Rent to Buy Government Backed Housing Plan
A “rent now, buy later” scheme is leading a series of measures which the government hopes will breathe new life into the housing market.
The sample project, being announced by Housing Minister Caroline Flint, will be open to some in England with household earnings under £60,000.
They would rent the property at a discounted rate for two or three years, with an option to buy part of it.
First-time buyers have been among the hardest hit by the credit crunch.
Other plans being outlined include the location of new local housing companies which would see councils and developers using unused land for homes.
Tough Times
The squeeze on mortgages caused by the credit crunch has made it difficult for first-time buyers to secure a mortgage deal, even though house prices are falling.
A first-time buyer couple on low incomes must save a year’s worth of their take-home pay to buy their first home, the Royal Institution of Chartered Surveyors (Rics) said last week.
A couple in the bottom quarter of earners in the UK would need £27,738 to pay the upfront fees even before paying any of their mortgage, The Rics report said.
Under the government’s plans, households earning £60,000 or less would be able to rent at 80% or less of the going rate for two or three years in order to save up for a deposit.
They would have an option to buy 25% or more of the property at any time under the scheme, called Rent to Home Buy.
The government had previously extended the shared ownership scheme from key workers to those households earning £60,000 or less.
Bids will have to be made for the rent first, buy later scheme through registered social landlords, but there were no specific numbers as to the number that would be granted.
Building Plans
The government hopes that this scheme - only available in England - alongside others will help 75,000 first-time buyer households get on to the property ladder.
James Rowlands, policy officer at Rics, said the scheme did not go far enough.
“This measure will only have a limited impact on the wider housing market unless it is rapidly expanded to include all first time buyers,” he said.
Ms Flint was also announcing that Barking and Dagenham, Newcastle, Nottingham and Manchester will be the first areas to run local housing companies for housing developments on surplus council land.
The government has been warned by various groups that its target of three million new homes built by 2020 is under threat, with house builders cutting back on their operations in the current climate.
The Council of Mortgage Lenders is calling for construction projects to be tunned to the specific needs of different locations in the UK.
The glut of new city centre apartment blocks has led to criticism locally in some areas.
“The long-term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase the housing supply,” said Ms Flint.
“That means being ambitious, but also practical and realistic, acknowledging not only the difficulties faced by individuals and families, but for those who work in the house building industry.”
She said that funding, in addition to the £200m already announced, could be made available to buy unsold stock from house builders for affordable homes.
Using the Department of Communities and Local Government’s own house price figures, £200m would buy 916 average priced homes.
14% Rise in UK Fraud Rates
Fraud cases climbed by 14% in the UK in the first half of 2008 compared with the same period last year, according to fraud prevention service Cifas.
It said there were 104,548 confirmed frauds filed to its database from January to July, with London and the south-east of England being the most affected areas.
Bank accounts and credit cards remain the main targets for fraudsters, followed by loans and phone deals.
East Ham in London topped the list of areas with the most prevalent cases.
The group said that con-artists thought they could work more anonymously in cities owing to the population density.
“London is a city of stark contrast where extraordinarily wealthy and socially disadvantaged people often live in close proximity,” said Cifas research manager Sandra Peaston.
“This can both provoke and help to facilitate fraudulent behaviour.”
Asset finance, such as car purchases; communications, such as mobile phone contracts; and insurance fraud were all active in Lanarkshire and Coventry as well as London and the South East, according to Cifas.
The most commonly appearing postal districts when looking at all types of fraud were East Ham, Croydon, Peckham, Plumstead, Walthamstow, Barking, Willesden, Thamesmead, Forest Gate and Tottenham.
Kate Beddington-Brown, of Cifas, said that those engaged in mortgage fraud had gravitated to London owing to its high property prices.
“Add to this the growing financial hardship caused by the credit crunch and you have a dangerous and potent mix,” she added.
Hard times ahead for first-time buyers
A first-time buyer couple on a low-income must save a years take-home pay to buy their first home, say surveyors.
A couple in the bottom quarter of earners in the United Kingdom needs £27,738 to pay in advance fees, according to the Royal Institution of Chartered Surveyors.
Affordability has improved for those who are able to get on the housing ladder, the group said.
But the credit crunch has made it more difficult to climb the first rung.
“Access to the housing market has deteriorated as the credit crunch seized mortgage lender sector,” said RIC’s senior economist David Stubbs.
“With the decline in mortgage approvals, the situation does not look like improving in the latter part of 2008 and first time buyers will find their path to homeownership increasingly blocked.”
