Buying, selling and letting - September, 2004

Welcome drop in fixed-rate mortgages

Home owners enjoying a welcome break after four base rate rises in eight months are in line for more good news. Falling swap rates – the money-market rates that determine fixed-rate pricing – have led lenders to cut the cost of fixed loans.
Stroud & Swindon Building Society has launched a two-year fixed-rate mortgage at 4.79 per cent. Those with a home valued at less than £250,000 will pay £494 in arrangement fees. The fee rises to £594 for properties worth more than £250,000.
The two-year fix from Derbyshire Building Society charges interest at 4.8 per cent, while Yorkshire Building Society offers a three-year deal at 5.1 per cent for those moving house and 5.15 per cent for home owners who want to remortgage.
Britannia Building Society has cut the rate on its ten-year fix by a tenth of a percentage point to 5.49 per cent.
Is this, however, a good time to fix? David Hollingworth of mortgage broker London & Country thinks so. He says: ‘Hanging around on a gamble for a cheaper rate may not pay off, particularly for home owners on an expensive standard variable rate.’
Simon Tyler of broker Chase De Vere Mortgage Management agrees. ‘There will almost certainly be another interest rate rise this year,’ he says. ‘The cheap fixed rates launched in the past few days should be snapped up because they will not be around for long.’

Housing market slowdown continues

The average property price in the UK fell for the third consecutive time last month, according to figures released today by the National Association of Estate Agents (NAEA), as over three-quarters of estate agents confirmed that they believe prices have reached their peak. Asking prices were on average 1.3 per cent lower than in the previous month and the annual increase in house prices was 8.5 per cent, down from 10.3 per cent the previous month. In addition, 79.6 per cent of estate agents believe that house prices have reached their highest point and will now decline – excellent news for first-time buyers.
Some prospective buyers who have been holding off waiting for prices to hit their peak earlier in the year are now reacting to the slight drop in prices and re-entering the market. In addition, they are reacting to the slowdown and attempting to achieve further discounts, securing an average of 5.5 per cent off the asking price compared to average discounts of around three per cent earlier in the year.
NAEA president Richard Hair comments: ‘The steadying of prices has encouraged more buyers than is usual at the end of the summer and activity in general is high, although overpriced property attracts little interest. Prices are not going to crash but there may well be further small correction before normal service is resumed.’

As house prices even out it’s easier for first-time buyers to enter the property market; and there is yet more help on the horizon, especially for certain key workers, says Mike Collins of Your Mortgage magazine.

Sally McCormack is a nurse who, until she qualified just over a year ago, was sharing rented accommodation in the East End of London with five fellow students. This was an acceptable arrangement for all concerned but, as invariably happens, the end of their training meant big changes.
‘A couple of the girls decided to go back to the Midlands, one had met a Scottish lad and went off to live with him in the Highlands and the other two went back to the London suburbs to live with their parents,’ she explains. ‘As I’m from Chelmsford, Essex, I didn’t fancy that journey every day, especially as I work odd shifts. But there was no way I could afford the rent in the house we had on my own. Basically, I wanted to buy a place in London, as close as possible to Bart’s Hospital, where I work’

Property lesson

Until this point McCormack was not an expert on London property prices, but her education on the subject was swift. ‘I started looking in estate agents’ windows and could scarcely believe my eyes,’ she recounts. ‘There was nothing below £120,000 and even that would only buy a poky flat in a rundown area.’
McCormack began to think that she might have to move home after all, until she heard about the Key Worker Living (KWL) scheme promoted by the Office of the Deputy Prime Minister (ODPM, to be found at odpm.gov.uk). ‘This scheme is a development on the Starter Homes initiative and was introduced in April this year,’ she explains.
‘I was awarded an interest-free loan of £30,000 to help me buy my flat in Wood Green, north London, for £120,000. I used a loan from my parents of £20,000 to put down a deposit and the remaining £70,000 is on a discount mortgage from Nationwide.’
So, how does the loan work? ‘I don’t pay interest on the government loan while I’m in the property, and the loan is repaid only when the property is sold or if I move to a different job that isn’t covered by the KWL scheme. The amount I’d have to repay would be worked out on the basis of what percentage of the property’s original value was covered by the loan – in my case 25 per cent of whatever I eventually sell the place for.’
And what does McCormack think of the scheme? ‘It makes the difference between having my own place – and a job I love in London – and going back to my parents’ house. It’s absolutely brilliant and I recommend the scheme to others.’

