HIPs Rolled Out For All Properties

They’ve been much criticised, and hardly anyone seems to like them, but the government is continuing to roll-out Home Information Packs (HIPs). They will be required for all properties on sales as from 14 December.

First introduced on 1 August for properties with four or bedrooms, the HIP scheme extended to three bedroom properties on 10 September, and will soon encompass all residential properties.

Critics claim they made it more difficult to sell a property and increased the cost (the average cost is between £300 and £350), but the government say the packs bring benefits to buyers.

Housing minister Yvette Cooper claims that HIPs will help first-time buyers with important information for their prospective purchase. Energy Performance Certificates (EPCs) give a home an energy rating of A to G (rather like the ratings given to household white goods). Homes with poor scores will receive assistance from the Green Homes Service just announced by the Prime Minister.

Miss Cooper said: “HIPs and EPCs are already helping consumers to save hundreds of pounds off their fuel bills and are cutting search costs too. All home buyers will be able to benefit from energy efficiency advice, with those receiving low green ratings of ‘F’ and ‘G’ especially targeted for support and grants.”

Packs include an EPC, copies of planning, listed building or building regulations consent, local searches, and guarantees for any work on the property.

A review of HIPs carried out by Europe Economics found no evidence of an impact on prices beyond the short-term, and said that any delay to the planned roll-out would cause “greater market difficulties and uncertainties”.

Yet in a housing market that is struggling of late it is hard to see how the implementation of HIPs across the board will have anything but an adverse effect, short or long term.

The extension of HIPs was criticised by the Royal Institution of Chartered Surveyors (RICS) housing spokesman Jeremy Leaf who argued that widening the scheme will have a negative effect on those people trying to get onto the property ladder. “Rolling HIPs out to one and two-bed properties could find first-time buyers caught between a rock and a hard place as accessibility to the market would go off the scale,” he said. “If the Housing Minister genuinely wants to improve the plight of first-time buyers, she should not continue with this flawed policy,” he added.

However, in the light of a recent shortage of HIPs work, the extension was welcomed by the Association of Hip Providers (AHIPP)

Rise In Inflation Means No Rate Cut

Inflation has jumped back up to 2.1% after being under 2% since June, and this has made the possibility of a rate cut in December or even early in 2008 virtually nil.

Driven up by rocketing fuel prices and higher foods prices the Consumer Price Index (CPI) – the Government’s preferred method of measuring inflation – went up faster than economists expected – their forecast having been 1.9%.

The Bank’s main aim with interest rates is to keep inflation down, so despite the blip in the economy, there is no chance of a rate cut with inflation having gone above target.

Petrol prices went up to 94p a litre in October (up 2.7p) – and have continued to rise even higher in November. The Government increased duty on fuel, but the price of oil per barrel is closing in on a record $100.

The CPI increase from 1.8% to 2.1% was the biggest monthly rise since March this year. Higher air fares have contributed, but the increase in food prices has had a major impact. Meat and fruit prices have risen sharply.

Coming down were gas and electricity prices, but they didn’t keep the overall figure below 2%, and it is hard to see them staying low for too long.

The Bank has held firm on the interest rate of 5.75% throughout the late summer credit crunch and the crisis at Northern Rock. At the same the US Federal Reserve has knocked 0.75% of its interest rate, resulting in some criticism for the Bank of England.

The housing market does appear to be cooling, but there are still forecasts that say the spenders will be out again in the run up to Christmas despite gloomy economic projections, rising mortgages, the squeeze on credit and now higher prices.

The Retail Price Index (RPI) includes mortgage payments, and this went up from 3.9% to 4.2% in October

Go For Bankruptcy, Advises Unregulated COmpany

A company called the IVA Council (IVAC) has been mailing people in debt, advising them to default on their repayments so it can step in and help them become bankrupt.

The unregulated company says that many thousands of people have received bad advice and have been shepherded into Individual Voluntary Arrangements (IVAs). The company says that many of these should not be trying to make repayments, but should go for bankruptcy instead.

In recent weeks it has sent out up to 4,000 letters to customers of debt-advice services, the details of which it bought off the Insolvency Agency – backed by the government. Calls have been made to make the database less widely available, and also complaints have been made that sensitive information can be viewed through the envelope’s window.