Mortgage Costs
Mr. Stubbs said that those who are able to find a larger deposit to benefit from a reduction in mortgage repayments as a result.
But he added that rising fuel and food bills means that household finances would remain strained.
The Council of Mortgage Lenders said that in May the average first time buyers mortgages stood at £113,500.
Rics believes that a low-income couple jointly earning £27,316 per annum after taxes, would need all of this for expenses such as a deposit and fees on a first home.
This was much higher than the 21% of their income they would have needed to get on the property ladder in 1996.
London is the most difficult area to enter the real estate market to low-income couples, followed by the south-east, east and south-west of England.
Scotland and the north-east and north-west England are most accessible.
Affordability
Larger deposits and the decline in prices means those low-income couples who have one foot was found that affordability has improved in April to July this year.
They should spend 34.5% of their take-home pay on mortgage repayments, down from 37.2% during the first three months of the year and lower than the record level of 46.5% at the end of 1989.
The figures come as Woolwich - the mortgage arm of Barclays - cut part of its fixed-rate mortgage deals by up to 0.3%.
Broker John Charcol also unveiled a two-year follow-up to deal with high-value mortgage loans with a record fee provision of up to £137,500.
Borrowers are offered an interest rate of 0.01% below the Bank of England base rate, available on mortgages between £ 500000 and £ 5m, but they must pay a fee arrangement 2.75% of the amount borrowed.
Thousands of new UK homeowners are facing negative equity
According to a CACI survey for the Daily Telegraph, one in eight of 1.2 million who bought a property, since then, owe more than their house is worth.
If a house loses its value is not necessarily a problem unless the owner has to move, re-mortgage, or can not pay the mortgage.
UK prices fell by 0.9% on average in June, according to recent figures nationally.
The increased risks
The CACI analysis also suggests that the holders of 360,000 mortgages could be negative equity in late 2008 if housing prices drop 20%.
A recent BBC report - based on data from the Council of mortgage lenders - revealed that more than 23,200 people who took 100% of mortgages in the year and March 31 could face negative equity.
In a rising market banks are willing to pay 100% of mortgages as there is little risk of not getting their money back.
But as prices have fallen, the risks have increased and lenders have been turning away borrowers if they do not have a deposit.
Last week Nationwide said house prices fell for the eighth month in a row in June, with prices now 6.3% lower than a year ago.
It said that the average home now costs £172,415 and is £13,629 cheaper than at the top of the market in October last year.
Deadline Set On Unfair Bank Charges Case
A High Court hearing to decide the Legimacy of bank overdraft charges should now start before the end of the year.
The Office of Fair Trading and the eight major banks agreed the timetable under pressure from a High Court judge.
Earlier, Mr Justice Andrew Smith allowed the banks to appeal against his first ruling last month that the OFT has jurisdiction over the charges.
If that appeal suceded, then any separate decision on fairness would be made redundant.
Customer Wait
Last month’s ruling by Mr Justice Smith was a victory for the OFT, which has been seeking legal confirmation that it can rule if bank charges are fair or not.
The banks have been keen to oppose this to protect the estimated £3.5bn a year of income they generate from charging customers who go overdrawn without permission.
Under pressure from hundreds of thousands of customers suing them for the return of their overdraft charges in the county courts, banks agreed to a High Court test case in two stages.
The first was on the authority of the OFT under consumer contract regulations. The second will be on the fairness of the charges themselves, which the OFT has been investigating since April 2007.
“The judge has indicated he wants the OFT’s investigation to be wrapped up quickly, and that is a very positive move for consumers waiting in the wings,” said Chris Warner, a lawyer for the consumers’ association Which?
“But the banks are appealing and it will be some time before a judgement is issued in that hearing and so consumers are still some way away from getting their money back.”
The banks’ appeal is likely to be heard this autumn, but if either side then takes the issue to the House of Lords, the OFT’s jurisdiction in the matter is unlikely to be settled until next year at least.
Ever Since the two sides first agreed this long process of litigation last July, tens of thousands of claims for the refund of bank charges have been frozen in the county courts.
Earlier in the course of the High Court case management conference, Mr Justice Smith expressed his discontent at the OFT’s initial statement that it had no idea when its investigation would be completed.
“While the investigation is going on, we are asking the county courts to keep the litigation on hold,” he said.
“How long are they expected to wait?”
Later, however, the OFT said it would share its initial findings with the banks in mid- to late July.
The regulator and the banks agreed that if they could not agree on a fair level of charges, the issue would go to the High Court before Christmas for a ruling.