Share and share alike

Shared ownership is another way that first-timers can get a property. The Housing Corporation (housingcorp.gov.uk) allows you to buy a proportion of a property from a registered housing association (HA) landlord, and you pay rent on the remainder that you do not own. You can then buy more ‘slices’ of the property as and when you can afford it, until you own it all.
People eligible for the scheme are usually first-time buyers, and priority is given to those on local authority waiting lists. You must be able to obtain your own mortgage to meet the purchase costs on a percentage of the property.
If interested you can register with Homes (homes.org.uk), where you will find details of new shared ownership properties or properties being sold by existing shared owners.
Paul Fincham of Halifax says: ‘We lend on shared ownership schemes. As long as the share you own is at least 50 per cent you can apply for a normal loan. You could then increase your mortgage in increments to buy more of the property as you can afford it. But the housing association will usually want you to be in a property for at least two years before you increase your share.’


Are you a key worker?

If you are a key worker in one of the groups listed below you could get help to buy your first home or to move into a family home. Opportunities are also available to rent homes at affordable prices. The help is available in London, the South East and the East of England.
Key workers who may get help are:
·    Nurses and other NHS staff
·    Teachers in schools and in further education and sixth form colleges
·    Police officers and some civilian staff in some police forces
·    Prison service and probation service staff
·    Social workers, educational psychologists and planners (in London)
·    Occupational therapists and speech and language therapists employed by local authorities
·    Whole-time junior fire officers and retained fire fighters (all grades) in Hertfordshire fire and rescue services
Eligibility criteria will vary across regions depending on local recruitment and retention policies.
Source: ODPM


What help is available?

The following help is available under the Key Worker Living scheme:
·    Equity loans of up to £50,000 to help key workers buy a home on the open market or a new property built by a registered social landlord
·    Higher-value equity loans of up to £100,000 for a small group of school teachers with the potential to become leaders of London’s education system in the future
·    Shared ownership of newly built properties. Under this system you buy at least 25 per cent of the home and pay a reduced rent on the remaining share
·    ‘Intermediate renting’ where the rent is set at a level between that charged by the social and private landlords
Source: ODPM

As the buyer’s market makes a comeback, it’s the areas that offer value for money that will see success. Johnny Turner looks at homes in two likely successes, Bow and Hackney.

All the recent evidence that a house price slowdown is now upon us means buyers are becoming more powerful. Following years of feeling excluded from the property market, first-time buyers and movers will start to see more affordable options – and it is the areas offering the more buyable properties that will have the lion’s share of prospective purchasers flocking to them.

Two such areas are the adjacent east London neighbourhoods of Bow and Hackney. Each has seen an influx of people who have found the proximity to central London, good green space and affordable property irresistible. Bow has benefited from the rise and rise of Canary Wharf, which is very nearby, while Hackney’s renaissance is partly due to a combination of its wealth of good-quality Victorian housing stock – and also the fact that buyers who were priced out of neighbouring areas such as Islington came eastward and liked what they found. Both locales are convenient for those whose desks are in the City.

Each of these areas has seen the expected follow-up to the initial reawakening of interest: vastly improved amenities, trendy bars, good restaurants and entertainment venues. They also happen to be located near some of London’s coolest markets, which only ups the desirability quotient further. But nothing proves an area is on the up like an abundance of good-quality newly built homes.
Telford Homes is a company with a good instinct for what buyers want, where they want to live and what they can afford. And Telford has seen great success in both the Bow and Hackney areas in recent years. The Goldsmiths Apartments in E2 was a groundbreaking scheme which found favour with a wide range of buyers, due to its simple, elegant design, good location and realistic pricing. And the Devons Road scheme in desirable E3 is now all reserved, as a combination of investment purchasers and owner-occupiers found the 24 one- and two-bedroom apartments very much to their liking.
Telford are now selling the successor to the latter development – and as with Devons Road, buyers are impressed. The Cubix Apartments, situated adjacent to the Devons Road apartments, is proof that the right specification in the right location will always find an audience.
The location, very convenient for both Docklands and the City, is ideal for a wide range of commuters; Devons Road DLR station is just moments from the development, meaning Canary Wharf is a quick four stops away.