IVAC had a website that was a close copy of the Insolvency Service’s website, but was forced to change the site last week.

The IVAC has admitted that it does not have authority to advise people to default on payments and has now changed its letter to accuse IVA providers of mis-selling, and saying: “The IVAC has noted a pattern of inconsistencies that may indicate that you may have been mis-sold your IVA… These IVA factories are offering only IVAs as debt solutions and are not exploring any alternatives.”

Malcolm Brown of IVAC said: “We unfortunately alienated a large part of the industry by targeting all IVA customers initially. Together with the first website we created, yes, that was a terrible mistake. But we have learned from our mistakes and have since decided to target five main IVA factories that we believe are not properly advising their customers. They tell people they cannot do a bankruptcy because it will ruin their credit rating, but there is no real credit blacklist in this country. Many of the people we have come across would be better off filing for bankruptcy and they have been mis-sold IVAs on the basis that they won’t lose their assets. But most of these people have nothing to their name, they have nothing to lose if they file for bankruptcy. Instead, they are dragged into making debt payments they cannot afford to repay.”

Derek Oakley, the insolvency director of Debt Free Direct, an IVA provider targeted by IVAC, said: “These people are unqualified and unregulated, which is ironic as all people who have taken on an IVA have done so with a regulated service.

Buy-to-let Paragon Is Another Credit Crunch Victim

Problems in financial markets and the slowdown in property looks as though they’re going to have an impact on the buy-to-let market in Britain, leading to a wider ranging implosion of the property market.

The third biggest buy-to-let lender in Britain, Paragon, has revealed that it is a victim of the global credit crunch, following the collapse of Northern Rock. In a similar to the north-east banking giant, Paragon said that it could no longer borrow enough money to sustain its business. The consequence of this is that it would be cutting the number of buy-to-let mortgages on offer by 50% next year, and experts expect other lenders to follow suit.

Further concerns about the future of buy-to-let mortgages were raised by an announcement by Bradford & Bingley that it had sold off two commercial mortgage loan books. B&B is the biggest buy-to-let mortgage lender in the UK. The impact of the sales might be a shortage of this type of home loan which might take buyers out of the housing market, and lead to further falls in house prices in most regions.

There are more and more impacts on consumers and the wider economy as a result of the credit crunch that is affecting financial markets worldwide.

Banks are having increasing trouble borrowing money at reasonable interest rates, which has meant the withdrawal of home loan deals and the rejection of more credit cards and loans than ever before.

The news from Paragon was unexpected in the City, but shares quickly fell by 50%. The company has high vulnerability to the credit crunch as it has no savings customers at all – unlike banks and building societies. All the money it needs it has to raise on the international money markets.

Bradford & Bingley said it had no problems raising cash for funding, saying that it commercial loans had been sold to move funding to the higher-margin residential mortgage market

Mortgage Lending Up – For Now

Figures from the Council of Mortgage Lenders show that mortgage lending was up by almost £2bn in October. It seems to be that people were drawing on loans that were agreed prior to the latest banking turmoil. Despite the increase, the CML’s forecast was for a slowdown ahead.

Gross mortgage lending went up from £30.6bn in September to £32.4bn in October, but lenders said that loan advances would drop over the rest of the year as the effects of the late summer financial market turmoil come through.

The increase experienced in October was twice the 3% typical for the season, and it was also 6% higher than the figure for October 2006.

However, the Bank of England has reported a reduction in mortgage approvals, and the lenders agreed, saying that borrowing would fall below the average of a billion pounds a day seen in October.

CML director general Michael Coogan said: “The next few months will be a testing time as ongoing pressures in financial markets feed through into the wider economy. Funding constraints will continue to restrict lending activity and make loans more expensive. The Bank of England’s recent Quarterly Inflation Report reinforced the likelihood of a reduction in rates early next year, and that should provide some relief for borrowers sooner rather than later.”

A rise in mortgage lending for October was also reported by the Building Societies Association whose members reported total advances of £4.65bn – the highest monthly figure since March. Removing redemptions and repayments gives Net Lending, which was £1.12bn, the highest since June. These figures were both lower than last October.

