E Smart Property by Steve Wright

esmartproperty The digital property magazine

April / May / June 2009

Signs of a turnaround in the housing market First monthly house price rises posted since October 2007

Making overpayments

Private tenants

Review needed to current arrangements

Shaping the future

A better mortgage regulatory environment for lenders and consumers

80 per cent of borrowers believe it makes financial sense

Getting on the right track A mortgage that can move with you

PLUS: Energy Saving >> Remortgaging >> Shaping the Future >> Buy-to-let

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In this issue 05

Extension to stamp duty.

Buyer interest levels begin to gain momentum.

Threshold ineffective, and should be raised.

Survey reveals market activity has increased for a fourth consecutive month.

Signs of a turnaround in the housing market. First monthly house price rises posted since October 2007.

Remortgaging.

Commercial property.

09 09

Credit crunch results in lenders tightening their criteria.

Some business owners believe now is the right time to enter the commercial property arena.

Shaping the future.

A better mortgage regulatory environment for lenders and consumers.

Every pound spent on housing generates around two pounds' worth of economic activity.

Campaign to provide better protection for tenants.

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Energy saving.

Consumer must receive a HIP before marketing commences.

Organisations are calling for a change in the law.

Make your home more energy efficient.

Bank did not offer better rates. OFT reports on Northern Rock findings.

Revised regulations impose additional requirements.

Getting on the right track.

A mortgage that can move with you.

House-building fiscal stimulus package needed.

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More borrowers are fixing their mortgages.

New Property Information Questionnaire.

Public confidence in the housing market rises.

Buyers with finance look to pick up a bargain.

The prospect of higher transaction activity looks good for the spring home-moving season.

Interest in the property market has risen for four consecutive months.

Restrictions on the initial size of mortgages.

Making overpayments.

Review needed to current arrangements.

Your buy-to-let questions answered.

Important pre-sale information will significantly increase the number of consumers viewing the HIP.

Private tenants. Buy-to-let.

Fixed rates are very much back in favour.

A case for protecting people from borrowing too much.

80 per cent of borrowers believe it makes financial sense.

Your property may be repossessed if you do not keep up repayments on your mortgage. 03

In this

issue Welcome to the latest issue of our digital property magazine. As we enter the second quarter of 2009 the Bank of England has indicated the credit crunch may be loosening, with some lenders saying they anticipate increased lending to individuals and small businesses over the next three months.

Inside this issue, we look at the news announced recently that there could be signs of a turnaround in the housing market and why some economists are tentatively talking about this being the bottom of the market. This follows the first monthly house price rises posted since October 2007, and comes days after mortgage approvals were reported to have jumped by almost a fifth. Turn to page 5 to read the full article. A campaign to provide better protection for tenants who face homelessness because their landlord is repossessed has been launched by four housing charities. Shelter, Citizens Advice, Crisis and the Chartered Institute of Housing (CIH) have formed a coalition to help the growing number of private tenants who face eviction when their landlord has defaulted on mortgage payments. Find out more on page 10. From 6th April this year, every home must now have a Home Information Pack (HIP) in place before it can be put on the market. Vendors will also be required to complete a new Property Information Questionnaire (PIQ) detailing important pre-sale information. The new PIQ will provide buyers with further, upfront information about their possible new home and it is also hoped that it will significantly increase the number of consumers viewing the HIP. Read the full article on page 16. 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 3 and 4.

In this issue 22 22 22 23

Concession dropped. Home sellers grace period refused.

Surveyors report a rise in rents. Marketplace has become more competitive.

Falling mortgage approvals boosts the lettings market. Potential buyers bide their time in short-term lets.

Housing Act 1988.

How does it affect the properties my tenants are renting?

Interest-free mortgages. Home tracker borrowers could have deals at half a point below the base rate or better.

Buy-to-let.

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What the jargon means.

Investors expect to hold on to their properties for up to twenty years.

The language of property.

Recession impacts on mortgage demand. Finance remains difficult to obtain.

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.

News Buyer interest levels begin to gain momentum Survey reveals market activity has increased for a fourth consecutive month A UK housing market survey published by the Royal Institution of Chartered Surveyors (RICS) showed that even though there was an increase in buyer interest during February, this has not resulted in an increase in sales. The survey also revealed that interest in the market had increased for a fourth consecutive month. There was also a rise of 15 per cent more buyer interest during the period reported by over 20 per cent of the chartered surveyors surveyed. Recent levels of interest in the London market have not been seen since October 2006, with 44 per cent more surveyors reporting a rise than a fall in new buyer enquiries in the capital, up from 25 per cent in January.

Extension to stamp duty

Jeremy Leaf, spokesperson for RICS, highlighted that while potential buyers are still visiting estate agents, they do not have mortgage finance in place, and until that is resolved transaction levels will remain close to record lows. He added: "Worryingly, the lengthy process of obtaining mortgage finance, even for those with large deposits, is contributing towards the blockage in the market place. Family homes remain in demand but flats are proving harder to sell in many areas as first-time buyers are struggling to gain a foothold on the property ladder." n

Threshold ineffective, and should be raised The Centre for Policy Studies (CPS), which is the UK's best-known centre-right forum and leading political think tank has called for the stamp duty threshold to be raised to £1 million and kept there until the housing market recovers. The forum, says that the government's temporary extension of the Stamp Duty threshold to £175,000 has been "ineffective" and that instead this figure should be raised much higher. Stamp Duty is charged as a percentage of the amount paid for property or land when it is bought or transferred. The lowest rate payable is 1 per cent of the transaction value. More valuable properties are charged at 3 or 4 per cent. The CPS pointed out that during the last recession in the early 1990s when Stamp Duty thresholds were increased eightfold, this excluded 99 per cent of the country's homes. A comparable rise today would see the threshold raised to £1 million. "These figures reveal stamp duty today for what it is, a tax on first time buyers and ambitious home owners with no other purpose than to give the government as much cash from as many people as they can get away with," says Peter Bolton-King, chief executive of the National Association of Estate Agents.

