Buying, selling and letting - Monday, January 17, 2005

Builders: an insurance risk?

Blundering builders are putting home owners at risk of an insurance trap, warn experts. Home owners spent more than £40 million on DIY and building jobs last year. However, most standard home contents policies don't cover accidental damage caused by builders or other contractors. Martin Nugent, of insurance broker UK & Ireland Insurance Services, warned: ‘People forget that domestic buildings policies usually only cover damage done by the home owner and their family – not builders. The first step is to ensure that reputable builders are used and references are checked.
‘Thousands of people will be undertaking ambitious projects to improve their houses in 2005. New kitchens, loft conversions and extensions are expensive and it’s worth checking how good your insurance policy is before the work starts.’

Headache for sellers

While the majority of new home buyers find the house purchase process straightforward, more than two-thirds (70 per cent) say selling their old property was much harder work. That's one of the findings of New Homes Today 2004, a survey conducted by an independent research house on behalf of several UK house builders, including Redrow.
The research, among more than a thousand recent new home buyers, was designed to uncover the behaviour, beliefs and attitudes of purchasers.
Just over half of the sample (51 per cent) found the house purchase process either straightforward or very straightforward, with only 12 per cent rating it very stressful. But of the various stages involved in the process, respondents indicated that selling their old property was the biggest headache, with the vast majority describing it as stressful.

Market looking good

The average property price in the UK fell again by a further 1.2 per cent last month, but finished 2004 on average 6.4 per cent higher than a year ago according to recent data from the National Association of Estate Agents (NAEA). However estate agents across the country report that activity is starting to increase and are on the whole expecting the market to pick up once again, with 95 per cent expecting this to happen by Easter at the latest, and over a half of all agents surveyed expecting an upturn in January.

There was little movement in the supply and demand figures, showing only a marginal decrease in the number of buyers and new instructions, as expected at this time of year. However, despite a slight decrease, the number of houses available is higher than at the same time in previous years, indicating that the market has the scope for strong recovery from the annual Christmas slowdown.
Agents report that sensibly priced properties are selling well and this is reflected with the news that buyers are achieving an average discount of around five per cent from asking prices, further demonstrating the shift in the balance of the market towards a buyer’s market.  
Over the second half of last year, as average prices stabilised, property became more affordable for many and the percentage of first time buyers rose. This level looks set to be sustained in 2005. First-time buyers currently comprise 16.1 per cent of total sales, compared to less than ten per cent at the end of the summer when house prices were peaking.

If the holiday season has left you with a financial headache, why not remortgage? It can get you some ready cash – and a better deal, says Alex Hammond of Your Mortgage magazine

How festive was your season? Chances are, the more festive it was the bigger the financial hangover you now have to deal with. And as the seasonal colours turn into bank account red, you might have to start showing the colour of your money. If you don’t want to spend the whole of the New Year repairing the destruction of one festive season, you need to take action. And you can do this with a little help from your mortgage.

Spread the load

Tony Jones, managing director of Pink Home Loans, which has launched its mortgage advice service for borrowers, says: ‘Using your mortgage instead of short-term borrowing, such as credit cards and personal loans, to consolidate Christmas debt has its advantages. The interest rate will usually be lower and the debt is spread over a longer term.’
One way to repair your bank account is to top it up with money from a further advance on your mortgage. If you have equity in your homes, a number of lenders will lend you some extra cash, which is added to your mortgage and paid off at the mortgage rate. You don’t necessarily even have to tell the lender what the money is for, but some will lend a different amount depending on this. Nationwide, for example, allows additional borrowing of up to 95 per cent of your home’s value (including the amount of your existing mortgage) if you are using the money for home improvements, or up to 85 per cent for other purposes.
A further advance could be useful if you need money in a hurry, but if you are going to start reviewing your mortgage you may as well consider switching it completely to get a better rate. You could even receive a little extra cash and still save money on your monthly repayments if you get a really good deal.

Many lenders will lend you more than 90 per cent of your home’s value but the cheaper rates are reserved for lower loan-to-value (LTV) mortgages. So if you borrow more it could mean you end up paying a more expensive rate.
Plus, it is, of course, all still extra borrowing. Jones warns: ‘The disadvantage of using your mortgage to consolidate debt is that you risk eroding your equity. This is a concern when house prices are falling. If you can’t keep up repayments you could lose your home.’

