Latest News from Almond Valley Property Centre
We are moving
Plans are taking shape as we continue to organise for our move to our new office in Carmondean, Livingston. The new office, part of a development under construction by Dunbar Homes, will ensure we are more accessable to clients old and new. Entry is planned for Apr 30th. More to follow soon...
Interest Rates Held
The Bank of England has kept interest rates at a record low of 0.5% for the 12th consecutive month.
The decision was widely expected by economists, who believe that any rise in the cost of borrowing could damage the UK's fragile economic recovery.
Also as expected, the bank has not pumped any more money into the economy under its quantitative easing (QE) programme - for now at least.
Last month the Bank halted QE, having spent £200bn to boost the economy.
'Mixed picture'
Figures released last week showed that the UK economy grew by 0.3% in the final three months of 2009, compared with an initial estimate of 0.1% growth.
But although the 0.3% growth in the final quarter of 2009 was stronger than previously thought, the Bank believes that continued economic growth is not yet guaranteed.
The October to December period was the first quarter of growth following six consecutive quarters of economic decline - the longest period since comparable figures were first recorded in 1955.
Lee Hopley, chief economist at the EEF engineering employers' group, said the Bank's Monetary Policy Committee (MPC) had little choice given the "mixed economic picture".
"An unchanged position at this point is the right one given the ongoing uncertainty about the strength of the recovery, with the reality that any moves could be on hold for some months to come," he said.
David Kern, chief economist at the British Chambers of Commerce, said it would be wrong to contemplate raising rates.
"Despite the upward revision to GDP in the fourth quarter of last year, the economy remains weak and fragile. Businesses are still under serious pressure and there is no room for complacency," he said.
"Threats of a double-dip recession are unquestionably more serious in the near future than risks of higher inflation,"
Inflationary pressure
Under QE, the Bank has bought assets in order to boost lending to businesses and individuals by commercial banks.
Capital Economics' senior economist Vicky Redwood said that without QE the UK could still be in recession, although the policy has not worked well enough to kick-start a strong recovery.
"We doubt that the £200bn undertaken so far will be enough to ensure a strong and sustained economic recovery. We still think that the MPC will have to take further action."
But the Bank has said that the full effects of QE will take more time to filter through to the economy.
Many analysts argue that banks have not in fact increased lending as the economy begins to recover. Banks in turn argue that businesses are looking to pay down debt rather than take out new loans.
The Bank must also be wary of the inflationary pressure caused by QE.
The latest inflation figures, released last month, showed the annual inflation rate rising by 3.5% in January, the fastest annual pace for 14 months. This compares with 2.9% the previous month.
As a result, the Bank's governor, Mervyn King, had to write a letter to the chancellor explaining why prices were rising so quickly.
A letter from the governor is required if inflation is more than one percentage point above or below the government's 2% target.
However, Mr King said that the rise in inflation was temporary, and was largely the result of the rise in VAT to 17.5% in January.
The government had reduced VAT to 15% to try to boost consumer spending.
Local Housing Allowance decision 'good for landlords'
According to Housing Benefit regulations, a landlord can apply to their local authority for direct payment of rent when eight weeks or more of arrears has accrued. Currently, some local authorities refuse direct payment within this period citing Department for Work and Pensions (DWP) guidance which states that "a person cannot be in rent arrears in respect of a period that has not yet been served".
In his judgment (I Doncaster v Coventry City Council), Mr. C Jones, Chairman, Coventry Appeal Tribunal, categorically disagreed with the DWP view, saying, "rent is in arrears once the contractual date for payment has passed irrespective of whether rent is due in advance or in arrears."
This decision, which neither sets a legal precedent nor is binding on future decisions, may, in the meantime, however be used by landlords in a similar position to Mr Doncaster when negotiating with local authorities over LHA rent arrears.
Richard Price, Director of Operations, NLA, said: "It is quite clear that the normal rules of renting should apply to Local Housing Allowance. According to most tenancy agreements, rent is payable in advance.
"Yet local authorities pay their Housing Benefit claimants in arrears. Therefore, when it comes to assessing the length of rent areas, there is a significant difference in approach between councils and landlords. The aim of the LHA was to put those tenants in receipt of Housing Benefit on a level-playing field to those in the open market. The fact that rent is paid in arrears puts them at a major disadvantage.
"This decision is good news for landlords and, although not binding, those who are experiencing similar problems should consider highlighting this decision to their local authority."
Landlord lending sharply curtailed
A clampdown on buy-to-let borrowing has been announced by Lloyds Banking Group, which will now allow landlord investors to borrow on a maximum of nine properties across the entire group.
This includes Lloyds TSB, Birmingham Midshires, Halifax, Bank of Scotland and Cheltenham & Gloucester.
The changes were swiftly kicked in on Saturday, and also limit total borrowing by a buy-to-let investor to £3m.
'False dawn' in UK housing market
An economic forecasting group has warned that the recent rise in UK house prices is a "false dawn".
The Ernst & Young Item Club says property values will not return to their 2007 peak for at least another five years.
However the latest figures from mortgage lenders show a continued revival in lending to house buyers.
The number of loans granted for house purchase in July was 19% higher than in July last year.
Turn in the market?
The Council of Mortgage Lenders (CML), which published the figures, said they showed the "first material annual growth" since early 2007, which was just before the UK property market was hit by a sudden downturn due to the onset of the credit crunch.
There are still constraints affecting the lending industry's capacity to fund increased lending
Paul Samter, CML
"It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing," said the CML's economist Paul Samter.
"But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being."
The CML said the number of new mortgages granted to house buyers stood at 56,000 in July, up by 24% from June and 19% higher than a year ago.
But the ITEM club argued that the increased lending this year, and the accompanying price rises of UK property, was largely due to "a small number of cash-rich buyers".
"The supply of these funds is limited, which means prices are likely to dip again in the first half of next year," said the forecasters's economist Hetal Mehta.
Differing views
The Item Club is the latest commentator to argue that recent upturn in prices reflects an unusual position in the market that is unlikely to last.
It pointed out that many homeowners are either trapped in negative equity or reluctant to sell for fear of having to absorb the losses of the past two years.
The sharp downturn in prices that started in 2007 seems to have come to an end this year, though whether or not prices are actually rising again is a matter of debate.
The Nationwide building society has said that UK house prices are £7,000 higher than the start of the year, while its big rival lender the Halifax says prices are in fact roughly the same.
The ITEM Club argued that as 56% of homeowners have a mortgage, any sustained recovery would have to be underpinned by a recovery in mortgage lending.
However, as the CML acknowledges, banks are still rationing the amount of money they are lending.
"The scarcity of mortgage supply and tough lending criteria is making it particularly difficult for first time buyers to enter the market," the Item Club said.
"Given that they typically purchase cheaper properties, this will have significant implications for those looking to trade up, clogging up the market and limiting the number of transactions taking place," it added.
Cheap loans
The continued rationing of mortgages means that first-time buyers still have to put down an average deposit of 25%.
But the cost of mortgages charged at a lender's standard variable rate has continued to drift down since the Bank of England lowered its bank rate to a historic low of just 0.5% earlier this year.
In July, according to the CML, new mortgages on an SVR were charged an annual interest rate of 3.9%, the lowest since the CML's records began in 1993.
Moving house, as opposed to buying one for the first time, continues to be the preserve of the middle-aged.
The average home mover is still 40, the oldest since these records started in 1974.
(BBC)