For the time being, unresolved cases before the county courts and the Financial Ombudsman Service will stay on hold.
“I don’t think this position should change,” said the judge.
“The reasons that these actions should not proceed seem as strong as they were, and will remain so until any appeal by the banks is resolved,” he added.
Help Placing Your Claim
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Joseph Rowntree Foundation Says Single Brits Need To Earn A Minimum Of £13400 a year
A couple with two children need to spend £370 a week and a pensioner couple need £201 excluding housing and childcare costs, the charity says.
Cinema tickets, a bottle of wine and a bird feeder on the list of products people need to participate in society.
The JRF figures are higher than some estimates of the Government.
According to the report, which took two years to put together the purchasing power necessary to pay a basic but socially acceptable standard of living was higher than the official government figures calculate the poverty line.
Staying alive
The report combines academic study with a consensus of 39 different groups of people to reach a series of benchmarks for an acceptable cost of living in Britain.
The definition of a minimum standard of living is not just the amount of money necessary for survival, and includes “more than just food, clothing and shelter,” says the report.
“It is about having enough money to have opportunities and choices necessary to participate in society,” he said.
For a single person of working age including boots, a pay-as-you-go mobile phone and a bicycle. For all these “essential” items, or rent a modest house in the council, one person would have £13400 per year before taxes, said the JRF.
For a retired couple, a meal and a bird feeder are on the list, a single mother and needed £ 210 per week - excluding housing costs and child care - for items including diapers and baby a Christmas tree.
Families should have an opportunity to take a week of self-catering holidays in the UK, according to the report.
Needs do not want
The study excludes “an aspiration” issues, and JRF said that was aimed at initiating a debate on what was an acceptable standard of living.
“This research is designed to encourage debate and to start building a public consensus about what level of income anyone should have to live below,” said the director of JRF Julia Unwin.
“Of course, everyone has their own views about what items in a family budget are essential. But this is the best effort to date to allow citizens to discuss and agree on what all homes should be able to offer, “he added.
Experts ensure that the lists provide a proper diet and enough heat to stay healthy.
According to estimates, only one person working full time would earn £ 6.88 per hour to reach the minimum weekly - which is more than the current minimum wage of £ 5.52.
A single person on income support would get less than half this amount.
An out of work family would get the in benefits two-thirds of what the JRF regarded as the minimum requirement, but to pensioners Pension credit reached an acceptable level of income, the charity said.
Poverty levels
Jonathan Bradshaw, a professor of social policy at York University and co-author of the report, said that this was the first time that the question of how much was sufficient income had been addressed.
Official poverty measures have been based on family income data.
The official poverty line is a household with an income of 60% of the average UK household, with the poverty line adjusted for family size.
The government has used this measure as the basis for his promise to halve child poverty by 2010, and have been eradicated a decade later.
The report of JRF took in the views of people from a variety of social groups in rural and urban areas, before coming with an average of a cross section of society.
It concluded that a car was not bound by any social group, nor were cigarettes, but a bit of alcohol consumed at home is acceptable.
The JRF accepted that it could not be proved that all those living below their level of minimum income would be in “hardship”.
From Governments
A spokesman for the Department for Work and Pensions said: “This government is committed to a fairer, more inclusive society, providing opportunities for all. We have lifted 600000 children and about one million pensioners out of poverty.
“We have increased payments for heating in winter to 400 pounds for someone over 80 years and 250 pounds for 60 years.
“We welcome the important contribution of this study.”
Two-Year Fixed-Rate Mortgage Deals Hit 7%
It means these loans are more expensive since February 1997.
The tightening of credit and mortgage shortage of funds has led to a sharp increase in the cost of borrowing to buy a house.
With lenders require large deposits, the number two-year fixed rate mortgage offers available for loans of 95% has almost disappeared, only 12.
Moneyfacts said that the increased cost of loans between lenders passed directly to customers.
“Lenders are also taking a greater margin at the top, since the prices of their products at risk,” said Darren Cook at Moneyfacts.
“The average level of variable rate (SVR) today stands at 7.02%.
“With most lenders do not charge a fee for their product moving to SVR, this is becoming a more viable option for many at this time,” he added.
Limited choice
Two-year fixes have been among the most popular types of loan in the past two years, especially among first-time buyers.
But the former wide selection of short-term concerns is rapidly disappearing.
The Woolwich, for example, now offers only a period of five years or 10 years to fix. The Bristol & West has only a five-year period compared to offer, like his father’s bank, Bank of Ireland.
“The kind of choice that is first-time buyer is now very limited,” said Aaron Strutt to mortgage brokers Chase De Vere.