Do your homework

Jones offers some advice. ‘First, I’d look closely at the terms of all the deals,’ he says. ‘Fees can vary dramatically and if you are only borrowing a small amount it can make the difference between a good deal and a bad deal. Also, make sure there are no early repayment charges – and if there are, make sure the rate is low enough to justify them.
‘On balance, and if you are sensible, a remortgage is a good way to help with your financial planning. There are some very attractive deals out there and with the property market slowing, lenders are working harder to attract your business.’

Escalating house prices mean that many first-time buyers cannot afford to go it alone. So why not buy with a little help from your friends, asks Christina Jordan of Your Mortgage magazine.

Although first-time buyers are coming back to the housing market, they are still few in number. Unless you earn a small fortune or have wealthy parents, you will find it difficult to get a mortgage on a single salary, which means you don’t get to own a property and therefore do not benefit from the increases in equity that many existing home owners can afford to smile smugly about.
So if you’re a first-time buyer, you need to look at your options. You could live on bread and water and save every spare penny you have to amass a bigger deposit, but with prices still continuing to rise, however slowly, the goalposts are continually moving while you are not.
You could take out a 100 per cent mortgage, where you don’t need a deposit; but then you’ll be borrowing more and probably paying a higher rate to do so – the best rates are available to those with a ten per cent deposit or more.
Or you could stretch your finances. Some mortgage lenders will lend you four or even five times your income – but only if you have a significant deposit and a particular kind of job. And this can be risky as borrowing to the limit gives you no leeway when interest rates rise or your income drops.

I want to hold your hand

If your salary is not big enough to enable you to buy your first property alone, you could consider buying with a partner or friends. Many couples buy their first home together and the lender will take into account both incomes.
Traditionally, you can borrow two-and-a-half times joint incomes or three times the biggest income plus one times the smaller income, though many lenders now offer more.
Most mortgage lenders will let you buy with up to three other people, but many will only take into account the two highest incomes. Joe Wiggins, spokesperson for Nationwide, explains: ‘We will take up to four people buying together, but we only take into account the highest two salaries when we look at how much you can borrow. Otherwise, four people might be able to borrow a huge amount. We use affordability rather than income multiples, which is a slightly more sophisticated way of calculating how much we lend, as we take into account outgoings as well as income.
‘It’s difficult for first-time buyers to get onto the housing ladder, with the average house price in the UK now reaching over £130,000, so joining up with friends can definitely be a practical option for some.’
But before you dive into buying with friends, you need to be aware of the potential pitfalls.

We can work it out

The most important thing to remember is that you may be best friends at the moment but nobody can predict the future. One person may, and probably will, decide to go his or her own way at some point, perhaps to set up home with a partner. Or one of the group could become unemployed. It’s essential that you know exactly what will happen when one person decides to leave or can no longer afford to pay.
Each borrower is responsible for the whole mortgage, not just their bit, so if three people bought together and one left the other two would be responsible for the whole thing.
It is important to seek legal advice before buying together; get a document drawn up, usually a trust deed, covering all potential situations. And you need to decide whether to buy as joint tenants or tenants in common.

A service has recently been launched for first-time buyers who want to get onto the housing ladder by buying with others. FirstRungNow offers a Joint Ownership Service that gives advice to groups buying together and helps individuals find potential property partners to invest with. Managing director Helen Adams explains the benefits of the service. ‘You can come to the website, FirstRungNow.com, for information and advice about joint ownership, such as legal and insurance requirements. And if you’re looking for someone to boost group numbers, or to find someone else with whom to buy, you can contact other people wanting to buy in the same town – you read profiles and choose who you want to get to know by email.’

Buying together could provide a valuable stepping-stone onto the housing ladder if your income won't stretch to buying your first home alone, but make sure you fully understand what you are getting into, choose people you know well and always get a legal document drawn up setting out what will happen if someone wants to sell their share. While money can't buy you love, if you go into the process with your eyes open, buying with a little help from your friends could turn out to be a great move.
yourmortgage.co.uk

Despite a range of doom-mongering forecasts predicting the end of the property market as we know it, a quick look at the mortgage lending statistics will show that the market is actually quite buoyant. The figures also demonstrate that first-time buyers are coming back into the market, having been somewhat sidelined by high prices; these first-timers are seeing price rises slow – or even reverse – and are now taking the leap into home ownership.

