The Nationwide survey shows prices down by 0.9% in August 2010 and annual inflation down to only 3.9% that is a massive fall from 6.6% in July. This is very disappointing news but at least they say in their press release that they expect interest to remain at 0.5% until well into 2011.
I am thinking that if rates remain low then at least we can pay off our debts and be in a stronger position when rates go up. Hopefully they will go up only gradually so we will have some breathing space to decide whether we can afford to hold onto the rented property. Trouble is if house prices fall too much then we will have no safety net and will be in a very difficult position.
Tuesday 7 September 2010
House Price Predictions
House predictions to summer 2011
Ray Boulger, John Charcol: "Very little change"
Bernard Clarke, CML: No prediction
Jonathan Davis, financial adviser: "Prices will fall"
Martin Ellis, Halifax: "Little change"
Martin Gahbauer, Nationwide: "Small falls"
Simon Rubinsohn, Rics: "Not a lot of difference"
Ed Stansfield, Capital Economics: "Down about 10%"
Ray Boulger, John Charcol: "Very little change"
Bernard Clarke, CML: No prediction
Jonathan Davis, financial adviser: "Prices will fall"
Martin Ellis, Halifax: "Little change"
Martin Gahbauer, Nationwide: "Small falls"
Simon Rubinsohn, Rics: "Not a lot of difference"
Ed Stansfield, Capital Economics: "Down about 10%"
Wednesday 25 August 2010
Interest Rates Could Reach 8% Next Year
The warning comes from the Policy Exchange, whose chief economist, Andrew Lilico, argues an economic recovery will unleash a wave of money which will lead to rampant inflation unless interest rates rise to prevent it happening.
He believes that the Bank of England has quadrupled the monetary base and once the economy starts growing properly again, lending will expand and there will then be "too much money chasing too few goods". I have heard this view before, in January people were predicting much higher interest rates by the end of this year because of quantative easing but there is little sign of it happening so far.
The Bank of England is a calming voice, Mervyn King has said that he is not overly concerned about price rises, even though they are rising at more than 3% a year, above the 2% target. He said he has been "surprised" by the recent strength of inflation, but added the factors pushing prices higher were temporary.
My opinion is that these so called experts love to grab the headlines when there are few other news stories around during he summer holidays.
One think tank reckons the base rate will stay low till 2014 and another says it will go up to 8% next year. Its a joke. If you locked a handful of economists in a room and said they could come out once they had reached a unanimous verdict they would starve to death!
He believes that the Bank of England has quadrupled the monetary base and once the economy starts growing properly again, lending will expand and there will then be "too much money chasing too few goods". I have heard this view before, in January people were predicting much higher interest rates by the end of this year because of quantative easing but there is little sign of it happening so far.
The Bank of England is a calming voice, Mervyn King has said that he is not overly concerned about price rises, even though they are rising at more than 3% a year, above the 2% target. He said he has been "surprised" by the recent strength of inflation, but added the factors pushing prices higher were temporary.
My opinion is that these so called experts love to grab the headlines when there are few other news stories around during he summer holidays.
One think tank reckons the base rate will stay low till 2014 and another says it will go up to 8% next year. Its a joke. If you locked a handful of economists in a room and said they could come out once they had reached a unanimous verdict they would starve to death!
Mortgage Lending Still Low
The UK mortgage market continued its summer slide with a fall in the number of new home loans approved by High Street banks. There were 33,698 mortgages approved for house purchases in July, down by 877 from June according to the British Bankers' Association (BBA). This was the second monthly fall in a row, and compared with the high of 45,415 home loan approvals in December.
"Gross mortgage lending remains stable, although demand for mortgages continues to be subdued. The greater availability of properties for sale and slowing house price growth have not yet fed through to increased house purchase approvals," said BBA statistics director David Dooks.
Since a pick-up in the housing market at the end of 2009, brought about by buyers getting in ahead of the end of the stamp duty holiday, the housing market has stabilised.
"Gross mortgage lending remains stable, although demand for mortgages continues to be subdued. The greater availability of properties for sale and slowing house price growth have not yet fed through to increased house purchase approvals," said BBA statistics director David Dooks.
Since a pick-up in the housing market at the end of 2009, brought about by buyers getting in ahead of the end of the stamp duty holiday, the housing market has stabilised.
Wednesday 11 August 2010
BoE Inflation Report
Woke up this morning to radio reports saying that the Bank of England was set to predict rising inflation and that would probably mean higher interest rates.
I watched some of the press conference after their quartely report had been released and it was certainly not as gloomy as had been feared. Although growth has been revised down and inflation revised up, the inflationary increase is due to one off things like VAT rather than underlying inflationary pressure in the economy. The bottom line is that Mervyn King still expects interest rates to remain unchanged for some time to come.
