House prices 'have not gone down', say stubborn consumers

Consumers have given a decisive clue as to why asking prices have been slow to register any decline – most simply do not believe that house prices will go down.

Indeed, more than one in five confidently expect them to go up.

Whilst Rightmove has finally reported a dip (of 3.1%) in asking prices within the last month, asking prices have still held up remarkably well. They are 1.2% up on a year ago, and at £232,144 are some £70,000 ahead of ‘actual’ prices reported by the Land Registry.

But while agents have been in the firing line for alleged over-pricing, a new survey –ironically by Rightmove, which frequently tears its hair out over the issue – goes some way towards solving the mystery of the reality gap.

The massive poll, of over 26,300 consumers, shows that two-thirds (63%) do not believe house prices will be lower in a year’s time than they are now. They expect them to remain the same or, according to 22%, to be higher.

Less than one-third (three in ten) expect lower prices – unchanged from a year ago.

Despite ongoing economic gloom, the optimism among consumers is almost universal. While Londoners are the most optimistic, with 29% of consumers expecting higher house prices in 12 months’ time, in Wales – the most pessimistic regions – only 35% are predicting price drops over the coming year.

A baffled-sounding Miles Shipside, director of Rightmove, said: “The public’s belief in the value of bricks and mortar seems to defy the deteriorating economic situation. This is a clear message that the majority of consumers view the property asset class to be as ‘safe as houses’ in these times of economic uncertainty.”

He added: “It should be remembered that in spite of the overall confidence expressed in this survey for property prices, transactions volumes are still well down on historic norms. Economic stability in the UK and Eurozone will be needed before many are willing or able to re-engage with the property market.”

The survey did, however, reveal some extremely localised opinions.

For example, in the North-West 26% of respondents in Preston expect prices to be higher in 12 months’ time, compared with just 14% in Lancaster only 20 miles away.

Shipside said: “Local variations highlight how patchy confidence can be, depending on an area’s housing mix and wealth demographics.

“The wealthier middle-to-upper price brackets may be feeling fairly blast-proof from any further economic eruptions, and see a less turbulent outlook.

“Meanwhile, some of the more cash-strapped terrace and semi dwellers may feel far more exposed to the negative pressures of reduced mortgage availability and job uncertainty.”

News Source: http://www.introducertoday.co.uk/

At least 5% more households are in mortgage arrears

Between 5% and 8% of households are in trouble with their mortgages – but lenders are showing them forebearance and so their woes are not showing up on official figures.

It means that official arrears figures are being ‘significantly’ masked, according to a new report from the Bank of England.

Its Financial Stability Report has released the findings of a review by the Financial Services Authority, which – at the Bank’s request – looked at the potential scale of the problem.

The Bank was increasingly concerned that the true arrears picture was being masked by lender action.

The Bank’s FSR says: “FSA estimates indicate that around 5% of these households would have been in arrears of six or more months if they had not received forbearance.

“That suggests that, in the absence of forbearance, the mortgage arrears rate might have been 0.5 percentage points higher at 1.7%, even at near-zero official interest rates.”

The report warns that “lenders who have exercised greater forbearance could be more exposed to losses in the event of a sharp deterioration in macroeconomic conditions”.

Yesterday's gloomy FSA also warned that mortgage borrowing costs are likely to climb next year.

This is due to hikes in the costs of borrowing between banks, which are uncomfortably exposed to the economic ills of countries in the Eurozone crisis.

News Source: http://www.introducertoday.co.uk/

Investors in stampede to get their money out of 'death bonds'

Guernsey-based EEA Life Settlements has suspended trading in its £608m EEA Life Settlements fund, after a run of investors tried to withdraw their assets.

The “unprecedented levels” of redemption requests, which put the fund’s solvency at risk, follows guidance from the FSA.

The suspension means that existing investors will not be able to get their money back until the board decides it is safe to resume repaying investors their money.

The FSA has said it does not believe that investors in the so-called ‘death bonds’ fund will necessarily lose all their money, but admits it may take some time for them to get it back.

Earlier this week, a consultation document from the FSA described traded life policies as “toxic products” and said they should not be marketed to retail investors.

It said it intends next year to ban the products – which the FSA document specifically referred to as US traded life policies.

With traded life policies, investors buy into a pool or fund which has bought life policies at discounted prices from people who are terminally ill and need cash now. Investors then share the payout when the policy holder finally dies.

However, the FSA warned that these ‘death bonds’ are ethically questionable, since investors are essentially betting on people’s life expectancy, and may not deliver if people outlive their prognosis.

The warnings have clearly provoked a rush from investors to get their money back before the products are banned.

A statement from the board of the EEA Life Settlements fund said: “Following a meeting on 30 November of the board of directors of EEA Life Settlements Fund PCC Limited, the board has declared an immediate suspension of the valuation of the net asset value of all classes of participating shares in each cell of the fund and of the issue, sale, purchase, redemption and conversion of shares of each such class, which the board is entitled to do in accordance with the fund’s articles of incorporation and offering memorandum.”

The statement said the fund maintains levels of liquidity which the board considers prudent for normal operational purposes, but said: “As the current liquidity levels of the fund are insufficient to satisfy such redemption requests in full and the board has determined that it is not reasonably practicable to realise or dispose of its investments to satisfy such requests, the board has decided to suspend dealings.”

It added: “The board will … resume dealings as soon as it considers it prudent to do so. Shareholders should be assured that the suspension of dealings will in no way affect the ability of the fund to pay premiums on insurance policies in the usual manner.”

