eSmart Property 12 by Steve Wright

esmartproperty The digital property magazine

JANUARY/FEBRUARY/MARCH 2009

The changing

remortgage

landscape finding the best deal that's right for you

Bank of England announce historic rate cut the lowest interest rate level since 1694

Housing market predictions underlying factors in the recovery of the market

Prime locations

economic conditions drive market fortunes

A challenging environment

reducing the negative impact on borrowers

Reducing home repossessions

new rules aimed at helping struggling homeowners

PLUS: BUY-TO-LET ONE MINUTE MORTGAGE GUIDE 2009 HOUSING MARKET FORECAST

Q: Do you want to explore your mortgage options?

A: Tell us what you need? Click here *

06 28

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In this issue 05 06 07 08 08 09 10

Bank of England announce historic rate cut… the lowest interest rate level since 1694

Tenancy Deposit Scheme… deadline approaches for landlords and tenants

South East proving the most popular region… significant population movements across the UK

Official Land Registry data… house prices at February 2006 levels

Mortgages… one-minute guide

Maximising rental income… European model could become more commonplace

2009 housing market… prospective purchasers register at a greater rate

11 13 14 15 15 16 19

20 Buy-to-let landlords… investors guarantee the growth of the private rented sector

The changing remortgage landscape… finding the best deal that's right for you

More tenants require unfurnished properties to rent… new trend is welcome news for landlords

Tenancy agreements… what are my legal and contractual responsibilities?

Reducing home repossessions… new rules aimed at helping struggling homeowners

Housing market predictions… underlying factors in the recovery of the market

Prime locations… economic conditions drive market fortunes

Your property may be repossessed if you do not keep up repayments on your mortgage.

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eSmartproperty

In this

issue Welcome to the first issue of our property magazine for the New Year. Inside this issue with the risk of lenders becoming even more restrictive over the coming months in the face of the worsening economic climate, we look at the key issues that will affect the property market over the next few months. The Bank of England cut its official base rate for the fourth month in a row as it attempts to shore up the economy. For the first time since 1694 interest rates have fallen below 2 per cent. On January 8, 2009 interest rates were cut to 1.5 per cent, the fourth time since October last year. The market is still not functioning properly and is likely to lead to a fragmented approach by lenders, as they try to balance the interests of savers and borrowers and other pressures on their businesses. Turn to page X to read the full article. Landlords and tenants who use the Tenancy Deposit Scheme (TDS) have been told they have until April 6, 2009, to ensure that they are protected by a regulated letting agent or government authorised deposit protection scheme. This follows a warning to tenants that they need to ensure their landlords have safeguarded their deposits. In an announcement on January 7, 2009, confirmation was given that the TDS will only be available to letting agents who are members of professional bodies. Find out more on page X. As house prices continue to fall, attractive remortgage deals are becoming more difficult to find. So it’s important to find the best deal that's right for you and particular situation. On page X, we look at the importance of obtaining professional advice, now that the mortgage market landscape has changed without all recognition, due to the current economic climate. Lenders are increasingly looking to attract borrowers who have higher levels of equity in their homes, a paradox when prices are falling. At the time of publication, the property market and events are changing very quickly, and some further changes are likely to have occurred by the time you read this issue. A full content listing appears on pages X and X.

23 21 In this issue 20

Gap narrows between prices in the capital and prices elsewhere… further base rate cuts and other measures needed to curb the drop in prices

21 23

This year shouldn’t be all doom and gloom… a list of positives for the 2009 housing market

Rekindling the market for mortgage backed securities… dearth of funding is the major constraint

Landlords are marking time, neither selling nor buying… capital values of rental properties show signs of stability

A challenging environment…

26 28 29

Mortgage facts… a quick guide

Offset mortgages… did you know?

House builders and developers look to the rental sector… a trend of 'let to not sell' rather than ‘buy-to-let’

Interest-free mortgages…

30 32

Letting agent's…

some borrowers are close to enjoying interest-free home loans

finding an instant home

Weighing up the pros and cons… professional advice is essential when choosing your mortgage

reducing the negative impact on borrowers

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. The FSA does not regulate commercial lending and some forms of buy to let mortgages. Your property may be repossessed if you do not keep up repayments on your mortgage.

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eSmartproperty

Bank of England announce historic rate cut The lowest interest rate level since 1694 The Bank of England cut its official base rate for the fourth month in a row as it attempts to shore up the economy. For the first time since 1694 interest rates have fallen below 2 per cent. On January 8, 2009 interest rates were cut to 1.5 per cent, the fourth time since October last year. The Monetary Policy Committee (MPC) reduced the base rate by 50 basis points, the lowest figure in the Bank of England's 315 year history. It has now fallen 3.75 per cent over the past twelve months, a reduction which few would have predicted at the onset of the current liquidity crisis. The announcement may help those with tracker mortgages in particular Council of Mortgage Lenders, director general, Michael Coogan said. "This cut is a double-edged sword for retail based lenders. While lower mortgage rates provide borrowers with the opportunity to repay their mortgage debt more quickly to reduce the term, lower savings rates impact lenders' ability to attract deposits and maintain the flow of mortgage lending in 2009." The market is still not functioning properly and is likely to lead to a fragmented approach by lenders, as they try to balance the interests of savers and borrowers and other pressures on their businesses, in responding to the announcement." Commenting on the Bank of England's interest rate decision, Royal Institute of Chartered Surveyors chief economist, Simon Rubinsohn said: “The decision to lower interest rates to just 1.5 per cent, while welcome, is unlikely to provide any meaningful encouragement for banks to increase the availability of finance to either households or businesses.

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“Indeed, the risk is that lenders are set to become even more restrictive over the coming months in the face of the worsening economic climate. With many first time-time buyers unable to find the finance to take an initial step onto the housing ladder and existing owner-occupiers needing to move similarly blighted, the time has come for the government to take direct action to restore an orderly property market.” Even before the announcement, the Association of Mortgage Intermediaries (AMI) had warned that any cut would merely serve as a distraction from the lack of liquidity afflicting the market. Robert Sinclair, director of AMI, said: "The 50 basis point cut is recognition that there are still fundamental issues facing the economy, which the government needs to address. While not inconsequential, the Committee's decision will have little effect on the real problems faced by the mortgage market." The majority of borrowers with mortgages are linked to variable rates, and even with this historic cut in interest rates, many borrowers are unlikely to see any change in the interest they pay. During December last year almost three quarters of lenders failed to pass on the base rate cut to borrowers on variable rate deals. In addition, about half of all borrowers are locked into fixed rate mortgages which means they may not benefit from the drop in borrowing either.

