Mixed data on impact of credit crisis

Activity in the housing market remains at a low ebb, but business investment was much stronger than thought at the end of last year and retail sales have steadied, a range of data showed -yesterday.

Delphine Strauss, FT.com - 28 March 2008

Mixed evidence on the extent to which credit constraints are holding back economic activity, coupled with more warning signs on inflation, make the timing of the next interest rate cut very uncertain.

The British Bankers Association said the number of mortgage approvals for house purchase rose from 43,732 in January to 43,870 last month, stabilising after the sharp falls seen in recent months. Yet that was still a third below the level of approvals in February 2007, so that the slight pick-up will do little to restore confidence - full article

Is this a good time to get into rental property

Thanks to the credit crunch and the general lack of confidence in the property market, it’s an interesting time to sell or buy a house at the moment.

PropertyToday.co.uk - 28 March 2008

It’s certainly a buyer’s market. And while it’s only house price growth that’s slowing, rather than prices themselves, it’s not clear whether there are “bargain” purchases to be had.

So if you’re thinking of becoming a landlord, is this a good time to buy rental property? We take a look at recent stories to see what the general consensus is.

The first story from the UK’s largest letting agent Your Move suggests the answer is yes. It says there was a 21 per cent increase in the number of new lets starting in January and February this year - full article

Nationwide and Halifax put up mortgage rate to deter new customers

Two of the biggest mortgage lenders increased their rates sharply yesterday in an attempt to close the door to all but the most creditworthy customers.

Grainne Gilmore, Economics Correspondent, The Times - 28 March 2008

The move could lead to tens of thousands of borrowers struggling to get any mortgage deal at all.

Nationwide, Britain’s second biggest lender, raised the rate on one of its more popular deals by up to 0.57 percentage points, while if.com, part of Halifax, the biggest lender, increased its rates by up to half a point.

Nationwide said that it did not want to take on many more customers as it would add too much risk. It is thought that if.com is also concerned about attracting too much new business - full article

Local Housing Allowance – a new way with Housing Benefit – goes live April 7 2008

Local Housing Allowance (LHA) is set to golive on 7 April 2008, for tenants in the deregulated private sector.

Essentially, LHA is a new way of calculating Housing Benefit based on the area in which the customer lives and the household size. It is for people who rent their homes from a private landlord, who are on a low income, and need help to pay their rent.

Local Housing Allowance is a central part of the government’s wider programme of benefit reform and aims to give Housing Benefit customers greater responsibility and will give landlords and tenants more choice and information. Local Housing Allowance is a flat rate allowance based on household size and location.

The new system will be fairer and more transparent and will encourage customers to take responsibility for budgeting for and paying their rent. Customers will know in advance the maximum level of Housing Benefit they can receive. For the first time, tenants living in similar circumstances will receive similar amounts of benefit to others in their area.

Local Housing Allowance will apply to private sector tenants who make a new claim for benefit and to existing tenants who change address or move into private sector accommodation, on or after 7 April 2008. Local Housing Allowance has been tried and tested in 18 local authorities, and has been subject to extensive and independent evaluation. The evaluation has shown that the LHA has been successfully implemented in all 18 authorities.

As a landlord, you will need to be aware that that payment of Local Housing Allowance will normally be made direct to the tenant. The tenant will be responsible for paying their rent to you.

Local Housing Allowance may affect any landlord who enters into a deregulated private tenancy agreement with a person awarded Housing Benefit. By deregulated, we mean a tenancy that has been entered into since 1989 and is not covered by one of the following exceptions: local authority landlords who let to ‘council tenants’, tenancies with registered social landlords, some supported housing, tenancies which started before 15 January 1989 (2 January 1989 in Scotland, tenancies in caravans, houseboats or hostel and tenancies where the Rent Officer has decided that a substantial part of the rent is for board and attendance, such as hotel accommodation.

For more information email lhaadviceline@dwp.gsi.gov.uk or visit www.dwp.gov.uk/lha

It’s time for property sellers to get smart

New-to-the market sellers raised their average asking prices again last month to £239,655, an increase of 0.8%, in spite of the credit crunch resulting in a more stringent mortgage environment. Average prices being sought by new sellers are less than 1% lower than the record high of £241,642 in October last year.