After the fund’s suspension, the FSA said: “We acknowledge that the publication of our guidance consultation may have prompted a number of investors to request redemptions from funds.

“We also recognise that our decision to intervene in this market may pose difficulties for existing investors.

“However, we considered that it was necessary for us to act because of our concerns about these products being inappropriately promoted or recommended to a growing number of retail customers.”

News Source: http://www.introducertoday.co.uk/

MEP tells Brussels to back off over buy-to-let mortgages

An MEP has waded into the row over the EU regulation of buy-to-let mortgages.

Nikki Sinclaire has lambasted the proposals.

The MEP for the West Midlands said that the proposals might bring the UK buy-to-let mortgage sector into line with continental practice, but ignore the real issue.

She said: “The UK is the only European country that has a thriving buy-to-let market. In other countries, property investment is carried out by companies or trusts rather than individuals.

“If implemented, the EU regulation could inflict huge damage to the private rental sector.”
 
Around 1.4m landlords with buy-to-let loans are set to be affected by the proposed changes, which would mean that rental income cannot be taken into account when mortgage approvals are being considered. As a result, some landlords with insufficient other income or with low deposits might find they no longer qualify for a remortgage if the new rules are implemented in around two years’ time.

Sinclaire said: “It is outrageous that the EU should try to dictate to lenders and borrowers the basis on which loans should be offered.

“This unwarranted assault on the buy-to-let market will inevitably result in less affordable rental housing. It will also put the lives of 1.5m British investors and their tenants into turmoil.”

She said that a number of MEPs have claimed that their constituents do not care about the new proposals and may use this excuse to support the proposed changes.

She urged landlords and tenants to bring pressure on the MEPs. She added: “People might think this would affect just investors, but in truth this will damage the whole housing market including ordinary home owners.”

The MEP, who is a member of UKIP although not in the official group, said that if changes to the UK buy-to-let market need to be made, they should be made by “our democratically elected politicians in Westminster, not by faceless and unelected bureaucrats in Brussels”.

News Source: Introducer Today

Mutuals step up mortgage lending as banks falter

Building societies have stepped into the breach, as other lenders retrench.

Mutuals approved mortgages worth £2bn in October, up 15% on the £16.6bn they lent in October last year.

It follows a 33% annual rise, and a 22% month-on-month rise, in mortgage approvals by mutuals in September.

Gross mortgage lending by mutuals was £2.3bn in October, a 20% annual increase, and the highest level of gross lending for any month since the Building Societies Association started its current series of reports in January 2010.

Between January and the end of October this year, mutuals lent £19.1bn in mortgages, up 15% on the £16.6bn lent in the corresponding period in 2010.

Savers are also showing signs of getting back in the habit, with building society saving up by £0.4bn, giving building societies net receipts of £0.2bn in October, compared with a net withdrawal of £1.3bn in October 2010.

Adrian Coles, director-general of the BSA, said: “Building societies and other mutual lenders continue to play their part supporting home buyers.

“So far this year, mutual lenders have lent 15% more than in the same period in 2010, whereas other lenders have so far lent 1% less than last year.”

News Source: http://www.introducertoday.co.uk/

Niche's £1m hello to bridging lender

Reading-based Niche Financial Solutions has marked its appointment as a preferred partner of Omni Capital, a specialist short-term lender, with a debut deal completion valued at £1m.

The second-charge loan is secured on a prime residential property in stockbroker-belt Surrey. While superficially straightforward, the case presented a number of significant processing challenges from the outset.

Following the refusal of the existing second-charge mortgagee to extend their facility, Niche Financial and Omni Capital stepped in to assist and were ultimately successful in negotiating a complex Deed of Priority with the senior lender.

Speaking for Niche Financial, Malcolm Scanlon said: “When this deal arrived in our office, despite its complex nature we knew the case would be in safe hands with Omni Capital.

“They have a great appetite to lend, and we were able to work in tandem to ensure the case reached a quick completion.”

News Source: http://www.introducertoday.co.uk/

RICS consultation into property's knotweed nightmare

Property's nightmare plant is being put under the spotlight. The thuggish Japanese Knotweed is the stuff of horror films, as it can grow through concrete and walls to blight a property in the eyes of lenders and insurers.

Now the Royal Institution of Chartered Surveyors is consulting on a new information paper which aims to help valuers and mortgage lenders consider the implications of a Japanese Knotweed intrusion when undertaking valuations of residential property in the UK.

A number of mortgage applications have been declined where Knotweed has taken its hold on properties.

In fact, says the RICS, although the plant can be difficult to control, with correct treatment it needn’t be a life sentence for a property.

It points out that since the mid-1970s, challenges posed by building movement and asbestos have presented assessment problems that were largely resolved and assimilated into the lending process. It says there is no reason why the assessment of Japanese Knotweed cannot follow a similar route.

RICS is inviting responses from members, lenders and Japanese Knotweed treatment experts. The consultation runs until December 9.

Philip Santo, for the RICS, said: “When assessing market value, valuers must take account of a variety of factors, and the presence and effects of Japanese Knotweed is just one of the many considerations that may affect value.

“While this invasive, non-native plant can be difficult to control, it should be recognised that timely and persistent treatment programmes can minimise its impact.

“A standard risk assessment framework is being proposed to help valuers to provide more informed advice to their clients and to enable lenders to adopt more consistent and balanced policies.

“As the treatment industry develops and matures it is hoped that Japanese Knotweed will soon become just one more consideration in the complex valuation process. The RICS consultation aims to canvass opinion in order to help make this happen.”

News Source: http://www.introducertoday.co.uk/