According to the Council of Mortgage Lenders (CML) the proportion of home loans approved in October for first-time buyers was nudging one-third of all mortgages; at 32 per cent, this figure is a substantial improvement over the previous month’s 29 per cent. Indeed, this improvement in the participation of property novices marks a high point in recent months, as the current number of first-time buyers as a percentage of home buyers is the highest since April 2003.
With the monetary policy committee of the Bank of England having kept interest rates in a holding pattern these last few months, it looks as though the first-time buyer will continue to come back to its previous place as a major force in the marketplace.

Mortgage lending fell in October for the third consecutive month to the lowest level since February, according to the Council of Mortgage Lenders (CML). Gross lending totalled £23.3 billion, eight per cent lower than the previous month’s figure of £25.4 billion; and the most recent figure is 17 per cent lower than that of October last year, when lending totalled £28 billion.
Although the number of loans for house purchase declined by nine per cent compared to the previous month, the slowdown was more pronounced for movers than for first-time buyers. House purchases accounted for 44 per cent of gross lending, a figure that is unchanged from the previous month.
Michael Coogan, CML director general, said: ‘These figures are in line with other indicators suggesting that interest rate rises have had their desired effect and the housing market is slowing down. Although lending figures may fluctuate going forward, we expect the slowdown to continue through the winter months.
‘However, interest rates are now probably at or near their peak, so despite the slowing market the overwhelming majority of existing borrowers will be able to continue to afford their mortgage payments.’

Looking ahead

Home hunters will start 2005 on a brighter note according to recent research. After hitting a low point in November, confidence in the housing market recovered slightly in December. Of people surveyed, 65.8 per cent expect house prices to fall in 2005, compared to 72 per cent in November, and 30 per cent now expect house prices to rise, compared to 24 per cent in November, showing a real belief in the market’s fortunes.

Stamp duty to remain high for UK home buyers

UK home buyers will be disappointed that the Chancellor did not take the opportunity in his 2004/5 Pre-budget report to reduce the increasing burden of housing tax policy – stamp duty and inheritance tax.

The UK housing market has remained strong in 2004, with house prices rising by 16.8 per cent during the year. Halifax estimates that the Government currently takes around £4 billion each year from residential stamp duty alone.

Halifax, the UK's largest mortgage lender, will lobby all three main political parties for changes in property taxation, especially inheritance tax and stamp duty, in the run up to the next general election.
Research by the Organisation for Economic Co-operation and Development (OECD) shows that UK property taxes, as a percentage of Gross Domestic Product (GDP), are the highest for any major developed country. According to the OECD, UK property taxes have risen from 3.7 per cent of GDP in 1995 to 4.3 per cent in 2002 (using the most current data available). In contrast, the average for Euro-zone countries is just 1.9 per cent.
The UK is one of only four OECD countries where property taxes make up more than ten per cent of Government revenues. The Euro-zone average is 4.9 per cent. In the UK, property taxes as a percentage of total Government revenue have increased from 10.5 per cent in 1995 to 12 per cent in 2002.

Shane O'Riordain, general manager for Government relations at Halifax, said: ‘It is disappointing that the Chancellor has not taken steps to ensure housing tax revenue is fairer where it counts, particularly for first-time buyers. As a very minimum we would like to see property tax thresholds automatically aligned with house price inflation.’
Ray Boulger of Charcol, says, ‘With income tax, the higher percentage rates of tax are only payable on the amount of income over certain thresholds. However, with stamp duty land tax, once you reach a certain level borrowers are forced to pay the higher percentage on the total amount. A sensible starting point for the one per cent tax band would be the average property price, based on Land Registry figures (currently £188,000), and the annual inflation adjustment (up or down) should also be based on Land Registry figures.’

Halifax estimates that the stamp duty threshold (currently £60,000) would currently be £146,750 if it had been increased in line with the rise in house prices since March 1993 – the last time that the threshold was increased. In 1993 almost two-thirds of dwellings sales were beneath the stamp duty threshold, compared with around a quarter now. According to Halifax figures the average first-time buyer now pays more than £1,000 in stamp duty, equivalent to around six per cent of their deposit or around two weeks of their annual income.

