Green Loans For Homes Could Push Up Property Prices
By Admin | March 2, 2010
Government plans for energy efficiency could reduce mortgage offers, experts warn
-
Green your home and repay the loan with a friendly pay-as-you-save scheme Photograph: David Cole/Rex FeaturesPlans to make UK homes more energy efficient through new “eco-loans” could help to push up property prices but reduce the size of mortgages buyers can borrow, property market experts warned today.
The government plans to allow homeowners to borrow money to fund the upfront costs of eco-upgrades, such as the installation of solid wall insulation, heat pumps and solar panels.
Instead of paying for the energy efficient work upfront, homeowners will be able to take out a long-term loan, with repayments made through a pay-as-you-save mechanism. The loans will be designed so the repayments are less than the amount the borrower saves each month on energy bills, producing a monthly surplus.
This means that anyone living in a house that has had energy efficiency work done could make money out of the process even while the loan is being paid off.
In its household energy management strategy (pdf), the government acknowledged that although efficient homes were cheaper to run, this had not yet been reflected in house-buyer demand or property prices.
“A price differential between energy efficient and inefficient homes, coupled with the added prospects of lower fuel bills, would offer homeowners greater incentive to invest in energy efficiency measures,” it said.
It has asked the Royal Institution of Chartered Surveyors (Rics) to develop recommendations for both government and property professionals “so that the energy performance of a property starts to be better reflected in its market value”.
Barry Hall, a spokesman for Rics, said the recommendations would include drawing up standards for the energy saving equipment and for those installing them.
“Although solar panels and wind turbines are available, we have no idea how long they might last before they need replacing,” he said . “You need some kind of reassurance about their quality and a register for the installers, before installation will feed through into property valuations.”
He likened it to the early days of radiators: “To start with people would have a back boiler and one radiator in the hall upstairs. Then they decided they liked the effect, started installing more radiators and this then fed through to property prices.” Now properties that don’t have up-to-date central heating are likely to be down valued.
Martin Ellis, chief economist at the Halifax, one of the UK’s biggest lenders, said he thought the strategy would pay off.
“Annually homeowners should be better off: I think energy efficiency will become something that people take into consideration alongside location. It won’t make a huge difference to prices, but it should be a positive one,” he said.
One potential sticking point is that the new loans will be attached to the properties involved.
If a borrower sells up before the loan is paid off, the loan will have to be paid by the next owner. Some mortgage experts fear this could have the effect of reducing the amount buyers can borrow when taking out a mortgage.
David Hollingworth of mortgage brokers London & Country said: “You can see the sense of this approach in order to stimulate the use of the loans, as no one would want to take on a 20-year loan if intending to move on in five years.
“But from a lender’s perspective they will certainly want to know that there is a eco loan, and the monthly payments are likely to have an effect on affordability and so could result in a smaller mortgage being available to the buyer.”
Lenders have not yet been consulted on the proposals. A spokesman for the Council of Mortgage Lenders said: “Environmental concern is rightly high on the political agenda, but even so, the new financing initiative needs to be considered carefully before being implemented.
“If pay-as-you-save is to be secured against the property and transferable to future owners, this raises questions about how the conveyancing process may have to change to identify and report the existence of such loans, and there is also a question about whether the loans will be regulated.”
The government’s strategy also includes proposals for regulation to force landlords to install standard loft and cavity insulation measures as a condition of renting out property in the future, but no sooner than 2015. This could involve using a Landlords’ Register to help local authorities identify rented property in their areas and linking that with information on energy efficiency.
However Matt Hutchinson, director of flat and house-share website Spareroom.co.uk, said: “Energy efficiency comes very low down on the tenant’s wish list when choosing a rental property. Consequently, there is very little incentive for landlords to ensure that the properties they rent are effectively insulated.”
Article taken from the Gaurdian.
Topics: Property Solutions In Scotland | 1 Comment »
Quantitative Easing Explained
By Admin | February 25, 2010
In March 2009, the Monetary Policy Committee announced that, in addition to setting Bank Rate at 0.5%, it would start to inject money directly into the economy in order to meet the inflation target. The instrument of monetary policy shifted towards the quantity of money provided rather than its price (Bank Rate). But the objective of policy is unchanged – to meet the inflation target of 2 per cent on the CPI measure of consumer prices. Influencing the quantity of money directly is essentially a different means of reaching the same end.