Current availability at Cubix includes nine two-bedroom apartments, priced from £210,000, and two one-bedroom apartments, priced from £180,000.
The Telford Homes development De Beauvoir is the reimagining of the elegant De Beauvoir school building and grounds as a scheme of 34 one-, two- and three-bedroom newly built and converted apartments, ranging from 650 sq ft up to 1,200 sq ft. The building will boast stylish entrance foyers, a landscaped courtyard and parking facilities. In addition there will be a newly built house and three apartments converted from the caretaker’s cottage.

The location is a case of an historic neighbourhood that has woken up to find itself trendy and sought-after. Islington, directly to the west, experienced a staggeringly successful reinvention in the early 1990s, with the number of amenities increasing exponentially, housing becoming more sought-after and prices going through the roof. The ‘overspill’ effect led to De Beauvoir Town’s southerly neighbour, Hoxton, hitting the headlines as a prime destination – for its art scene, nightclubs and range of choice for home buyers – a few years ago. Now it’s the turn of the De Beauvoir area itself. It is literally surrounded by quality going-out options, shopping hotspots and transport connections. The proposed extension to the East London underground line, due in the next decade, will make this part of town even better connected.
In the Telford development, located on Tottenham Road, the original late-Victorian school building retains all the hallmarks of that style: an elegant brick and stone façade, tall windows, ornate gables and brick detailing. The Victorians’ emphasis on high design – and their belief in high ceilings and huge windows – means that buildings created during the 19th century, both converted and unconverted, are finding favour with home buyers two centuries later.
The new use of this historic building will see the creation of loft-style apartments, a type of home that Londoners cannot get enough of. These apartments will boast stylish reception rooms incorporating large sash windows, providing a generous window-to-wall ratio and allowing light to pour into the living areas.

The apartments are built to a premium specification, ideal for upwardly mobile professionals who desire the chic London lifestyle. The fully fitted kitchens feature a range of Systemat contemporary German units from Urban Myth; the white bathroom suites feature polished chrome fittings by Grohe, satin chrome heated towel rails, steel baths and coordinated ceramic wall tiling. All master bedrooms have en suite facilities and fitted wardrobes, and there is the option to use the second or third bedrooms as an office or study.
The finish combines soft antique white walls, warm neutral colours for carpeted areas, wood strip laminate floors in the living room and hallway and ceramic floor tiling to the kitchen and bathrooms. There is audio entry security to both the main entrance and the residents’ own underground garage; parking spaces may be purchased separately if required.
One one-bedroom apartment remains, priced at £275,000. There are also four two-bedroom apartments, at prices from £350,000. For more information call selling agent Thomson Currie on 020 7354 5224 or visit debeauvoir.com.

The east London areas of Bow and Hackney have benefited tremendously from the forward-looking attitude towards regeneration that has been demonstrated by government and developers; both of these locales are rich in disused land and buildings, the reinvention of which is having quite a ripple effect in terms of quality of life.
A good example of what is possible when derelict land and structures are treated with respect is Berkeley Homes’ Bow Central development, where phase two has now been released. The former site of a rubber and plastics factory is being transformed into a gated residential scheme of 146 contemporary apartments. The series of elegant buildings of four and five storeys will incorporate glazing and contrasting brickwork, with sleek, simple columns, picture windows and Juliet balconies. Around the building will be pedestrian pathways, landscaping, wide driveways and surface parking facilities. There will also be 14 three- and four-bedroom town houses.

