Green Shoots in the UK Economy and Markets?
There's been a lot of positive talk in the UK housing market over the last few days or so........Onward Christian Soldiers.....
Relaxation of the credit stanglehold?
Total net lending to individuals rose by £0.3 billion in October. The twelve-month growth rate fell to 0.7%, and the three-month annualised growth rate increased 0.3% to 0.5%, according to new figures from the Bank of England.
Money for New Mortgages?
The value of building society mortgage approvals in October was £1,511 million - broadly in line with the £1,565 million of approvals in September according to new figures from the Building Societies Association.
Gross lending also remained steady with £1,666 million being lent in October compared to £1,605 million in September.
Within the total, net lending secured on dwellings increased by £0.9 billion, in line with the September increase and above the previous six-month average of £0.6bn. The twelve-month growth rate was unchanged, at 0.8%. The three-month annualised growth rate increased 0.4 percentage points to 1.0%. Within total secured lending, secured lending by banks (excluding the effects of securitisations) increased by £3.1 billion, slightly below the September increase (£3.3bn) but above the six-month average of £2.6bn.
The number of loan approvals for house purchase (57,345) was above the September figure (56,205) and above the previous six-month average, whereas approvals for remortgaging (24,596) were below both the September figure and the previous six-month average.The number of loans approved for other purposes (29,195) was higher than in September and higher than the previous six-month average.
Credit Cards - Britains 'Secret' loan sharks!
Consumer credit fell by a net £0.6 billion, below the previous six month average of -£0.1bn. Credit card lending increased by £0.1 billion and other loans and advances fell by £0.7 billion. The annual growth rate of consumer credit continued to fall, to -0.1%; the three-month annualised growth rate fell to -2.2%.
Housing Market still in Cheyne-Stokes
House prices grew by 0.2% in November according to the latest national house price survey published by Hometrack, the housing intelligence business - the fourth consecutive increase in prices, bringing the year on year rate of house price growth to -2.9%.
Commenting on this month's survey, Richard Donnell, Director of Research said:
“There are three distinct elements to the latest results from this and other recent surveys. This first is that prices continue to post month on month increases. The second is the extent of prices rises across the country and the number of households who have seen an improvement in market conditions over 2009. The third, and most important element, is the short term outlook for prices.”
“This is the third consecutive month that the survey has posted a 0.2% price rise. Add to this a growth in sales volumes and it is easy to see how agents are beginning to feel more confident about sustainable pricing levels - at least in the short term. But this pick up in market activity and prices is not one that has been felt across the whole country. The stark reality is that there are large swathes of the country where prices have remained unchanged or have seen continued price falls.”
Over the last 6 months London and the South East have consistently seen the largest number of postcodes registering price rises - values are up across 78% of London and over half of the South East. Yet in five regions less than 20% of the market has registered any price rise.
Personally I see nothing in these indicators to warrant any change of course by the Bank of England regarding Interest Rates.
It is quite clear however that the money invested by the British people into the Quantitive Easing 'project' is clearly designed to line the pockets of those within the system where the money will not 'trickle down' into the general money supply.
The credit strangulation of SME's and individuals is as bad as ever!
Labels: Business, Consumer Credit Law, credit cards, credit crunch, Debt, Economy, House prices, housing market, money supply, Money System, pump priming, Quantitative Easing, UK government
Recession still to bottom out as UK Insurance Industry Suffers
The pundits in the housing markets often seem to be singing from a different songsheet when it comes to what's really happening in the UK economy. One minute we hear that repossessions have dropped in comparison to the first quarter of 2009, and that house prices are rising, but this is surely industry sales talk.
Fact of the matter is house prices haven't reached anything like the levels needed to stimulate a National recovery and movement in the market. Mortgages are very difficult to come by and often require up to a thirty percent deposit. Those lucky ones on tracker mortgages are praying every month that the Bank of England doesn't put up interest rates, otherwise many of them would bejoining the ranks of the reposessed!
Credit in general is non-existant, particularly in the Car Finance sector, and the credit card companies with their extortionate rates are only interested in recuoperating lending and tightening the national screw further!
Unemployment is rising and you only have to drive a short distance to see hundreds of towns that relied upon local industries that have gone to the wall, with the ranks of unemployed growing on a daily basis!
We as a Nation are in the proverbial big time, the good news is so is everybody else!
Insurance in the UK is suffering big time in many ways too. Households are cutting back on items seen as luxuries and Insurance is often perceived this way. In particular
home insurance and personal finance insurances such as income protection have seen their markets decimated.
As no mortgages are being given away and the recent furore over miselling,
mortgage protection insurance has virtually disappeared as a product to be replaced by a more encompassing lifestyle protection insurance policy.
