Housing Minister Calls for 30 Year Fixes

The Housing Minister Grant Shapps has recently called on lenders to offer more long term fixed rate mortgages – up to 30 years.   This is very much a continental model and I welcome this input from the Minister.  I think that long term fixed rates add a degree of certainty to household finances and reinforce a degree of stability to the property market.  The Council of Mortgage Lenders has responded to the Minister by saying it will be keeping the issue of long term fixed rates under review with the CML Director General Paul Smee indicating “The choice of whether or not to fix and for how long involves taking a view about the likely direction of future interest rates along with a personal consideration of how much rate risk is acceptable to a household.  Given the economic uncertainty it is not surprising that for the time being many of those who have reverted on to variable rates are choosing to wait before they decide what to do next”.

Markets are currently expecting the bank base rate to rise to 2% by the end of 2014.

There is no doubt that we are in a very uncertain time and I will continue to monitor trends and rates and report back to you.

Lindsay Darroch
Partner and Head of Property

17,000 First Time Buyers Excluded from Mortgage Market

Readers of previous blogs will know that I have been campaigning over the last few years asking for Government assistance for first time buyers.  I was very interested to read figures from the British Bankers Association showing that the number of would be first time buyers left out in the cold in September was a staggering 17,000.  There were 33,130 house purchase approvals in the month of September which, although down on August, was 8% higher than in September 2010.  The Banks’ gross mortgage lending totalled £8.4b and was up 7% on September 2010.  The British Bankers Association also show that gross mortgage activity is being driven by the buy to let market.  David Dooks, Statistics Director, advises “A modest stimulus to gross mortgage lending is coming from the buy to let sector as rental yields continue to improve”.

These figures show a stuttering recovery in the property market but also once again reinforces the need for assistance to be given to first time buyers.  The Council of Mortgage Lenders’ stats show that in the 12 months to August an average of 15,800 first time buyers per month secured mortgages compared to a monthly average of 33,100 per month between 2002 and 2007.

I will continue to keep you advised of figures.

Lindsay Darroch
Partner and Head of Property

Property Merry Go Round

I was recently involved in a chain of property transactions which reinforced the importance of the property market.

The chain started off when my clients sold their property  to a family who lived outside of the Tayside area – an example of money coming in to bolster the local economy. The sellers of my clients’ new property were moving to a new house within the area, the owners of that property were moving up the property ladder and they bought from a couple who were down-sizing – an example of hippies – people who are using their property either by selling and down-sizing or using equity release to fund their retirement (more of this in future blogs!).  The property purchased by the couple who were downsizing was an executry sale – presumably the money freed up from this sale went to beneficiaries who were then able to use it either to fund lifestyles, reduce debt or perhaps purchase property!

This chain shows the impact of the property market on the general economy – the number of transactions having an impact on services – legal, estate agency, perhaps painting/decorating, furniture stores etc. It also shows that the funds at the end of the chain are being freed up for the general economy both by the clients who were down-sizing to fund their retirement and also the executry sale – an asset being turned into cash and passed out to beneficiaries. It also re-enforces the importance of first time buyers.

Readers of previous blogs will know a normal moving market requires a minimum of 40% of its transactions to be first time buyers and while it is good and important to have people moving into areas, every local property market needs its own supply of first time buyers to keep the chain moving. The housing market is very important to the UK economy and also the social fabric of our society and the Government requires to take more action to get the property market moving.

Lindsay Darroch
Partner Head of Property

PS Since writing this blog the UK Government has announced changes in planning legislation enabling developers to purchase Brownfield Sites for the construction of residential properties and only to pay for these sites as and when the properties are sold. This legislation is only relevant for England and Wales? and while I think its impact will be limited I do think this is another innovative scheme which I welcome. Hopefully the assistance this will give to developers in relation to their cash flow will increase the number of new houses being built and will also enable the developers to offer some form of shared equity or mortgage assistance package for their properties.

Eurozone crisis forces Lloyds to raise SVR’s

I note with interest that Lloyds Banking Group has become the first big bank to raise standard variable rates prompting suggestions that the era of borrowing at rock bottom rates is drawing to a close as the Eurozone crisis deepens.  The rise would appear to be in response to the Eurozone crisis and in particular the requirements of the Eurozone for banks to hold extra capital.  I understand other banks are considering the position and I think that other lenders are likely to raise SVRs in the near future.  It will be interesting to see if this encourages people to remortgage at fixed rates.  I will keep you advised.

Lindsay Darroch
Partner and Head of Property

CBI CALLS ON CHANCELLOR TO JUMP START HOUSING MARKET

I was very encouraged to read remarks by John Cridland, Director General of the CBI, calling on the Government to back measures to help home buyers in particular first time buyers.  Cridland commented  “As we have seen, without a steady stream of eager first time buyers, the housing market stagnates and our whole economy suffers. Now is the time to stop the stagnation and get the housing market flowing again.”

As readers of previous blogs will know I have been calling for the Government to take urgent action to assist first time buyers for the last few years.  We ran a very successful deposit match scheme via a couple of main stream lenders which proved hugely popular and reinforced to me that it would not be difficult for the Government to enter into discussions with a number of the High Street lenders to agree a package supporting first time buyers. This would be of very little cost and would reap huge economic benefits. Like the Director General of the CBI, I would ask that the Chancellor uses his Autumn statement on 29 November to jump start the housing market.

Lindsay Darroch
Head of Property

The Blackadders property team get the market moving

I am constantly analysing the Scottish Housing Market, in particular our own share of the market, both in terms of property listings and property sales. While our listings in general have held up and we have seen an increase in listings throughout Scotland, I do fear that a slow down in the number of properties coming on to the market now would lead to a stagnation of the housing market for the first six months of 2012.  It is very important to get new stock on the market to keep people’s interest in buying and selling property.  With this in mind we are pleased to launch an initiative which will allow us to offer an option of a FREE home report for clients who list their property with us during the month of October – subject to terms and conditions and availability.  My hope is that this will encourage the wavering seller to go ahead and put their house on the market which will keep the property market moving. 

Lindsay Darroch
Head of Property