Some lenders have pledged to pass on the most recent interest-rate cut in full to borrowers on mortgages linked to their standard variable rate (SVR). Although many lenders are likely to follow, as they attempt to balance the needs of savers who are feeling short-changed. Those borrowers who will be celebrating are those who have base rate tracker loans, and they should see their mortgage costs drop in line with the base rate at the end of January. But as a note of caution some lenders have refused to lower their tracker rates any further. A number of lenders have withdrawn their tracker range for re-pricing. It is anticipated that when they are re-launched, if reductions follow the same path as we witnessed after previous interest rate cuts, new borrowers could benefit from this historic rate cut. Although lenders have become more stringent about whom they accept as new customers, with a 40 per cent deposit typically required to gain access to the cheapest deals. Nationwide, Halifax and the Council of Mortgage Lenders have all refused to make predictions for house prices falls in 2009. However, other commentators forecast a further fall could be between 10 per cent and 15 per cent.

Need more information? Please email or contact us with your enquiry. If you would like us to email a copy of our digital property magazine to someone you know, please email us with their details and we’ll send them a copy.

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TENANCY

DEPOSIT SCHEME Deadline approaches for landlords and tenants

Landlords and tenants who use the Tenancy Deposit Scheme (TDS) have been told they have until April 6, 2009, to ensure that they are protected by a regulated letting agent or government authorised deposit protection scheme. This follows a warning to tenants that they need to ensure their landlords have safeguarded their deposits. In an announcement on January 7, 2009, confirmation was given that the TDS will only be available to letting agents who are members of professional bodies.

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South East proving the most popular region Significant population movements across the UK

The TDS was established under the Housing Act 2004, and requires landlords to register details of the start and end of all Assured Shorthold Tenancies, by way of protecting tenant deposits and ensuring their return at the end of tenancy. Landlords using letting agents who hold their tenancy deposits for them, are advised to check with their agents to see whether this will affect them, and if so, what steps they are taking to ensure that deposits continue to be protected after April 6. Unregulated agents may wish to consider joining one of the approved professional organisations, such as NALS (the National Approved Letting Scheme) before April, to allow them to continue to use the TDS service. Otherwise if they don’t join one of the approved organisations, they will be left with the mydeposits scheme run by the National Landlords Association with Hamilton Frazer Insurance, and the Deposit Protection Service, which is free of charge. The TDS was established under the Housing Act 2004, and requires landlords to register details of the start and end of all Assured Shorthold Tenancies, by way of protecting tenant deposits and ensuring their return at the end of tenancy. The TDS at the insistence of their insurers will now only provide deposit protection and alternative dispute resolution to letting agents who are members of recognised professional bodies. Spokesman for the TDS, Malcolm Harrison, said, “What’s going to happen is really quite simple and is to ensure our insurers will cover us. We

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have written to tenants already, explaining the situation, and to make sure that if they are renting, then the agent is regulated. “We recommend the use of a regulated letting agent anyway, not least because it means they have complied with all the letting regulations.” Steven Hilton, spokesperson for the National Landlords Association, commented that the news had come as a shock to the industry. He said,“It came as a bolt out of the blue. We always advise that landlords use letting agents who are approved, but we didn’t see this coming. “It’s important the deposits remain protected which is our priority, that is where our resources are going to be. I think that on the whole this has been a commercial decision.” The Scheme is advising landlords and tenants to be certain either that their lettings agents are members of either the Association of Residential Letting Agents (ARLA), The National Approved Lettings Scheme (NALS), the National Association of Estate Agents (NAEA), or the Royal Institution of Chartered Surveyors (RICS), or that deposits are protected under one of the other government authorised deposit protection schemes, Tenancy Deposit Solutions (trading as mydeposits.com) or The Deposit Protection Service.

Figures released by Halifax Bank of Scotland on January 8, 2009, have revealed 2.2 million people moved to the South-East in the last decade. The figures also showed how, during the same period, some 1.6 million people moved to London from elsewhere in the UK, and almost 2 million people moved out of London to other parts of the UK. Martin Ellis, chief economist at Halifax, said, “There have been significant population movements across the UK over the past ten years. Regions in southern England saw the largest gain from internal migration with the South East proving the most popular region for people to move to from elsewhere in the UK.” London's population has risen by around 370,000 over the last decade, despite the numbers of people moving out to the suburbs and elsewhere. This was because London has seen by far the biggest level of international migration with 1.8 million more people moving from abroad, making up the number of those who have moved from the capital to live elsewhere in the UK. London also saw 1.6 million people, the second highest level of people from within the UK, relocate to the capital. Regions which saw an overall reduction in their populations were the North-East and North-West.

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Official Land

Registry data House prices at February 2006 levels Figures published last December by the Land Registry, showed house prices fell 12.2 per cent in the 12 months to November. The official data put the average house price at £161,883 in November, a fall of 1.9 per cent on the month before. This puts house prices at February 2006 levels. Sales volumes were also down in September to 38,508, a drop of 61 per cent. The average detached home fell 11.9 per cent in value to £245,368, while a semi-detached was down 11.3 per cent to £153,949. Terraced homes dropped 13.5 per cent in value to £124,700 and the average flat or maisonette was down 12.4 per cent to £153,164. Every region of England and Wales experienced price drops, most notably in the east and east midland’s, both down over 14 per cent. In London, house prices fell 10.2 per cent to an average of £317,101 and the south east saw a 13.7 per cent drop in residential property values. The biggest monthly fall was recorded in the south east, down 3.2 per cent.

ONE MINUTE GUIDE

TO MORTGAGES Standard variable rate

Tracker

Your repayments have the potential go up and down in line with any Bank of England base rate changes.

The rate you pay will track either the Bank of England's base rate or the lender's standard variable rate. It is usually a set amount above or below the base rate for a set period from the start of your mortgage. If the base rate changes, your rate (and payment) will usually change too.

Fixed rate Your mortgage payments will be fixed for a set period of time from the start of your mortgage. Any changes to the lender's standard variable rate or the Bank of England's base rate will not affect your payment during the fixed rate term. A fixed rate allows you to budget with certainty.

Cashback You receive a cash lump sum once your mortgage has completed.

Discounted rate

Flexible mortgage

Your rate will be discounted by an agreed percentage for a set period of time from the start of your mortgage. Your repayments still go up and down in line with the lender's changes to their standard variable rate, but the discount is always applied.