These figures reveal stamp duty today for what it is, a tax on first time buyers and ambitious home owners with no other purpose than to give the government as much cash from as many people as they can get away with. "The CPS report confirms that the current policy on Stamp Duty is not helping anyone." However, not everyone agrees with the National Association of Estate Agents and the Centre for Policy Studies. When chancellor Alistair Darling refused to deny that he was considering deferring or suspending stamp duty, many were quick to point out that the 1991 raising of the duty's thresholds failed to stop sliding sales activity or prices and was quietly withdrawn in August 1992. n

Signs of a turnaround in the housing market First monthly house price rises posted since October 2007 There are signs of a turnaround in the housing market according to some economists who are tentatively talking about the bottom of the market. This follows the first monthly house price rises posted since October 2007, and comes days after mortgage approvals were reported to have jumped by almost a fifth. The Nationwide building society said prices jumped 0.9 per cent in March, following a 1.9 per cent drop in February. The number of mortgages approved for house purchase jumped by 19 per cent during February. The number of home loans approved for house purchase rose to 37,937, up from 31,791 in January, well above the six-month average of 31,500 and the highest level since May last year, the Bank of England said. This follows initial signs that the US housing market, which has also been hit hard by the sub-prime crisis and resulting credit crunch, is also showing signs of a pick up. Sales of existing homes jumped by 5.1 per cent last month, spurred on by first-time buyers snapping up foreclosure bargains. More than 4.7 million homes were sold last month, including a 4.4 per cent rise in single-family houses and an 11.4 per cent jump in apartments. n

Remortgaging

Remortgaging Credit crunch results in lenders tightening their criteria Remortgaging to another lender during this period of economic downturn paradoxically could potentially be more difficult to achieve today compared with a few years ago, even though there are now fewer mortgage schemes to choose from. This is why it is essential to receive professional mortgage advice so that you can fully assess the options available.

The credit crunch has resulted in banks and building societies tightening their criteria for mortgage lending. If you have a mortgage worth more than 75 per cent of your property's value, you may miss out on the best rates. However, the lower the proportion you owe, the better the rate you could secure.

advance. This can be useful if you think that interest rates are likely to rise by the time you come to remortgage. The process typically takes at least a month and can be even longer if you are borrowing extra when you switch.

These may include legal fees, an application or arrangement fee and a valuation fee. Although some lenders may permit you to add the fees to the loan, you will be paying interest on that amount for the remainder of the mortgage term.

If your deal is a tracker or other variable rate deal, it has probably gone down in recent months so you may want to check how much you were paying before rates started to fall so you have an idea how much you can afford to pay each month.

Some lenders may offer fee-free deals, where they pay for or refund legal and valuation costs, but these usually come with a higher interest rate. You should also consider excessive extra charges as schemes with the lowest loan rate may come with considerably higher arrangement fees, and often high redemption penalties.

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The process of remortgaging involves moving your current mortgage from your existing lender to another. You may want to do this to reduce your monthly repayments by securing a cheaper mortgage, or, release some of the equity you have built up in your property, to pay for additional home improvements or to pay off debts. If your original mortgage was taken out with a small or no deposit, you may find there is not enough sufficient equity for you to remortgage. So where do you start? Initially, you should review the details of your current mortgage as this information will help you to evaluate its competitiveness within the current market.

It is important to see if you will also be subject to an early redemption charge (ERC), and some lenders may charge an exit fee for closing your mortgage (this covers releasing the deeds and Land Registry costs). The exit fee you are quoted should match the one in your mortgage agreement. Lenders are not permitted to increase these fees once you have signed up for a loan.

You should also see if your current lender is willing to match any new scheme. If your existing lender does not come up with something worth staying for, you need to apply for the new deal you have found. You will need to complete the lender's application form and provide proof of income (such as bank statements or accounts if you are self-employed) and proof of identity.

It is not correct to assume that ERCs automatically end when your fixed or discount rate ends, as some loans have overhanging tie-ins. You may find you need to pay the lender's standard variable rate (SVR) for a set period after the initial deal ends. Although in this current climate of low interest rates, this may not necessarily be a bad thing as some SVRs are lower than the fixed-rate mortgages on offer. Taking a longer term view, if rates begin to rise, which many commentators are predicted during the first quarter of next year, lenders may start to increase their SVRs.

Start to think about remortgaging three to six months before your current deal ends. It is possible to book a mortgage rate with a lender up to six months in

When you know how much switching will cost, you can work out whether it is worth moving loans. So discussing the potential fees involved is essential.

Understanding your options Variable You could remortgage and look for another deal straight away.

Flexible Truly flexible mortgages may allow you to leave your previous deal when you want to without penalties.

Base Rate Tracker You may have to pay a redemption charge to switch deals.

Variable with a cash-back Depending on the terms you may have to repay the value of the cash-back before you are allowed to switch mortgages.

Variable with a discount, fixed rate or capped rate You may have to pay a redemption charge to switch deals.

Commercial property

The location for your property is also crucial. Do you need to be close to your customers, or could you locate to a more remote location to save money?

Commercial property Some business owners believe now is the right time to enter the commercial property arena

to have a full survey carried out, rather than depending on your bank's survey, since you could be liable for any problems that were overlooked.

Even during this time of economic downturn some business owners believe now is the right time to enter the commercial property arena. If you are considering purchasing a commercial property you should view it as a longterm investment and it is essential that you receive professional advice so that you can consider and way up the options available to you.

Your lawyer can advise you on the detail of your contract. They will also arrange for the exchange of contracts and completion of the transaction (usually 28 days following exchange) and negotiate the terms of your mortgage arrangement.

To start with you are likely to have to provide a deposit of between 20 per cent and 30 per cent of the value of the property in advance. This will largely depend on the kind of premises you require that fits your specific criteria. Consider how much room you need per employee, storage space and parking requirements.