David Stubbs, RICS senior economist said: “Despite the on-going slowdown in the market, buoyant economic conditions are still encouraging people to take out mortgages and buy homes. Indeed, despite the withdrawal of many mortgage products from the market, those with solid earnings and the necessary deposit are still gaining access to mortgage finance. However, lending volumes are set to trend lower in coming months. An economic slowdown is underway and the housing market is losing momentum. This is likely to prompt the Bank of England to cut interest rates in coming months.”

HIP Roll-out May Be Delayed

The Government’s Home Information Packs (HIPs) have come under criticism for their cost, complexity and the time they take to produce. They were introduced for houses with four bedrooms and more on 1 August, and then for homes with three bedrooms on 10 September. The Government had said that it will introduce HIPs for smaller properties as soon as it can, but the stance has changed.

Last week housing minister Iain Wright said the Government would assess the success of HIPs to date before completing the roll-out, especially in the light of the credit crunch and its potential impact on the economy. He said: “We are monitoring the impact of HIPs in the marketplace before we complete the roll-out. We are at a time of unusual market conditions. Most serious commentators are clear that interest-rate changes, house prices, the end to fixed-rate mortgages for some consumers, stock market uncertainty, concerns about sub-prime lending across the Atlantic and the Northern Rock issue have determined the housing market over the summer. Against that background, it is to be expected that property owners might think twice about putting their property on the market.”

The Department for Communities and Local Government said nothing had changed, but there was little doubting the content of Mr Wright’s comments, and a delay beyond the end of 2007 is expected to HIPs for smaller properties. Mr Wright said a timetable for further implementation would be set out in due course.

The National Association of Estate Agents said it would be a farce if HIPs were in place for larger properties, yet not for smaller, and said that the whole things had been very badly managed.

There is, however, a concern that HIPs will have a greater adverse effect on the lower end of the market with the cost of each pack at around £400. The smaller property market has already suffered most in current conditions, and the implementation of HIPs could only make it worse. Houses under £300,000 have seen most pressure on prices.

First-Time Buyer Affordability Worsens

The latest figures from the Council of Mortgage Lenders (CML) suggest that it is getting harder for first-time buyers to get on the property ladder. First-time buyers now have to spend an average of 20.4% of their monthly income on mortgage interest payments, the highest level for 16 years.

In September there were 28,400 loans to first-time buyers, down from 34,800 in August as would-be borrowers struggled to find affordable properties.

The CML held high interest rates to blame, and hoped that they had now reached their peak. CML director general Michael Coogan said: “Higher interest rates are now beginning to slow the housing market. The Bank of England’s decision not to reduce rates earlier this month will have disappointed many borrowers. Looking forward, affordability is likely to continue to constrain buying activity, which we expect to remain subdued.”

The gross figures for all mortgage lending were also down in September – to £30.6bn, from £34bn in August.

This is further evidence of the cooling UK housing market, and first-time buyers seem to be holding back from entering the market, borrowing £3.8bn in September, down from £4.7bn in August. The figures mean that the average first-time mortgage was £118,750, down slightly from its September level of £119,000.

The CML also calculated that affordability had become harder for home movers. Now, their mortgage interest payments take 17.5% of their income; it was 17.3% in August, and it’s the worst figure for 15 years.

Those moving house took out 52,400 loans worth £8.9bn in September, showing a sharp fall from the August when 68,000 loans were approved totalling £11.5bn. According to the CML remortgaging activity was still robust at £11.1bn, up slightly from the previous month, while buy-to-let totalled £6.8bn, the same level as in August.

Earlier in the week figures from the Royal Institution of Chartered Surveyors (RICS agreed with the CML view that buyers were feeling the effects of higher rates and the credit squeeze. The latest RICS survey of members in England and Wales showed that house prices fell for the third month in a row during October, and quicker than for more than two years.

RICS Reports A Slowdown

The Royal Institution of Chartered Surveyors (RICS) has reported that the slowdown of the housing market is becoming more significant. Its October survey of members says that prices in October were down for the third consecutive month, falling more steeply than at any time since July 2005.

The only region where surveyors felt prices were rising well was in London, with all other regions indicating a fall since summer.

RICS spokesman Ian Perry said: “The housing market is seeing the awaited slowdown that many had been expecting, with modest falls reported across most UK regions. Credit market turmoil has yet to put downward pressure on prices in the capital, although prices have now stabilised even here.”