A flexible mortgage usually allows you to make overpayments, underpayments and take payment holidays. Some of the mortgages mentioned here could have flexible features.

Capped rate Your interest rate will not go above a certain level for a set period of time from the start of your mortgage. This means you can benefit from rate reductions, but won't have to worry about your payments going above a set maximum.

Portable mortgage If you move home, you can keep the same mortgage product with the same lender without paying an early repayment charge.

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eSmartproperty

MAXIMISING

RENTAL INCOME

European model could become more commonplace The UK property market could be heading towards the European model where it is commonplace for people to rent, as opposed to buy somewhere to live. So what should landlords consider to maximise future rental incomes?

principle up to six months prior to your current mortgage ending.

Maintain close contact with your tenant.

Improve your property:

This is likely to lead to greater sharing of information, and your tenant paying the rent in full and on time.

There are a number of simple, lowcost measures landlords can take to improve their properties, to save both them and their tenantâ&#x20AC;&#x2122;s money.

Be aware of the changes to household benefits payments.

These include, installing energy saving light bulbs, checking the thickness of loft insulation, fitting lagging to pipes and water tanks, draught proofing and turning down thermostats.

Maintain your property over the winter. Be prepared for burst pipes, boiler breakdowns, leaking roofs and make provision for these. Buy-to-let mortgage rates. Rates are beginning to come down so consider getting a mortgage agreement in

New changes were introduced in 2008. The Local Housing Allowance (LHA) applies to new claims for Housing Benefit (HB) for tenants renting accommodation from private landlords.

Carry out market research. Make sure you price your rental charges accurately and according to market rate.

Energy Performance Certificates (EPCs). These became a legal requirement for all new lets in October, 2008.

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Maintain close contact with your tenant. This is likely to lead to greater sharing of information, and your tenant paying the rent in full and on time. Make sure you are on top of this, and donâ&#x20AC;&#x2122;t be caught out by your tenant.

References. Make sure you request references for new tenants.

Locking in longer. Where possible, try to lock in good tenants to secure a longer tenancy period.

Emergency procedures. Provide your tenants with emergency telephone numbers, either for yourself or to enable them to contact a maintenance professional, which could save you, and them time and hassle. Source: upad

eSmartproperty

2009 HOUSING MARKET Prospective purchasers register at a greater rate

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Buy-to-let landlords Investors guarantee the growth of the private rented sector Amidst the findings of a recent study, buyto-let investors expect to hold on to their properties for up to twenty years in spite of falling house prices, according to the Association of Residential Letting Agents (ARLA).

A leading national surveyor says there is cause to be optimistic about the housing market as we enter 2009. Tyser Greenwood Surveyors say, while 2008 was clearly a year many in the property industry wish to forget, there are some indicators that there is cause for some optimism in 2009. Roger Russ, operations director for Tyser Greenwood Surveyors, said, “It is difficult to make a projection for the housing market during this year with any certainty, but the feedback from many estate agents is that there was a marked increase in activity towards the end of 2008 and early 2009, with prospective purchasers registering at a greater rate.

Borrowed Rate (Libor) rate still remains key to satisfying mortgage demand and stimulating the housing market. Mr Russ, said, “The effects of government intervention in the mortgage market were not fully realised in 2008. However, with the Special Liquidity and Credit Guarantee Schemes now in

Mortgage lenders, while still adopting a prudent approach in the wake of the sub-prime market problems in 2007 and 2008, are releasing new competitive products. “There appears to be a general perception amongst potential buyers that we are at or near to the bottom of the drastic fall in prices. Vendors still have to be realistic on price, with purchasers not under pressure to agree deals quickly if prices are not increasing, but as people plan for 2009, many will feel that it is a good time to buy.” Mortgage lenders, while still adopting a prudent approach in the wake of the sub-prime market problems in 2007 and 2008, are releasing new competitive products. While there is still some way to go to assist prospective purchasers with higher loan-to-value products, the recent reductions in base rate will ease the affordability issues that helped depress prices in 2008. However, the underlying London Interbank

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place, and direct government involvement with mortgage lenders, then the impact will likely lead to greater access to funds for the lending institutions, and thereby to the consumer. “While the rise in unemployment figures and house repossessions casts a shadow over the economy, the necessity for some home owners to down-size will bring property onto the market which will generate interest, and act as a stimulus for greater activity. “We are not out of the woods by any means, and this will not likely be a bumper year for anyone in the housing industry, but there is just cause for optimism of a market recovery as 2009 unfolds.”

The latest quarterly ARLA Review and Index, published on January 12, 2009, reveals that the proportion of investment landlords who do not expect to sell during the next year has increased from 77 per cent to 88 per cent. The results were produced from data supplied by 488 lettings offices and from 328 investor landlords in November last year and show that on average landlords keep their investment properties for 16.3 years. More than one in five investors expects to maintain their investments for over 20 years. Ian Potter, head of operations for ARLA, says, “Again and again these independent surveys show that buy-to-let landlords are helping to guarantee the growth of the private rented sector. “They are providing housing solutions for those hit by the current recession and will continue to do so in the future.”

did you know? Claiming deductions against tax Deductions against tax on rents received may be claimed for the costs of maintenance, such as insurance, cleaning, gardening, agent's commission and other reasonable management expenses (but not improvements). The initial cost of furniture fittings and fixtures is not allowable, but the actual cost of subsequent replacement may be claimed, or, alternatively, a wear and tear allowance of 10 per cent of the rents received may be deductible.

Planning your remortgage… isn’t it time you talked to us about saving money? We’re passionate about making sure you’ll obtain the best mortgage deal available. Contact us to discuss your current situation, and we’ll make a New Years resolution to find the best deal that's right for you.

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THE CHANGING

REMORTGAGE LANDSCAPE Finding the best deal that's right for you As house prices continue to fall, attractive remortgage deals are becoming more difficult to find. So it’s important to find the best deal that's right for you and particular situation. Unfortunately in this current economic climate the remortgage market landscape has changed without all recognition. Lenders are increasingly looking to attract borrowers who have higher levels of equity in their homes, a paradox when prices are falling.

There are however some positives, as the housing market is showing some signs of stabilising. According to figures from Halifax, the number of mortgages approved to finance house purchases was broadly unchanged in September 2008 for a third successive month, at a seasonally adjusted 33,000 compared to 32,000 in August 2008. So if you find yourself in the position where you are looking to remortgage during this ‘credit starved’ economic climate, what should you consider?