When you move into your business premises, you also need to consider the cost involved of the move itself. In addition there may be decorating costs, the need to purchase office furniture, computer and technology equipment and new stationery. n

The location for your property is also crucial. Do you need to be close to your customers, or could you locate to a more remote location to save money? Think also

about transport links and consider the commuting needs of your staff. If you require a commercial mortgage to finance the acquisition, bear in mind that you will need to commit to a minimum mortgage term of around 15 years, and will have to provide details of your business accounts and cash flow projections to the lender. Although some lenders may still accept applicants or businesses with an adverse credit history,

it helps if you can show a clean credit record, as this will give you greater choice and a more competitive deal. Lenders will apply a loan-to-value ratio to the mortgage and will often require you to invest some of your own money into the property. The more of your own money you invest, the more chance you will have of securing the mortgage. Unless you are a cash buyer, you will need to have a survey carried out as part of your mortgage application. If appropriate arrange

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News Shaping the future A better mortgage regulatory environment for lenders and consumers The Council of Mortgage Lenders (CML) believes that Lord Turner's report provides a helpful assessment of the regulatory environment as it stands and as it is expected to change. The CML looks forward to working with the FSA as it develops its proposals further. Michael Coogan, CML director general, commented: "We welcome the opportunity to explore the pros and cons of limitations on products in a rational way. And we agree that this needs to be done alongside an assessment of alternative ways of regulating to achieve the same risk-mitigating objectives.

A tracker mortgage is a variable rate mortgage which follows the Bank of England’s Base Rate, so your payments will change in accordance with external market interest rates.

"We see the FSA's September paper on the future of mortgage regulation as a real opportunity to help shape a future regulatory landscape that will serve both lenders and consumers better. We look forward to working constructively and collaboratively with the industry and the FSA towards this objective." n

Getting on the right track A mortgage that can move with you Tracker mortgages have been very popular products, especially in this current economic climate of low interest rates. They shadow the movement of the Bank of England’s base rate and the payments fall if the rate drops, and increase when it rises. A tracker mortgage is a variable rate mortgage which follows the Bank of England’s Base Rate, so your payments will change in accordance with external market interest rates.

Tracker mortgages are often suited to borrowers who are looking for lower initial payments and are prepared to take the risk that their payments could increase at a future date. The interest rate tracks whatever rate is set by the Bank of England with a constant differential. The result on your monthly mortgage interest payments is

that they go up when the base rate goes up and go down when the base rate goes down.

House - building fiscal stimulus package needed Every pound spent on housing generates around two pounds' worth of economic activity

Tracker mortgages are often suited to borrowers who are looking for lower initial payments and are prepared to take the risk that their payments could increase at a future date. Some lenders may also specify a minimum rate that you will have to pay if the base rate plunges below expectations, in order to protect them from you paying an extremely low mortgage rate.

The National Housing Federation (NHF) has revealed in its latest research that the number of new homes built in England this year and next year could slump to the lowest levels since 1921.

Even though we have recently seen unprecedented falls in interest rates, you also need to bear in mind that base interest rates don't just go down. As and when the Bank of England eventually raises UK interest rates, the cost of tracker mortgages will rise as well. n

In its latest forecast the NHF said that their findings strengthen the case for a house-building fiscal stimulus package proposed by a range of organisations. Under the terms of the package, the government would fund the building of 100,000 affordable homes over the next two years, at a cost of around £6.3bn which could save thousands of jobs and provide a boost to the economy.

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The NHF predicted that the number of new homes built in England during the next financial year could fall by 50 per cent to just 70,000, as private developers defer hundreds of developments across the country during the recession.

Ruth Davison, director of the NHF, commented: "With every pound spent on housing generating around two pounds' worth of economic activity, the value of the proposed package could be more than £20bn. We face one of the worst housing crises this country has ever seen doing nothing is not an option." n

Legal

Campaign to provide better protection for tenants Organisations are calling for a change in the law A campaign to provide better protection for tenants who face homelessness because their landlord is repossessed has been launched by four housing charities.

Shelter, Citizens Advice, Crisis and the Chartered Institute of Housing (CIH) have formed a coalition to help the growing number of private tenants who face eviction when their landlord has defaulted on mortgage payments. The organisations are calling for a change in the law which would mean courts would have the power to defer the possession to allow the tenant to find other suitable accommodation. Currently, most tenants whose landlords are repossessed have no legal rights, which would otherwise protect them from losing their home without notice. Shelter chief executive, Adam Sampson, said: "Shelter has seen a steep rise in the number of tenants who have kept their side of the bargain by paying their rent but who are being thrown out onto the street because their landlords have defaulted on the mortgage and the house has been repossessed. "With more and more landlords struggling with mortgage arrears and tenants facing repossession, the government must allow the courts to defer possession dates so that tenants can find other suitable accommodation."

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Members of the joint campaign are calling for the law to be changed to give courts the discretion to take into account the circumstances of sitting tenants where an outright possession order is granted, and defer possession for a limited period of time. The charities have written to MPs urging them to sign an Early Day Motion, calling for changes to the law. They estimate thousands of tenants in the private rented sector could be at risk of losing

their homes in this way and are warning urgent government action is needed to avoid a potential crisis.

living in the sector are afforded basic legal protection when their landlords become the latest victims of the repossession crisis."

Simon Gordon, head of communications, National Landlords Association (NLA), responded to the campaign, saying: "We think it is absolutely right that we should be looking at offering further support for the small number of tenants affected by buy-to-let landlords who have their properties repossessed.

Tenants who moved in after the mortgage was taken out generally have no rights to stay in the property once it has been repossessed. A lender will be able to take action to have any occupier evicted as part of the action to repossess the property.

"It is also important to remember that, for the most part, buy-to-let landlords only experience problems with their mortgage if their tenants fail to pay their rent. Our latest research shows that 37 per cent of landlords are currently experiencing some form of rental arrears. This is bound to have an impact on the level of repossessions."