Hotproperty gives you some hints on what to think about when it comes to front door security.
A secure front door is vital for keeping your home safe and protected. Fitting the right locks and taking a few precautions will deter burglars and provide you and your family with peace of mind, whether you're at home or away. And this is especially important during these summer months, when the majority of people spend all day out of their homes, either enjoying the outdoors or actually out of the country, and burglary rates are at their highest.

Locks

Firstly, remember that a lock is only as strong as your front door. If your front door or frame is weak, replace this first before spending time and money on locks. In general, several locks will be far more effective than a single lock, however strong. This is because a heavy blow to the door may cause the frame to split or a single lock to fail, and two or more locks will strengthen the door's resistance.
It is also an advantage to have different types of lock. You should ideally have at least a cylinder lock (the most common type of front door lock, with three parts – the cylinder, the body and the staple), which locks automatically each time the door is closed, together with a 'dead bolt' mortice lock. Hinge locks or rack bolts – similar to those used for window frames – are also very effective as additional locks.

Insurance companies will often ask what types of lock you have on your front door before giving an estimate. Fitting certain locks may make you eligible for lower premiums.
Other ways to improve the security near your front door:
Install a door viewer or security chain. Each provides a simple way of monitoring who is at your door before you open it fully
Set up a routine for answering the door to callers. Always ask for identification from service engineers – many will now set up a password when arranging to visit as a way of confirming their identity
Keep the area around your front door tidy and maintained. Repair any damage to the door or frame promptly. This will help you highlight any weaknesses in your security before they become problems. Psychologically, a home which looks well kept is perceived to be well protected
Make sure there is adequate lighting, both outside your front door and in your hallway

A government-backed tribunal service provides quick and easy housing dispute resolution – but thousands are still missing out, finds Johnny Turner.

Thousands of people throughout the country could be missing out on the opportunity to resolve costly and traumatic disputes over their property leases, rents, service charges and other housing problems, because they are unaware of the quick and affordable solutions offered by tribunals.
The government-backed Residential Property Tribunal Service (RPTS) runs tribunals that are able to resolve a range of housing related disputes. These tribunals are quicker and cheaper than the County Court system and are available locally to landlords, leaseholders and tenants alike. Applications cost between £50 and £500 depending on the nature of the dispute. Certain disputes can be resolved free of charge.

While use of the RPTS’s services is growing, senior president Siobhan McGrath believes that a great many people who encounter problems with leases, rents and other housing issues simply do not know what solutions are on offer through the tribunal system. McGrath and her colleagues have embarked on a nationwide awareness campaign to highlight that help is at hand.
‘Whether you’re a leaseholder, tenant or landlord, housing disputes can be stressful, time-consuming and expensive,’ says McGrath. ‘Our tribunals, which are available locally throughout the country, can resolve many types of dispute, breaking the deadlock with the potential to save both sides time and money.’  

The RPTS is one of 70 tribunals in England and Wales. It is able to settle a wide range of disputes, including disputes over rents under regulated and some assured tenancies, as well as issues regarding leasehold enfranchisement and service charges.
The RPTS is strictly impartial and every case it handles is decided on its merits. Hearings take place locally or at one of RPTS’s five regional offices. If applicants have mobility problems, panel hearings can even be held in their own homes.
Hearing panels are typically made up of a valuer, a lawyer and a lay person. Seventy percent of disputes are heard within 20 weeks or, in urgent cases, even sooner. Panel members usually undertake property inspections.
As well as being efficient the service is also extremely cost-effective. You don’t have to hire a lawyer or valuer to represent you as the hearings are semi-formal and user-friendly, although you can appoint a lawyer at your own expense if you wish.
The RPTS’s powers were extended last year as a result of the Commonhold & Leasehold Reform Act 2002. Leasehold Valuation Tribunals, which form part of the Residential Property Tribunal Service, now have the ability to settle disputes on:
Service charges The LVT has much wider powers to decide whether service charges are payable including decisions on whether the costs are reasonable, the standards of work are reasonable and whether the lessees have been properly consulted.
The right to manage A new right for lessees of flats to manage their own properties has been introduced. The LVT can decide disputes between the landlord and the right-to-manage company.
Administration charges The LVT can decide whether other charges under a lease (e.g. a landlord’s costs associated with giving consent to sell the flat) are payable and/or reasonable.
Variation of leases The power to correct defective leases, which was previously exercised by the County Courts, has been transferred to the LVT.