How to remortgage in the current financial climate Take professional advice With mortgage deals coming and going very quickly it's important to talk to a professional adviser who can research the market for your particular requirements. An independent mortgage specialist can advise you on the whole of the market, which is essential if you want to obtain the best deal when remortgaging.

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Time is of the essence If you go it alone and take your time doing your own research, you may actually miss out on a good deal. So one of the benefits of taking professional advice is that your adviser can act quickly on your behalf, and some lenders will even let you reserve a rate six months in advance before your remortgage deadline.

Existing lender solutions Your existing lender will be keen to retain your business. Some banks offer product transfers to existing customers which may also save you time and money as there may not be additional costs involved in setting up the new mortgage.

Consider using your savings As lenders become more selective about choosing customers with higher equity in their property, it may make good financial sense to use some of your savings to pay off more of your existing mortgage. Overpaying before you look for a new remortgage deal could improve the choice of loans available to you. However, your adviser will check with your current lender, as this can sometimes incur

a fee which will be stipulated in your terms and conditions of your current deal.

Increasing your credit score Lenders have a responsibly and duty to ensure that all risks are mitigated when assessing a consumer's suitability for borrowing. Any blemish on your credit history can be taken into account, so keeping your payments up to date is important. You can obtain a copy of your credit report online from Experian, Equifax or CallCredit. Check it carefully and correct any information that is wrong. In addition, close down any unnecessary accounts. Source: Halifax

eSmartproperty

MORE TENANTS REQUIRE UNFURNISHED PROPERTIES TO RENT New trend is welcome news for landlords

The objections to unfurnished property can be traced back to before1974 when disposable incomes were lower, the cost of furniture relatively high and unfurnished property was thought to be a charter for sitting tenants. That impression was firmly quashed by the courts 21 years ago and again by the 1988 Housing Act.

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eSmartproperty

TENANCY AGREEMENTS What are my legal and contractual responsibilities?

However, whatever possessions the tenant moves in with, the landlord will always be responsible for safety involving gas installations and appliances. At all levels and ages, there is currently a trend towards an increasing number of tenants requiring unfurnished properties to rent. This is sometimes known as ‘partfurnished,' as all rental property that lets successfully comes with carpets, curtains, electrical fittings, fully fitted kitchens and attractive bathrooms. With the exception of the furniture itself, a property being shown to let for the first time should look no different from a builder's show house. For the investor landlord, the change to an unfurnished market could be welcomed. Properties that let quickly need no more than quality neutral decor along with plain colours for the carpets and curtains. It should all form the backdrop for an incoming tenant's own choice in furniture and the fabrics of the soft furnishings, and, kitchens and bathrooms aside, only electrical fittings should be left in place as properties cannot be re-wired at the end of each tenancy. All of this helps the investor landlord with the Fire and Furnishings (Safety) regulations. If furniture, that is soft furnishings, the covers and fillings of mattresses, pillows and cushions, is supplied by the landlord in the course

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of business, all of it must comply and be properly labelled as having passed the appropriate tests. However, whatever possessions the tenant moves in with, the landlord will always be responsible for safety involving gas installations and appliances. These must be subject to annual safety checks, with proper records kept. Regulations also cover the safety of electrical installations and appliances while common sense dictates that carbon monoxide and smoke detectors are fitted in all let properties.

A tenancy agreement is a legally binding contract between a landlord and tenant that sets out both the legal and contractual responsibilities and obligations of the two parties. It should be written in plain and intelligible language and its terms and clauses should be fair and balanced, taking account of the respective positions of the parties and should not mislead about legal rights and responsibilities.

Landlord and tenant should take care to individually negotiate any particular terms or conditions that are important to them or especially relevant to the particular let or property.

Reducing home

repossessions New rules aimed at helping struggling homeowners Mortgage lenders will have to prove they have tried to help struggling homeowners avoid losing their property, under new rules brought in by the government on October 22, 2008 aimed at reducing repossessions. Under the new rules, lenders seeking a repossession court order will be expected to show that they have tried to find alternatives when borrowers get into trouble with their mortgage repayments, the Treasury said. ’We need to make sure we help those who might be hardest hit in the tougher times ahead, ensuring repossession is the last resort, not the first,’ said the Chief Secretary to the Treasury. ’We also want to make sure that vulnerable homeowners are protected from exploitation and dodgy deals.’ The government also wants the Financial Services Authority to regulate firms that buy property cheaply from those struggling to keep up with their mortgages and then rent it back.

eSmartproperty

HOUSING

MARKET

PREDICTIONS Underlying factors in the recovery of the market

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eSmartproperty

The Nationwideâ&#x20AC;&#x2122;s, chief economist, Fionnuala Earley, form Britain's largest building society, believes the housing market predictions for 2009 are unrealistic in such a fickle climate and may even add to uncertainty. Ms Earley commented that despite the recession seen in the final quarter of 2008, the economy may benefit from the built-up demand of first-time buyers who will invest when the market begins to recover.

from those wishing to get onto the property ladder. This falling demand, she said, could help the housing market to re-stabilise by initiating an influx of buyers when affordability becomes easier.

She said, "In these turbulent times the uncertainties around all forecasts are greater than usual. If the economy goes into a deeper recession we should expect to see a slower recovery in the cycle. However, if the economy recovers more swiftly, we may expect a faster turnaround in the housing market.

She added, "An important underlying factor which we expect to play a part in the recovery of the market is the likely build-up in pent-up demand since 2003.

"Three main factors have been behind the sharp fall in prices, credit conditions, expectations and affordability. Conditions remain highly volatile going into 2009, making it more difficult than usual to arrive at a specific forecast for house prices. In these unsettled times a forecast subject to frequent change could itself add to greater uncertainty." Continuing, Ms Earley also highlighted the promise which first-time buyers may bring to the economy, following a successive five year period of falling demand

Since then, first-time buyers have made up only 33 per cent of transactions, compared to an average of 46 per cent since 1979. If one assumes that the same proportion of first time buyers would have liked to have entered the market, it is possible to work out how many have been 'locked out.' "This adds up to about 750,000 buyers over the 2003 to 2007period, which is more than the total number of house purchase transactions expected in 2008. "But it does appear likely that a substantial pool of pent-up demand has been building up, which could make its way back into the market when affordability

improves and economic conditions and house price growth expectations stabilise." The Royal Institution of Chartered Surveyors (Rics), have also commented that new buyer enquiries climbed to their best levels since October 2006, although the crucial factor to a recovery in the sector is the availability of funding. Rics chief economist, Simon Rubinsohn, said, "Lenders are likely to remain cautious in the near term in the absence of any 'guarantees' on mortgage backed securities. This, coupled with an increasingly gloomy economic picture, suggests that house prices will continue to decline in 2009. "However, transaction levels do seem to have hit a floor with some signs that opportunistic investors are returning to the market. We expect a modest rise in sales over the course of the next year from the very low levels seen in recent months," he concluded.