The apartments range in size from 413sq ft to 892 sq ft, and many will have private balconies.
The interior spec and décor will be fresh and funky, and each will feature a bright and airy reception room. Fully fitted kitchens will have Karndean flooring, stylish units and sleek worktops, as well as a comprehensive range of integrated AEG appliances.
Bow Central lives up to its name, being in the heart of Bow and within 500 metres of Bow Road tube station and Bow Church DLR. Bow Road tube gives commuters access to both the Hammersmith & City Line and the District Line – and that opens up communications with a great many destinations popular with London commuters, from Victoria to Moorgate, Baker Street to Temple. For those who work in the City or Canary Wharf, this is the ideal place to live.
Berkeley offers a wonderful incentive for buyers in Block One, which is currently scheduled for occupation in February/March 2005: those who visit the sales and marketing suite between 12 noon and 4pm on 25 September and reserve a one- or two-bedroom apartment in the building will have their mortgage paid for a year (at five per cent of the purchase price; subject to terms and conditions).
Prices in this phase range from £180,000 to £280,000. The sales and marketing suite is open daily from 10am to 5pm. To find out more about Bow Central and the special buyer incentives call Berkeley Homes on 020 7321 2122.

East Central, the latest phase of Barratt’s new development in the heart of Hackney, offers stunning contemporary apartments in a 16-storey tower. East Central is a sleek, ultra-modern development featuring the striking tower at one end and a smaller block at the other, and will ultimately comprise 159 apartments. The development is within easy walking distance of London Fields mainline station, from where trains into Liverpool Street take only seven minutes.
Prices range from £199,995 to £362,995. Call 020 8986 6793 for further information.
One of the most impressive current developments in the Bow area is Urban Island, Countryside Properties’ collection of homes on Three Mills Island. Urban Island gives prospective buyers a unique combination of space, light and style – it is a truly ambitious collection of homes. The exclusive island sits on a curve of the River Lea and offers a tranquil waterside setting. Prices currently range from £224,950 to £489,950. Contact the marketing suite, open Thursdays to Mondays, on 020 8215 3377.

The legal process can be confusing to home buyers. Here we answer some frequently asked questions about the legal side of property purchase

Q What is the difference between a search and a survey?

A This is a distinction that often baffles the buyer. A survey is a physical inspection of the property being purchased, which is carried out either by the buyer’s own surveyor or – if a mortgage is involved – one appointed by the mortgage lender. There are various types of survey available, generally falling under three levels of service:

·    Lender’s valuation A cursory look around on behalf of the bank or building society. This includes taking measurements of the rooms, as well as a broad analysis of what a similar property is likely to be worth in that particular area. This exercise is conducted simply to establish that any mortgage advance would be financially secure. The report will tell of major defects which affect the value, but not minor problems
·    Homebuyer’s survey and valuation This report, drawn up by the RICS and ISVA, provides details on the general condition of the property in a standard format, and should highlight significant defects. It also comments on the value and any factors affecting it. Can often be combined with the bank/building society valuation so that the same surveyor only makes one journey
·    Structural report A full building survey is essential for old or unusually designed properties, or those in poor repair. The surveyor provides a detailed report on most aspects of the structure; the report can be tailored for the client’s individual requirements. Advice is given on how to remedy defects and the likely cost involved

A search, on the other hand, involves putting a set of questions to various authorities, such as the local authority, water authority and coal authority, and involves no physical inspection of the property. The purpose of the search is to discover any current or potential environmental issues that may affect the structural soundness or value of the property in years to come.

Q I’ve been shopping around for a conveyancer and each one quotes a flat fee ‘plus disbursements’. What are disbursements?

A Disbursements are payments that your conveyancing solicitor pays on your behalf to other people, such as those for searches and land registration fees. The largest of these payments that a home buyer must budget for is stamp duty, which is a property tax payable to the government on the purchase of residential property. A property bought for £60,000 or less is not subject to stamp duty; for homes valued at above that figure the fee scale is as follows:

·    for properties over £60,000 but no more than £250,000 – one per cent of the purchase price
·    for properties over £250,000 but no more than £500,000 – three per cent of the purchase price
·    for properties exceeding £500,000 – four per cent of the purchase price

Other disbursements on a property purchase may include Land Registry search fees, a bankruptcy search charge and a bank transfer fee for sending the monies to the seller's solicitors on completion of the purchase. Your solicitor should be willing to outline what disbursements will have to be paid and at what stage of the sale they will be payable.