Car insurance is in trouble too, despite the fact that it is compulsory. Many underwriters have been asking for rate rises for nearly two years but the prices have been artificially kept down by the levels of competition brought in by the Internet insurance comparison sites or aggregators as they are known. Many major players have made substantial losses in the Motor market over the last few years and many have had to cut deeply into their reserves. This cannot go on ad infinitum, and prices must harden. This will inevitably lead to many suppliers leaving the market.
As for the car scrappage scheme - did that generate demand? Yeah for a couple of thousand Hyundais built in India and imported into the UK - Sheer and utter madness!
Commercial Insurance is the one area which has obviously taken a massive reduction in premium volumes as businesses go to the wall and very few new startups enter the market.
One thing we can be sure of it's going to be a long cold winter, a change of UK Government won't make the slightest bit of difference and by the noises coming out on ABC and CBS News recently is going to kick of Stateside long before it does here!
Labels: Barack Obama, car insurance, credit crunch, Home Insurance, housing market, insurance news, misselling, recession, small business insurance, UK government, unemployment
Government Loans for First Time buyers
Those self serving suits from around Threadneedle Street who we saw exposed in Channel 4's excellent documentary on non-executive banking directors, have been racking their brains recently on how to get the first time buyer market moving.
Laughing into their cafe crappe they must be rubbing their hands in glee that the public furore has shifted onto their erstwhile employers - the MP's of Westminster or as Sky TV would have us call it 'The Rotten Government'
So on the back of the Speaker Bashing, the Government in the guise of Lloyds TSB has today launched a new first time buyer mortgage product called- ‘Lend a Hand’ (who thought of that?) - offering 95% loan to value (LTV)
‘Lend a Hand’ or 'Cop for Your Kids' as it is soon to be known, which is obviously aimed at the middle classes with kids still at home, offers first time buyers a 95% loan to value (LTV) mortgage by taking a legal charge on a savings account belonging to their parents, grandparents, rich friends or anyone else willing to cough up the dough to get the kids a place to live.
The new product is a fixed rate mortgage at 4.39% for 3 years, and is nearly £100 a month less than the industry average 90% mortgage rate at 5.98%.
Hmm - isn't the base rate currently 0.5%?
Lloyds are still looking for a 25% deposit but they are allowing this to be made up through a combination of a minimum 5% deposit by the first time buyers and the remainder from the parents or backers savings account.
For example,on a £100,000 property, a 95% LTV mortgage of £95,000 is provided by Lloyds TSB at a three-year fixed rate of 4.39% with a £995 fee. £5,000 is provided by the first-time buyer as a deposit for the property, £20,000 is provided by parents, grandparents or friends and held in the Lloyds TSB ‘Lend a Hand’ savings account earning a fixed rate of 3.5% for 42 months.
Why couldn't they offer the rate Tax-free like an ISA if they really want to encourage people to get involved ?
So what are the multiples of salary limits and can the first time buyer really afford the mortgage repayments?
Furthermore Insurance Blogger is amazed that the Government thinks that there are lots of people have got £20 grand to spare during the current credit crisis and recession, plus a possible further five thousand on top if they really want their kids out the house?
At least Lloyds TSB isn't allowed to sell
mortgage payment protection insurance at the point of mortgage sale any more! Granny's pension wouldn't stretch to that!
Labels: credit crunch, Gordon Brown, House prices, housing market, mortgage, mortgage payment protection insurance, nationalisation
Tenants at risk as Landlords are repossessed
Questions have been asked in the House of Commons regarding tenants who have been paying their rent and fulfilling all their other obligations but who nonetheless find they are at risk of losing their home. What protection do they have?
We sympathise with tenants who find themselves in this position. So, what can lenders with the charge on the property do in cases where the tenant is paying their rent, but the landlord is not using this money to meet their mortgage commitments?
It seems it all depends upon what type of mortgage the landord has and the protection for tenants falls into two distinct groups, and are affected in quite different ways.
The first are those whose landlord has a buy-to-let mortgage, and these tenants are generally in a much stronger position.
The second group comprises those whose landlord has a residential mortgage. A borrower with this type of loan should seek the permission of the lender before renting out the property. Where the lender agrees, it will be bound by the tenancy agreement. That provides protection for the tenant, should the mortgage lender need to take possession of the property or appoint a receiver because the borrower stops paying the mortgage.
In some cases, however, a borrower with a residential mortgage decides to rent out the property without telling the mortgage lender, in contravention of the mortgage agreement and perhaps even fraudulently. These tenants have been disadvantaged and their tenancies put at risk through no fault of their own.
Likewise the mortgage lender. It is quite likely that neither the lender nor the tenant will even be aware of each other’s interest in the property. Both have been put in a difficult position because of the irresponsible behaviour of the borrower.
But while mortgage lenders may sympathise with tenants in this position, it is important to understand that their legal responsibility – reinforced by regulatory requirements – is to the
landlord, and not to the tenant.