The Royal Institution of Chartered Surveyors (Rics), have also commented that new buyer enquiries climbed to their best levels since October 2006, although the crucial factor to a recovery in the sector is the availability of funding. JANUARY n FEBRUARY n MARCH 2009

Assessing your mortgage options... are you looking for the best mortgage solution? If you’re unsure about how to navigate the mortgage market during these challenging economic times, let us help you – don’t leave it to chance. Contact us to discuss your requirements, and we’ll help you make a well informed decision.

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PRIME LOCATIONS Economic conditions drive market fortunes

According to the Knight Frank Prime Central London Index, the number of £1 million plus sales of London homes was down 49 per cent in 2008. Properties costing £1 million to £2.5 million have been hit hardest and are 22 per cent down on their March 2008 peak. Prime prices dropped by an average of nearly 10 per cent in the final quarter of 2008 and have fallen 18.4 per cent since March. Houses worth over £10 million plus are down by 8.1 per cent from their August 2008 peak, but they are now falling in line with the rest of the market. Head of residential research at Knight Frank, Liam Bailey, said, “Prices continued their ongoing downward slide during the final month of 2008. Prices for the best properties in the capital are now almost 20 per cent below their peak in early 2008. Our view that the market will see a 30 per cent peak-to-trough fall in value looks likely to be borne out. “The market worst affected by the price falls is the £1 million to £2.5 million sector, the so called ‘entry-level’ prime market, which has seen prices fall by 22 per cent from the peak." Hit mostly by actual job losses and fears of further job cuts in 2009, Mr Bailey, explained this segment of the market had been favoured by city workers and other salaried professionals. There was also little respite from the bad news across

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any of the central London markets, with prices falling for flats and houses from Canary Wharf across to Chelsea. "The only bright spot appears to be that the rate of price decline is beginning to slow, with the 2.2 per cent fall in December the smallest drop since September 2008," he said. “Despite the slowing rate of price falls, it is too early to say that the market is turning a corner. The number of new properties coming to the market in December was slightly higher (1 per cent) than the same month a year earlier, however the number of properties sold was down by 44 per cent over the same period. “Our estimate is that the total number of £1 million plus sales in the whole London market was down 49 per cent in 2008 compared with 2007, with only 2,746 taking place in 2008, compared with a record 5,386 in 2007." Looking forward into 2009, Frank Knight predicts the market's fortunes to be driven by economic conditions, especially those in the City.

"We are still holding to our forecast of a 30 per cent peak-to-trough price adjustment, suggesting that by the spring we will be fast closing in on the low point of the market in terms of pricing," Mr Bailey said. "In terms of sales volumes, 2009 is likely to be as weak as 2008, with £1 million plus sales at or below 3,000 in Greater London, well below the level we have got used to in recent years.”

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GAP NARROWS BETWEEN PRICES IN THE CAPITAL AND PRICES ELSEWHERE Further base rate cuts and other measures needed to curb the drop in prices Property prices in London fell by 13.3 per cent last year, compared with an average across the UK of 12.8 per cent, according to the Centre for Economics and Business Research (CEBR) house price poll-of-polls, commissioned by Chesterton, the estate agent.

All types of property have suffered, with the most expensive 20 per cent of homes falling in value by 12.8 per cent year on year, in line with the national average, and the bottom 20 per cent dropping the most, down 13.8 per cent from December 2007.

“The house price fall in London has narrowed the gap between prices in the capital and prices elsewhere in the UK,” Douglas McWilliams, the chief executive of the CEBR, said.

Terraced housing has been hit the hardest. The average value of a terraced property has tumbled 13.2 per cent in the past year. Detached houses have proved the most resilient, with a year-on-year drop of 10.8 per cent.

The average property in England and Wales is worth £171,348, down 1.6 per cent from November and at a level last seen in February 2006. The monthly decline was the sixteenth successive drop in house prices. With the exception of Scotland, which experienced marginal growth, prices fell across the UK last month.

Mr McWilliams commented that interest rates, cut to an historic low of 1.5 per cent following the Bank of England’s January announcement, were now "so low that the economy may not benefit from any further base rate cuts and other measures might be needed to curb the drop in house prices .

"We also urge the government to act upon the recommendations set out in the Crosby review and set up a mortgage loan guarantee scheme." Sir James Crosby, the former Halifax Bank of Scotland chief executive, recommended that the government provide temporary guarantees for new residential mortgage-backed securities. Banks traditionally sell on bundles of their mortgages to investors, in a process known as securitisation, to raise money to fund new lending. But the securitisation market has dried up in the wake of the problems in the US sub-prime mortgage sector, leaving banks increasingly reliant on using money from depositors to fund their mortgage lending.

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THIS YEAR SHOUDN'T ALL

BE DOOM AND GLOOM A list of positives for the 2009 housing market Hamptons International, the UK residential agent, have produced a list of ‘positives’ for why this year shouldn’t be all doom and gloom in the property sector, and outlined why 2009 might not be as bad as we all think. Marc Goldberg, head of residential sales, at Hamptons International said, “Increased buyer and seller confidence will not happen overnight. Any uplift will also be dependent on factors such as mortgage availability, unemployment levels, the degree and duration of recession on the high street and overall global economic outlook. “However, we believe that the sharp correction in house prices that took place throughout 2008 will positively impact the 2009 housing market, as people begin to realise that the worst of the house price falls have already happened; boosting optimism and confidence and encouraging growing numbers of prospective buyers to start their search for a new home.”

last January. As a result, the cost of borrowing is gradually reducing and affordability for many is enhanced. 2. Prices have already dropped by 20-25 per cent since the peak in 2007. The general consensus amongst industry commentators is that the full peak to trough drop will be 30 per cent which, if correct, means that we are most of the way to the bottom of the market which we expect to reach by the middle of this year.