Women call the shots with estate agents

Research has shown that women are much more demanding than men in their dealings with and their expectations of estate agents. The survey, by propertyfinder.com, showed that women are far more likely to consider it essential that agents have a good local reputation, are readily available, make appointments, know the property and area well and will market their home on the internet.
Men, on the other hand, are far more likely to seek lower fees than women, are less concerned that agents make viewing appointments before turning up and do not see the importance of showing their home off in its best light. One commented, ‘I think buyers should just take me as they find me.’
Nicholas Leeming, director of propertyfinder.com, said: ‘Women research their agents in a different way from men. Men may underestimate the need to present a home at its best before a viewing and are less worried if potential viewers turn up unannounced.’
Overall, low fees come much further down the list. Vendors do not select on price, partly because agents’ fees are fairly standard but mainly because they are more concerned about quality of service. Sellers with higher-value homes are much more concerned about fees. Those who consider low fees ‘essential’ are generally selling homes 38 per cent more expensive than those who consider low fees ‘irrelevant’.
The internet has come of age too. Having a property effectively marketed on the internet is the second most important factor vendors use in selecting their agent. The internet is now the most important place to search for a new home, with 79 per cent of house hunters starting their search in front of a computer.

One in two Britons sees property as best route to riches

One in every two Britons (50 per cent) believes that investing in property is the best way of getting rich quickly, yet nearly half (49 per cent) say that they do not feel in control of their long-term finances, according to new ICM research commissioned by Interactive Investor (iii.co.uk).
The research also reveals that four out of five people who say that money keeps them awake at night only spend an hour or less a week actually looking after their finances. Over half of these insomniacs (51 per cent) spend less than five minutes per day. And more people lose sleep over job or money worries (43 per cent) than those who sleep soundly or worry instead about family (39 per cent), sex (13 per cent), weight problems (ten per cent) or their favourite sports team (seven per cent).

An electric shower is the way forward these days – not only does it save you time and money in the long term but is also better for the environment, says Hotproperty

If you are thinking of getting an electric shower think of the benefits not only to yourself but also to the environment. An electric shower not only saves time and hassle by providing hot water on demand, but it also saves up to a third of the water a bath would normally use, great in these times of hosepipe bans and diminishing resources. And because water is heated instantaneously, an electric shower saves energy as well. Here are some tips on what to look out for when buying and installing your shower.

Which one to buy?

You will find that electric showers are rated in kilowatts (kW). The higher the wattage the more powerful it is likely to be. You can find electric shower units in most large DIY stores. Prices vary – they start at around £75, but it is worth paying more for the particular model that is right for you.

Can I install it myself?

Most of the work involved in installation is relatively easy to do. However, if you do not have sound plumbing and wiring skills, it is best to hire a professional. They will do it in half the time and will leave you with none of the stress. And in addition their work will be guaranteed, so if anything goes wrong afterwards you only have to make a phone call.

Tool kit

This job requires a number of specialised tools and materials, including copper pipe, power drill, spanners, wire strippers, electric cable, stopcock, hacksaw, earth-bonding cable, tube cutter and double-pole switch. Your local DIY outlet can advise you on the best tools to buy (and explain what they do).

Making the connection

Safety is the most important aspect of this process. Wiring the shower to an electric power supply must follow wiring regulations set out by the Institution of Electrical Engineers. Get a qualified electrician in to make the final connections. Make sure your electrician is approved by the National Inspection Council for Electrical Engineering Contracting. Always turn off the electricity when making connections to the mains. The last thing you want is a nasty shock (literally).

Mortgage Talk, the independent mortgage broker, highlights the week’s best mortgage deals

Short-term fixed rate

The Lambeth Building Society is offering a fixed rate until 1 October 2006 at 4.85% (APR 6.7%). There is a valuation fee of £200 and an arrangement fee of £440.