Under the Government’s Housing Bill, The Residential Property Tribunal Service will also become the appeals body for local council decisions on housing fitness standards, the licensing of landlords in selected areas and the licensing of houses in multiple occupation.

Siobhan McGrath says: ‘We are urging anyone who is having problems resolving disputes over any of these issues to contact one of our regional offices or phone the national helpline.’
RPTS National Helpline 0845 600 3178
Regional office 020 7446 7700
rpts.gov.uk

Colder weather brings with it a whole new set of home safety concerns. However, by following these simple guidelines from the experts at gas-elec you can have a safe winter.

Winter requires heat and light that just aren’t necessary at other times of the year. This means dealing with open flames, boilers and heaters that you do without in summer. With the cold with us once again it’s a good time to remind ourselves of the basic rules of keeping you and your family safe during the freezing season.

Love your boiler

By servicing your boiler on an annual basis – before the deep winter sets in – you will not only reduce the likelihood of a breakdown but may actually increase the working life of your boiler by up to five years. A pre-winter service carried out by a CORGI-registered engineer may also make your boiler run more efficiently, helping you reduce those dreaded January bills.
If the worst happens and your boiler breaks down during the festive period, there are a copule of quick checks you can do before you incur the cost of an engineer call-out charge. Central heating systems often switch off for other reasons besides a problem with the system itself – for example, a blown fuse or a lack of water in the system. These are the first two things an engineer will check and are simple things to fix. So try checking your water gauge and topping up the system, as well as replacing the fuse.
If the boiler is still not working, you should not attempt to repair the boiler in any way. Having made sure it’s neither the fuse nor the water level, call a CORGI-registered service engineer.

Protect yourself from CO

You can’t see it or smell it but carbon monoxide (CO) is a poisonous substance which is responsible for the deaths of 50 people every year, and which makes many more ill from exposure to it. A good way to minimise the risk of CO poisoning is to have chimneys swept and gas appliances and flues checked.

Draughty dangers

Living rooms with solid fuel heaters should be ventilated, as hazardous situations can arise when windows and doors have been draought-proofed and the permaent ventilation is blocked by the home owner. When keeping out uncomfortable draughts, make sure that you’re not keeping in something much more dangerous: deadly CO fumes!

Lights and electricity

Electric heaters and kitchen appliances are in constant use during the winter and should also be checked by a registered electrician to ensure they meet safety standards.
If a piece of electrical equipment cuts out continually or gives off a strange smell, or if the plug feels warm, switch off immediately and get it checked.
Never overload power points. If there are not enough sockets, consider having more installed as this is a much safer option than extension leads.
For appliances that use a lot of power, such as heaters, hair dryers and kettles, use only one plug per socket.
Never double up your Christmas tree lights with the plug of another appliance as this could result in overheating, electric shocks and short circuiting – and could possibly cause a fire.

Candles and flames

Candle safety is all about common sense but during the festive season our sensible selves can seem to be absent. There are, however, some simple rules you should follow about candle use:

Don’t surround candles with foliage or Christmas decorations
Always use a stable holder – don’t stick a candle to a saucer with hot wax
Don’t place candles on carpets, tablecloths or other flammable surfaces
Keep lit candles away from pets, children, hair and clothes
Never leave burning candles unattended while you are out of the room – and never forget to extinguish them before going to bed.

Bedtime checks

By carrying out the following checks before you go to bed, you can greatly reduce the chance of a fire starting while you are asleep – and increase your peace of mind:

Make sure all the burners or rings of your cooker are off

Check all heaters are off and place guards in front of open fires
Switch off all unused electrical appliances at the socket
Close all internal doors, particularly in unoccupied rooms such as the kitchen, living room and dining room

This information is provided by gas-elec, a company that provides the next generation of gas and electrical safety inspection services to letting agencies, private landlords, home owners, buyers and sellers. For more information visit gas-elec.co.uk or call 0800 587 9999 for your regional offices.