7 reasons to remain optimistic and positive this year

3. Lower prices also enhance affordability. The pound has lost around 35 per cent of its value against the euro and 30 per cent against the dollar in the past 12 months. This makes the UK property market far more attractive to overseas buyers and the net impact combined with price falls for this sector equates to more than a 50 per cent drop in the cost of buying a UK property.

1. The bank base rate is only 1.5 per cent compared with 5.5 per cent

4. Vendors are far more acceptant of the need for price realism in order to

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achieve a sale. This was not the case at the beginning of last year and we had an uphill battle to close the expectation gap between buyers and sellers. Those looking to sell now are generally extremely motivated. 5. Banks are under extreme pressure to increase liquidity and it is widely expected, with government pressure that mortgage finance will increase during the course of the year. 6. There is a strong indication that plenty of people have a desire to move but are delaying their plans due to falling house prices, suggesting that as soon as any positive news is reported there should be a strong pick up in demand. 7. Stock of available property is down 25 per cent since May last year according to Hamptons figures. A reduction in supply will take some downward pressure off prices which also suggests the bottom of the market is not far away.

Buy-to-let... we offer professional investor advice, essential when choosing the right mortgage deal. Providing investors with professional advice to make an informed choice is what we do best. Whether youâ&#x20AC;&#x2122;re a new or experienced property investor, contact us to discuss your buy-to-let requirements.

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Rekindling the market for mortgage backed

securities reform Dearth of funding is the major constraint

The Council of Mortgage Lenders (CML) welcomed the government's in-principle decision to accept the recommendations of the Crosby report to rekindle the market for mortgage backed securities. The CML have urged the government to proceed as quickly as possible in seeking the necessary permissions to proceed, as the dearth of funding is a major constraint to the current mortgage market. The CML also confirmed it looks forward to playing a full and constructive role in the new public and private forum to monitor and review the flow of lending. It is important that the government looks not only to individual banks to achieve its objectives, but across the entire spread of the lending industry. The CML in principle supports a standard 3-month period of negotiation before lenders begin court proceedings for possession. However, the detail will be important, as it may postpone rather than change a lender's decision to seek possession. Supporting the income of households in difficulty is just as important, which is why the CML supports the further modest improvements to the Income Support for Mortgage Interest scheme. The CML believes further support through this scheme will be necessary and should be included in the 2009 Budget, if it is to address the increasing number of borrowers who may lose their jobs in 2009.

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Pre-Budget Report main POINTS Housing support package The government will offer an overall housing support package worth £1.8bn.

Affordable housing An extra £775m will be brought forward to invest in new housing and modernisation schemes.

Mortgage rescue scheme The government said that the scheme would be extended to those with a second mortgage.

Mortgage interest scheme The limit on the mortgage interest scheme is to be raised from £100,000 to £200,000.

Repossessions Main lenders agreed to wait three months before starting a repossession order against struggling homeowners.

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Landlords are

marking time, neither selling

nor buying

Capital values of rental properties show signs of stability

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Nine out of ten investment landlords are marking time, neither selling nor buying residential rental property, even though asset values and rental yields have fallen, according to the fourth quarter Association of Residential Letting Agents (ARLA) Members Survey of the Private Rented Sector, published on December 8, 2008. This is the largest independent survey of the rental market. However, capital values of rental properties appear to be showing signs of stability. Away from prime Central London, where falls of 4.3 per cent for houses and 12.8 per cent for flats have reversed the increases seen in August, the South East saw falls of 4.9 per cent for houses and 5.9 per cent for flats. By contrast, outside London and the South East, values for rental houses actually rose by 1.5 per cent. For flats, the capital values fell by 3.8 per cent over the three month period. ARLA head of operations, Ian Potter said, "This suggests that the oversupply of new build flats in some areas may be coming to an end as local authorities, housing associations and bargain hunters take up the slack. This has also helped to stabilise rents in some areas." The average weighted value of houses to rent is £400,400, down from £414,800. There are big differences by area. The average value for prime central London is £828,900, compared to not much more than a third of that in the South East at £306,000, and around a quarter, £221,800, in the rest of the country. Overall, the average fall in value of houses in the rental market is 8.3 per cent in the past year. For flats, the weighted average for prime central London is nearly half a million, compared to £191,400 in the rest of the South East and £144,300 in the rest of the UK. Overall, average values for flats have fallen by 10.6 per cent in the past year. With increasing numbers of "Reluctant Landlords" coming to the rental market while waiting for a better time to sell, there is an oversupply of property to rent. This is particularly noticeable in prime central London. There, average weighted rents for houses are down by 2.5 per cent over the quarter, largely

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driven by the decline of 8.1 per cent in the prime central London market. This compares with small increase of 1 per cent in the South East and virtually no change in the rest of the country. Average rents for flats are down 9.3 per cent. Again this is a result of falls in London and the south east. Away from the South East, rents have dropped by an average of only 2 per cent. Mr Potter, said, "These falls are inevitable given that so much of the London market is driven by the international financial services industry and the ripple effect this can have on the market generally." Average monthly rents for houses range from £3,177 in London to £924 away from the South East. For flats the range is from £2,051 to £553. The majority of tenants continue to stay on in a rental property for well over a year, with nearly three out of five staying in place for more than 18 months. Despite these extended stays, which have been a feature of the market for three years now, the number of new tenancies arranged through ARLA member letting agents also remains virtually constant, at an average of 36 new tenancies this quarter against 38 last quarter. Four fifths of all respondents believe that immigration from the new EU counties continues to have an effect on the rental market, with more than a quarter saying that this effect remains "Significant." The data for the fourth quarter ARLA Members Survey of the Private Rented Sector, is drawn from 488 lettings offices. The survey is supported by the ARLA Group of Buy to Let Mortgage Lenders: Bank of Ireland Mortgages, Cheltenham & Gloucester, GMAC RFC, Mortgage Express and Paragon Mortgages. Together with the Survey of Landlords this survey forms part of the quarterly ARLA Review and Index.

A challenging

environment Reducing the negative impact on borrowers

Gross mortgage lending reached an estimated £14.6 billion in November 2008 according to the Council of Mortgage Lenders (CML). This is a 22 per cent fall from October 2008 and a 51 per cent fall from November last year. While there is typically a decline from October to November, this is considerably larger than usual reflecting the market disruption and continued deterioration of confidence in the economy. The CML have published forecasts for the 2009 mortgage market, but cautions that in the current challenging environment, the forecasts need to be seen as indicative, rather than as a precise assessment of likely activity. CML, director general, Michael Coogan said: “The housing market will remain extremely subdued and net mortgage lending is likely to turn negative. Repayment problems will worsen against the backdrop of rising unemployment but lenders and government are working to try to reduce the negative impact on borrowers. “Recent glimmers of light in terms of government intervention to improve conditions to support new lending are helpful, but more will be needed. 2009 will be a challenging year, but borrowers who remain in employment will see some benefits in the form of lower mortgage rates.”