Long-term fixed rate

Derbyshire Building Society is offering a fixed rate deal to 30 September 2009 at 5.54% (APR 6.3%). There is a valuation fee of £180 and an arrangement fee of £350.

Short-term discount

Norwich & Peterborough is offering a two year discounted scheme at an interest rate of 4.84% (APR 6.3%), with a valuation fee of £225 and no arrangement fee. Subject to redemption penalties.

Long-term discount

Alliance & Leicester is offering a five-year discounted scheme, at a current rate of 4.84% (APR 6.3%), with a valuation fee of £280 and an arrangement fee of £395, without redemption penalties.

Cashback

Northern Rock is offering a variable-rate mortgage that gives a 9% cashback on the amount borrowed. The current rate is 6.84% (APR 7.1%), with no arrangement fee, but a £410 valuation fee. Subject to redemption penalties.

Buy-to-let

NatWest is offering a buy-to-let discount mortgage until 31 December 2006, currently at 5.44% (APR 7.2%) with a valuation fee of £225, an arrangement fee of £395 and no penalties.

Remortgage

The Woolwich has a two-year discounted scheme, currently at 4.89% (APR 6.6%), with a free valuation, free legal work and no arrangement fees.

Tracker

This week's best tracker comes from BM Solutions, with a two-year deal at base rate minus 0.5%. This equates to 4.25% (5.9% APR), and has a valuation fee of £265 and an arrangement fee of £699.

Terms and conditions apply. For full details contact Mortgage Talk on 0800 996 1111 or e-mail enquiries@mortgagetalk.co.uk.

Q I have put in an offer on a flat with a sale price of £255,000. I hadn’t realised until I made the offer that I will have to pay £5,150 more in tax than if the sale price were £250,000. Is it possible to go back to the vendor and agree some way of making the actual purchase price less while agreeing to buy appliances and other fittings separately? Is this legal?

A It is true that the jump from stamp duty of one per cent of the purchase price (on home purchases of more than £60,000 and up to £250,000) and three per cent (on those of more than £250,000 and up to £500,000) is quite a leap and seems most unfair to those buying at just over the threshold. And although many have criticised the current rates of stamp duty, and the treasury is said to be working on reform, it is still the purchaser’s responsibility to pay the rate that pertains to the actual purchase price of the property.

Stamp duty is paid on the price of the property in respect to the transfer of land. Therefore a purchaser (with the agreement of the vendor, of course) may negotiate the separate purchase of any fixtures, fittings and other chattels which are to be left at the property. Keep in mind, however, that the Inland Revenue are vigilant in respect to property transfers and no doubt pay particular attention to transactions at the top end of each threshold. This must not be simply a case of assigning a nominal price to items above and beyond their actual value. Misrepresenting the actual cost of the items in question constitutes tax fraud, which carries penalties far beyond the amount of money you are trying to save here.

Don’t even think of entering into such an arrangement unless the value of the items in question is accurate and clearly demonstrable. Stamp duty should be factored in as an unavoidable cost as part of a property purchase – and many would say that if you can’t afford this level of stamp duty you are buying out of your price range.

Q I accepted an offer on my flat which was the asking price suggested by the agent. I was told this was ‘subject to survey’ but based my own offer on a new house on what I could afford given the sale price. My buyer has now had his survey, which has come up with several problems with the property, all very minor. He now wants me to drop the price by £3,000, but this would make me unable to afford the house that I am moving to. What should do?

A It seems you haven’t much of a choice. If you can’t afford to buy if you drop your price by £3,000 it seems you have nothing to lose by telling the buyer that you are not prepared to go lower.

If he was interested enough to make a full asking price offer in the first place then he probably will not wish to lose the property now. A survey will always throw up something, but if these are all minor in nature you have to ask precisely what he was expecting for his money. If, for example, the place needs decorating inside or out then the agent would have taken this into account when setting the sale price. The buyer would be getting a double discount if you were to drop the price now. If the problems outlined by the survey were unexpected then you may have to be more reasonable, but only you can decide how reasonable you can afford to be.