PennyStockPayCheck.com Rss

Featured Posts

Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to http://pennystockpaycheck.com for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

Read more

Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

Read more

Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

Read more

Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

Read more

UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

Read more

Housing market predicted to revive in 2013 with more than 1m to move home

Category : Business

Forecasters Item Club say chancellor’s Help to Buy scheme will get people moving but broader economic outlook still gloomy

The housing market will finally return to life this year with more than a million people expected to move home – the highest number since the financial crisis struck.

The Ernst & Young Item Club, which uses the Treasury’s economic models, predicted that housing transactions this year will rise by 7.5% to 1m. In its spring forecast the respected economic forecaster said the chancellor’s plan to use £12bn of taxpayer funds to underwrite up to £130bn of mortgages will push home moves up a further 7.8% next year to 1.08m.

House moves are also expected to be encouraged by falling mortgage costs due to the Bank of England’s Funding for Lending scheme.

Property prices are not expected to rise this year, but are predicted to increase 2.1% in 2014 and 5% in 2015.

Peter Spencer, chief economic adviser to the Item Club, said: “With export markets continuing to disappoint, the chancellor has focused his firepower on the home front. And the timing couldn’t have been better. Real incomes are already starting to recover, mortgages are becoming more readily available, and homes are more affordable as the house price to earnings ratio continues to fall.

“Although it’s not a long-term strategy, stimulating the housing market and the high street will keep GDP growth positive. Unbalanced growth is better than no growth.”

Spencer said the chancellor’s Help to Buy scheme had the potential to get people moving again, and dismissed claims that it would just put up prices rather than increase supply and make it even more difficult for first-time buyers to get on the ladder.

“We expect [the scheme] to boost the number of housing transactions, particularly at the lower end of the market where the deposit and low equity have been a major constraint,” he said.

However, the Item Club had a gloomier view of the prospects for the economy as a whole, predicting that the UK will have to wait until 2015 before exports start contributing to growth.

It expects GDP to expand by just 0.6% this year and said that with the rebalancing of the economy on hold, the UK will again have to rely on the consumer.

“We should start to feel slightly better off this year, which will help to loosen the purse strings. Consumer spending added 0.7 percentage points to GDP in 2012 and the chancellor’s budget will help ensure the tills continue to ring for some time yet,” Spencer said.

Consumer spending is set to increase by 1.2% this year and 1.9% in 2014, but the 2.2% growth predicted in the following two years is still well down on the 3.7% a year it averaged in the decade prior to the financial crisis.

Spencer added: “Consumers have been burnt by the experience of the recession and are much more cautious with their finances. Households are likely to continue paying down debt rather than racking up huge credit card bills.”

The bitter March weather dragged high-street footfall down 5.2% last month, according to the British Retail Consortium. It was the weakest month since April 2012.

Helen Dickinson, the consortium’s director general, said: “The prolonged cold was the main culprit for deterring shoppers, especially compared against the far milder March of 2012. Although footfall did pick up around the Easter weekend, it couldn’t fully compensate for a weak showing across the month as a whole.”

London housing associations join private market to fund affordable rents

Category : Business

Top 15 social landlords to build 13,000 new affordable homes but also let and sell properties at market rates to fund projects

Housing associations in London are to venture into the private property market on a grand scale for the first time in an attempt to extend their social housing mission to “generation rent” – the growing number of people who can not afford to buy in the capital and are vulnerable to exploitation from unscrupulous landlords.

The 15 biggest social landlords in London are working together to build 13,000 affordable homes by 2015 – but they will also provide an additional 4,000 properties for rent at market prices and at least 1,100 homes for sale at regular London prices. They will use the profits to fund further affordable housing.

Housing associations have traditionally focused solely on affordable housing for low earners and key workers such as teachers and nurses. The new strategy is a widening of their scope to help those in their 20s and 30s who have become known as “generation rent” – those trapped renting at sky-high prices, at the mercy of sometimes exploitative landlords.

The “G15″ group of housing associations – which houses one in 10 London residents – is promising to grant more secure tenancies than those available on the private market. The intention is to allow tenants to settle down for longer with a plan to “kitemark” label these better quality homes for those who rent in an attempt to go head to head with the rest of the private market.

