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Archive for October, 2006

HIP infrastructure a ‘costly indulgence’, says CML

Friday, October 27th, 2006

The director general of the Council of Mortgage Lenders (CML) has said that the infrastructure for home information packs (HIPs) looks like a ‘costly indulgence’ and has urged to government to think again about whether it can still be justified. The complex certification system looks ‘disproportionate and anachronistic’ now that the  requirement for a home condition report has been dropped.

Mr Coogan commented: ‘This infrastructure seems a costly indulgence . It is also a clear-cut example of gold-plating. We have therefore written to the Better Regulation Commission to draw its attention to this example of poor implementation of European legislative requirements.’

The CML believes that the delayed dry run that will soon take place will not be an effective test of the new arrangements, as government funding has been made available to increase take up. There are also no clear criteria for monitoring and evaluating the dry run.

The CML has highlighted the recent innovations that have emerged from lenders in making unconditional mortgage offers at the point of sale, using credit reference information about the borrower and automated valuation data about the property. Mr Coogan concludes: ‘Comparing our experience with other countries around the world, I am even more convinced that market forces should be the primary mechanism for delivering improvements to the house buying and selling process.  The current HIPs framework, seemingly justified by the EPC requirements, is simply not proportionate and could not pass a robust regulatory impact assessment. It is time for the government to think again … again.’

Posted in Borrowing, Consumer Credit, Consumer debt, Financial news, Financial products, Homeowners, House buying, Housing news, Property, UK Finance | No Comments »

New research reveals FTBs’ property struggle

Friday, October 27th, 2006

First time buyers face more of a challenge to get onto the property ladder than their parents did, says a new study by the Alliance Trust Research Centre. The study is looking at key property and income ratios. According to the research, between 1970 and the present the ratio of house prices to income has risen by an average of 60 per cent. The situation is particularly acute in London, East Anglia and the South West, where the increases were 66 per cent, 65 per cent and 63 per cent respectively.

The least affordable region for first time buyers is London, where house prices are now 4.4 time income, compared to 2.6 times income in 1970. In the South East the ratio has increased from 2.7 times income to 4.3 times income, making it the second least affordable region. Scotland has the lowest ratio of house prices to income, with prices now at 3.2 times income, compared with 2.4 times 35 years ago.

During the 35 year period house prices have increased by 3,432 per cent in London, the highest increase, and 1,906 per cent in Scotland, which was the lowest increase. Meanwhile income growth has been very mixed.

Shona Dobbie, Head of the Alliance Trust Research Centre, said: ‘These figures clearly show it is becoming harder for first-time buyers to break into the housing market. In recent years, buy-to-let investors have taken on the traditional role of first-time buyers in keeping the market going, but you really need first-time buyers to sustain prices over the longer term. Our research shows how much pressure these new buyers are now under.’

Dobbie added: ‘With so much time now being spent focusing on saving for a house and paying it off, people are putting off retirement saving for even longer.’

Posted in Borrowing, Buy to let, Consumer Credit, Consumer debt, Financial news, Financial products, First time buyers, Homeowner Loans, Homeowners, House buying, Housing news, mortgages, Property, UK Finance | No Comments »

Loan and Mortgage Market Opening to Self-Employed

Friday, October 27th, 2006

New competition in the mortgage and loan industry is opening the market to new customers. One market group that will benefit from the new changes are self-employed people.  The non-conforming mortgage market has already introduced self-cert loans.  The rise in the number of self-employed applicants is the driving force behind many of the new changes.

Managing director of My Mortgage Direct, Paul Hearnden said: ‘Over the past year we have seen a steady rise in enquiries from people who, while earning enough to pay their mortgage, are dismissed by mainstream lenders because they can’t prove their income with pay slips.’

‘But this doesn’t mean they can’t get a mortgage. A self-certification mortgage option is the straightforward way round this stumbling block and makes the buying of property easier for a section of the market that has long been sidelined.’

Self-certification mortgages allow people who cannot verify their income, those who derive an income from several sources, or  those who have been in business for long enough to apply for a mortgage. The mortgage is based on the customer’s actual income instead of its documentary evidence.

‘Increasing numbers of workers are being offered short-term contracts as employers look to reduce their responsibility to their workforce in terms of benefits and pensions,’ Hearnden added. ‘But this should not – and does not – mean they can’t enjoy the financial security of those on permanent contracts.’

This is good news for people who have been self employed in smaller businesses, but do not qualify for a mortgage because their income fluctuates.  This can be frustrating for people who are in the higher tax brackets, but have banks treat them like they are in the highest bad-credit category.

Posted in Borrowing, Consumer Credit, Consumer debt, Financial news, Financial products, Homeowner Loans, Homeowners, House buying, Housing news, mortgages, Property, UK Finance | No Comments »

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