The Council of Mortgage Lenders (CML) believes it is important to distinguish between different groups of occupiers. CML director general, Michael Coogan said: "Everyone sympathises with those tenants who are paying their rent, and fulfilling their obligations, but who find that their landlord has not been paying their mortgage and not told their lender that they are renting out the property.

If a lender has started proceedings against a tenant's landlord, the lender is required to send notice of the possession hearing, addressed to 'The Occupier', at least 14 days prior to the hearing. From April 6th this year, the lender must now send a notice to the property within five days of receiving notification of the date of the court hearing. However the notification letter will still be addressed solely to 'the Occupier'. Sarah Webb, Chartered Institute of Housing (CIH) chief executive says: "Much of the government's focus so far during this recession has been on supporting homeowners through a number of means. "Whilst we welcome these initiatives, we are concerned that tenants in the private rented sector are being left to the mercy of market forces. With the worst of the recession yet to come it is important that the three million households

"Good tenants should not be disadvantaged, and nor should lenders, by the irresponsible behaviour of a small minority of landlords. We look forward to working with the government and advice agencies on effective measures to help the modest number of tenants affected." The Association of Residential Letting Agents (ARLA), has responded by supporting the campaign. Ian Potter, operations manager of ARLA, said: "ARLA strongly supports the awareness raising campaign and firmly believes that the government could be doing a good deal more to mitigate the stress of tenants facing homelessness. This has already been documented in our budget submission to the chancellor and we are very keen to hold a dialogue with the government to re-assess best practice in this area. n

Tenants who moved in after the mortgage was taken out generally have no rights to stay in the property once it has been repossessed.

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News Banks did not offer better rates OFT reports on Northern Rock findings Government support for Northern Rock, the Office of Fair Trading (OFT) concluded has not adversely affected competition within the banking sector since its nationalisation. The OFT investigated the effect of public support for the bank in February as part of the bill which took Northern Rock into state ownership. It reported that there were some concerns that Northern Rock could take advantage of a lower cost of capital, as a result of its government backing, to offer better rates in the mortgage market, thereby potentially distorting competition. With the closure of the wholesale markets, the OFT said that even if the bank had a lower cost of capital compared to its competitors, it would not have been able to exploit this and offer better rates or a larger product range. The OFT report avoided any 'definitive conclusions', due in part to the significant market changes since the report was commissioned, stating that the effect on competition of the public support for Northern Rock now needed to be seen in the context of significant public support for the whole banking sector.

Energy saving Make your home more energy efficient The awareness of making sure that our homes are energy efficient has increased over the past decade. However for many households it’s lighting that is probably the most consistent drain on energy supplies. Energy-saving lightbulbs may be slightly more expensive to buy, but they last a lot longer. An enormous amount of energy can be wasted by washing machines. Washing clothes at lower temperatures will also reduce your energy expenditure. Next time you buy a new washing machine or any other appliance for that matter look for the Energy Saving Recommended logo. Any product carrying this logo has met strict criteria on energy efficiency and will therefore cost less to run and reduce carbon emissions. Boilers play a huge part in our energy consumption, typically accounting for around 60 per cent of domestic carbon emissions. If your boiler is more than 15 years old, then it’s probably time to look for a new one. A new boiler works by recovering the heat that it would traditionally have wasted, making it

around 15 per cent more efficient than a conventional boiler.

Half of the heat that escapes from your home is lost through the walls and the loft. Half of the heat that escapes from your home is lost through the walls and the loft. It stands to reason that you could make huge energy savings by installing insulation, or looking into how efficient your current insulation is and improving it. Fitting a brush over your letterbox is another simple measure you can take to prevent such heat loss. Double-glazing and pipe insulation are also highly effective energy-saving methods. n

The report also highlighted that since the granting of public support to Northern Rock, there have been significant changes in the financial services sector, and public support has been granted to a number of other banks. The instability and change within the sector continues and is likely to reduce the impact on competition of the public support specifically targeted at Northern Rock. Later this year, the OFT will publish a Financial Services Plan, which will include a review of competition issues relating to public support of the banking sector. n

Consumers must recieve a HIP before marketing commences Revised regulations impose additional requirements Home Information Packs are now required for every case where a residential property is ‘marketed’ that would normally mean either through an estate agent, by email or website or by private advertisement to what lawyers define as ‘the whole world’. Private sales between family or a direct approach to a neighbour or friend is not marketing for this purpose. From 6 April 2009 the Home Information Pack (HIP) has to be made available to the agent or anyone who would be construed as a ‘consumer’ before marketing commences. The revised regulations impose additional requirements, particularly in respect of leasehold flats. n

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Lettings

If the landlord fails to keep up their mortgage payments, a lender will often put in place a receiver of rent to accept the tenants' rental payment for the lender instead.

Private tenants Review needed to current arrangements When looking at the potential problem of repossession for private tenants, the Council of Mortgage Lenders (CML) believes it is important to distinguish between different groups of occupiers.

The largest group of private tenants will have a landlord who has taken out a buy-to-let mortgage. If the landlord fails to keep up their mortgage payments, a lender will often put in place a receiver of rent to accept the tenants' rental payment for the lender instead. This is a widely used approach by lenders to private landlords in the buy-to-let market, and it avoids the need for court action for possession during the tenancy period. The second group of customers are those tenants who are unknowingly renting properties under owner-occupier mortgages without the lenders' knowledge or consent. The CML shares the concern of advice agencies that these customers can be disadvantaged through no fault of their own. Landlords with owner occupier mortgages will be in breach of the terms of the mortgage and potentially acting fraudulently. This disadvantages both the tenant and the lender,

who will be unaware of each other's interest. Where no payments are being made by the occupier, or the occupier is not looking after the property, the lender will wish to enforce its rights to possession as soon as possible, rather than allow the landlord's arrears to build up or the property's state of repair to deteriorate. The CML agrees that there is a need to review current arrangements for giving notice to occupiers, to seek to ensure there are no "nasty surprises" for private tenants, and to review what would be a reasonable period to enable occupiers to move out in cases where the lender is entitled to possession. CML director general, Michael Coogan commented: "Everyone sympathises with those tenants who are paying their rent, and fulfilling their obligations, but who find that their landlord has not been paying their mortgage

and not told their lender that they are renting out the property. Good tenants should not be disadvantaged, and nor should lenders, by the irresponsible behaviour of a small minority of landlords. We look forward to working with the government and advice agencies on effective measures to help the modest number of tenants affected." n