A board paper, seen by the Guardian and approved by the group, sets out the problems: “The average home in London costs more than £400,000 and is 15 times the median income for Londoners – the highest in Britain. And while wages are higher too they are not nearly high enough to allow most people to meet their own housing needs … Younger people are increasingly priced out of home ownership and find renting takes a growing portion of their salaries. Those without access to capital may become lifetime renters.”

Housing associations insist moving into the private market to capitalise on the increasing rental and sale prices in London will not undermine the social purpose of its members – to provide affordable housing for those who can not meet their own housing needs.

Keith Exford, chief executive of the Affinity Sutton housing association and chair of the G15, said it was not true private renting would make a vast profit for social landlords.

“The yields in private rent are insufficient to do much more than cover the running costs,” he said. “The only profit to be made is from the sale of stock at a later stage as values rise. A well-managed, reputable private rented sector is an important part of our offer to London.”

Homes built for private rent can also be turned into affordable housing or shared ownership properties by housing associations, or sold for profit according to changing business plans, he said.

The move is being welcomed by some tenants and staff working to tackle rogue landlords in the capital. Ben Reeve-Lewis, a tenant liaison officer in south London who also rents privately, said he would be interested in one of the properties himself. “Housing associations don’t have a great record for speed of repairs, but that pales in comparison against the security they provide. In private rent you never know if you’re going to get home and find a note on the doorstep because the landlord is likely to sell.”

Vincenzo Rampulla, a policy officer in his early 30s who rents in west London, said the exorbitant cost of market rent was tied up in letting and management agency fees which could be cut out by social landlords. “A lot of the skills that they have developed in managing housing association stock are really needed in the private rented sector,” he said.

The G15 will also for the first time set up a cross-London allocations agency to help find homes for families qualifying for social housing in London, with each local authority invited to join. This could help councils and housing associations manage the impact of welfare reform and house homeless families more quickly.

To date, those looking for social housing only qualify for tenancies in their local area, even if a suitable property is available elsewhere in the capital.

“We’re going to have to manage mutual exchanges and more movement than we have before,” said David Montague, chief executive of L&Q, another G15 member. “We have people who are under-occupying and will have to pay a penalty [through the bedroom tax] and we have people who are overcrowded. We need to work together more creatively.

“There aren’t many good things to be said about austerity, but one of the good things is that housing associations are working together more than ever before.”

Four in 10 homes sold for a loss since 2007, research shows

Category : Business

Analysis of Land Registry figures shows 41% of homes sold for average shortfall of £24,430, while 56% made profit of £45,199

Four in 10 homes have been sold for a loss in England and Wales since 2007, while more than half made a profit, according to researchers.

Almost three-quarters (71%) of houses sold in London during this period made a profit despite the tough economy, compared with less than half in Yorkshire and the Humber, the north and the East Midlands, shared equity firm Castle Trust found.

Of the 41% of homes sold for a loss across the country, the average shortfall was £24,430, according to the firm’s analysis of Land Registry figures.

Over the same period, 56% of homes were sold for an increase on the original amount the seller paid, making an average sum of £45,199.

London house prices have tended to buck the national trend by recording relatively strong increases, much of which has been put down to wealthy overseas buyers who see the English capital as a safe haven amid the troubles of the eurozone.

Lenders are expecting housing market activity to pick up this year amid government efforts to improve mortgage availability and give people a helping hand on to the property ladder.

However, while activity is thought likely to increase, predictions for house prices this year have been more mixed, with some reports forecasting increases, some decreases and others saying prices will remain broadly flat across the country.

Property search website Zoopla recently reported evidence that sellers are becoming more confident in taking a firmer approach to their pricing this year.

Earlier this month, Zoopla said 31% of homes on the market have had the asking price cut – the lowest proportion in two and a half years and a sharp drop from 37% a year ago.

A separate survey by Castle Trust among more than 2,000 people found that the most common reason people had for selling their home at a loss was that they wanted to trade up while house prices were still relatively flat.

Other popular reasons for selling at a loss included divorce, the house being too cramped, the need to relocate for work or no longer being able to afford the mortgage.