Home unaffordability has risen to record levels as the combination of high property prices and increased interest rates has taken its toll. New buyer enquiries fell for the eleventh month in a row. Demand has been impacted by the factors above, plus the credit crunch and the tightening of lending criteria.

The RICS survey reported that prices were still rising slightly in Scotland, but even Northern Ireland, which has seen great increase in the last year, is now seeing a reversal. In Scotland and Wales 22% more surveyors thought prices were falling rather than rising.

House buyers are getting cold feet when it comes to the crucial moment, with over a third pulling out of purchases at the last minute, as they fear where the market is heading next. Buyers are said by agents to be nervous about predicted property price falls.

Mortgages have been reported to be just as easy to come by as before the summer credit crisis hit for mainstream borrowers, but the number of products on the market has been cut by 40%, so the choice is narrower. Even those who do get mortgage approval are changing their minds. Mortgage brokers John Charcol report and increase of 50% in prospective buyers pulling out at the last moment. Many are worried about falling into the negative equity trap should the value of their new house start to fall

Bovis Feels The Squeeze

The credit crunch continues to have wide-reaching effects. Home builder Bovis Homes has warned of sharp price falls and has admitted that in its crucial autumn period sales were severely impacted as confidence fell in both buyers and sellers.

Company chief executive Malcolm Harris forecast that the average selling price of a new Bovis Home will end up 3% lower in 2007 than in 2006 – a fall of around £5,500 on last year’s figure of £184,000. He also reckons that the number of homes sold through the year will be slightly down, which will result in profits being lower than previously expected.

It is unlikely that Bovis will be the only housebuilder affected in this way and more statements of bad news are expected from other housebuilders in coming weeks and months. Shares across the sector fell and Credit Suisse cut its rating on Taylor Wimpey, Barratt and Persimmon. However, with some irony, Bovis shares gained some ground as some had expected even worse news.

Recent surveys, forecasts and data have indicated that the housing market is heading for a slowdown and pricing correction. Wimpey and Barratt have noted falling demand, and shares in the sector have tumbled this year. The root cause blamed for the problems is the US sub-prime market, and Harris pointed the finger there and at the freezing of the credit market in its wake, which has had disastrous consequences for Northern Rock.

Harris said: “Recent events in the financial markets have adversely affected consumer confidence, resulting in sales being lower than anticipated during the key autumn selling period. At the half-year we said the outlook would depend on the autumn and during that period we have had Northern Rock and the confidence hit from the subprime market woes generally.”

Despite the bad news, and mortgage rates still on the rise, Harris remained optimistic about the housing market. “Looking ahead the mid- and longer-term supply and demand dynamic remains very attractive in the housing market. In the short term, sales will reflect this recent decline in consumer confidence, in particular as it relates to major consumer purchases.

Green Rules Will Put Up New Build Costs

The increasing regulations for the environment for homes could make construction 60% more expensive, according to a new study.

New legislation from Europe and in the UK on planning regulations and building standards have already added 14% to build costs, and that could continue to rise if BRE Environmental Assessment Method (BREEAM) standards need to be met.

The study was carried out by Miller Developments, and division of Miller, the UK’s largest privately owned property development and construction company. The Government may come under pressure to review some of the rules, such as that which says that new developments must generate 10-20% of their energy through onsite renewable power.

Miller Developments chief executive, Phil Miller, said: “There seems to be lots of authorities competing with each other to set higher targets without listening to the industry and finding out whether these targets are viable. European targets are now coming through in both planning and building regulations, but they are coming through in a very disorganised way.”

The extra 14% costs already added come from the need to pay for such technologies as ground-source heating, high-performance glass and energy-efficient heating and cooling. With BREEAM guidelines, the costs rocket again.

Miller: “The rules have already completely changed and a lot of people in the industry do not realise it. What we don’t know is what the market will demand. Nobody knows what green means. It is all rather confused and needs to be clarified.”

The lack of direction from the Government has led to speculation that Energy Performance Certificates which have been introduced for residential property as part of the Home Information Packs will be used as a tool for introducing green taxes on commercial buildings. There is some concern that the EPC measures will be used to offer rebates to the best performers or increases taxes on the worst

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