssesions in ’sub-prime’ mortgages was up, lenders have raised their rates on these types of mortgages and few companies are now offering them. Government action would be appreciated on this point, lenders offering mortgages which are out of scale with earnings and then removing them when times get hard leaving homeowners with nowhere to go as other lenders have had the same thoughts. Attracting borrowers in with low rates and 100% mortgages and then going back on their pledge when the financial outlook changed!

All figures from the BBA or British Bankers Association.

I saw an article in the papers today saying Scottish leader Alex Salmond claimed that Scottish house prices were up and some from a leading estate agents counter-claiming that they had gone down, from the figures we have it’s quite conclusive that they HAVE gone up. Number of sales is of course way down on 2007, that is why estate agents are all doom and gloom.

The average first time buyer in Scotland had a 3% larger deposit than the previous year at 13%, however there were a third less mortgages granted to first time buyers than this time last year.

Below are areas in Scotland with a rise in average house prices (prices rounded down):

Aberdeen City - July 2007 £178k - Jun 2008 £185k

Aberdeenshire - July 2007 £187k - Jun 2008 £188k

Argyll And Bute - July 2007 £162k - Jun 2008 £179k

East Ayrshire - July 2007 £114k - Jun 2008 £131k

East Dunbartonshire - July 2007 £189k - Jun 2008 £214k

Highland - July 2007 £154k - Jun 2008 £189k

Orkney Islands - July 2007 £235k - Jun 2008 £294k

Perth and Kinross - July 2007 £173k - Jun 2008 £193k

South Lanarkshire - July 2007 £135k - Jun 2008 £139k

West Dumbartonshire - July 2007 £108k - Jun 2008 £110k

These are obviously averages from all the data however you may see a localised drop in prices where you are.

The figures for Scotland in 2008 are January £151k and June £159k so Mr Salmond could argue that while England was down by an average of £8K in that period Scotland was doing better that the rest of mainland UK

Check on your local area to see whether your area has gone up or down, House Price Spy is free and gives you all the property information you need to keep an eye on the market locally or nationally. Help to spread the word about our great free service, tell your family and friends to join up for free!!

With property prices falling by around 6% in recent months more people than ever will be facing the spectre of negative equity ie paying more for their mortgage repayments than the property is worth on the open market.

This is especially for people who took out 100% and large value mortgages during an inflated property market and bought outside the usual hot areas. New build flats and houses are not looking such as great investment in the light of recent developments as these are the first lose value and can even ‘depreciate’ after the initial burst of interest in new property developments.

The Royal Institution of Chartered Surveyors (Rics) have recently stated that over 23,000 borrowers now face negative equity by 6% to 10%, this is a 15 year high.

Just for the record the average cost of a home in England in April 2008 was £226,194, in Wales it was £164,994, in Scotland £165,546, and in Northern Ireland the average value was £224,664.

England is around 5% down, scotland is slightly down and NI is holding steady after recent rises causing a boom in the market.

When the lenders and government sort out the credit crisis this will all change, the cost of an average mortgage is up almost 7% with many of the attractive packages enjoyed in recent years.