Land Registry Loopholes Lead To Property Fraud

Loopholes in the Land Registry website have allowed criminal gangs to steal £12m in the last two years. They have done this by gaining access to sensitive information about property transactions from the website, using the details they have discovered to launch complex frauds. One of these netted £8m for criminals.

The old system issued title deeds only manually every time a property changed hands, and people had to actually go to the Land Registry office to get details, and they needed permission from the owner. The new system updates the register electronically, enabling details to be downloaded from the website at £3 a go. Criminals can easily access mortgage account details and signatures.

Fraudsters appear to have fooled banks, building societies, solicitors and officials into transferring ownership to them using fake ID and information from the website. Favoured methods are to sell the house and melt away with the proceeds or take out a mortgage and disappear with the cash. As properties are often rented it can take some months before the scam is uncovered. One incident had a tenant  copy the homeowner’s signature to give him power of attorney. The tenant then took out a mortgage for £150,000 paid into a bogus bank account and disappeared with the proceeds. The first thing the owner knew was when he received letters from the building society warning that his property was about to be repossessed.

Tory MP and ex-Cabinet Minister Peter Lilley has called for signatures to be removed from documents kept online. One of his constituents was a victim of the scam.

It can take months of effort fending off debt collectors and struggling to convince people that have been victims of a fraud before they are eventually believed and compensated.

Seven people have been charged by West Midlands Police over a suspected £1.3m fraud using Land Registry papers. The Land Registry is in discussion with the Council of Mortgage Lenders about tighter security.

Buy-to-let Becoming Tougher

A report by the Royal Institution of Chartered Surveyors (RICS) says that buy-to-let property investment has become a ‘rich man’s game’, with investment in residential property now beyond the reach of the average person, thanks to high property prices and expensive mortgages.

RICS said that a prospective buy-to-let investor would need a deposit of 30% to meet traditional lending standards, and buy-to-let lenders like monthly rent to cover mortgage payments to at least 125%. Buy-to-let buyers now need a deposit of around £65,000 compared to only about £10,000 five years ago.

RICS senior economist David Stubbs, says: “It takes more capital than ever to set up a buy-to-let investment. Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined. However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones, and this should ensure that demand from the buy-to-let sector does not dry up entirely.”

The term buy-to-let was coined only about ten years ago, but has quickly risen in popularity in that period, with house prices going up by around 285%, according to figures from Halifax.

The increase in buy-to-let has been amazing. In the first half of 2000 there were 120,300 mortgages worth £91.bn for buy-to-let; in the first six months of 2007 there were 938,500 buy-to-let mortgages worth £107.8bn.

Any landlord already of board with buy-to-let is in a good position, but for those wanting to join the market, and those who have joined recently, it is a tough time. Lenders have actually relaxed criteria, allowing borrowing on the basis of personal income rather than rental income, and with less cash up front.

The National Landlords Association says that newcomers should do their homework, and stick to traditional entry criteria for their own benefit.

In some areas there is still strong demand for property, but in other places there has been an over-supply of flats, and buy-to-let landlords should avoid these places

North-South Gap Narrows

The prosperity gap between the North and South of the country has narrowed. Earnings, employment and house prices are rising faster in the North, according to the latest figures.

In northern regions average full-time earnings have gone up by 22% in the five years to April 2006. In the South they only went up by 18%. Meanwhile employment in the North has gone up by 5% in the five years to March 2007, compared with a rise of 2.7% on southern areas.

Since 2002 house prices in the North have jumped by 97%, whereas in the South they have managed only a 53% increase.

Halifax plc reported that the North, including the North East, North West, Yorkshire and Humber, East and West Midlands, Wales and Scotland had not outstripped the South in every measure. In the southern regions economic growth per head had showed faster growth. Unemployment also remains higher in the North, but the gap is closing.

Similarly, pay is still lower in the North. Southern wages were 21% higher: average earnings in the South were £31,020 in 2006, compared with £25,642 in the North.

