Cheltenham and Gloucester cuts mortgage rate: Another sign of a thaw in the frozen credit market today as the Cheltenham and Gloucester made its third cut in three to its mortgage rates in as many weeks. C&G cut the rate on its 1½-year and two-year fixed rate loans by 0.14% to 6.05% and 6.15% respectively, while the rate on its three-year fixed loans dropped 0.1% to 6.19%. These aren’t huge falls of course and aren’t much going to affect the affordability of your mortgage. Cutting 0.1% from a £100,000 mortgage will save borrowers £8.30 a month. But coming on the heels of cuts by Nationwide, HBOS and the Woolwich in recent weeks it comes as a reaction to drops in the interest rate swaps, a rather complex derivative, but which is crucially pegged to the interbank lending rate. All that suggests that banks, albeit slowly, are beginning to lend money to each other once again.

What it doesn’t mean is that lenders are touting for sub prime borrowers any more. The entry fee for mortgages is high, with all the C&G loans having a maximum loan to value of 75% and an arrangement fee of £995. Money may be getting marginally cheaper, but for those who really need a mortgage it’s still horribly hard to come by.

Tags: credit crunch, subprime mortgage, Cheltenham and Gloucester, UK mortgage rates

Call it weltschmertz, call it morbid curiosity, but the propertysnake.co.uk website is horribly fascinating for us observers of the UK property market. Like watching a car crash in slow motion one knows one should turn away … but the eyes are irresistibly drawn back. The site does one thing only - charts individual price falls on properties in your (and every other) area of the UK. Prices are given, then percentage falls, then the stages of price fall (£50,000 in May another £30,000 in June and so on), with the highest percentage fallers at the top (currently there are properties nudging 50% falls). You can sort by biggest fall, area, most expensive to cheapest and so on.

Propertysnake is a staggeringly simple website, with a great deal of computing power behind it, and is made possible by the powerful database accessing abilities and fast data transfer speeds of the modern internet. It’s also made possible by the critical mass of properties on the agents’ sites these days (and also on the aggregated sites, such as rightmove.co.uk and findaproperty.co.uk). Propertysnake can hit those sites and, courtesy of the database, spot changes, calculate and rank. Unsurprisingly, it’s not proved a big hit with estate agents, and Propertysnake has been threatened with legal action, which is why many of the properties onsite no longer have photos. But for getting the ‘feel’ of price movements in an area, it’s unbeatable. Also note that Propertysnake lists changes in asking prices, not prices achieved. For that you’ll have to go to the Land Registry Figures.

For those optimists calling the bottom of this particular asset price slide, we’d caution there’s a lot more pain yet. I spoke to an estate agent this week who, yet again, told me this ‘credit crunch thing’ was nonsense dreamed up by pessimist journalists. If I were a fortune teller, I might point out that the stock markets generally give a good six month lead on the financial health of the economy - with the FTSE 100 dropping below 5300 on 11 July, to its lowest close in nearly three years, I’d guess that there’s more pain to come for the economy, and thus the UK housing market. Keep watching that propertysnake!

Tag: Propertysnake.co.uk, credit crunch, UK house prices

More on property investment.

I may be stating the obvious here, but don’t go for property buying… please. Having heard an estate agent on Radio 4 this morning affirming that ‘I can see light at the end of the tunnel‘, I can only assume that he’s either being absurdly bullish or that he’s got extremely good eyesight - I suggest avoid buying property.

I also read this week of big foreign property companies snapping up job lots of offplan flats in London just now, at a 25% discount. These of course are people looking at long term places to stash their cash - in the firm knowledge that prices will probably drop a good bit further from the discounted price.

It’s very hard to get mortgages just now and they are expensive, so many purchases simply fall through anyway. Unless you absolutely MUST move, sit tight and don’t go 4 property… there will be bargains later, much later. Stay put, ask yourself how much is my property worth and how can I improve the value so when the market does pick up you’ll profit.