Buy-to-let

Your buy-to-let questions answered Q: What measures could I take to improve my properties? A: There are a number of simple, low-cost measures you could take to improve your properties to save both you and your tenant’s money. 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. Q: My current buy-to-let mortgage scheme is coming to end. What could I do to improve the mortgage rate? A: You should obtain professional advice so that you can discuss the options available to you. Be mindful of the fact that buy-to-let

mortgage rates are coming down, and you may be able to secure a mortgage agreement in principle, up to six months prior to your current mortgage ending. Q: Should I maintain a closer contact with my tenants? A: This is for each individual landlord to decide, however maintaining a closer contact with your tenants may lead to greater sharing of information, and your tenants paying their rent in full and on time. Q: Have there been changes introduced to household benefit payments? A: Yes, the new changes were introduced last year. The Local

Housing Allowance (LHA) applies to new claims for Housing Benefit (HB) for tenants renting accommodation from private landlords. Q: How do I make sure that I’m not over pricing my rental charges? A: Obtaining local professional advice is the obvious answer, however you could also carry out your own market research to ensure you price your rental charges accurately and according to market rate. Q: Do I need an Energy Performance Certificate? A: An Energy Performance Certificate (EPC) became a legal requirement for all new lets from October 2008.

More borrowers are fixing their mortgages Fixed rates are very much back in favour Legal & General’s fifth report in the ‘Mortgage Purchase Index’ shows that over 70 per cent of borrowers are fixing their mortgage as average fixed rates drop. The Mortgage Purchase Index’ series analyses trends from thousands of mortgage applications made in the last quarter through Legal & General’s Mortgage Club.

Q1 2009 key findings were as followed: n 7 2 per cent of residential borrowers chose a fixed rate compared to 65 per cent in Q4 2008 n 68 per cent of buy-to-let borrowers chose a fixed rate compared to 43 per cent in Q4 2008 and 30 per cent chose a variable rate, compared to 56 per cent in Q408

Q: What emergency procedures should I consider for my tenants? A: You should provide your tenants with emergency telephone numbers, either for yourself or for a maintenance professional, which should save you, and them time and hassle. n Source: upad

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n A verage two year fixed rate was 4.78 per cent (vs. 5.90 per cent in Q3); average three year fixed rate was 5.41 per cent (down from 6.30 per cent) n A verage residential LTV was 58 per cent, whereas for buy-to-let it was 68 per cent Commenting, Stephen Smith, director of housing at Legal & General, said: “Since we started producing these reports in early 2008, the popularity of fixed rates has swung wildly. Fixed rate pricing has only really started to come down in the past few months, and even then only for those borrowers with a hefty deposit. The gap between what you’d pay with a 40 per cent deposit compared to what you’d pay with a 5 per cent deposit is still significant. However, fixed rates are very much back in favour, partly because lenders have been increasing the margins on their new tracker mortgages.” n

Home Information Packs

New Property Information Questionnaire Important pre-sale information will significantly increase the number of consumers viewing the HIP From 6th April this year, every home must now have a Home Information Pack (HIP) in place before it can be put on the market.

As vendors play an increasingly involved role in the HIP process, AHIPP warns consumers that they need to act quickly and efficiently to ensure they do not delay the marketing of their own home.

Vendors will also now be required to complete a new Property Information Questionnaire (PIQ) detailing important pre-sale information such as the home's council tax band, parking arrangements, utilities and any structural alterations, vital when deciding to make an offer. Not only will the new PIQ provide buyers with further, upfront information about their possible new home, but it will significantly increase the number of consumers viewing the HIP, according to the Association of Home Information Pack Providers (AHIPP). Mike Ockenden, Director General, AHIPP comments: "Finally we will see HIPs getting into buyers' hands. There is already evidence that HIPs have helped to speed up the conveyancing process. However, one of the key challenges we have faced as an industry is consumer apathy. While every home on the market has had a HIP since December 2007, a recent CLG report has indicated that so far, only 40 per cent of buyers even saw the HIP for the home they eventually purchased, and this needs to change. "HIPs provide buyers with a great deal of important information that should be taken into consideration before making an offer, from the home's energy efficiency to local search information. Following the launch of the PIQ, the level of upfront information available in the HIP will increase and we expect to see more buyers asking to see a home's HIP. The reality is that most of those selling a home will be buying a home too and if they have completed a PIQ for their own property, they are more likely to ask to see the PIQ for any properties they plan to purchase."

As vendors play an increasingly involved role in the HIP process, AHIPP warns consumers that they need to act quickly and efficiently to ensure they do not delay the marketing of their own home. Completing the required PIQ and allowing Domestic Energy Assessors (DEAs) into the property to conduct the necessary Energy Performance Certificate (EPC) as quickly as possible will be essential to ensure smooth and seamless process.

As vendors play an increasingly involved role in the HIP process, AHIPP warns consumers that they need to act quickly and efficiently to ensure they do not delay the marketing of their own home. Ockenden, adds: "Our members are turning HIPs round in an average of five days. As a result, this new legislation is unlikely to delay consumers looking to sell their home. However, with vendors playing an increasingly important role in the HIP compilation process it is essential that they are provided with the necessary information and are made aware that their PIQ must be completed before their home can be marketed. "The majority of our members are offering a PIQ completion service to assist vendors with the form. To avoid any delays, anyone planning to put their home on the market post 6th April should ensure their agent is offering access to such a service." n

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.