The lender has an obligation to minimise arrears and get the best price possible for the property. This is likely to lead the lender to seek possession of the property quickly. In this situation, the tenant has few rights.
So how common is this problem? Recent television coverage of the issue reported it against the backdrop of 75,000 mortgage possessions this year.
The reality is, however, that only a much smaller proportion of total possessions – perhaps 4,000 this year, or around 5% of the total, according to the Department for Communities and Local Government (DCLG) – will involve residential mortgages where the lender discovers the property is occupied by tenants.
Buy-to-let mortgages
If tenants are renting from a borrower with a buy-to-let mortgage, they are in a better position. Here, the tenancy is normally binding on the lender if it needs to take enforcement action against the borrower/landlord. The tenant will have the statutory right to notice under their assured shorthold tenancy.
Instead of seeking possession, the lender may choose to appoint a receiver, who will, as far as the tenant is concerned fulfill the role of the landlord, maintaining the property and collecting the rent.
Under an assured shorthold tenancy, a tenant is entitled to the remainder of their contractual period – which is typically six months but can be longer – as notice and to a minimum of two months at the end of that period. In practice, a lender or receiver will often allow the tenant to remain beyond the notice period until rent arrears are paid off or the tenant chooses to leave.
Sometimes, a property may be sold with a sitting tenant. This is rare, however, because the lender has a responsibility to the borrower to obtain the best price for the property, which usually implies sale with vacant possession.
New Advice agency campaignA number of organisations, including Crisis, Citizens Advice, Shelter and the Chartered Institute of Housing have launched a campaign to help tenants when the mortgage lender takes enforcement action. The campaign calls for courts to be able to delay possession to allow tenants to find an alternative home.
But if there is a residential mortgage on the property, giving the tenant more time to find a new home could put the lender in conflict with the borrower, particularly if it means mortgage arrears build up and the property is eventually sold for less than would have been the case if it was marketed straight away. If the landlord had had adequate
mortgage protection insurance for commercial premises the situation would not have arisen in the first place
The campaign also calls for notices to occupiers to be made more obvious and perhaps to carry a risk warning.
Landlords Insurance is available to compare online.
Labels: credit crunch, housing market, insurance news, landlord insurance, mortgage, mortgage protection insurance
House Prices tumble as sales dry up
New data from Royal Institution of Chartered Surveyors (RICS) has shown that house prices have fallen to a 30-year low over the last 3 month period and the number of surveys fell to the lowest since it began in 1978, with sales declining from 11.5 to 10.9.
RICS believe it is the lack of
available mortgages which is overwhelming the market. However, they believe that sales would start to rise again now that more sellers are assenting to drop their asking price.
And with the Bank of England slashing interest rates by 1.5% , bringing borrowing costs down to 3%, there have been some serious efforts to avoid a deep recession and hopefully these actions will help to enhance sales.
However, Britain’s largest bank, the Nationwide, believe that house prices will continue to fall over the next few years.
Here we agree with the latter, and despite the drop in interest rates, believe a recovery in the housing market is still a long way off, with the inevitable repossessions and falling house prices to beyond 30%, eventually fuelling a recovering economy in 2011, just one year prior to the London Olympics.
Labels: House prices, housing market, mortgage
Nationwide gives false hope to housing market prices
U.K. house prices dropped 1.7% in September compared to the same point a year ago, according to data compiled by the Nationwide Building Society.
The monthly fall means that house prices fell 12.4% on annual basis, thought to be a direct knock on effect from ongoing turmoil in the mortgage market.
The average house price now sits at £161,797 a fall of £2,857 from last months average of £164,654.
Nationwide's Chief Economist, said:
“House prices fell by 1.7% in September. This brings the price of a typical house in the UK to £161,797, 12.4% less than at this time last year.
House prices have now fallen for eleven consecutive months, but the monthly rate of fall has been almost unchanged in the last three months.”
“The less volatile three-month-on-three month series has also barely changed for the last three months, after accelerating in the first half of the year. This may suggest the beginning of some stabilisation in the pace of house price falls."
Insuranceblog is inclined to strongly disagree with this analysis from Nationwide.
House prices in the middle bracket of 250000 to 500000 have dropped in most cases 25 to 30 percent in order to sell.
In fact ask any estate agent and they will tell you that it is only those who bite the bullet that sell.
The problem with the whole housing market is that this mid-sector price range is the most bound, with owners hanging onto unrealistic valuations and prices.
Unrealistic owners are refusing to drop their prices because many paid over the odds in the first place. In some cases a 30% drop would put them in negative equity.
A 30% adjustment in the market downwards would be a realistic correctional target in order to see liquidity and movement in this mid-sector, which is the only solution to the current credit crunch crisis.
When it happens - watch Nationwide eat their words!!
Labels: credit crunch, House prices, housing market, Nationwide