Previously, the British Bankers’ Association, revealed that the number of mortgages that were approved for house purchase has fallen by almost 60% over the past year because of the mortgage squeeze.
Rising costs
With lenders to have their ration of money, all major mortgage companies such as Halifax, Nationwide and Abbey, have been pushing up the cost of their mortgage loans.
This has been reflected not only in higher interest rates but also increased demands for deposits and payment in advance of broader agreement fee, which could previously be rolled into the loan.
With the collapse of housing prices, lenders have been motivated by a desire to protect themselves against the possibility of losing their money if borrowers default on their subsequent payments.
In January, the average of two years will set a price of 6.61%.
Already in June last year, concerns like these costs were borrowers only 6.2% - nearly one percentage point cheaper than the current average rate of 7.02%.
The increase in the past year have added £ 77 to the monthly cost for someone to draw a typical home loan of £ 150000, with both interest and capital payable in 25 years.
Such a loan will now take £1,073 out of a borrower’s earnings.
One In Ten UK Citizens In The Dark About Their Level Of Debt
New research from CreditExpert reveals UK society in denial
As a nation, we’re in the dark about our finances, according to new research released by CreditExpert today. The survey reveals that despite 96 per cent of us claiming to be familiar with the state of our current finances, when questioned further it appears that many of us do not have a really clear picture of our credit commitments.
The research revealed that:
Only one in four (26 per cent) of us can accurately state how much we have left to pay on our loans
One in five (20 per cent) admit to only planning finances once every six months or less
One in ten of us admit to having no idea about how much debt we are in
Jim Hodgkins, Managing Director for CreditExpert, comments: “It’s alarming to see that while almost the entire UK population think they are on top of their finances, many aren’t. Keeping track of your commitments and planning for the future are always important and in addition to checking bank and credit card statements, you also need to regularly check that your credit report is accurate and up-to-date.”
APR – Approximate Price Reckoned
As well as being unaware of what is going on in our credit accounts, a significant proportion of us are also unclear about the APR (annual percentage rate) we are charged on credit cards, loans and overdrafts. Whilst most of us know our overdraft limit, the study revealed that over a third (36 per cent) of the population are unsure what APR is. The lack of APR awareness is even more marked when it comes to credit cards, with 48 per cent of the nation unable to recall the APR on the cards they hold.
Young Money
The younger generation (18 – 34 year olds) are the worst when it comes to financial management. Nearly a quarter (23 per cent) admit to being bad at managing their finances and almost one in five (18 per cent) claim to have no savings, compared to 13 per cent of all adults who claim to have no savings.
On loan
The research also reveals the British public are not confident when it comes to applying for loans. Twenty three per cent of us expect to be refused a loan of £1,000, 42 per cent do not believe we could secure a loan of £10,000 and 66 per cent think that we would be refused a loan of £30,000.
Jim Hodgkins added: “This research provides a worrying insight into people’s perceptions of their finances. It is clear that many of us are not as familiar with our finances as we believe. This could lead to disappointment when people are planning to get a loan or change existing credit arrangements. Having a better understanding of your credit report could make the difference between being refused credit or being offered credit with a higher APR. If you want to take greater control of your finances, an online credit report monitoring service such as CreditExpert can help by providing a summary of your credit status and advice on how to improve it. Get a 30-day free trial today with creditexpert.”
Mortgage approvals reach a record low
The Bank of England yesterday released figures confirming the slowdown in the UK mortgage market continues. It said the number of new mortgages approved for house purchases in March fell to a record low of 64,000, down from 72,000 the previous month.
This was the lowest level since current records began in January 1999, and was down 44% on the figure for the same month in 2007. However, credit card and other lending increased in March from February.
The weakening market due to the global credit crunch has caused lenders to put up prices on mortgages and withdraw mortgage deals, especially for those unable to put down a significant deposit, in recent months due to them being more cautious.
Mortgage brokers are warning significant number of lenders have just pulled out of the market completely including some of the big lender groups that have actually got access to funds,
Off the mortgages that are being two-thirds now to the top five lenders compared with 56% this time last year which will likely lead to higher cost to customers due to lack of competition.
House prices
In the UK, property prices have also started to dip during 2008, according to various housing surveys some warning they could drop by as much as 30%.
“The news that mortgage approvals dropped to a record low of 64,000 is hardly surprising given that lenders have been aggressively scaling back on the provision of finance to home buyers,” said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).