Housing market

Public confidence in the housing market rises The prospect of higher transaction activity looks good for the spring home-moving season Confidence in the housing market is back to levels not seen since September 2008, according to propertyfinder. Public confidence in the housing market is well and truly off the bottom as the March survey of home buyers and sellers showed confidence in the market back to levels not seen since September 2008. A majority of the 2075 respondents to the March poll (61.5 per cent) still believe prices are likely to continue falling, by an average of 3.7 per cent over the coming year, but this is far fewer than the low point in December when 75 per cent predicted further falls in the value of homes. The pick-up in confidence suggests the number of housing transactions is now likely to recover from its lows. The Land Registry reported just 33,404 transactions in November (latest data available), 59 per cent lower than the previous year and the lowest since records began.

Nicholas Leeming, director propertyfinder said: “The prospect of higher transaction activity is not only good for the spring home-moving season, it’s crucial for the economy too, much more so than house

The pick-up in confidence suggests the number of housing transactions is now likely to recover from its lows. prices. When homes change hands people use all sorts of services such as removals firms, surveyors and so on, and will spend money on renovations and new consumer goods for their new homes. House prices may yet drift lower, but buyers can take advantage now. A typical buyer offered 9 per cent below the asking price in March, saving them around £15,000 on already lower asking prices.” n

Buyers with finance look to pick up a bargain Interest in the property market has risen for four consecutive months According to the Royal Institution of Chartered Surveyors buyer interest in the property market throughout the UK is increasing, with London and the south of England leading the way. It says that interest in the property market has now risen for four consecutive months. The rise in interest reflects both the drop in 'asking prices and continued interest rate cuts.' As house prices fall, those with finance are looking to pick up bargains. However, this has not yet translated into sales and the net balance of surveyors reporting new 'instructions to sell' remains in negative territory indicating that supply is very tight. In the current market, a lack of mortgage finance and weak economic conditions are restricting the ability of many to consider the option of entering the market. However, surveyors remain optimistic that sales will pick up in the coming months as 11 per cent per cent more Chartered Surveyors expect sales to increase in the coming three months. n

Mortgages

Restrictions on the initial size of mortgages A case for protecting people from borrowing too much The Financial Services Authority (FSA) may introduce restrictions on the initial size of mortgages. Lord Turner's review of banking regulation says there is case for limiting the size of home loans to protect people from borrowing too much. Banks as a result could also be protected from the dangers of excessive lending. But Lord Turner said there were some potential disadvantages to any such restrictions, and so the FSA will consult on the issue this autumn.

"The rapid extension of mortgage credit was a key factor in the origins of the financial crisis in the US, the UK and several other countries," his review said.

the health of financial institutions and ensuring they treat their customers properly, allowing both sides to make their own choices.

"In the UK high initial LTV (loanto-value) and LTI (loan-to-income) ratios played an important role," it added.

The banking crisis of the past year and a half has shattered the belief that "market discipline" would lead to banks and individuals avoiding excessive risk.

If the FSA does decide to formally limit the size of mortgages it would involve a fundamental change to its past policy. Until now the authorities have believed that regulation should focus on

"Both some customers and some providers relied imprudently on the assumption that ever rising house prices would reduce the risks otherwise inherent in high LTVs," the Turner review said.

The FSA's consultation paper, to be published this September, will look at various methods of regulating mortgages, including protecting lenders and borrowers. n

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Making overpayments 80 per cent of borrowers believe it makes financial sense Research released by the Co-Operative Bank has revealed that mortgage customers making overpayments have increased by 50 per cent in the past year. The figures also provide people’s motivations behind making overpayments, with 80 per cent doing so because they believe it makes financial sense, due to the current low return on most savings rates. Some 37 per cent of people making overpayments The Co-Operative Bank found were doing so because their rate had fallen due to the drop in the base rate, and almost one in ten were hoping to secure a better mortgage deal by making overpayments. Head of mortgages at The Co-operative Bank, Terry Jordan, said: “Our internal data has shown a 50 per cent increase in our mortgage customers

making overpayments. It would appear that with interest rates now at an historic low, customers are recognising more than ever the benefits of making overpayments.” The figures also identified why people were not overpaying on their mortgage. Apart from lack of income, almost a third of those not overpaying would prefer to put their money into savings and 24 per cent of people are spending any excess money they have on holidays and clothing. Mr Jordan added: “Providing their mortgage allows the flexibility to overpay, at the current time it can make real financial sense for customers to make even small monthly overpayments, as these can really add up to a large difference over the lifetime of the mortgage.”

A spokesperson for the Council of Mortgage Lenders (CML) added: “Many borrowers are now benefiting from lower mortgage rates and as a result are considering overpaying on their mortgages to reduce their mortgage balance and protect themselves against falling house prices. “Overpaying on your mortgage will improve your equity position, reduce your interest payments and can shorten the length of your mortgage. “And now is also a good opportunity for borrowers on interest only mortgages to switch to repayment mortgages to use this period of low interest rates to start to pay down their loans.”

The FSA's consultation paper, to be published this September, will look at various methods of regulating mortgages, including protecting lenders and borrowers.