The South also has much higher house prices still. The average house costs £265,921 in the South, whereas in the North it is only £158,636.

Meanwhile the impact of Home Information Packs (HIPs) continues to adversely affect property sales. Since the introduction of HIPs for three bedroom homes on 10 September, there has been a 37% drop in those homes for sale compared with the same period in 2006, according to the Royal Institution of Chartered Surveyors (RICS). This follows a 51% drop in the number of four-bedroom properties being put up for sale when HIPs were introduced for them in August.

RICS reported that 65% more of its surveyors were seeing a drop in the number of people putting three or four bedroom properties on the market that those that saw an increase.

RICS spokesman, Jeremy Leaf said that HIPs seemed to be having a detrimental impact on the housing market, despite assurances from the housing minister that this would not be the case.

Oil Prices Make Base Rate Cut Impossible

The Bank of England started the current round of base rate rises in August 2006, before which the rate had stood at 4.5%. Quarter point rises in August, November last year, and January, May and July of this took the base rate to 5.75%. Then came the US sub-prime crisis, the run on the Northern Rock and all of a sudden base rate rises were forgotten. With inflation also dipping below the 2% target, and consumer confidence turning downwards, the talk in late summer and early autumn was of possible rate cuts.

Then oil prices started soaring, and last week British households were advised to forget about a base rate cut until spring 2008. Oil Prices reached a record $96 a barrel, and the Confederation of British Industry (CBI) warned that the price surge would add a quarter point to the consumer price index, taking it over target. The CBI forecast that inflation would reach 2.1% for October, and stay around that level, making it impossible for the Bank of England to bring the rate down again as long as that situation lasted.

Inflation is always the priority for the Bank of England, and policy makers Kate Barker and Charlie Bean have re-affirmed that in recent weeks. The Monetary Policy Committee meets this week and the popular view of economists is that the base rate will be held at 5.75%.

Oil prices are forecast to hit $100 before long, and with higher energy costs forcing up utility bills and prices in shops, it is unlikely that households will be full of spending power to bring Christmas cheer to the economy this year. Consumer activity in October was at its lowest since November last year.

John Longworth, executive director at Asda, said: “Retailers’ hopes have been disappointed for the past few months, and they anticipate only subdued growth in the important run-up to Christmas.

House Prices Dip For Second Month

For the first time in well over two years house prices have fallen for the second consecutive month, according to the latest figures from Halifax. In September there was a 0.6% fall, and this has been followed by a 0.5% price dip in October.

The Halifax figures say that the average price of a home is now £197,247, and the annual rate of house price inflation has fallen to 8.9%, from 10.7% in September. The peak house price reached was in August at £199,600.

The figures seem to add more evidence to the theory that house prices are about to hit the buffers, but Halifax maintained that the outlook remained sound, whilst admitting that the monthly rises and falls were typical of a more subdued market.

Chief economist at Halifax, Martin Ellis, said: “Prices in the three months to October were 0.3% higher than in the previous quarter – a good guide to the underlying trend - continuing the steady easing in house price growth since the end of 2006. The rise in interest rates since August last year and negative real earnings growth so far this year are curbing housing demand, leading to a slowdown in both price growth and activity. The UK economy is in a strong position. Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices.”

Halifax last reported two consecutive months of falling house prices in May 2005, when the average price was £162,600.

In the middle of this year Halifax revised its house price inflation forecast up from 4% to 6%, but given that house prices had risen strongly in the first half of the year, it actually reflected an expectation of a downturn in the market – and this has happened.

Howard Archer, chief UK economist at analysts Global Insight, said: “Most data and survey evidence are pointing to weakening housing market activity and cooling prices in the face of slowing activity, increased affordability pressures and tightening lending practices, and the Halifax data are certainly consistent with this. We expect these factors to increasingly bite over the coming months.