Although most homes have been sold for a profit since 2007, researchers said the probability of making a loss has increased significantly compared with long-term averages – 92% of homes sold since 1995 have made the owners a profit.

Buy-to-let landlords’ buying spree will keep more families in rental trap

Category : Business

Rightmove predicts three-quarters of professional landlords will buy more homes in 2013, as MPs begin to look at the issue

Buy-to-let landlords will embark on a home buying spree in 2013 while young adults and families remain trapped in rental properties, according to a forecast by Britain’s biggest property website.

Three out of four professional landlords will buy more homes in 2013, while the number of “virgin landlords” looking to buy for the first time is running at the highest level for a year, the research from Rightmove found. Meanwhile, 53% of tenants say they are trapped in renting, wanting to buy a home but unable to afford to do so.

The research is published as a committee of MPs begins a formal investigation into the problems facing Britain’s “Generation Rent”. The Commons communities and local government committee will examine the potential need for rent controls, regulation of landlords and letting agents, and a revision to tenancy contracts.

Urgent action is needed to tackle rogue landlords and rip-off letting agent fees, according to the Local Government Association (LGA), which represents 370 councils across England and Wales. It found that tenants are being asked to pay as much as £500 in non-refundable administration fees to letting agents on top of the rent and deposit.

Tony Newman of the LGA will give evidence to the committee on Monday. Before his appearance, he said: “With the housing market stagnant and a shortage of mortgages available to help first-time buyers, people are increasingly turning to the private rented sector to find a home.

“For many people looking to rent, the up-front costs of a deposit and agency fees can be huge. We’ve heard stories of some letting agents charging hundreds of pounds just to carry out basic credit and reference checks.”

Bank lending to landlords fell sharply during the financial crisis but has surged in recent months, boosted by the funding for lending scheme designed to help small businesses and first time buyers. Interest rates on buy-to-let loans have tumbled – Skipton, Coventry and Birmingham Midshires all cut rates for landlords last month – and lending volumes are rising. In the last quarter of 2012, loans to landlords were up 8% to £4.2bn, with new entrants such as Interbay Commercial jostling to offer mortgages of up to £1m spread over 30 years.

Rising rents (yields average 5.7%) and low-cost mortgages (now below 4%) will spur small landlords to buy more properties in 2013, said Rightmove, even if the long-anticipated investment from institutions such as pension funds has failed to materialise.

Rightmove director Miles Shipside said: “While the cavalry charge from major institutions seeking to invest in the private rented sector has so far failed to materialise, private landlords, whether accidental, virgin or professional, are seizing the opportunities that come with having the battlefield to themselves.”

But campaigners at Priced Out, a group representing tenants unable to afford to buy, said without new building, landlords are simply displacing first-time buyers.

Negative equity plagues homeowners

Category : Business

Council of Mortgage Lenders estimates there are 719,000 households with mortgages worth more than the property

In autumn 2007, in the days just before Northern Rock began to crumble, Nick Scott and his fiancee Hayley Thomas bought a three-bed semi in Warrington, Cheshire. It cost £100,000 but needed another £8,000 for renovation. The words “credit crunch” were yet to enter common usage, and lenders were still being easy with mortgages. The couple managed to obtain a 100% interest-only mortgage on the property, which set them back £450 a month in repayments.

Nearly six years on, the property is worth substantially less than the couple paid for it. At best, Scott thinks they could get around £70,000, which would leave them £30,000 out of pocket, an amount he says there is no way they can afford.

While London and much of the south-east has seen prices largely recover to their pre-credit crunch peak, the forgotten victims of Britain’s housing market rollercoaster grow in number as you travel north.

The Council of Mortgage Lenders (CML) estimates that there remain 719,000 households in the UK with mortgages that are worth more than the property. Worst hit is Northern Ireland, which hitched a ride on the Celtic Tiger but has come down with a painful bump. It is estimated that around one in three households in the province is in negative equity.

In Glasgow, one debt adviser describes the city’s negative equity problem as an “epidemic”, though across Scotland as a whole the percentage of households with problem loans, at 11%, is smaller than the north-west, Yorkshire and Humberside, where the official figure is 15%. That compares with 5% in London.