News

Concession dropped

Home sellers grace period refused

Surveyors report a rise in rents The government refused to give home sellers a grace period to prepare a Home Information Pack (HIP) for their property despite a recent petition to Downing Street asking for one signed by nearly 1,700 members of the public. Prior to April 5th home owners only needed to pay up front for a HIP and "make a commitment" to obtain one before putting their home on the market, however after this date the concession was dropped. Instead, a full HIP now has to be completed, submitted to the Department of Communities and Government with payment and returned back before the property can legally be advertised 'for sale.' This new process many commentators believe will delay a home going on the market by several weeks. The government claims the wait will be between three and five days. And any agent or homeowner advertising a property without a HIP will be fined up to £200 a day if caught out by local Trading Standards Officers, it is claimed. "Not content with presiding over an estimated 20 per cent fall in the value of our homes, 75,000 of them about to be repossessed, and sleepless nights for a half million people worried about losing their homes, the government is charging sellers for a sales pack no one looks at, and fines them if they try to find a buyer on day one with a HIP," says Trevor Kent, former president of the National Association of Estate Agents. "They [the government must relent and, at least, continue to allow marketing to begin as soon as the HIP is ordered, but preferably scrap the whole damn lot.” n

Marketplace has become more competitive The Royal Institution of Chartered Surveyors (RICS) has revealed in its latest ‘Residential Lettings Survey’ that by the end of last year the number of would-be sellers continued to increase, flooding the rental market with unsellable properties. The survey shows that the number of surveyors reporting a rise in rents during Q4 2008 residential lettings went from -12 per cent to -48 per cent between Q3 and Q4 last year. Q4's net balance is the lowest level in the survey's 11-year history. It was the South-West that experienced a marked drop in rental prices, with surveyors seeing a rise in rents go from 0 per cent in Q3 to -73 per cent in Q4.

The reason for the pressure on rents has been caused by higher levels of property coming on to the market during this period. Some 46 per cent of surveyors said they had more instructions for flats to rent than the previous quarter while 53 per cent said they had more instructions to rent houses. Jeremy Leaf, spokesman for RICS, says: "The marketplace has become more competitive as reluctant landlords continue to look to let properties that they are unable to sell." n

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Falling mortgage approvals boosts the lettings market Potential buyers bide their time in short-term lets During December last year, rental data from Your Move showed that demand increased by 63 per cent year-on-year in the lettings market as it continued to reap the benefit of falling mortgage approvals.

increased by 49 per cent compared to figures from 2007. However the thirst for rental property demand comes against a 14 per cent month-on-month drop in the number of tenants signing up to new leases.

For the full year in 2008 demand for rental accommodation also

David Newnes, managing director of Your Move, says: “In 2008 the lettings market

was the only good apple in a bad cart. “The mortgage market is still choked but the drop in lending has boosted the lettings market. House prices are still under pressure and potential buyers are biding their time in short-term lets while they eye the market from a safe distance.” n

News

Interest-free mortgages

Some tracker borrowers could have deals at half a point below the base rate or better

Some borrowers are now close to enjoying interestfree mortgages, following the Bank of England’s bank rate reductions. An estimated 4m borrowers have mortgages linked to the base rate, but tracker deals pegged below it have not been available for 16 months.

Housing Act 1988 How does it affect the properties my tenants are renting? Q: I am a landlord and have been letting out a number of flats. I believe this was governed by the Housing Act 1988 and I’ve heard that the procedure I follow for letting these has changed. Can you tell me what changes there have been and how it will affect the properties my tenants are renting? A: The only difference is that a lease of a family home to which the owner intends to return can be a shorthold subject to different notice provisions. Most investment (buy to let) are Assured Shorthold Tenancies unless the annual rental exceeds £25 000pa. They must be by agreement in writing and where a deposit against damage is taken it is governed by specific requirements on the person first handling the matter (generally the letting agent). Assured tenancies are normally granted for one year minimum but in practice for no more than six months provided the correct notice is given by the tenants.

This is important in calculating the anticipated return and where any original loan was for owner occupation mortgagees require their consent to be obtained prior to putting the property in the letting market. Care must be taken that the correct returns are made to Her Majesty’s Revenue and Customs as they have and exercise the power to require details from agents in the jurisdiction of all clients and rents collected. It is also essential that insurance policies are compatible with letting and furniture and gas regulations are complied with prior to letting. n

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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 continues to fall, they will be close to having interestfree home loans. n

Buy-to-let Investors expect to hold on to their properties for up to twenty years The quarterly Association of Residential Letting Agents (ARLA) Review and Index published in January by the ARLA showed that buy-to-let investors expect to hold on to their properties for up to twenty years in spite of falling house prices. The review also 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, taken from 488 lettings offices and 328 investor landlords in November last year, 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 buyto-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.” n

Glossary

What the jargon means The language of property APR

Building survey

Conveyancer

Disbursements

The Annual Percentage Rate (APR) enables you compare the cost of different mortgage deals. It takes into account the amount of interest you will pay, the length of the term of the mortgage, and other charges such as any arrangement fee.

This is a technical report following an inspection of the property. It will give you a comprehensive account of the condition of the property, describing any structural or other defects.

A legal expert handling all documentation for the sale and or purchase of a property. This will be a solicitor or licensed conveyancer.

All the various costs itemised on your conveyancers invoice for carrying out your homebuying legal work.

Arrangement fee A fee lenders sometimes charge to cover the work involved in setting up your mortgage or for certain mortgage rates.

Bank of England base rate This is also known as the Bank of England's repo rate. This rate can go up or down from time to time and is announced by the Bank of England's Monetary Policy Committee.

Building insurance Insurance to cover the cost of rebuilding a property, following structural damage, for example by flood, fire or storm.

24 24

Capped rate Your interest rate won't go above a certain level the 'cap' during the capped rate period. This means that you can benefit from rate reductions, yet have the comfort of knowing that your rate will not rise above the cap.

Completion The day on which a property becomes legally yours.

Conclusion of Missives The Scottish equivalent of exchanging contracts.

Contents insurance A policy insuring household contents against theft and damage.

Conveyancing The legal process involved in buying and selling a property.

Credit scoring A technique used by the lender to assist in the assessment of your application.

Daily interest With this method of calculating mortgage interest, it is charged on the amount of mortgage outstanding daily. This means lenders take into account any changes in the amount you owe on a day-to-day basis.

Deposit The money you pay on exchange of contracts as part of your initial contribution to the purchase of your home.

Discharge Fee You have to pay this to some lenders for releasing their hold over a property once you have paid off your loan.