Tesco To Become Online Estate Agency

Back in June Tesco, the UK supermarket giant, joined the property market with an offer to sell property for homeowners at a bargain price of just £199. Soon after Tesco set up its Tesco Property Market service, estate agents complained to the Office of Fair Trading that it constituted estate agency work, though the company said it was just offering a listing service. Services included in the OFT’s definition included a For Sale board which includes the retailer’s contact details, managing enquiries and handling viewings.

After discussions with the OFT Tesco suspended its private sales sections on the website just two weeks ago, and now it plans to relaunch it as an online estate agency services.

The Tesco Property Market site came as no surprise to the property industry which was well aware that the supermarket giant had been planning to join the property fray for a number of years. The site offer houses through agents and enabled customers to market their own homes. Anyone who chose to sell their own property got online advertising space plus a Tesco-branded For Sale board for use at their property.

Regular estate agents, who have charges of between 1% and 3% which, on a property selling for £250,000 makes a charge of from £2,500 to £7,500, complained that Tesco was effectively acting as an estate agent, and pointed out that sellers might end up paying the £199 Tesco fee and a fee to the estate agent who eventually sold the property.

Tesco said: “Whilst being an online estate agent was never out intention, we are so encouraged by the positive reaction from customers to Tesco’s entry into this market that we are now reviewing our business with a view to launching a new and exciting online estate agency service.”

The OFT had advised Tesco that it was engaged in estate agency work, and as such it needed to abide by all the laws relating to estate agency

First-time Buyers Lured Into 100% Mortgages

The nightmare of negative equity could be returning to Britain. The problems of negative equity – where a mortgage is higher than the value of a property – was the cause of a great deal of misery for British families in the early 1990s.

So far the genitive equity trap has been avoided thanks to the continued rise of house prices. However, recently there have been strong signs that house prices are beginning to fall month on month, and although annual house price inflation is still positive, industry experts expect it to come to a halt in 2008.

This will cause problems for people who take out 100% mortgages – a mortgage to the full value of the house at purchase time; as soon as the house value dips, they will have negative equity. There have been an estimated 33,000 first-time buyers who have borrowed the full value of their property to the end of August this year, and the Mortgage Advice Bureau says that the number of people taking out 100% mortgages has more than doubled so far this year compared to the same period last year. A small fall in the value of their house would leave them owing more than their home is worth.

Earlier this week the Council of Mortgage Lenders (CML) forecast that the number of homes being repossessed would increase by 50% in 2008, taking the number to 45,000 – the highest in a year since 1994.

Lenders continue to provide 100% mortgages with alacrity, despite the government’s calls for more responsible lending. In April there were only 92 100% mortgage products, but by the beginning of October the number had risen to 160. Although many products have been withdrawn that were available to higher risk customers, first-time buyers with stable jobs are still being offered these risky mortgages. There is a feeling that credit is still being offered at dangerously high levels to would-be borrowers, especially in the current climate of rising interest rates, credit crunch and falling house prices.

Capital Economics expects the value of house prices to fall by 3% in both of the next two years

Mortgage Approvals Drop

Bank of England figures show that the number of mortgage approvals for homebuyers have fallen to their lowest level for over two years in September. At the same time, unsecured borrowing reached its highest level for 18 months.

In September there were only 102,000 homebuyer mortgage approvals, down by nearly 10% on recent levels, and the lowest figures since July 2005.

Unsecured borrowing, via credit cards, overdrafts or personal loans jumped up by £1.35bn to reach its highest peak since January 2006.

Britons are borrowing more than £1bn per day against their homes, but the fall provides more evidence that the property market is distinctly cooling. A recent report from Hometrack said that prices fell nationwide for the first time in two years during September.

Commenting on the Bank of England figures, Simon Rubinsohn, RICS chief economist, said: “This provides further evidence that the housing market is cooling in response to five interest rate increases and the more recent squeeze on credit. Although today’s figure represents a fall in activity of 11% since July, mortgage approvals are still above the long run average thanks to the combination of a resilient economy and generally healthy employment climate. That said, we expect further weakness in activity in the coming months.”

