Buying, selling and letting - December, 2000

Funny Money? Foreign Currency Mortgages

What would you do if you heard about a mortgage with interest charged at 1.625 per cent? And no, that’s not the discount – it’s the standard variable rate. Most borrowers would jump at the chance for this kind of deal, but since the rate sounds too good be true, the more circumspect borrower should ask ‘what’s the catch?’.

Surprisingly, the figures are right. But it’s not a common or garden mortgage from a high street bank or building society – the loan is a foreign currency mortgage, and the debt is calculated in Japanese Yen.

With the Japanese economic climate in recession, their central bank has lowered the base rate down to an unbelievable 0 per cent. Consequently, borrowing in Yen is dirt cheap, even after the lender has put on their margin. And as UK borrowers become aware of the bargain rates available, some might be interested in shipping their home loan off to the Far East.

Ray Boulger, senior technical manager at Charcol, says: ‘Fleet Boston Financial offers a currency mortgage in Yen at a current rate of 1.625 per cent, which is the LIBOR rate plus a one per cent margin. And Kleinwort Benson on the island of Jersey also offers a Yen mortgage facility.’

But before you get on the phone to find out more, you need to consider some key points. Firstly, these Japanese Yen mortgages are clearly not from mainstream mortgage lenders and, secondly, they’re not for normal borrowers.
Boulger adds: ‘The Fleet Financial rate is for loans between £250,000 and £500,000, and Kleinwort sets a minimum loan size of £100,000, with a maximum loan-to-value of 70 per cent.’

Currency loans are, therefore, only available to the more advantaged borrower, and should only be considered by the truly financially sophisticated.

‘People have to understand what they’re doing before taking a currency loan,’ warns Boulger. ‘It is crucial that they understand all the pros and cons.’

The main advantage of the Yen mortgage is clearly the interest rate, but the main risk is currency rates.

Let’s assume you buy a home in the UK and are paid in Sterling. The actual cost of the monthly payments to the lender will depend on the exchange rate between Sterling and Yen. If, for example, the Yen increases in value against Sterling, it will cost more in pounds to meet the same Yen payments, even if the interest rate remains constant.

Similarly, the pound equivalent of your outstanding debt will also increase if the Yen strengthens against Sterling. In the case of Kleinwort’s deal, should the sterling equivalent of the debt increase to 80 per cent loan-to-value, the loan is automatically repatriated into Sterling. This is designed to protect the borrower (and the lender) from even bigger losses, but it does crystalise an actual loss. The borrower will find they are forced into taking a larger mortgage at a UK interest rate with correspondingly bigger monthly payments.

‘A lot of people look at the interest rate and forget the risks associated with a foreign currency mortgage,’ says Boulger. ‘However, exchange rate fluctuations can also be a major advantage of the currency mortgage.

‘If the pound strengthens against the Yen, you might actually want to switch the loan into Sterling, as it would immediately reduce the outstanding debt.’

So are foreign currency mortgages about to enjoy a renaissance in the UK?

Boulger is sceptical. ‘The Yen is the only currency currently worth investigating because all the other major countries’ base rates are pretty close to the UK’s bank base rate,’ he warns.

For example, both Barclays and Abbey National offer Euro mortgages, but the rate on Barclays’ deal (available only on an interest-only basis) is currently 6.06 per cent, while Abbey’s repayment-only offering is charged at 6.24 per cent.

‘The borrower has to be paid in Euros, which excludes the majority of borrowers,’ explains Barclays spokesperson, Perry Jones. Abbey National has a similar salary restriction, and both lenders are happy to deal with intermediaries who have clients who might fit the bill.

However, with UK standard mortgage rates at 6.5 per cent or lower and a huge range of mouth-watering discounts and low fixed rates designed by lenders to buy market share, the clever money should stay in Sterling.

At one time the London Borough of Hackney was one of the most urban and highly populated boroughs in the East End. A mecca for nonconformist worship, Hackney has been home to Jewish people since 1684, and the community has shaped the area with centres and synagogues. Frances Roe explores how things are developing

Today Hackney is still full of diverse cultural influences. With regular ‘hidden art’ trails, the Whitechapel Gallery and the recently rescued Empire theatre, the area is increasingly receiving the attention of artists and designers. Spilling over from neighbouring Shoreditch, new residents are partly responsible for nicknaming the area ‘Happening Hackney.’ As in other areas of London, disused historic buildings are making unusual homes for the future.