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MORTGAGE

FACTS A Quick Guide

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Advance

Discounted rate

Mortgage deed

The amount of the mortgage loan.

The lender will discount the Bank of England base rate for a set period of time from the start of your mortgage. Your mortgage payments will go up and down in line with any changes the lender makes to their standard variable rate, but the discount remains for the agreed period.

A legal document establishing a mortgage on a property.

(APR) Annual Percentage Rate The APR was designed to help you compare different mortgages by including all the likely fees and charges on a mortgage in the interest rate.

Arrangement fee Lenders sometimes charge this fee to cover the work involved in setting up your mortgage or to secure a fixed rate or discounted mortgage deal.

Early repayment charge A financial penalty for redeeming the mortgage early.

Equity

Bank of England base rate

The difference between the amount you owe on your mortgage and the property value.

This is the base rate set by the Bank of England and will influence the rates that lenders charge on their mortgage deals and variable rates.

Fixed rate mortgage

Capped rate Your interest rate will not go above a certain level during a term fixed by your lender, whatever the fluctuations in the Bank of England base rate.

Cashback You receive a cash lump sum payment once your mortgage has completed.

Completion Completion is the last stage in the mortgage process when the property is legally transferred to you. For remortgages, this is the day your mortgage transfers from one lender to another.

Conveyancer A legal expert who handles the contractual side of the arrangement between you and the mortgage lender.

Credit crunch Is a term used to describe a sudden reduction in the general availability of loans (or “credit”), or a sudden increase in the cost of obtaining loans from the banks.

Credit scoring Your credit score looks at your borrowing history and helps lenders decide if they want to lend to you.

Detailed building survey (full structural) The most comprehensive type of property survey carried out by a professional surveyor. This report will give you an indication of any structural problems or repairs that may affect the value of your property.

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Your mortgage payments will be fixed for a set period of time. Any changes to the lenders standard variable rate or the Bank of England’s base rate will not affect your monthly payment. A fixed rate allows you to budget with certainty.

Flexible mortgage A flexible mortgage usually allows you to make overypayments, underpayments or take payment holidays.

Higher lending charge A one-off fee charged by some lenders where the loan is above a specified percentage of the value of the property.

Interest only mortgage Your mortgage repayments only pay the interest charged on the loan. If you make all the payments expected, at the end of the term you will owe the same amount that you borrowed. You can make arrangements to repay the amount you borrowed by using an investment (for example, Individual Savings Account, or an endowment policy) or personal pension. However you decide to repay the amount borrowed, it will be your responsibility to make sure that it’s regularly reviewed so you know it will pay out enough to clear your mortgage.

Key Facts Illustration (KFI) The KFI gives you all the information you need to know about a mortgage product. It will detail the monthly payments, interest rates, fees or charges and total amount payable over the term.

Loan to value The size of mortgage loan as a percentage of the value of the property or purchase price of the property.

Mortgage payment protection An insurance policy that normally pays your mortgage in the event of accident, sickness or redundancy.

Mortgage term The length of time over which you agree to repay the mortgage.

Portable mortgage You can move your mortgage to a different product with the same lender without incurring an early repayment charge.

Remortgage Switching your mortgage to a different lender without moving home.

Repayment mortgage (capital and interest) Your mortgage payments will gradually pay off the amount you borrowed together with the interest charged to the loan. Provided you make all the repayments expected, your mortgage will be paid off at the end of the term.

Standard variable rate Your repayments go up and down in line with the lenders mortgage rate changes. There are not normally any early repayment charges.

Tracker The rate you pay will usually follow the Bank of England’s base rate.

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Offset mortgagesâ&#x20AC;Ś

did you know? Offsetting savings or current account deposits against mortgage debt in a single, rolled-up account began in Australia decades ago.

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House builders and developers look to the rental sector A trend of 'let to not sell' rather than ‘buy-to-let’ Developers will start to build properties to rent rather than sell if the housing market continues to lag, predicts Savills. Yolande Barnes, head of residential research at Savills, says that house builders and developers will look to the rental sector as sales fall and mortgage finance continues to be rationed.

With offset mortgages, borrowers are not credited with any interest on their savings, but don’t have to pay any interest on the equivalent amount of their outstanding mortgages. For example, if a borrower has a £200,000 mortgage and £80,000 in savings, they will pay interest only on the difference, £120,000, enabling them to reduce the mortgage term sooner. The principle works on the basis that most mortgage borrowers also have savings, even if they are small, and using this money to cancel out mortgage debt makes sense. Savers avoid paying tax on interest that their deposits would otherwise have earned. Lenders calculate interest daily and in this low interest rate environment, any savings you have are effectively earning interest at a higher rate than most mainstream savings accounts will pay. This type of mortgage is particularly popular with higher-rate taxpayers, who may not be earning any interest on their savings but don’t have to pay tax on them either. However, homeowners who took out highly competitive tracker offset mortgages a year or more ago may find that they are now paying such low mortgage rates that they might be better off moving their savings to a separate account. Advantages of offset mortgages n Benefits those who can save money, less mortgage payments. n Allows greater flexibility. n Usually interest on savings attracts a tax penalty. However, if your savings are automatically used to offset your mortgage you will not pay any tax from these savings.

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If you pay tax on savings at the higher rate you could save a sizable amount. This is because your savings are automatically used to offset the mortgage. n T he interest on a mortgage is usually higher than a current account so this is another advantage. For example often a current account may only give you 1 per cent interest, however the interest on a mortgage may be 6 per cent. Therefore it is more efficient to use the money to reduce payments on your mortgage than it is to keep it in a low interest saving account. Disadvantages of offset mortgages n I t can be tempting to consolidate a lot of debt into one place. However in the long run this can lead to higher interest payments. n M ost offset mortgages allow the borrower a certain credit limit in the beginning. If you are not disciplined about paying this back then at the end of your mortgage period you can be left with a big loan to pay. nA s with all mortgages worth check all small prints about tie ins and relative rates of interest.

