Gleeson Homes abandons Oldham housing project

A landmark housing development, undertaken by housebuilder Gleeson homes in partnership with Oldham council way back in January 2005, has been abandoned. Gleeson needed to save on capital due to the severe credit crunch and found the Oldham development too resource-intensive to continue.

The scheme involved construction of 192 eco-friendly upmarket apartments, with rooftop lawns, solar panels, wind turbines and a 10 storey tower with parks.

It was a very tough decision for the pull out since Gleeson had already made huge investment into the project. Gleeson decided to withdraw since it found it was no longer able to continue providing expected service to Oldham.

The Oldham council will assess all options for future developments and decide which housing developer could be entrusted with development of the site, or would explore other avenues.

The council is however considering Gleeson Homes’ withdrawal from the project as a temporary setback. The council is considering this as a major opportunity which it would utilise for reassessing use of the site for broader plans for town centre.

The city centre site, measuring 2.5 acre was previously the home of number of flats. It experienced many setbacks earlier also. It is currently serving as a free car park for visitors of town centre.

British Government urged to expand house fund to £2bn

The Home Builders Federation (HBF) has urged the Government to increase its clearing house fund set up for buying homes from private sector for social housing.

The clear house fund was mooted by the Government in its spring budget as a measure to prevent housing market collapse.

HBF has proposed expanding of initial allocation of £200m to £2bn, so that most of the 15,000 completed homes lying unsold could be bought for council housing.

According to data from the Department for Communities and Local Government, 1,531 homes had been purchased through the clearing house fund so far. However, only 4 local authorities out of 20 benefited from the fund for council housing.

This fund has been financed from budget of the New Homes and Communities Agency, which has been allotted £8.4bn to be spent over 3 years. Major part of this Agency budget is earmarked for housing projects agreed between local authorities and private developers. But the fact is most of these projects have not been even started due to downturn in housing industry.

Executive chairman of HBF, Stewart Baseley wants part of this £2bn budget to be spent on purchase of unsold properties which could provide homes to those waiting for council housing, and give boost to the housing market.

NLA feels new landlords are posing risk to British rental market

The National Landlords’ Association’s research revealed that there is a breed of landlords who are letting out their personal properties in order to avoid likely losses in sale.

The National Landlords’ Association (NLA) considers that these entrants would adversely affect the health of the British rental market. It warned that new entrants, particularly those who have not made up their mind for letting, must acquaint themselves with rules and regulations to operate tenancies successfully.

The number of new landlords opting for letting has increased at its fastest rate in third quarter of 2008. The research also highlighted that growth in instructions for houses was much higher than for flats. In third quarter, 56% of surveyors reported rise in new instructions as against 45% in the second quarter.

Though majority of new landlords are hoping their stay in letting business to be of short duration due to grim economic outlook, it is possible that they may have to rent properties for very long periods, waiting for decent capital growth.

NLA believes that potential landlords would find themselves in financial difficulties and risk well-being of tenants if several of serious issues related to letting were not investigated properly.

New landlords will have to ensure that they are permitted by their building society or bank to let out property and also make sure that their insurance policy covered letting of property.

Lenders could receive rent from tenants, says CML

According to the spokeswoman of CML, lenders could collect rent from tenants of defaulting landlords for a fixed period to recover mortgage loan amount.

She opined that it would not be a wrong step since it would protect those tenants from eviction who pay their rent regularly but their landlords fail in paying mortgages.

Estate agents have reported sharp increase in number of properties in the rental market and decline in rents for the first time in last 5 years, said the Royal Institution of Chartered Surveyors.

The banks have already deployed more staff to attend calls from struggling homeowners who are in arrears of their mortgage payments.

Executive chairman of the Bradford & Bingley, Richard Pym, informed the Treasury select committee that its staff strength in arrears department would swell to 400 next year from existing 200 in August. Northern Rock also would be deploying more staff for arrear recovery. Experts expect more banks would follow suit as the economic condition worsens further.

According to Defaqto’s principal consultant, David Black, increasing number of borrowers would find it extremely difficult to repay mortgage under deteriorating economy and waves of job losses.

Research by an insurance group revealed that 50% of 2.9 million interest only UK borrowers possessed no investment vehicle to pay off loan capital.

CML stated that lenders would not sell houses occupied by residential borrowers in absence of possession order from a court.

Lenders begin to offer tracker deals to new borrowers

As a result of cut back in interest rates from 4.5% to 3% by the Bank of England last week, mortgage lenders have relaunched tracker deals for the first-time borrowers.

Alliance & Leicester, Abbey and Lloyds TSB, have started offering new tracker deals with bigger margins between bank rates and charged rates.

Some of the deals are specifying higher deposits. Alliance & Leicester’s deals are offered at 40% deposit with 4.89% interest rate. In addition the borrower is required to pay 1% of loan value as arrangement fee.

Abbey’s tracker deal has two-year tenure with 25% deposit at 4.99% interest rate, which is 1.99% above bank rate.

Barclay’s mortgage brand, Woolwich, is offering one-year fixed-rate deal, charging 3.99% interest with 40% deposit. At the end of one year, the deal would revert to life-time 1.99% rate over current base of 4.99%. This ‘fixed and track’ deal has lock- in period of three years and carries early redemption charge of 1% of mortgage value.

Some lenders have put a collar or floor on tracker deals for existing and new borrowers which prohibits borrowers from receiving cuts if bank rates fell below fixed levels. HBOS has set floor at 3%, Nationwide at 2.75% and Abbey on 3% on selected existing deals.