Montague Court in Hackney Down was originally built as a synagogue in 1934 and is the latest impressive conversion from City Build London Limited.

Set in the heart of a pleasant residential area, the former synagogue has been tastefully converted into eleven luxury one- and two-bedroom apartments over two floors. Many of the building’s original features have been maintained, including its hexagonal shape, the domed ceiling, arched or round windows and balustrades.

All apartments have a spacious open plan design, fully-fitted wooden and chrome kitchen, carpet and wooden flooring. Each home is unique in its own way, some are split-level and others have a private terrace, patio or courtyard. Those with an eye for original features will like the 1,169 sq ft mezzanine apartment on the first floor. Blessed with a view of the magnificent domed ceiling and surrounded by round windows, this apartment is priced at £279,500.

Montague Court nestles in a secluded spot set back from the street and has its own landscaped courtyard and water feature. When you want to be closer to all the action, Hackney Downs station, a short stroll away, has frequent train services to whisk you to Liverpool Street in just seven minutes.

Prices start at £150,000 and more information is available through Sterling Ackroyd on 020 7729 7763.

‘Right to Buy’ has been a familiar phrase since the first schemes were introduced in the 80s – but how does the scheme actually work? Solicitor David Greaney from Adams Solicitors in Walthamstow explains what tenants need to know about becoming owners.
 
Under the Labour government’s Right to Buy scheme, many council tenants have the right to buy the property they are currently renting at a discounted purchase price. This scheme is seen as a good opportunity for those who might not otherwise be able to buy property otherwise.

Whether you qualify for the scheme depends on several factors, the main one being how long you’ve been a council tenant at your present property. The process consists of building up points over the years as a council tenant, eventually reaching the stage where you qualify. Other factors are also relevant, so you should contact your local authority for more information on the criteria.

Qualifying tenants will receive a discount towards their purchase of anything up to £38,000 – a huge advantage in today’s property market. The exact amount of the discount is determined as a percentage of the market value of the property. Again, the extent of the discount will depend on various factors including the length of tenancy at your current address.

Once you get the go-ahead under the scheme, you should appoint a solicitor to handle the conveyancing. Like any other buyer, you will need to consider your finances and, in particular, whether you will require a mortgage.

After you buy, your local authority will insist that you retain ownership for three to five years. If you do sell early, you will have to be prepared to refund your initial discount to the council. Although this penalty may seem strict, many first-time buyers on the open market would give their right arm for an opportunity to buy a property at such a substantial discount, even if they have to hang on to that property for some time.

If you are interested, contact your local authority and ask for their Right to Buy section or Right to Buy pre-sales section. Enquiries are free. If you are a council tenant and are interested in the scheme, you have nothing to lose by finding out more about your potential right to buy. An investment opportunity may await you. But remember that buying a property, in whatever circumstances, may be one of the most important decisions you will ever have to make.

For advice on your rights after you buy, contact:

Leasehold Advisory Service (LEASE)
8 Maddox Street
London W1R 9PN

Tel:    020 7490 9580
Fax:    020 7253 2043

For free housing booklets, or if you want a list of free DETR housing publications, contact:

Department of the Environment
Transport and the Regions Publication
Free Literature
P O Box 236
Wetherby LS23 7NB
London SE99 6TT

Tel:    0870 122 6236

For a copy of the guide to the Right to Acquire contact:

Publications Department
The Housing Corporation
149 Tottenham Court Road
London W1P OBN

Tel:    020 7393 2000
Fax:    020 7393 2111

With house prices high and land at a premium, many home owners who find they need more space are making the most of their present home rather than buying a new one. Turning cellar space into living space is proving effective – maximising not only the square feet of a property but its value.

Houses built between1700 and1900 would have had a coal cellar under the pavement at the front of the property. In these cases the size of the cellar is relative to the number of fireplaces. Terraced properties built between 1900 and 1940 generally have a long narrow indoor cellar with a low ceiling under the front entrance hallway.

By their very nature, cellars are subject to moisture, lack of ventilation, fungal decay and vermin. Turning them into a useable living space is not a job for the casual DIY enthusiast. Before they can be used for any other purpose cellars must be waterproofed or ‘tanked’ to seal and line the room and prevent damp. The ground may need to be excavated to lower the level and allow adequate standing height, and as a result the structure will need to be underpinned. Cellar conversions must also conform to drainage, daylight and escape route regulations.

