House Price Spy Blog

Further to my other blogs about the Northern Rock:

1. Gordon Brown rules out offering any assitance to The Northern Rock.

2. The media cause panic with investors who proceed to get up early to withdraw funds.

3. Gordon Brown pledges to back The Northern Rock to the tune of several billion pounds.

4. Fickle savers rush to put their money back in.

5. Shares slump in price and the government are again forced to back up the Rock.

6. Sir Richard Branson tables a takeover bid for the ailing financial giant.

So let me get this straight if Alistair Darling says The Northern Rock would have gone failed if were not for his intervention then does that mean any financial institution that invest badly will be bailed out by the UK taxpayer? Or will we get a share of the profits when Sir Richard Branson takes over and turns it’s fortunes around?

Whats the point of making sound investments (on a personal level) if you have to subsidise others poor choices (on a national level)?

The Northern Rock in more detail.

The Scottish parliament looks set to aprove legislation which would see another barrier removed from the foot of the housing ladder. The Single Surveys bill will make it manditory for every property seller to have a survey done prior to placing the property on the market.

Surveys depend on the size, age and value of the property and are usually around £200 to £400. This legislation will be great news for first time buyers but bad news for surveyors who are used to having repeat business on popular properties and sellers who will have another deduction from their sale price.

Single Surveys were piloted up north briefly in 2004.

Read Clarkes previous Blog about Home Information Packs

With legislators apparently keen to tip the balance in favour of buyers rather than sellers (see changes in Stamp Duty) there could be further changes ahead!

The UK is facing a housing crisis with properties returning to 1980s values of inflation and negative equity a real threat. New homes need to be built on a scale not seen since the 1950s to prevent a housing crash in ther UK.

The UK is presently producing around 200,000 new homes each year but this will need to rise by a third if we are to keep housing affordable for first time buyers. The National Housing and Planning Advice Unit (NHPAU) has produced a report saying that property prices will rise to 13 times average salary should this trend continue. With many people priced out of ownership and occupations who could traditionally buy property not being able to get on the housing ladder, this problem is set to grow.

This could effect the property market if there is a shift in outlook of middle earning, young people who see property as unobtainable and out of reach. Gordon Brown has promised action on new home building under his leadership.

Inheritance Tax seems ridiculous to many people me included. Would it be OK to go to a shop pay tax on something and then have to pay tax again once you were fnished with it-which is basically what happens with Inheritance tax! You pay tax on money to pay for your home and then when you die you pay 40% on it again!

With property prices rising more and more people will have to pay Inheritance Tax of 40% on propety valued £300,000 and over.

Gordon Brown has initiated measures to prevent Inheritance Tax avoidance which could be backdated to 1986! These would mean any payment of £5,000 or more would need to be considered as Inheritance. Pensioners who inherited property since 1986 will have to pay Inheritance Tax on it!

Fortunately for Gordon Brown with the scarcity of new properties and inflation in prices no-one will be able to afford one so most people will not notice! As usual the people with the most money will have the best advice and more options to avoid paying 40% tax on already taxed income, with the government penalising middle earners who have taken Government advice and saved carefully for their later years.

Inheritance Tax is set to bail out Gordon Browns government to the tune of £3Billion!

The Bank Of England has decided to make no change for October to the Mortgage Bank Rate. The last change was a 0.25% rise in June, this was the last of a series of rises which has checked inflation in property pricing and some concern about unsustainable prices and lack of adequate housing.

While there was no change for October, Gordon Brown will want to keep inflation in line with a possible election around the corner.

So there was no change for October, if you want to be the first to find out about the next rise on the 8th of November 2007. check out the Bank Of England Site.

After my blog of a few weeks ago I thought I would follow that up a little bit. Gordon Brown had vowed not to go down the route that the US has which led to instability in financial institutions saying that they were on their own.

With the Northern Rock hysteria caused by the TV and media with news images of pensioners taking out their life savings (the next day they would put it all back in of course) Gordon Brown buckled and said he would cover Northern Rock and any savings that were kept in there would be covered. As if by magic people returned the next day to pay back in their money-cue smug grin from Gordo for saving the day…

Northern Rock have been criticized for selling risky mortgages especially to first time buyers.

The Northern Rock fiasco has made banks think twice about inappropriate lending, many mortgage lenders have pushed their rates up to 11.5% for some higher risk categories. More and more lenders including credit cards have begun turning away potential borrowers, however this message would have been so much stronger if Gordo had not backed down and relented to pressure.

The last financial institution to go under was Barings Bank in 1995, there was no Treasury assitance on that occasion.

You can’t have failed to notice that there was somewhat of an international crisis going on…American lenders have been criticized for irresponsible lending causing chaos in the international markets. The US Treasury has used reserve federal cash to consolidate lenders.

The governor of the Bank Of England Mervyn King has now requested that Gordon Brown not bail out financial institutions in the way the US have done and this has sparked a fear that house prices will drop in the UK as lenders and their shareholders bear the brunt of this crisis.

The raises in mortgage borrowing rates of the last few months have put a little bit of caution into borrowers and this will have a knock on effect on house prices in the years to come. Combine this with the reduction in bank profits and shareholders payments and you have a more difficult position for many borderline borrowers in the UK.

Any crisis abroad will have the usual trickle down effect in the UK with finance and property the expected sectors to be hit hardest.

Gordon Brown still has the option to use reserve funds to back up affected lenders but seems unlikely to spend tax payers money for this purpose.

The Bank of England have kept the mortgage rate at 5.75% untill October 2007.

The rate has now remained unchanged for two months after 5 successive changes which might suggest that mortgage inflation is now more managable.

Keep up to date directly at the Bank of England keep site

The mortgage interest rate is due for review on the 6th of September 2007 but what will the Bank Of England do?

The Bank Of England have shown that they are taking a pragmatic stance to reduce inflation and curb borrowing under these circumstances and more increases in the base rate are expected next month. Only time will tell, but this could be depressing news for homeowners especially first time buyers.

Get the details hot off the press from the Bank Of England.

Only time will tell, House Price Spy will keep you fully updated on any changes!

With all the stories that have been around last week regarding the lack of affordable housing It raises the question that with flooding also in the news this week, can we keep building in ‘flood plains’?

To keep abreast of the increasing need for afordable new build housing it is claimed that we will need 140,000 new houses per year whereas only a few hundreds ar enow being bult across the country.

What is the permanant solution to this problem?