Significant reductions in Bank Rate have provided a large stimulus to the economy but as Bank Rate approaches zero, further reductions are likely to be less effective in terms of the impact on market interest rates, demand and inflation. And interest rates cannot be less than zero. The MPC therefore needs to provide further stimulus to support demand in the wider economy. If spending on goods and services is too low, inflation will fall below its target.
The MPC boosts the supply of money by purchasing assets like Government and corporate bonds – a policy often known as ‘Quantitative Easing’. Instead of lowering Bank Rate to increase the amount of money in the economy, the Bank supplies extra money directly. This does not involve printing more banknotes. Instead the Bank pays for these assets by creating money electronically and crediting the accounts of the companies it bought the assets from. This extra money supports more spending in the economy to bring future inflation back to the target.
Taken from the MPC website.
Topics: Property Solutions In Scotland | Comments Off
Gross Lending Falls To 10-Year Low
By Admin | February 22, 2010
Gross mortgage lending declined to a 10-year low in January, according to the Council of Mortgage Lenders (CML).The figure of £9.1bn in January represents a 32% fall from £13.4bn in December and a 21% decrease from the £11.5bn result posted in January 2009. Although the trade body said a decline is typically expected between December and January, the monthly total is the lowest since February 2000.
CML economist Paul Samter said: “We remain in a period of uncertainty for the housing market and economy at large. However, the market improved in the second half of last year and started 2010 in better shape than most would have predicted twelve months ago. Recent developments have been influenced by the end of the Stamp Duty holiday, and are likely to foreshadow a larger than usual seasonal drop off in activity in the early part of this year.”Samter added that the Bank of England is likely to keep rates low, which should continue to mitigate mortgage payment problems and help cushion borrowers from the worst of the recession.
Brian Murphy, head of lending at Mortgage Advice Bureau, claimed that despite the figures, the market is in a far better state overall, with mortgage availability at a twelve-month high.
He said: “This time last year, the mortgage market was in a coma, but in the past three to four months a lot more products have become available, as lenders once again start fighting for market share. But while more competitive rates are starting to emerge at higher loan to value amounts, you still need a faultless credit history if you are to secure a loan. It is important for borrowers not to take low interest rates for granted, especially in light of the latest inflation figures and lower than expected unemployment data.”
Taken from the council of mortgage lenders website.
Topics: Property Solutions In Scotland | Comments Off
House Prices Will 'Go Nowhere For Years'
By Admin | February 19, 2010
Forget the positive reports of ‘recovery’ – property remains fancifully overvalued in Britain. But prices are more likely to flatline than suffer a further crash.
The latest press release from one of the cheerleaders of Britain’s still-bloated property market, the Royal Institution of Chartered Surveyors (Rics), is today headlined “House prices continue to rise, albeit at a slower pace”. It is peppered with the lexical set so fondly used by property boosters: lots of references to “recovery”, “demand outstripping supply” and “lead indicators”.
But even Rics is forced to acknowledge it’s not all green shoots in the housing market. If you peer beyond the spin and look at the underlying data it reveals that house prices are falling in five out of the 12 UK regions.
Yet the press release represents these falls as “indicating that the recovery in the market is less entrenched in some parts of the country than others”. This positive approach to negative figures must surely mean a top job in a government press office beckons.
Over at Merrill Lynch, economists who don’t rely directly on the property market for their incomes are altogether less enthusiastic about the market’s prospects. Its global predictions for the year, across all asset classes and all countries, suggest that UK house price optimists are in for something of a shock.
Chief portfolio strategist, Bill O’Neill, sees the US economy growing by 3.3% this year and China speeding ahead with growth above 10%. But of the major economies, the UK will be the laggard growing by just 1.5%.
And that is after trillions has been borrowed and spent trying to keep economies alive and kicking. O’Neill says nowhere else in the world has been more aggressive in its stimulus package than Britain; the Bank of England has pressed its foot on the financial accelerator harder than any other central bank in the world. This year the UK’s biggest challenge will be what happens when the Bank takes its foot, as it must, off the pedal.