Overall, the CML estimates that negative equity has reduced across the UK from a peak of more than 800,000 households, and says it is significantly below the levels during the early 1990s property crash, when it peaked at 1.6m homes. But despite talk of households paying down their debts and improving personal balance sheets, for those who bought at the top of the property boom and have suffered salary freezes since, debt worries have only increased.

Figures from the Office for National Statistics reveal that debt levels increased everywhere in the UK, except London, between 2006-08 and 2008-10. Total debt outside of mortgages reached £94.7bn in 2010, at the same time as the opportunity to “consolidate” debt on to a mortgage has virtually disappeared.

Lucy Haughey of PlanBPartners, a social enterprise in Glasgow specialising in financial advice for charities, retirees and what she calls “the working poor”, says negative equity is at epidemic levels. “A lot of clients are self-employed and professional and in their 40s. They did something a little naive, like remortgage upwards a few years ago. Now they’re in negative equity.”

Haughey’s firm has up to 10 clients a week registering with credit card or other personal debts. “If they had homes, I’d get them to remortgage to clear higher-interest debts, but now that’s not an option as so many are in or close to negative equity,” she says.

Land Registry figures this week revealed that although prices across England and Wales rose by 1.7% in 2012, they remain 11% below the peak level reached in November 2007.

In most of London, prices have surged ahead, but in other parts of the

Post to Twitter

The great property divide: a tale of two halves

Category : Business

Hackney vs Hartlepool. Patrick Collinson on the winner and loser in the house price casino

Ten years ago, a budget of £150,000 would pay for a new-build executive detached home in Hartlepool, or a run-down terrace in Hackney, east London.

In December 2002 the buyer of the Hartlepool house, which is in Clover Drive and part of a pleasant estate, paid £143,950. In October 2012 it was sold for just £124,999, a 13% drop.

But the property gods smiled on Hackney. A five-bed terrace in Cecilia Road sold for £150,000 in April 2002. In October 2012 it sold for £716,000 – up 377%.

Land Registry figures for 2012, published this week, paint a picture of Hartlepool and Hackney at the two extremes of Britain’s property market. Last year Hackney was among the fastest rising in the country, spurred not just by the general shortage of properties in the capital but also by the Olympic Games, held just outside the borough. Prices rose by 10.3% in 2012, almost 10 times the typical 1.7% across England and Wales, to reach an average of £429,000. Since 2002, they have risen by 115%, barely touched by the financial crisis a few miles away in the City of London, regaining and surpassing their 2007/08 peak within a matter of months.

In Hartlepool, prices have never recovered from their 2007-08 highs, and may not for another decade. As Northern Rock collapsed, so did average home prices in the former shipbuilding centre, from a peak of £113,172 in August 2008 to £74,702 in December 2012, according to Land Registry figures. The 34% fall (including a 4.7% decline in 2012) is one of the biggest in any part of the country, and takes prices back to June 2004.

But Hartlepool is hardly alone. The number of negative equity “cold spots” in England and Wales is far higher than many London-based property commentators realise. In Nottingham, prices peaked at £105,000 in May 2007 but now stand at £85,000 – the same as nearly 10 years ago. In Blackpool, prices remain 32% below their December 2007 peak.

Neither is negative equity just a north-south issue. In Luton, 29 miles from the centre of London, the average home-buyer paid £152,000 in 2008, but will find the property is worth just £125,000 today, while some northern cities such as York have largely escaped declines.

For first-time buyers, the country is now cleaved in two. With average prices below £100,000 in large parts of the north, affordability is finally beginning to return. But in most of the south, affordability has never been worse.

Rent arrears at highest level for a year

Category : Business

Total of £326m rent was either late or unpaid in December, with Christmas bills adding to straitened finances

More tenants struggled with rent payments last month and arrears levels have reached the highest level since January last year. A total of £326m of rent was either late or unpaid, according to LSL Property Services’ buy-to-let index, up from £241m in November.

The cost of Christmas on strained household budgets is likely to be one factor behind the rise, which equates to 10.1% of all rent in England and Wales.

With finances under pressure, the study also found that the average rent fell by nearly 1% to £734 a month. However, rents are still 3.2% higher than a year ago – above the 2.7% level of inflation.