I watched some of the press conference after their quartely report had been released and it was certainly not as gloomy as had been feared. Although growth has been revised down and inflation revised up, the inflationary increase is due to one off things like VAT rather than underlying inflationary pressure in the economy. The bottom line is that Mervyn King still expects interest rates to remain unchanged for some time to come.
House Prices Falling
After a few days when of being a bit less worried about the future, the first thing that I heard when I switched on the radio yesterday morning was that the Royal Institution of Chartered Surveyors (RICS) are expecting house prices to fall. Although most surveyors had seen no change in the past three months those seeing a decline in prices outnumbered those reporting a rise.
Despite all the recent talk about house prices already beginning to fall I was surprised that it was the first time since last July that the monthly survey has detected a downturn.
The most worrying thing is that the RICS survey is usually a good indicator of the way thing are going.
On the plus side the survey was only of 242 opinions and of those 64% had seen no change in prices in the past 3 months, so in actual fact perhaps the headline should have been "Most RICS Report Stable House Prices".
Not a great start to a Monday morning.
Despite all the recent talk about house prices already beginning to fall I was surprised that it was the first time since last July that the monthly survey has detected a downturn.
The most worrying thing is that the RICS survey is usually a good indicator of the way thing are going.
On the plus side the survey was only of 242 opinions and of those 64% had seen no change in prices in the past 3 months, so in actual fact perhaps the headline should have been "Most RICS Report Stable House Prices".
Not a great start to a Monday morning.
Sunday 8 August 2010
Dreaming
Not much economic news in the last few days but I never intended for this blog to be just a summary of the news. My intention is to record my feelings as the news unfolds.
Last night I had a dream that was incredibly symbolic. I was in a fantastic garden that was on the coast but because the garden was slightly sloping upwards it wasn't clear from the house whether the edge of the garden was a sheer cliff face drop or whether it was just a few gentle steps down to the beach. Once you got to the edge of the garden you could see that it was indeed a sheer drop down to the sea. In the dream I remember that when we bought the house the previous owner had warned us about the drop but it hadn't really registered.
The dream represents my life at the moment. We are in a great place (even though the house is fairly modest and no more than we deserve having worked hard all of our lives) but there is a huge danger that thing could go wrong if interest rates rise and house prices fall. We were aware of the danger when we took on the project but it didn't really register, I suppose we wanted the house so much that we were a little blinded. I like to think that we took a calculated risk but I am not entirely confident about the finer detail of our calculations!
Last night I had a dream that was incredibly symbolic. I was in a fantastic garden that was on the coast but because the garden was slightly sloping upwards it wasn't clear from the house whether the edge of the garden was a sheer cliff face drop or whether it was just a few gentle steps down to the beach. Once you got to the edge of the garden you could see that it was indeed a sheer drop down to the sea. In the dream I remember that when we bought the house the previous owner had warned us about the drop but it hadn't really registered.
The dream represents my life at the moment. We are in a great place (even though the house is fairly modest and no more than we deserve having worked hard all of our lives) but there is a huge danger that thing could go wrong if interest rates rise and house prices fall. We were aware of the danger when we took on the project but it didn't really register, I suppose we wanted the house so much that we were a little blinded. I like to think that we took a calculated risk but I am not entirely confident about the finer detail of our calculations!
Thursday 5 August 2010
Interest Rate Held At 0.5%
The Bank of England has kept interest rates on hold as expected.
The decision by the bank's Monetary Policy Committee (MPC) means rates will stay at their current record low for an 18th month. It suggests the committee does not see high inflation as a serious concern.
Economists broadly welcomed the bank's decision, arguing that low interest rates were still needed to help the recovery in the economy, particularly with cuts in public sector spending expected to hit growth.
"While GDP growth in [the second quarter] was the strongest in four years, the data probably overstated the strength of economic activity," said Nida Ali, economic adviser to the Ernst & Young Item Club.
"And with significant fiscal tightening ahead, growth is likely to slow significantly.
"The MPC made the right decision," agreed David Kern, chief economist at the British Chambers of Commerce (BCC).
I am now fairly relaxed about the mid term prospects for low interest rates and level house prices or better. I just hope that I am not being too complacent. There seems less need to lose sleep worrying about the doomsday scenario.
The decision by the bank's Monetary Policy Committee (MPC) means rates will stay at their current record low for an 18th month. It suggests the committee does not see high inflation as a serious concern.
Economists broadly welcomed the bank's decision, arguing that low interest rates were still needed to help the recovery in the economy, particularly with cuts in public sector spending expected to hit growth.