No, there won’t be a “double dip” in the British economy, O’Neill predicts, but the end of quantitative easing will mean asset prices could experience such a thing. He brandishes a graph labelled “housing assets overpriced”, which indicates that the current firmness in the property market may be a false bottom.
Affordability has improved since mid-2007, it shows, but only to the level where it matches the peak of the late 1980s property bubble. In other words, property remains fancifully overvalued in Britain. “I still think there is another phase to come in the revision of affordability,” O’Neill says, in true economist-speak.
How will it correct? Don’t assume it will necessarily be in the form of a renewed drop in prices. Instead, we could see property prices flatline for years, O’Neill says, as the necessary adjustment takes place between prices and incomes. “Prices could go nowhere for a number of years. It’s a softer form of adjustment,” he says.
Topics: Property Solutions In Scotland | Comments Off
New Homes In Scotland
By Admin | February 17, 2010
Although shy of the phenomenal growth seen in Northern Ireland, Scotland has nonetheless seen some dramatic increases in property prices in recent years. However, prices are still well below national levels, with a property costing an average of around £145,000, according to Halifax. Scotland also has a great deal to offer those looking for a home, from the culture and history of Edinburgh, to the picturesque Highlands in the north of the country.
Topics: Property Solutions In Scotland | Comments Off
No Change For Interest Rates
By Admin | February 17, 2010
Interest rates have been held at 0.5 per cent yet again, the Bank of England has announced.
The monetary policy committee (MPC) also held its quantitative easing programme limit at £175 billion.
Some financial analysts had called for the programme to be increased to £200 billion.
David Kern, chief economist at the British Chambers of Commerce (BCC) earlier warned: “Despite some positive signs that the UK recession may be ending, the very disappointing recent decline in manufacturing output provides a stark reminder that recovery is not guaranteed.
“Large-scale job losses and the persistent weakness in lending to companies remain serious problems that must be resolved. Recent figures show that annual growth in lending to non-financial companies remains negative, and the pace of decline continues to worsen.
“To counter the threat of a relapse, we urge the MPC to increase the quantitative easing stimulus to at least £200 billion, and to consider a lower – or even negative – interest rate on deposits held by commercial banks at the Bank of England. This would penalise banks hoarding cash, and provide an incentive to lend to viable, credit-worthy customers.”
Interest rates have been held at 0.5 per cent, a 300-year low, for a number of months now, with experts claiming it may stay at the same level into 2010.
David Bexon, managing director of SmartNewHomes.com, commented: “The continued stability of interest rates is important for maintaining the cautious level of optimism currently being seen throughout the market. However, while the Bank revealed improvements in net lending over the summer, it is still evident that more must be done to assist home buyers.
“Those without significantly large deposits continue to be penalised by the extremely high mortgage rates charged by lenders.”
Topics: Property Solutions In Scotland | Comments Off
Bad Weather Affects Mortgage Market
By Admin | February 17, 2010
Recent bouts of snowfall and ice have affected the mortgage market, putting a hold on many transactions, according to one industry expert.
All aspects of the sector came to a standstill in the winter weather, said Catherine Hearnden, director of financial advice firm MyMortgageDirect.
“Surveyors weren’t able to get properties, people weren’t able to go and view, estate agents were closed, solicitors weren’t available,” she explained.
Traditionally, warmer weather sees housing activity pick up, with Easter a key time for people to start looking at buying houses, the mortgage expert continued.
The climate has always had an effect on the property market, but should not be a major cause of concern, Ms Hearnden added.
Figures from the Royal Institution of Chartered Surveyors revealed that house prices rose again in January but buyer interest and new instructions to sell fell. Newly-agreed sales fell for the first time in ten months amid the winter conditions.
Topics: Property Solutions In Scotland | Comments Off
First-Time Buyers Still Struggling To Afford Supposedly 'Affordable' Properties
By Admin | May 3, 2009
The crash in UK house prices means properties are in theory now three times more affordable for first-time buyers (FTBs) than in 2007. The house price-to-earnings ratio is at its lowest level in more than six years.
To read the rest of this article click here
Topics: Property Solutions In Scotland | Comments Off
Next Entries »