Rents across the country have fallen for two months in a row, but LSL warned that this seasonal “blip” is unlikely to last for long as pressure on the sector continues amid strong demand from people struggling to get on the property ladder.

Campbell Robb, chief executive of Shelter, said: “With the rising cost of living, wage freezes and rents remaining high, it’s not surprising that rent arrears are at their highest for a year.

“This time of year is particularly difficult for many families as bills coming in from Christmas take their toll on finances already stretched to breaking point.”

Rents in London saw one of the biggest month-on month drops, with a 1.5% slide, although at a typical £1,087 a month, they are still 6.3% higher than a year ago.

The East of England and the North East recorded the biggest month-on-month falls at 1.7%, while rents in the West Midlands, the South West and Wales bucked the trend, with increases of 1.3%, 0.9% and 0.4% respectively.

David Newnes, director of LSL Property Services, which owns estate agents Your Move and Reeds Rains, said: “Rents have returned to August levels, but it’s a seasonal blip rather than an about-turn in the market.

“Tenants were in a stronger bargaining position as landlords reduced rents to fill empty properties in the slower winter months, yet as the new year progresses the underlying weakness in the mortgage market will mean competition will heat up once more.”

Green belt housing gamble – a bet too far?

Category : Business

When work does not pay and savings are threatened by low interest rates, it seems logical to see property as the prime asset

Watching two of the better-known rightwing thinktanks prime their intellectual cannons and bombard the same target is an impressive, if stomach-churning, sight. In the past week the Institute of Economic Affairs (IEA) and Policy Exchange, both of which have the ear of No 10 and No 11 Downing Street, have taken aim at the UK’s planning laws.

The IEA opted for a straightforward bombardment of the green belt. It argued that property developers should be allowed to give incentives to local communities to free up otherwise sacred ground. In other words, if developers see a profit in building on certain land, most likely in the London commuter belt, and the local parishioners can be successfully bought off, then what right does anyone have to intervene?

It is the latest salvo in a sustained campaign that has won over the housing minister, Nick Boles, though not yet MPs representing home counties constituencies and electorates, who appreciate the status quo.

Policy Exchange adopted a more politically sophisticated approach in its policy paper Planning for Less, the Impact of Abolishing Regional Planning. It did the job of demolishing the government’s attempt at laissez faire, which was to strip local authorities of meeting targets for building homes. The targets were established by the previous government. The communities minister, Eric Pickles, said in opposition the targets were routinely missed, so what better than to get rid of them and let free-market forces take over?

The thinktank, which has just seen its director, Neil O’Brien join George Osborne’s team as a special adviser, commissioned a report that found abolishing targets, rather than unleashing a previously shackled industry, meant local authorities in England simply cut by 270,000 the number of new homes planned.

When Britain is supposed to be enjoying a house-building renaissance akin to the 1930s, when much of today’s suburbia was constructed, research that finds planners taking the opposite path should be deeply wounding.

Like the IEA, Policy Exchange rejects re-establishing targets in favour of incentives for home building. However, it says the incentives should be focused on bringing back brownfield land which has already been used, often for industrial or commercial purposes.

It is easy to see a political conspiracy in all this. The Tory party remains deeply in hock to the industry for donations. But it does not explain why there is a growing agreement that the only way to resolve the housing crisis is to buy off neighbourhoods in the green belt or inner city. After all, Gordon Brown was the first chancellor to commission a report, from the former Bank of England policymaker Kate Barker, which argued for extensive building on the green belts around major cities, especially London. Admittedly, he preferred a top-down approach, one that gave birth to the original targets, but there were plenty of incentives in the policy too.

So a political deal is only part of the picture. A much more fundamental issue is the increasing reliance on property wealth for the UK’s short-term sense of financial wellbeing, and the major part it plays in its medium-term financial destruction. When work does not pay, except for the lucky few, and savings are constantly in danger of being undermined by low interest rates or, worse, destroyed by the stock market, it seems logical to focus on property as the prime asset. It is the best pension around, isn’t it?

The latest Halifax survey of homeowners shows they remain optimistic about the value of their assets, with a majority expecting prices to rise in 2013.