Miles Shipside, commercial director of Rightmove explains: “Most sellers coming to the market seem to be ignoring the increased competition from other unsold properties and the challenge buyers now face in obtaining a mortgage. As many of these sellers are likely to be buyers themselves, they seem to be trying to bank a higher figure for their home but want a bargain when they buy. It’s human nature, but in the current market, sellers should price below their competition to achieve more interest now and avoid a larger price drop later in the year.”

Continue reading It’s time for property sellers to get smart…

Government warns of zero tolerance of ‘commercial vandalism’

The property industry has been firmly warned by the government today that any attempt to avoid paying new empty rate bills through deliberate vandalism of properties will be met with a ‘zero tolerance’ retaliation.

Jennifer Rigby, Property Week - 25th March 2008

Local government minister John Healey has set out tough measures to combat so-called ‘commercial vandalism’ in order to avoid paying the charges, estimated to raise up to £1bn for the government annually, which become effective next week - full article

UK house prices will escape America’s crash

The Bank of England joined the Federal Reserve in doling out serious cash in a bid to unblock the credit markets. And all week economic and financial issues dominated the front pages.

Liam Halligan, The Sunday Telegraph - 23 March 2008

Even this Easter weekend, when the markets are closed, Britain’s annual, semi-ritualistic church-versus-state dingdong is being upstaged - the airwaves are full of talk about “short-selling” and “City boys”.

I suspect most readers have had their fill of breathless reports about this or that “rescue bid”. You’ve probably heard enough about the “rumour mill” almost grinding up another leading British bank.

Personally, I’m fascinated by such matters - and would argue that they matter enormously. But I realise the question most people want answered is this: “Will house prices in Britain collapse, as they seem to be in the States?” - full article

DIY Landlords Plan To Do Repairs

Prospective landlords are planning to take a more hands-on approach to their investments, with a majority saying they would manage their properties themselves, a survey shows.

Annova.com - 21 March 2008

Around 54% of people who are aiming to get a buy-to-let property say they would manage it themselves, rather than pay an agent to do it.

And 88% admitted they would often drive past their property to check how well the tenants were keeping it, according to Birmingham Midshires.

More than a third of landlords also said they would fix problems and carry out maintenance themselves, rather than pay a professional to do it - full article

Surveyors lower home valuations

Homeowners coming to the end of cheap fixed-rate mortgage deals are having the valuation of their properties reduced by surveyors, who fear the housing slowdown could gather pace.

Sharlene Goff, FT.com - 21 March 2008

Some borrowers are being denied new and cheaper mortgage deals after finding their properties are worth less than they paid for them two years ago.

This comes as a growing number of mortgage providers restrict loans to customers outside certain areas or cap the maximum amounts homeowners can borrow at £350,000 as the credit squeeze intensifies.

Paul Welch, managing director of Clegg Gifford Private Clients, a mortgage broker, said borrowers were increasingly being locked into expensive rates with their existing lender as they were unable to remortgage after their initial cheap-rate deal expired - full article

Buy-to-let investors who fear they may be left homeless

They face personal ruin after losing the properties they thought would be their pension. As Tony Levene reports, their story is far from unique.

Tony Levene, The Guardian, Saturday March 22 2008

Buy-to-let investors are facing their hardest times since amateur landlords first hit the scene in force a decade ago. Property values are falling, rents are static, and interest rates are on the way up - assuming buy-to-letters can find mortgages now that many lenders have toughened up their criteria.

But for many investors - including Chris Miller and Geoff Morris - it’s more than belt-tightening that’s needed. Unless they can pull out a last-minute rabbit, it’s game over and personal ruin.

They have already lost the properties they believed would provide them with riches. Now they also risk their own homes and other assets.

Their stories are far from unique. Thousands of would-be amateur landlords are in a similar position.

The two men are not after sympathy. While both say they were deceived by developers, lenders, lawyers and, above all, valuers, they accept that ultimately they have only themselves to blame - full article