Help To Buy: Lloyds Boss Questions Scheme

This article by Yahoo! news UK & Ireland on October 14th, 2013 reveals the viewpoint of Britain's biggest mortgage lender about Help to Buy that it might create bubble in property prices.

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The chief executive of Britain's biggest mortgage lender says he fears Help to Buy could create a dangerous bubble in property prices - just weeks after giving the Government's scheme his unequivocal support.

Antonio Horta-Osorio - head of Lloyds Banking Group - told the Financial Times that unless steps were taken to increase the number of new homes being built, there was a risk of a "substantial increase in house prices."

He said the scheme should also be tweaked to focus "outside London and the South East", while planning and building rules should be relaxed.

The Lloyds boss also called for more social housing projects so that rising mortgage approvals do not drive up house prices.

Just six weeks ago, in an interview with Sky's business presenter Jeff Randall, Mr Horta-Osorio described Help to Buy as "absolutely the right thing to do."
 
The Halifax, which is owned by Lloyds, is a major lender under Help to Buy, which was recently extended to include a Government guarantee on high-risk mortgages, allowing people to buy a home with a deposit of just 5%.

Mr Horta-Osorio made his comments as a leading forecaster said the efforts to revive the mortgage market had been "well-timed" and would not lead to another housing market bubble.

The Ernst and Young ITEM Club believes house prices will rise by 3.5% across Britain this year and by 6.6% in 2014.

The boss of Britain's so-called 'bad bank' also fuelled the debate by suggesting that Help to Buy could speed up the repayment of its £42bn taxpayer loan by lifting house prices.

Richard Banks, who runs UK Asset Resolution (UKAR), which manages the loans of failed lenders Northern Rock and Bradford & Bingley, said this could help lift customers out of negative equity - where loans exceed the value of their homes.

In an interview with the Times, he said: "If house prices go up outside London, it is a good thing for us as quite a few of our customers are trapped by their high loan-to-values.

"If higher house prices mean sufficient customers are able to and choose to remortgage with another mortgage provider, it may facilitate UKAR being able to pay off the Government loan more quickly."

While support for Help to Buy has been strong, so too has opposition with former Bank of England governor Lord King and the International Monetary Fund urging caution.

Recent official figures showed mortgage approvals running at a five-and-a-half-year high in August, while data from Nationwide showed house prices rose at their fastest annual rate in more than three years in September.

The strongest growth remains in London and the South East.

Lenders including Halifax, RBS and NatWest have started offering mortgages under Help to Buy while Santander, HSBC, Barclays, Virgin Money and Aldermore also plan to join it.

The scheme is expected to offer £12bn in mortgage guarantees over three years and some estimates suggest 180,000 loans could be taken out under the initiative.

Article Source: http://uk.news.yahoo.com/help-buy-lloyds-boss-questions-scheme-101121891--finance.html#SU0xXFM

Tips for Buyers to Survive Estate Agent's Tricks

This article by Henry Pryor of theguardian on October 6th, 2013 reveals the guidelines that buyers should follow when dealing with estate agents.

Estate agents are not your friends. They work for the seller and are paid by the seller to get the best deal for the seller.

You wouldn't play poker with all your cards face up on the table, so don't be tempted to explain why you're moving, how much you have to spend (say "we hope that we won't have to spend more than X"), or that you need to be in by January. These will all be used against you when you fall in love with the right home. The agent will know how far he can push you, how little time you have to find something, or that you have already lost out on five other houses and you've threatened divorce if you don't get this one. Don't be panicked into buying and most of all, don't be afraid to make an offer.

Here are my tips for buyers:

■ Agents get paid when deals are done. They are therefore keen to find a buyer who is serious. To make sure you are the first to be called when a new property becomes available, make sure the agent knows you are ready to go. Cash in the bank is better than someone who needs a mortgage. Someone in rented accommodation can move faster than someone with a property to sell.

■ Ignore tempting discounts or incentives to buy a new-build property. If someone is paying your stamp duty or moving costs then it's in the price and you will pay for it over the next 25 years of your mortgage.
■ Confirm every conversation you have with an agent. Viewing appointments, offers made, bids rejected together with the terms of any offer. Agents like people who know what they're doing and you will look like you have bought and sold before.

■ Ignore invitations to rush to see a property or to be panicked into bidding. Fewer than 10% of homes for sale in any one month sell. Proceed in your own time – there are 24m other homes in the UK.

■ Don't get your finance from the selling agent's financial services company. Get a quote, but then discuss it with your own mortgage adviser.

■ Don't assume that the guide price is anything more than an indication of the owner's greed or the agent's enthusiasm to get the job. Be confident and make an offer. A house is worth what you and the seller agree, not what the agent thinks it's worth.

■ Double-check everything you are told. Is it quiet on a Friday or Saturday night? Are there neighbours from hell? Is the road a rat-run and does the roof leak?

■ Don't be fooled into thinking that a bank valuation is for your benefit. It's for the lender and you have no comeback on the surveyor.

■ Don't expect an agent to send you new properties when they are available. Keep in touch, go and see possible properties and look serious. You'll be amazed how much you will learn from frequent contact.

Article Source: http://www.theguardian.com/money/2013/oct/06/tips-buyers-estate-agent-tricks

House Prices Rising at Quickest Rate in Three Years

According to Halifax the rise for eight consecutive months brings annual growth above 6%, making it the highest annual rate since June 2010 as revealed on this article by Harriet Meyer of theguardian on October 3rd, 2013.