Home Information Packs to go ahead

The Housing Act 2004 has now received Royal Assent, which means that from the introduction date of the new scheme anyone selling a property in England and Wales will need to compile a Home Information Pack (HIP) up-front for potential buyers when marketing their property.
This pack will include a Home Condition Report (HCR), all the required legal documentation, a lease copy and management records (if the property is leasehold) plus planning permissions and building control approvals for alterations and extensions. From January 2007, it will be illegal to market your home without a HIP.
The HCR needs to be produced by a government-licensed home inspector. Local chartered building surveyor Rund Partnership Limited, based in Locks Heath, will be among the first few home inspectors in the UK and will be expecting to introduce, in conjunction with local estate agents, voluntary schemes of pre-sale-surveys (i.e. home condition reports) in advance of the launch of the national scheme.
Stuart Parrett, director of the new scheme at Rund Partnership Limited, states that ‘this act is the result of consumer pressure to provide a level playing field when buying and selling homes. The new Home Information Pack is designed to help prevent gazumping, provide property-condition advice and set a national standard for home inspection and report writing. Several innovative features are to be introduced on the Home Condition Report, including an Energy Efficiency appraisal.’
proinspect.co.uk.

Buyer confidence in market increases

The Hometrack November survey of the national housing market reports a fall of 0.6 per cent for the second consecutive month, the fifth month in a row that house prices have fallen. The average property price now stands at £164,800, down from a peak of £167,700 in June this year. Since January this year prices have risen by 1.90 per cent, which hides an initial rise of 3.8 per cent in the first six months of the year before the downturn began in July.
John Wriglesworth, Hometrack’s housing economist, comments: ‘This month’s house price fall confirms, beyond doubt, that the housing boom is well and truly over. With house prices now over 100 per cent higher than five years ago, values have reached their peak given current levels of household income and interest rates.
‘We expect house prices to stabilise next year and recover in the second half. Household incomes are rising by five per cent per annum, unemployment is falling and is now at a 20-year low, interest rates are likely to remain stable rather than increase and lenders are continuing to extend the multiple of income on which they will lend, which all points to a recovery of buyer confidence next year. Typical mortgage repayments as a percentage of average earnings are broadly in line with long term averages, and are two-thirds of the previous peak back in 1989.’

Prices continue to fall

The average property price in the UK has fallen for the fourth consecutive month, according to the latest figures from the National Association of Estate Agents (NAEA), meaning that first-time buyers have increased opportunity to get onto the property ladder. House prices are on average 1.6 per cent lower than the previous month and the annual increase in house prices is down to 7.95 per cent – its lowest level so far this year. However, prices are still historically high.
All monitors of activity show that there has been an increase in the number of homes for sale but a decrease in the number of buyers. New registrations fell by 20 per cent but new instructions and the number of houses available remain at quite high levels. Agents across the country support these figures, with reports of plenty of new instructions on the books but a lack of buyers as the latter wait to see what is happening in the market. With a shortage of buyers, transactions were down on previous months. There were fewer sales agreed, compared to both the previous month and usual activity at this time of the year, and more viewings before a sale.  
Agents also report that only those properties that are realistically priced are selling. This is backed up by the average discount achieved from asking prices, which has been rising for the past six months and now, at 5.5 per cent, is at its highest level for the last two years. This demonstrates the continuing readjustment of prices and the shifting balance of the market as it turns in favour of buyers.

Free video explains tribunal service

The Residential Property Tribunal Service (RPTS) will launch a new video this week to explain its user-friendly procedures to tenants, leaseholders and landlords. The video will guide people through the simple procedure of applying to a Leasehold Valuation Tribunal (LVT) or Rent Assessment Committee (RAC). It is particularly aimed at those representing themselves at hearings without professional help. It will be sent to such users with the letter fixing their hearing date. The video will be available for other users on request.
The video has been produced to remove the fear factor from the tribunal process, using a dramatised case study to demonstrate the simple and user-friendly procedures at each stage of an application, while explaining the roles of the tribunal’s staff and members.
RPTS senior president Siobhan McGrath says: ‘Representing yourself is bound to be stressful. We are very excited about the new video and feel that it will go a long way to alleviating any anxieties that applicants may have.’
The video, which was produced by TNR Ltd and features broadcaster Gill Pyrah, is available on VHS or DVD format. The RPTS National Helpline is 0845 600 3178.