Asking prices for homes fall to lowest level

Asking prices for homes in the UK have reached their lowest level since 2002, reported a search agency in the UK.

According to agency’s house price index, number of properties being offered for sale in November 2008 fell to 20,000 a week, down from 35,000 houses during November 2007.

The information released by search agency indicates that average asking price of a house in Wales and London up to November 8 was £223,000, which is 2.9% down from October. This again was the highest fall since 2002.

The UK home asking prices are down 7.1% from previous year, but the search agency claimed that sales were taking place at prices more than 20% lower than the highest prices fetched in 2007. It stated that if sellers demand realistic prices, prospects of selling homes would increase significantly.

According to the agency, many sellers are reluctant or unable to offer big discounts, particularly those with negative equity of their properties. If they come forward with reasonable discount offers they would be able to sell more quickly and cut back on their waiting period.

The average waiting time of a property on sale has reduced marginally, not because of early sales but due to withdrawal of properties on account of lack of interest.

It is however believed that high interest rate cuts, brought to lowest level since 1955 by the Bank of England, would serve for revival of the property market next year.

Steady rise in mortgage lending

Mortgage lenders have started approving more deals as they advanced loans of £18.7bn in October against £17.5bn in September.

However Council of Mortgage Lenders (CML) claimed that lending were still 44% less than in October last year.

CML warned that increase in lending is not going to improve demand for housing due to falling prices and worsening economic conditions in spite of Bank of England’s significant cuts in interest rates in last two months.

Difficulties faced by the wholesale money market are putting constraints on mortgage lending as the banks are unable to raise funds for lending to consumers.

According to CML’s Director General, consumer confidence was going down due to grim economic outlook, and recovery in lending was being hampered by fund shortages. He urged Government to release Crosby Review as Pre-Budget Report and make announcement of concrete steps which would encourage more lending.

Some experts suggested that mortgage lending may not now go further down. Recent survey by the Royal Institution of Chartered Surveyors revealed increase in enquiries from potential buyers. But it is also anticipated that this increase is unlikely to continue and would adversely get affected by the rising threat of unemployment in coming months.

Irrespective of improvements in lending and sales, experts are predicting that house prices would continue falling and could go down further by 20% in 2009.

Borrowers stand more risk of repossession with recent court ruling

The statutory right of the mortgage lenders has been upheld by the high court in its recent ruling. Under a 1925 law, a lender is free to sell mortgaged property independently, without applying for court’s permission, if borrower fails to make two consecutive payments.

In the court of Mr. Justice Briggs, lender was allowed to take possession of buy-to-let property of a borrower who missed payments. The court granted permission to auction the property for recovery of loan arrears.

Financial Services Authority is very much concerned with the approach of lenders who are too focussed on recovery of arrears and go all out for repossessions.

The Citizens’ Advice Bureau is also deeply concerned over likely misuse of court ruling as a practice to ignore rules on fair treatment to people in arrears of payment.

The ruling goes against the Prime Minister’s guidelines to lenders that repossession should be used as a last resort. It has created necessity for an urgent amendment to the existing law to safeguard borrowers’ rights.

As per the records of Financial Services Authority, percentage of evictions of families from their homes on account of arrears has increased by 70% in last one year. It is expected to keep rising as recession grips the UK economy.

Landlords are focussed on rental yields, plan increase

Results of the quarterly survey by the research agency, BDRC, indicate that 14% of the UK’s private landlords are seeing very good prospects for the private rental sector, as compared to 10% in the year 2007.

The research study conducted during July to September involved 500 British landlords. The findings are based on opinions, and expectations of landlords.

The study revealed that 18% of the landlords were expecting very good rental yield during October to December, down from 22% compared to last year’s results.

The study however points out that large number of landlords are less optimistic about capital gains from property when compared with expectations in October 2006.

60% of landlords are now focussing on rental yield and 17% have plans to hike rents by an average 5.7% before end of December. The data revealed that 38% of landlords had already started charging higher rents. The survey highlighted rather surprising observation that 20% of landlords were intending to purchase additional properties before end of 2008.

The study also revealed that 96% of those professional landlords who owned 20 or more portfolios were in profit as compared to 63% of those who owned only one property.

Low deposit mortgages virtually withdrawn by lenders

It was expected that a sharp decline in house prices would benefit first time buyers in fulfilling their dreams, but withdrawal of low-deposit mortgages by lenders has made it almost impossible for them to get on to the ownership ladder.

Moneyfacts’ data shows that borrowers are currently offered only 35 deals with 5% deposit and 66 deals with 10% deposit as against 1,126 deals which required 5% deposit or more a year ago.

Borrowers with inadequate savings are straight away rejected by the lenders, fearing risk of non-payment. A large number of first-time-buyers are required to wait for raising their own savings with parents’ and friends’ help to meet lenders’ demand of higher deposits, as reported by the Council of Mortgage Lenders.

Those with capacity to pay higher deposits or with significant equity are in a better position to get a remortgage deal. The number of deals which specified a minimum 15% deposit has gone up to 228 from 198 a year before while those requiring 20% deposit has come down to 189 from 216.

Lenders are specifying a minimum 25% deposit for the reintroduced tracker mortgage deals, making them unaffordable for the vast majority of first-time-buyers.

However, Tracker deals are surely the best option for borrowers in the present circumstances.