This is obviously a job for professionals – and there are numerous companies who specialise in treating and converting dank, dark cellars into dry, bright living spaces. Keep in mind that a conversion is an investment. When hiring a professional, insist on seeing a selection of testimonials from previous clients and make sure you are confident in their standard of work before you sign away your cash.

As for the money involved, a typical mid-terrace house in Fulham with a small narrow under-hall cellar may cost around £50,000 to convert. This might seem a lot, but may be much cheaper than moving to a larger house in the same area. A cellar conversion is an investment that can add as much as 30 per cent to the value of your home, allowing you to stay put and avoid costly moving expenses, not to mention an increased mortgage.

While storage space is useful, extra living space will add to quality of life as well as the value of a home. Popular uses for converted cellars include a home office, play room, utility room, nanny/granny flat, gym and music room.

Let Hot Property take the strain out of the search for a conversion specialist. Find a professional in your area here [link to http://www.hotproperty.co.uk/improve/professionals.asp].

General storage

If you want to use your cellar for long-term storage then you really need to make sure it is damp proofed. If you can’t afford this, then avoid storing valuable or sentimental items down there. Moisture and a lack of air circulation will cause perishable items to deteriorate and encourage fungal growth. Use moisture resistant materials for shelving and where possible store belongings in airtight boxes. Inexpensive sealable plastic containers are readily available from high street stores and come in all shapes and sizes.

Wine cellars

There are many places that you can keep wine, from the cupboard under the stairs to the garage. But if you are lucky enough to have a real cellar to store your wine then there are certain conditions that will keep your good stuff good.

Position

Store wine by placing the bottles on their sides. This stops the corks from drying out and reduces the risk of air entering the bottle and spoiling the wine.

Temperature

Long-term wine storage needs a stable temperature of 10 to 15 degrees celsius. Wines that are subject to extreme temperature may have their characteristics and flavour spoilt.
Heat causes the most damage as it accelerates natural fermentation and prematurely develops the wine.

Humidity

A stable environment for storing wine should be between 55 and 70 per cent humidity. Low humidity can affect the moisture in the cork and allow the wine to seep. High humidity can encourage moulds and bacteria to grow, which may change the characteristics of the wine and damage the labels.

Light

Wines should be kept in the dark, as light rays can cause damage. If you have a glass window in your wine cellar, coat it with a UV-protective layer.

Q I’m about to buy a property and was surprised when my solicitor mentioned something called an environmental report. It shows the property is in an area with a high risk of subsidence. I am tempted to ignore this as I know the house is located where London clay is prevalent and I believe this is what concerns my solicitor. What should I do?

A The Environment Agency of England and Wales, local and other authorities have begun to issue environmental reports to give buyers and sellers information about  land contamination, subsidence, flooding, industrial land use or other potential problems that may affect a property.

As you seem to realise, the environmental report’s findings don’t necessarily mean the property you hope to buy is itself in danger of subsiding. These reports usually cover an area, often a postcode sector, typically 250 to 500 metres around the property in question.

However, any potential dangers revealed by searches or enquiries must be looked into thoroughly so that you know as much as possible about what you’re getting into. It would be worth asking your surveyor whether the property has suffered foundation movement in the past. You should also arrange for a consulting engineer or structural surveyor to look into the possibility of subsidence and produce a report. This may delay the transaction and will probably cost you upwards of £700, but could avoid future problems. Additionally, you should explain the problem to whoever is to arrange the buildings insurance for you. It’s essential you obtain written confirmation from the insurer indicating they are aware of the threat and agree to continue cover.

If it looks like the property has suffered from subsidence or may do so in the future, the usual remedy is underpinning. If you still wish to proceed with the purchase, you should consider using this as a bargaining tool in seeking a price reduction.

Above all, make sure you take all the necessary precautions before and not after exchange of contracts, when it will be too late.

Q I recently decided to put a maisonette I own on the market. I bought it some years ago as a letting investment. My estate agent advises me the property is suffering from physical defects which may put some buyers off. These include damp walls, faulty electrical wiring, loose plastering and woodworm. Do I really have to sort these matters out before I can sell the property?

A Not necessarily – physical imperfections do not have to be remedied in order to put a property on the market. However, the problems you mention will almost certainly affect the ultimate selling price and possibly also the speed at which you can sell.

The law puts the onus on buyers to discover for themselves what kind of condition the property is in. You do have a duty to disclose hidden defects you are aware of, but it’s clear that you have been straightforward with the selling agents.