There has been a small increase in the number of people re-mortgaging and buy-to-let loans, but these only serve to increase the belief that more and more people are looking for more ways to raise cash or invest for a better future. With borrowing increasing on credit cards, and via overdrafts and personal loans it looks as though people are looking for other sources to fund their mortgage repayments.

Howard Archer, chief UK economist at Global Insight, said: “Evidence is now coming pretty thick and fast that housing market activity is being squeezed by a combination of tightening lending standards resulting from the credit crunch and the increasing affordability pressure on house buyers coming from higher interest rates, elevated house prices and modest real disposable income growth.”

Buying With Friends May Not Work Out

Young people, desperate to get onto the property ladder, are pooling resources to try and get a start in home ownership. Brothers, sisters, friends, even strangers are being called upon to boost people’s ability to afford a home. Websites such as c-buywithme.co.uk and gohalves.co.uk are demonstrating the popularity of such schemes, as people join financial forces with people they’ve never met before.

Over 20% of first-time buyers who have not taken out a mortgage with a spouse have taken out a home loan with someone they haven’t known for even as long as a year, says the Skipton Building Society. However, there is a big downside, as the study also shows that a quarter of these liaisons do not work out, leaving at least one party worse off. A major eye-opener was that four out of ten in such a broken deal had not signed an agreement as to how to resolve the situation if it fell apart. The path is not for everyone and one in three borrowers who ended up having to sell said they regretted having bought with the other person.

First-time buyers have been pushed into such drastic measures by high property prices, but they need to protect themselves and their money by drawing up an agreement beforehand.

Even girlfriend-boyfriend relationships break up and the fall-out can be problematical. Who stays? Who goes? Who pays who what? And what happens if neither can afford to pay off the other? There are also extra fees involved in changing a mortgage: early redemption penalties, legal fees, valuation fees etc.

If you are buying with other people, it is a good idea to seek advice from a solicitor. It might seem a bit cold, especially if the buyers are a couple, but it could save a lot of emotional and financial pain if a relationship ends. If you buy property with friends, a solicitor can draw up a ‘tenancy in common’ agreement so each person owns a definite share in the property.

Mortgage payment protection insurance can help if one person is unable to pay part of the loan if they are ill or made redundant.

Is A House Price Crash Coming?

It seems that predictions of a house price crash have been with us since the start of 2007, but it hasn’t happened yet. Experts such as Kate Barker, Alan Greenspan and the International Monetary Fund say UK house prices could be about to fall. Recent figures have indicated a cooling in the market, then along come the latest figures from Nationwide saying that house prices were up in October. Which way is it going?

There have been two years of strong house price inflation, but there have been signs this year that it has been weakening. Successive figures from the Land Registry, Halifax, Nationwide, Hometrack have all given slowdown messages for the industry. Despite Nationwide’s latest figures, they say that it would be wrong to see it as a sign that house prices were not weakening.

Other signs are that mortgage approvals are down and house repossessions are up. The Royal Institution of Chartered Surveyors also sees signs that the property market is cooling with the projections of its members.

Forecasts of housing market stagnation have been coming since autumn 2005, but since then lenders boosted the market by basing mortgages on higher salary multiples and relaxed rules on sub-prime customers. That helped to buoy the housing market and its prices.

This year, however, interest rates have reached 5.75%, and the credit crunch has caused lenders to rein in their lending. Together with the run at Northern Rock this has undermined consumer confidence, and they are beginning to sit tight and wait for things to get better. House prices have still risen in 2007, so the affordability gap has just got wider.

Another factor is the buy-to-let market which boomed when property prices were going up, but this market could come to a grinding halt if landlords cannot cover their costs, which could result in a surfeit of property on the market.

A lot of what is happening now happened before the last property crash in the early 1990s, and the fall seems to have begun, with Hometrack’s figures, if not Nationwide’s.

The most likely scenario is a soft landing rather than a crash, but a degree of price correction seems inevitable

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