Links: Buying offplan in London

Should I rent or should I buy? For many prospective purchasers in the UK the question is still academic. The withdrawal of 100 per cent home loans mean that buyers now have to stump up a 10 per cent deposit. All very well and prudent, and what we all did a generation ago, but that was when the starting price for property equated to two or three years gross salary not ten or more. To give an example - I bought my own first flat in Edinburgh in 1985. It cost a cool £15,600, while I was earning £4000 a year (yes I know these figures are impossible for anyone under the age of 40 to comprehend, but there you are).  I had to save £1600 or so, which I did over the course of three or four years. It rendered the question ’should I rent or should I buy academic’. Of course I wanted to buy - like everyone else it might cost a little more but I had property within my grasp.Buy your average £200,000 flat today and you have to find £20,000, and that’s net. How long is that going to take to save up?

And that’s if a first time buyer can actually persuade a lender to give him or her a mortgage … there’s precious little credit about as we know. Should I rent or should I buy? It depends whether the banks will let you. Which makes the fact that buying has become cheaper than renting for the first time in years a bitter irony. Buying a house is the cheapest option … you just can’t afford it! Check out House prices, cheaper to buy than to rent.

Tags: mortgages 

2008 has been a vintage year for dinosaur words emerging behemoth-like from the depths of financial prehistory. Of course these aren’t the sort of monsters anyone really wanted to see again. First we had stagflation and now the dread return of gazundering, which most of us haven’t seen since the most bearish of UK residential property markets back in the early 1980s.

Gazundering is simple. You make an offer on a house, you get close to completion, then you go back and say you’re putting in a lower offer. By that point the seller has gone a long way down the road of purchasing their next home and has incurred a lot of expense. Hey, maybe they’re about to complete and have moved their children to a new school near the new house. None of which bothers the masterminds behind www.firsthomebuyer.co.uk who not only give you a step by step guide to the process (really not that complex a process I’d have thought) but also produce a lengthy mea exculpa on why gazundering is not only good but is ethically sound also.

The masthead proclaims that ‘this web site is produced by ‘three young couples’ buying our first homes. We hope you like it.’ I don’t actually, I think it stinks, and I very much doubt that the ‘three young couples’ actually exist (their identities have been ‘withheld’ because they’ve been ‘threatened and intimidated by the real estate industry’. Hmmm … what does this mean? They’ve been revving up their heliotrope and banana coloured new model Beetles and Minis outside the couples’ flats? They’ve been blanket mailing them with unsuitable properties that don’t match the couples’ search spec, or not returning their calls? Ah no, that’s what estate agents do anyway.

Apparently when you gazunder your buyer, he’ll just go up the chain and renegotiate HIS price and so on back to the top of the chain (who is ‘probably a property developer’ anyway). Easy as that. It isn’t, as they say, illegal, but using the fact that your behaviour isn’t yet against the law is a pretty flimsy and craven defence. You CAN gazunder, though you risk seriously queering your pitch with local buyers and agents, and you have to ask yourself ‘Do I feel good about what I’m doing’. Be aware too, that many people may not be pragmatic and may just tell you to ‘**** your offer’. I know I would. By all means drive a hard bargain, but if you do this you’re lying to people aren’t you. Your choice.  See more on house prices in ‘price your house realistically‘.

You’ll remember we commented on the collapse of Inside Track a couple of weeks back, in the course of which I also mentioned Whitney UK, which runs courses educating Britons in how to profit from property. The post prompted a flurry of responses, including one telling me I was being brave after the event, and that nobody mentioned these companies while they were still in business … and one from the MD of Whitney UK, which very much IS still in business. Iain Edwards (for it is he) politely but firmly pointed out that Whitney had zip in common with Inside Track, of whom he was very scathing, arguing that the outfit created a ‘dependency’ culture, whereby customers relied on Inside Track for their properties, their profits, while learning nothing themselves about developing, improving and renting out property.

‘Come and see for yourself’ they said, and so a few phone calls and emails later and I find myself booked on to a Whitney UK ‘Train the Trainers’ day, the trainers in this case being property investors who work with Whitney on their property training courses. The stipulation by Whitney is that they must be investors themselves, which makes sense to me, as I’d rather be receiving instruction from somebody who actually has bought, improved and rented out a property. I hasten to add though, that this is not one of the Whitney seminars, so I can’t comment on how those run, but I was pleasantly surprised by company. There were talks on new building and rental regulations, discussions on how tax and other matters affected private landlords … and there was plenty on how to do well during the currently dreadful property market in the UK.