What you choose to do really depends on how quickly you want to sell the property. Consult at least two estate agents to compare the market value of the property in its present state with how much it might fetch in a better state of repair. This will help you to decide whether it’s more economical to sell the property in its present condition or make the repairs. The choice is yours.

First impressions count. Keep the outside of your home shipshape. Sweep paths and driveways, neaten the garden and shine those doorknobs

Keep the place tidy but not clinical, particularly children’s rooms. Remember that you are not selling a house – you’re selling a home.

A lived-in home has more appeal than an empty one. Existing décor and furnishings can stimulate the buyer’s imagination.

Paintwork should be washed or redecorated but don’t paint at the last minute. The smell arouses the suspicion that you are hiding something.

You don’t have to bake bread, but pleasing smells will relax visitors, so air and fragrance your rooms. Avoid cooking up an onion and garlic surprise before viewings as strong odours can often offend.

Music can be useful to create a mood but remember that personal taste varies. Generally speaking soft background music is appropriate. Heavy rock should be avoided.

Hunters and highwaymen, kings and commoners have all made their mark on Epping Forest. The remains of a primeval woodland extending from the Thames Valley to the Wash, the forest has a history as old as Britain. Evidence can still be seen of two Iron Age settlements, and Boudicca is rumoured to have fought her final battle against Roman invaders in the area. Centuries later, King Harolde was buried at Waltham Abbey, having crossed the forest to do battle with Norman invaders.

The forest was a favourite hunting ground for early kings, and in 1226 citizens of London were given the right to hunt on Easter Mondays. The famous Easter Hunt was a fashionable event for over 600 years.
After 1700, hunting fell out of fashion with royalty, and the forest became the haunt of thieves and highwaymen. The increasing encroachment of nearby landowners eroded the area of open woodland from over 12,000 to a mere 6,000 acres, and by the mid-nineteenth century only 3,000 acres were left. Out of concern for its future, an act of parliament in 1878 gave control of the remaining land to the Corporation of London, who declared the forest open public space.

Epping Forest continues to draw all kinds of people. The forest still has the largest collection of hornbeams in the country, and is home to a host of rare flora and fauna. Walking, horse riding, cycling, orienteering and camping are all popular pursuits, and many clubs are based in the area. With its nearby golf and cricket facilities, as well as the many pubs and cafés, Epping Forest looks set to maintain its popularity with locals and tourists alike.

Ten years ago, if you said you lived in Hoxton you’d have invited a look of either poor-you or where’s-that? Back then it was known, if it was known at all, as an impoverished backwater, a very urban neighbourhood of council housing and dilapidated factories. As Islington underwent what can modestly be called a makeover, Hoxton sat and quietly waited for the inevitable overspill from its western neighbour. What has actually happened in the last decade is far more interesting.

Whereas Islington emerged with three inches of pancake (and it’s still being applied), Hoxton has been colonised by more artistic types who appreciate its simple, solid architecture as well as its central position. What in many London neighbourhood ‘occupations’ would have been grounds for razing and rebuilding has been celebrated in Hoxton; its history as a centre for textiles and light manufacturing means the buildings are unpretentious and well built. As local industry has moved on or been priced out, the structures which once served as a base for manufacturing have been renovated to meet the needs of a more technology-based workforce, as well as a huge demand for inner-city housing. With the hunger for loft conversions in London showing signs of outlasting the supply of structures to convert, Hoxton has seen its share of developers move in and change the industrial into the residential. This inevitably brings an upsurge in the quality of amenities — restaurants and bars, cinemas and clubs — and Hoxton has shown flair in its creation of entertainment spaces.

The hub of local entertainment and culture is Hoxton Square, a leafy enclave adopted by the scenesters as their treehouse. The groovy young crowd drawn to the Bluu bar and the Lux, an impressive state-of-the-art cinema and video gallery, spill out into Hoxton Square after closing time, creating an atmosphere that resembles an open-air house party. Hoxton Square is also the home of White Cube², a smart, minimalist showcase for modern painting and sculpture.

Dining has become more varied and sophisticated. Traditional Greek food meets nouvelle cuisine with impressive results at The Real Greek in Hoxton Market. Nightlife is booming, as exemplified by the queues outisde the 333 Club in Old Street and the 60s-themed night Orange Sunshine at the Orange Bar on Kingsland Road. Bars such as Furnace are busy seven days a week.

Hoxton has managed to move with the times without losing the essence of its appeal – a relaxed mix of friendly neighbourhood and urban leisuremart. As the saying goes, you don’t have to be hip to live here – but it helps.