House prices are rising at their fastest annual pace for more than three years, according to figures from the UK's largest lender.

Halifax said prices rose by 0.3% in September, the eighth consecutive monthly increase, resulting in an average figure of £170,733. The lender's annual growth figure, which compares quarterly averages year-on-year, showed a 6.2% rise – the highest annual rate since June 2010.

Prices remain some way off the peak of £199,612 recorded by the index in August 2007, but a background of low interest rates, improving consumer confidence and government schemes such as Help to Buy and Funding for Lending, are stoking demand.

The lack of available homes has also contributed to the upward march in house prices, with demand outstripping supply in recent months.

However, Halifax's housing economist, Martin Ellis, said the lack of supply should ease as more people are encouraged to put their homes on the market. He said: "There are signs that supply is beginning to respond to the pick-up in demand, which if continued should help to constrain the upward pressure on prices. The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home, enabling more to put their property on the market for sale. Levels of house building are also increasing, albeit from a very low base."

Halifax's report follows similar findings from Nationwide that the housing market revival is gathering pace. It showed UK house prices rose 0.9% in September, with the annual rate of growth running at 5% nationally and 10% in London – in both cases the strongest figures since 2010. As recently as May, the UK annual rate was just 1%.

Fears have been growing that stronger than expected price rises this year could lead to a bubble, with borrowers over-stretching themselves. The government has brought forward the launch of the new phase of its flagship Help to Buy scheme from January to next week, and concerns have been raised about the further upward pressure this will place on house prices as demand is stoked further.

Howard Archer, UK economist at IHS Global Insight, said: "There is a mounting danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the Help to Buy mortgage guarantee scheme now starting in October."

The Help to Buy scheme will offer state-backed mortgages to people with deposits as low as 5% who want to buy a new-build or an existing home.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Bringing forward the launch date of the second phase of Help to Buy has revealed just how much pent-up demand there is from buyers, with brokers already receiving plenty of inquiries about how the scheme will work and where they can get a mortgage. Lenders will have to work hard now to catch-up, ensuring they launch 95% LTV products that are competitive."

Article Source: http://www.theguardian.com/money/2013/oct/03/house-prices-quickest-rise-halifax

The Hidden Dangers of Shared Ownership

Shared ownership is said to be the easier way to get onto the housing ladder, but is currently presents some legal flaws for the buyer as revealed on this recent article by Giles Peaker of TheGuardian on September 3rd, 2013.

It's touted as an easier way onto the housing ladder, but shared ownership is mired in worrying legal flaws for buyers.

Shared ownership is being positioned by housing charity Shelter and others as the future of home ownership for low- and middle-income households, and as a means to encourage investment in home building. However, shared ownership currently presents some significant legal flaws for the purchaser – not the least being that there is actually no 'shared ownership' at all.

As a solicitor who works in leasehold litigation, I am concerned that the significance of a case called Richardson v Midland Heart, from 2007, is not more widely known. Rebecca Richardson had purchased a 50% share of a property with housing association Midland Heart for £29,950 in 1995. The arrangement, a typical one, was that she paid rent on the other 50%. There was the usual staircasing option, by which Richardson could opt to pay more for a greater share, up to owning outright with 100%, but, again not uncommonly, she had not exercised this.

Unfortunately, Richardson got into arrears on the rent. Despite agreeing to allow the property to be sold, Midland Heart quickly brought possession proceedings under Housing Act 1988. Midland Heart used a ground where if there are eight weeks of rent arrears when a notice is served and also at the date of the court hearing, the court must order possession, with no discretion to do otherwise.

The court found, reluctantly, that what Richardson had was an assured tenancy for 99 years (the length of the lease). She did not have a lease that could be protected, as it was not for the whole of the property. What is more, she had no right to the return of the £29,950 she had paid. The court made a possession order and Richardson lost the property.

In practice, this means that shared ownership is just a tenancy, with an expensive downpayment for an option to buy the whole property at a later date. The landlord or housing association remains the owner of the property up to the point of the 100% buyout and the tenant can be evicted for rent arrears regardless of how much of the property they supposedly own – and without being recompensed for that payment. A case this year suggested there may be a human rights claim for the return of that money, but this is untested.

Richardson paid for her 50% share up front, but if it were a mortgage the lender would almost certainly step in to pay off the rent arrears, adding the arrears and additional charges to the mortgage loan, to preserve its security and avoid the shared-ownership tenant being evicted. But the legal position remains the same.

There are other problems that, though not unique to shared ownership properties, occur more often with them. For example, frequently the housing association will itself only lease a number of flats in a block built by a developer, which it then sub-leases to people on a shared ownership basis. In this situation, the shared ownership leaseholder will often find that they have no way to enforce repairs to the building, as the housing association will have no responsibility for its condition. The shared ownership leaseholder may well face leaks, heating problems, or defective windows but be unable to make the landlord or freeholder carry out repairs, or be compensated, where a social tenant would at least be able to get compensation from their landlord.

These are major problems for the shared ownership model. The Richardson v Midland Heart problem will almost certainly need legislation to change. While shared ownership may well be the most promising route into home ownership for many, there are substantial risks for those taking that route.

Article Source: http://www.theguardian.com/housing-network/2013/sep/03/hidden-dangers-shared-ownership