Why, when the UK economy is in a dreadful state, with its core lending banks strapped for cash, would anyone in their right mind think property prices could rise? But as Fred Harrison, research director of the London-based Land Research Trust, points out in his new book, The Traumatised Society, rent-seeking by a wealthy class of people hooked on accumulating even greater wealth is the cancer that has brought down many more civilisations than the present one.

Free-market thinkers understand that the accumulation of property wealth by a wealthy middle class and corporate sector and placing a sky-high charge on it – either to rent or buy – will undermine the capitalism they seek to promote. It undermines the incentive for work and, more importantly, the incentive to innovate, both for themselves and the people who must commit a large part of their meagre income to paying the rent (or mortgage).

The IEA reckons prices could fall 40% if millions of homes are built on green belt land. In this way, the landlord’s power is undermined, workers have bigger disposable incomes, and innovation can begin again. But the price fall only happens at the expense of the countryside.

Policy Exchange confronts this issue, but refuses to take away the incentive to gamble on property, something decried by one of its heroes, Adam Smith, and many contemporary pro-capitalist bodies that have thought more broadly about the subject.

The Organisation for Economic Co-operation and Development, the International Monetary Fund and the Institute for Fiscal Studies have in the past couple of years concluded that only an annual tax on land can end the obsession with property. Once landowners face a tax, they will free up land they are sitting on, rather than wait for a rising market to make a killing.

In London, that is what we are seeing now. It is the crazy, financially engineered boom of 2007 beginning all over again.

First-time buyer mortgage rates fall

Category : Business

Life is getting (slightly) easier for first-time buyers, with high loan-to-value mortgage deals now below 4%

There are some glimmers of hope for those looking to buy their first home, with Nationwide revealing it has doubled its lending to first-time buyers, and figures showing an increase in the number of mortgage deals for those who can only manage a small deposit.

Four months on from the launch of the government’s Funding for Lending scheme, aimed at encouraging more lending to homebuyers and businesses, we are finally starting to see some cheaper mortgage rates for those who cannot afford a huge deposit.

Prices also continue on a welcome downward trend. The Land Registry said prices fell 0.3% in October, while Halifax says the typical price paid by a first-time buyer is £121,063, down 20% from the £151,923 peak reached in the second quarter of 2007.

If you’re planning to buy your first home you could do a lot worse than talk to Nationwide. Britain’s biggest building society has revealed it is responsible for almost one in five of all new mortgages being granted to first-time buyers. In the six months to 30 September the society lent £2.5bn to almost 20,000 first-time buyers – double the amount it lent in the same period in 2011.

Nationwide also revealed it now has more than 22,000 would-be first-time buyers putting money into its Save to Buy account. This is a regular savings account designed to help someone save for a deposit and which provides access to a 95% loan-to-value (LTV) mortgage once the account has been held for at least six months.

Across the market the number of 90% LTV mortgages available has risen from 242 in August, when the Funding for Lending scheme started, to 258 now, and the average rate has fallen from 5.33% to 5.21%, according to analysis by MoneySupermarket. The number of 95% deals has crept up from 26 to 32, though the average rate on these is almost unchanged at 5.83%.

Ray Boulger at mortgage broker John Charcol believes more lenders will launch 95% mortgages in 2013, but says: “People with small deposits will still have to have a good credit record.”

So what are some of the best deals available for those looking to borrow 90%-plus?

The Co-operative Bank has a two-year fixed-rate mortgage for people borrowing up to 90% of their property’s value, priced at 3.99%, and it carries no arrangement fee. “Any fixed rate that starts with a ’3′ for a borrower requiring a LTV of 90% has to be applauded,” says Mark Harris at mortgage broker SPF Private Clients.

Nottingham building society offers one of the best five-year fixed deals for those borrowing 90%: 4.74% with a small fee of £299. The Co-op has a five-year fix up to 90% at a lower 4.59%, though the fee is £999. Similarly, HSBC has a 4.69% deal, though the fee is £899.

• For those who can manage a deposit of 15% or more, Coventry building society is launching a five-year fix at 3.99% up to 85% LTV with a £999 fee, while Yorkshire building society has cut the rates on its 85% LTV fixed-rate deals by 0.2%, which means its two-year fix is now 3.84% with a £995 fee.