Currently the rental sector accounts for about half of all household moves, and the supply of private rental housing is still increasing. This could mean that we start to see a future trend of 'let to not sell,' rather than 'buy-to-let. ' Speaking at the launch of industry trade body publication UK Housing Review, Ms Barnes said, "We are seeing rental demand increasing and although there are some issues with oversupply, it is true to say that renting is the new selling. The space to watch is build-to-let." The National Landlords Association (NLA) has some concerns about builders focussing on the rental sector. A spokesman for the NLA commented that if developers are going to build-to-let they will be entering a crowded marketplace and you also have to ask what happens when house prices go up again, will developers abandon their short-term rental business models? And what happens to tenants when developers eventually decide to sell up?

Interest-free mortgages Some borrowers are close to enjoying interest-free home loans Some borrowers are now close to enjoying an interest-free mortgage, following the Bank of England’s bank rate reduction to 1.5 per cent on January 8, 2009. An estimated 4m borrowers have mortgages linked to the base rate, but tracker deals pegged below it have not been available for 16 months. It is estimated that about 100,000 tracker borrowers could have deals at half a point below the base rate or better. This means that in the event that the base rate falls again, they will be close to having interest-free home loans.

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LETTING

AGENT'S Finding an instant home

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For the tenant, it is much simpler to rent than to buy, a contributory factor to the steady growth in the Private Rented Sector and the agent does most of the work for the landlord too. That is why the letting agent's job is so complex. It is not just a matter of finding a property that appeals to the personal taste of one buyer. For the tenant, the agent has to find an instant home, usually at short notice, that will be pleasant to live in and in good working order.

will be the basis for checking that the contents and the condition of the property at the end of the tenancy are the same as they were at the start.

For the landlord, the agent finds suitable tenants who will enjoy and care for the property, by managing the maintenance and repairs and by producing the income stream the owner requires.

The legal process is fair and equitable to both landlord and tenant, everyone will know where they stand. Virtually every let nowadays is arranged as an Assured Shorthold Tenancy, unless the property has a rental value of more than ÂŁ25,000 a year. An Assured Shorthold is for a minimum of six months; and, more often than not, these tenancy agreements run for a year. They can contain options to renew but the initial length of the tenancy will have been agreed at the outset. So will the rent payable, with it being stipulated in advance that when the agreement is for more than a year, or if there is an option to renew, the rent will be increased, probably annually and in line with any upward movement in the Retail Prices Index.

To attract good covenant tenants the agent needs to be well-established in the area with a strong local reputation. It is this reputation for professionalism, client accounting and indemnity cover leading to fidelity bonding that brings in the instructions from the property owners and that is what attracts the tenants. After a tenant's offer has been accepted, the letting agent is responsible for taking up references and making credit checks before preparing to change the utility accounts and drawing up the Tenancy Agreement. It all begins with references, credit references from the bank or building society and personal references from the employer and, if applicable, from a previous landlord. These personal references are very important. Some clues to character are needed to match with the agent's own experienced assessment of the applicant. For the self-employed, references are expected from an accountant or solicitor.

As well as including the length and cost of the tenancy the deposit and the responsibilities of the tenant, an agent's own Agreement will certainly detail many other matters important to each individual property. The Agreement will cover pets (and the agent may well have demanded pet references), children and specific responsibilities like looking after common parts or the garden, even down to feeding the goldfish in the pond. It's all there in black and white and both parties must read it carefully before signing.

Then, an inventory and condition report must be made. In this report, the entire contents of the property will be noted down, along with the condition of the carpets, curtains, furniture, wallpaper and paintwork. Both the tenant and the landlord, or their representatives should be present when this inventory report is compiled, and then they should sign each others' copies. It

The agent will notify the mortgage lender of the new let and its terms and change the utility accounts as bills from the electricity, gas, water and telephone companies and for Council Tax become the responsibility of the tenant. Then, once the cheque for the deposit (usually the equivalent of a month to six weeks rent) together with the amount for the first rental

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period has been cleared, the keys are handed over and the tenant can move in. During the term of the tenancy the letting agent will collect the rent, attend to day-to-day maintenance and repair as requested by the tenant and required under the terms of the Tenancy Agreement, alert the owner of major problems needing attention, account to him for costs incurred and pay over all balances due. Periodic but regular inspection visits are made to check that all is well with the property and that the tenant is happy. Finally, at the end of the tenancy, the inventory and condition is checked against the signed report, deposit monies returned, or allocated against missing or damaged items, and the utility accounts returned into the ownerâ&#x20AC;&#x2122;s name. Then the whole process starts again, hopefully with the property only vacant for a very short time. In a well drawn-up Tenancy Agreement there is always a clause to allow the agent to start showing the property to prospective new tenants before the existing tenancy has run its course. Source: Association of Residential Letting Agents

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Weighing up the pros and cons Professional advice is essential when choosing your mortgage If you are considering remortgaging, or you’re a first-time buyer, it is essential that you obtain professional advice to enable you to weigh up properly the pros and cons between opting for a standard variable rate, fixed loan or tracker deal. Especially as interest rates could continue to remain low or even fall below their current levels. If you currently find yourself in this position, then rates of about 4 per cent should be considered for first-time buyers and borrowers wishing to remortgage. The lowest rates are also still reserved for those with a large deposit or significant equity in their home. The cost of fixed-rate mortgages have dropped only slightly since last December’s 1 per cent point cut to the base rate and this January’s 50 basis point reduction. This is despite swap rates, the rates at which banks lend to each other, falling to record lows. As the base rate is likely to stay low for the remainder of this year and there is still scope for rates to fall further, tracker borrowers would remain the greater beneficiaries of lower rates. This means that trackers with no collar, the

minimum rate that some lenders apply on trackers, are likely to be more attractive to many borrowers in this current economic climate. A borrower with a deal linked to a standard variable rate (SVR) continues to be at the mercy of their lender as to whether they benefit from base rate cuts. Those lenders that have announced they would cut their SVR by the full half-point are typically offering rates between 3.5 per cent and 4.5 per cent. Many SVR rates, which borrowers revert to after a fixed or discounted-rate deal ends, could now be lower than the best tracker rates. This could be welcome news for remortgage borrowers who have lower levels of equity in their properties. Borrowers with less than 10 per cent equity are likely to have their choice

restricted in terms of new mortgage deals, other than going on to their lender's SVR. Although SVRs have been falling in recent months, fixed-rate deals are still taking longer to show signs that they are another alternative option.

Your property may be repossessed if you do not keep up repayments on your mortgage. Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

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