Early Repayment Charge With some mortgages you may have to pay an early repayment charge if for example, you pay off some or your entire mortgage, or you transfer to a different mortgage rate before the end of the special rate period.

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

Exchange of contracts The swapping of contracts between a buyerâ&#x20AC;&#x2122;s conveyancer and a sellerâ&#x20AC;&#x2122;s conveyancer. Once you have

Glossary

exchanged contracts you are both legally bound to the transaction.

Feudal A form of legal title applicable only in Scotland.

Fixed rate A rate of interest guaranteed not to change over a fixed period of time.

Freehold A form of legal title to land which means you are the absolute owner of the property and the land it’s on.

Guarantor Someone who guarantees to repay the mortgage if the borrower can't or won't for any reason. Guarantees are usually entered into where the borrower's circumstances would not allow them to borrow enough to buy the home they want. For example, parents may act as guarantors for their children when they buy their first home.

Higher Lending Charge Fee or premium sometimes charged by lenders if your mortgage represents a high percentage of the property’s value.

Home Information Pack A marketing pack that contains important information buyers need to know, including an energy performance certificate, sale statement, searches, evidence of title, leasehold and commonhold documents (if applicable), new homes warranty (if applicable).

Interest-only mortgage You only pay interest to your lender throughout the mortgage term and your mortgage balance doesn't reduce.

assurance policies can run parallel with a repayment mortgage, so the mortgage should be repaid if you die before the end of the term.

gradually pay off your mortgage as well as the interest if your payments are strictly in accordance with the terms and conditions of the original loan.

Investment mortgage

Local authority search

Repo rate

As with an interest only mortgage, you only pay interest to your lender throughout the mortgage term and your mortgage balance doesn't reduce. At the same time, you put money into a separate investment which should grow and pay off the mortgage as scheduled. You must make sure you keep premiums up to date on any mortgage investment products.

Part of the conveyancing process when you buy a property, carried out by your conveyancer. It gives details of any matters which, from the local council's point of view, affect the property. It reveals any proposed changes to the local area, such as road improvements, and details any planning permission given for the property.

This is also known as Bank of England base rate.

Key Facts Illustration A Key Facts Illustration sets out details of the mortgage product that a customer is interested in. All lenders are required to set out the details in a Key Facts Illustration in the same format, so it's easier for you when you want to compare products. You must receive a KFI before making an application.

Land Registry Fee Your conveyancer pays this on your behalf to register your details in the Land Registry records once you've bought a property or changed your mortgage lender.

LTV This means 'Loan to Value' and is the proportion of the value or price of the property (whichever is the lower), that you borrow on a mortgage.

Mortgage deed A legal document establishing a mortgage on a property. This is called a standard security in Scotland.

Mortgage term The length of time over which you agree to pay back your mortgage.

Negative equity This is when the amount you owe on your mortgage is greater than the value of your property.

Leasehold

Remortgaging

This means you own a property for a set number of years. When the lease expires, the property returns to the freeholder. Flats are commonly sold as leasehold.

When you arrange a new mortgage on your home, with a different lender and use the new mortgage to pay off the old one. This could be to withdraw equity to spend on home improvements.

Household insurance

Life Assurance

A way of referring to both buildings and contents insurance.

A form of insurance by which someone’s life is insured. Life

Retention Holding back part of a mortgage loan by the lender until repairs to the property are satisfactorily completed.

Stamp duty Government tax you have to pay based on a percentage of the purchase price of a property currently worth £175,000 or more.

Structural engineers report A specialist report from a structural engineer on the condition of a property.

Survey and valuation A property survey that can include a valuation and should reveal any major faults in the property. It must be noted that valuations do not strictly involve surveys. It is recommended that a buyer should have a survey taken out.

Tracker rate Tracker rates vary in line with changes to the Bank of England base rate during the tracker rate period.

Valuation Arranged by your lender to find out if the property is suitable to lend a mortgage on.

Repayment mortgage Your monthly payments will

Mortgages

Recession impacts on mortgage demand Finance remains difficult to obtain Figures released by the British Bankers Association (BBA) reveal that there were 28,179 mortgages for house purchase approved in February, well above the 24,278 in January, and the six month trend of 22,068. Meanwhile the number of mortgages approved for remortgaging (28,746) and equity withdrawal and other purposes (22,946) continued to decline, as would be expected at this point in the cycle, with equity levels falling and Loan to Values (LTV) at a prohibitively low level. Gross mortgage lending in February was £9.2 bn down from £9.7 bn in January, but looking solely at loans approved for house purchase, which will drive the market forward, approved loans increased from £2.9 bn in January to £3.5 bn in February. The £3.5 bn in February is some 25 per cent up on the trend for the last six months of £2.8 bn. BBA statistics director, David Dooks, said of the latest data: “Most new mortgage lending

is being done by the high street banks but demand is, of course, being moderated by the impacts of the recession. Remortgaging activity has slowed in recent months, while higher numbers of loans approved for house purchase simply reflect the banks’ greater market share. In the wider consumer market, unsecured credit is very subdued and individuals’ deposits are also weak, as people respond to the current interest rate climate. Within company financing, consumer-facing sectors were the only significant borrowers in February.” RICS Chief Economist Simon Rubinsohn commented: "The February mortgage approvals data published by the British Bankers Association show that the increase in buyer

enquiries, as highlighted by the RICS Housing Market Survey, is now feeding through into actual transactions. Suggestions that the heightened level of interest was just window shopping is clearly misplaced. BBA figures demonstrate that mortgage approvals have risen for three consecutive months. Even so, the actual level of activity still remains not that far away from historic lows and it would be premature to conclude that some semblance of order has returned to the housing market. Mortgage finance remains difficult to obtain and typical loan to value ratios are making it challenging for first-time buyers to access the market. Even the commitment given by RBS, LLoyds TSB and Northern Rock to raise lending this year will only boost the available mortgage finance by around 10 per cent compared with 2008. More needs to be done to ensure that the market is able to function effectively." n

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

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