Disappointingly short on Rachmann or Rigsby types discussing how now to shaft their customers and tenants, the debate focused more on how the trainers could continue to deliver a decent product to attendees. The demise of the 100 per cent mortgage (and the rest when the whole gifted mortgage thing comes into play) was roundly acknowledged too. And the relentless enthusiasm of the speakers (among them a former sheep farmer turned one of Wales’s biggest private landlords) was rather infectious. And not tub thumping American enthusiaam, but good-old British tongue in cheek enthusiasm. Being unremittingly positive types, of course, they were relentlessly looking for opportunities in a falling market - and they are there, and I have no problem with that.

You can’t get away from the fact that Whitney UK is selling a product to attendees, and you can’t deny it doesn’t come cheap. But, but, but … these are big investments, and though all the information may be out there in the public domain already you’d have to dig some to find it. I rather greedily snaffled some useful titbits about the Land Registry and other stuff which I wouldn’t have got elsewhere. So a useful ‘club’ to be part of I would say, and with no guarantees or talk of ‘get rich quick’. As ever, it’s caveat emptor.

The collapse of Inside Track, which has been running property seminars around the UK for the past few years, promising attendees the ability to ‘get rich quick’ should come as no surprise given the current state of the credit, mortgage and housing markets. The scandal is that so many of these companies are allowed to trade on the gullibility of the public. I personally don’t buy the line that ‘if people are greedy they deserve to get ripped off’. Yes, people are responsible for their actions and if they lose money trying to make money, then hard luck. But investment companies making misleading claims should be taken to task, and prosecuted if necessary. The Inside Track model was largely predicated on new build. Putting down a deposit off-plan in the sure knowledge that the property value would have risen before completion.

The even ’sexier’ version of this was ‘flipping’. Here’s how it works - though as you’ll see, it often doesn’t. A new block of apartments is being built off-plan at £200,000. In February enter the sales suite, a nicely white painted prefab amid the mud and rubble and slap down your 10% deposit of £20,000, and are told that your apartment will be ‘delivered’ in a ‘turnkey’ condition in November. I apologise for all the ‘quotes’ but enter the world of estate agents and property investment and you start to drown in the jargon. Hey, the market’s flying. You put your property back on the market in July and sell it for £220,000. 100% profit! You’ve done nothing! In fact it gets even better. You didn’t have to put the deposit down because it was a ‘gifted deposit’ from the developer. His way of saying thankyou, free money.

Er no. When a developer offers to give you something for nothing, check who’s paying for it. The apartment is likely to be selling at a premium to absorb his gift. In simple terms, it would have been £180,000 otherwise. The other beauty for the sellers of seminars is that this gifted deposit enables you to get a 90% buy to let mortgage, because 100% BTL mortgages are very hard to get. And there’s a good reason for that - prudence, safety, not overstretching yourself. And of course, you DON’T have a 90% mortgage, you effectively have a 100% one because all they did was diddle the figures.

Now in a rising market all this is disguised. The flat goes up to £220,000 (and comfortably masks the fact that had you saved a deposit, or just bought a Victorian flat or something that needed a bit of work you could have avoided paying a premium). But when things are flat or falling, as they are now, you’ve lost big time.

But … they’re still out there. Win, Russ Whitney, Win Property Investing and the rest. Whitney, to its slight credit, advises buyers to purchase distressed properties and do them up, though that too is a much tighter market than it was. And, certainly in the past, Whitney were suggesting people buy using Credit Card debt, which, call me a scaredy cat, strikes me as a terrifyingly foolhardy plan.

But again … I use Wordtracker to find what the great British public are actually searching for, typing into Google, MSN and Yahoo, and I find lots of results for ‘property investment seminars’, ‘make money through property’ and, oh dear, ‘get rick quick through property’. This is spring 2008, credit crunch, property crash, bad news being shouted from the rooftops. Some people, it seems, are their own worst enemies.

Not all property advisors are equally bad, but you should ask yourself some careful questions before you invest. In my next property investment post, I’ll be giving some pointers. In the meantime, check out our ‘House prices in my street’ post for some observations on what’s really happening to our property market … or should that be markets!