• At 95% Moneyfacts‘ best-buys include Melton Mowbray building society‘s three-year fix at 5.49% with a £998 fee, and Newcastle building society‘s two- and five-year fixes at 5.99% (the five-year version carries a £690 fee).

Nationwide‘s 95% Save to Buy mortgages start at 5.79% for a three-year fix and 5.99% for a five-year fix, and in both cases there is a £499 fee. However, its main current account holders are being offered a four-year fix from 5.69%.

Legal & General Mortgage Club highlighted Mansfield building society‘s 95% three-year discounted rate deal currently priced at 5.49% with a £1,198 fee.

FSA mortgage review will ‘hard-wire common sense’ into market

Category : Business

Mortgage borrowers must prove their earnings and take advice on their choice of loan to make sure poor practices of the past are not repeated

Mortgage lenders will be forced to verify would-be borrowers’ incomes and check there is a credible repayment plan in place if they apply for an interest-only mortgage under rules the City regulator says will “hard-wire common sense into the mortgage market”.

From April 2014, anyone applying for a new home loan will be expected to prove how much they earn rather than the lender simply asking them to state their salary. At the same time, lenders will be expected to be able to demonstrate that a borrower can afford mortgage repayments after paying tax and their regular household bills, and will only be able to grant interest-only loans if a borrower has a clear repayment plan in place.

The rules, outlined by the Financial Services Authority (FSA) following a three-year review of the mortgage market, are designed to stop borrowers taking on loans they cannot afford.

As well as rules on lending they also deal with mortgage advice, and state that in future all borrowers who apply for a loan via a branch or phone will be required to take advice on their choice of loan, unless they earn more than £300,000 or work in the mortgage industry.

The changes will sound the death knell for self-certification mortgages, which allowed borrowers to take out loans based on a stated income that went unchecked by lenders. These were popular in the property boom years and although designed to help self-employed borrowers without a complete set of accounts were misused by some who wanted to maximise how much they could borrow.

They will also have an impact on older borrowers who will need to be able to prove they can afford repayments after they have finished work, although the regulator did not, as was suggested in some quarters, recommend an age limit on lending.

“Contrary to some reports the over-50s won’t be ‘banned’ from getting a mortgage under the new rules. Consumers will, however, be faced with more detailed questions and the need to demonstrate they can afford a loan – the application process may also take rather longer than it does today,” said Paul Broadhead, head of mortgage policy at the Building Societies Association.

Broadhead said the rules were “sensible” and the FSA had “been very careful to keep the market open for self-employed borrowers and first-time buyers”. However, he warned that lenders would need to be reassured about how the rules would be implemented to stop them acting too cautiously towards borrowers.

Since the FSA announced its first take on the rule changes in December 2011 lenders have started to alter criteria, with some already imposing tight restrictions on interest-only mortgages and others, like Nationwide building society and Co-op Bank, ruling them out altogether.

Martin Wheatley, managing director of the FSA and CEO-designate of the Financial Conduct Authority which will replace it, said: “We recognise many lenders are now using a far more sensible set of lending criteria than before, but it is important these common sense principles are hard-wired into the system to protect borrowers.

“We want borrowers to feel confident that poor practices of the past, which led to hardship and anxiety, are not repeated. At the heart of the new measures is an affordability test to check borrowers can meet the repayments of the mortgage they want.”

The FSA has addressed the issue of so-called mortgage prisoners – borrowers who are already on deals set-up on an interest-only basis or with other requirements who will not qualify for mortgages under the new rules – by telling lenders they can make exceptions for customers who need to remortgage, providing there is no increase in the outstanding amount to be repaid.

Which? chief executive Peter Vicary-Smith said: “Proposals for banks to conduct an affordability test will hopefully prevent a return to the irresponsible lending of the past. But it’s disgraceful that banks encouraged so many people to borrow more than they could afford without proper checks. The banks have a responsibility to help these people who are now struggling through no fault of their own.

“The housing market is failing not just one but two generations of consumers, with many mortgage prisoners trapped with their current lender and young people excluded from the housing market altogether.”