The Bank of England also reported a drop in loans approved for re-mortgaging, down 11,000 in March from the previous month at 98,000, and for other purposes such as buy-to-let, down 6,000 at 57,000.
Net lending secured on homes was £6.9bn and led to another monthly fall in the annual growth rate, down from 9.4% in February to 9.1% in March.
Lenders much more cautious
The figures come a week after the British Bankers’ Association (BBA) said mortgage approvals for house purchases in March were down 46% on the same period in 2007, the lowest monthly figure since September 1997.
In an attempt to ease banking concerns and help them operate during a global credit squeeze, the Bank of England announced a plan that would let lenders swap potentially risky mortgage debts for secure government bonds.
Lenders how ever have continued to withdraw mortgage offers for new customers, with Nationwide the latest to do so as it announced that, from 1 May, all but two mortgages would require a 10% deposit.
The Bank of England’s Special Liquidity Scheme, if it works, might stop things getting much worse. But many lenders will remain cautious until the situation improves
However the Royal Bank of Scotland (RBS), including NatWest, has moved to buck the trend. From Wednesday, it will cut all its fixed and tracker rate mortgages by between 0.1% and 0.3% for new customers buying directly from the bank’s branches, and for existing customers switching deals.
The bigger rate cuts are for those who offer a bigger deposit, but RBS is also launching a cash back deal for first-time buyers as it tries to increase its share in the mortgage market.
With mortgage deals being so tight if your planing on getting a mortgage or re-mortgage it’s more important than ever to ensure your credit file is completely accurate as the tiniest error could lead in an application being turned or an increased APR costing thousands or even tens of thousands over the term of the loan.
Sign up here for your free Experian credit report today.
200 Percent Increase in Phishing Incidents During January to March 2008
APACS, the UK payments association, has published figures showing a 200 percent increase in the number of phishing attacks in the UK. During the period January to March 2008 there were a record 10,000 reported incidents.
Phishing is the name given to false emails that claim to be from your bank or other financial institutions but are actually sent to you by fraudsters. These emails typically tell you to click on a link that takes you to a fake website identical to the one you would expect to see. You are usually then asked to verify or update your personal security information but, by doing so, you are actually giving your information to the fraudster who has created the fake website. The fraudster then uses the details to access your real online bank account and take your money.
Number of reported phishing incidents* targeted against UK banks and building societies Q1 2006 – Q1 2008
|
Q1 |
Q2 |
Q3 |
Q4 |
Total |
|
|
2006 |
2,369 |
2,738 |
3,967 |
5,102 |
14,156 |
|
2007 |
3,394 |
3,830 |
8,931 |
9,642 |
25,797 |
|
2008 |
10,235 |
- |
- |
- |
- |
A typical phishing incident, involves thousands or even million’s of emails are sent out blindly by fraudsters, in the hope of trying to dupe people into clicking on a link that will send them to a fake website. The criminals’ objective is to fool people into thinking it is a genuine site so they will enter their online banking security information.
Sandra Quinn, director of communications at APACS, says:
“Although online banking fraud losses fell last year the fraudsters clearly aren’t giving up. Phishing scams are continuing to rise and they are becoming ever more sophisticated, which is why we want to remind people to remain wise to them. The advice is quite simple: just remember that your bank will never send you emails asking you to disclose PIN numbers, login details or complete passwords – if you receive an email of this nature you should delete it. If you think your details have been compromised you should contact your bank immediately.”
APACS research shows that although the number of people either deleting or taking no action when receiving a phishing email has increased from 75% in 2006 to 82% last year, there are still nearly one in five people who don’t follow these common sense precautions. Also, although 93% of people have anti-virus software on their PC, almost one in three people (29%) don’t have any anti-spyware software on their computer.
To avoid phishing scams, we advise you:
- Always be suspicious of unsolicited emails that claim to be from your bank; delete any phishing emails that you receive your bank will never send an email asking for sensitive account information.
- Never give your login details, PINs or passwords in full by email – banks will never request these in this way as email is not secure way to transmit account data online.
- Always access your internet bank account by typing your bank’s web address directly into the address bar on your web browser;
- Ensure that there is a locked padlock or unbroken key in the bottom right of your browser window when accessing your bank’s website. The beginning of the bank’s internet address will also change from ‘http’ to ‘https’ when a secure connection is made.
- Make sure PCs you use for any online transactions are equipped with up-to-date security and virus protection.
- Take extra care when using an internet cafe or public computer for online banking if possible avoid using a public network when making financial transactions online.
- Phishing emails can be reported directly to most banks via their website or to APACS at reports@banksafeonline.org.uk.