"While GDP growth in [the second quarter] was the strongest in four years, the data probably overstated the strength of economic activity," said Nida Ali, economic adviser to the Ernst & Young Item Club.
"And with significant fiscal tightening ahead, growth is likely to slow significantly.
"The MPC made the right decision," agreed David Kern, chief economist at the British Chambers of Commerce (BCC).
I am now fairly relaxed about the mid term prospects for low interest rates and level house prices or better. I just hope that I am not being too complacent. There seems less need to lose sleep worrying about the doomsday scenario.
Wednesday 4 August 2010
Garden Delight
The kids are loving the garden at our new house. It is great to see them running around and having fun. The move may have been a financial risk but it is worth it to see them happy.
House Prices Rise - Halifax
According to the Halifax house prices rose by 0.6% in July. This is in contrast to Nationwide who reckoned that prices had fallen by 0.5%. That is odd because Halifax usually declare lower than Nationwide. It is all very confusing, you just don't know who to believe.
Despite prices rising by 0.6% Halifax say that the annual rise is down to 4.9%. Nationwide on the other hand reckon that annual house price inflation stands at 6.6%.
Halifax predict house prices are steadying rather than falling sharply. "The Halifax figures confirm that what we are seeing is a stabilisation in the property market rather than, as some have suggested, the beginnings of a sharp correction," said David Smith of property consultancy Carter Jonas.
Despite prices rising by 0.6% Halifax say that the annual rise is down to 4.9%. Nationwide on the other hand reckon that annual house price inflation stands at 6.6%.
Halifax predict house prices are steadying rather than falling sharply. "The Halifax figures confirm that what we are seeing is a stabilisation in the property market rather than, as some have suggested, the beginnings of a sharp correction," said David Smith of property consultancy Carter Jonas.
Tuesday 3 August 2010
Mortgage Lending Still Slow
Mortgages are still hard to get according to Moneyfacts. 58% of the deals available require a deposit of at least 25% of the value of the home being purchased. And the proportion requiring only a 10% deposit still stands at just 8% of all the mortgages currently on offer.
As long as mortgages are hard to get then demand will be low and downward pressure on house prices will result.
The banks are reporting big profits so they may hopefully ease their lending criteria soon.
I notice that Sundays reports about the prediction for house prices to rise at least until 2014 did not get reported on the BBC website. However the press release is now available on the CEBR website and it is very encouraging.
I feel moderately optimistic now after feeling quite down throughout most of July.
As long as mortgages are hard to get then demand will be low and downward pressure on house prices will result.
The banks are reporting big profits so they may hopefully ease their lending criteria soon.
I notice that Sundays reports about the prediction for house prices to rise at least until 2014 did not get reported on the BBC website. However the press release is now available on the CEBR website and it is very encouraging.
I feel moderately optimistic now after feeling quite down throughout most of July.
Sunday 1 August 2010
House Prices To Rise 4%
News that the Centre for Economic and Business Research (CEBR) is predicting that house prices will rise by 4% during 2010 and will continue to rise until the end of 2014. They say that this will happen because of a fundamental shortage of housing.
This is fantastic news but when I looked the story up on the internet it was still surrounded by stories predicting a house price crash. Still hopefully it is a move in the right direction, perhaps other researchers will follow suit eventually.
This is fantastic news but when I looked the story up on the internet it was still surrounded by stories predicting a house price crash. Still hopefully it is a move in the right direction, perhaps other researchers will follow suit eventually.
Saturday 31 July 2010
July 2010
After June`s optimism July takes a downturn.
I read a report that says that house prices are expected to fall because more people are wanting to sell than buy. This is because of the effect that the Tories are having on people`s confidence and also the abolition of HIPs is making it easier to be a seller. But surely most of those people who sell will then become buyers?
I become further worried and depressed when I see BBC programme that says that interest rates will begin to rise sooner rather than later and that we should expect rates to be around 6% as that is the norm. 6% would definetely blow us out of the water and we would probably lose both houses. This is very worrying indeed.
Some good news combined with some bad news. A large accountancy firm predicts that because of the Tory deficit plans, interest rates will need to stay at 0.5% until 2014. 0.5% will become the norm. This is great news but the report also predicts that house prices will fall by nearly 25% over the next 3 years. That would be a disaster for me and my family but I don't see how anybody can predict such a big movement, it must be guess work.
Its official, according to the Nationwide house prices have fallen by 0.5% in July. Is this the beginning of a big slide? Should I start to panic now? Should we be thinking about selling our second property while we still can?
I am torn between trying to relax and take things as they come but risk being too complacent or constant worrying which seems to be a by-product of monitoring the situation closely.
I read a report that says that house prices are expected to fall because more people are wanting to sell than buy. This is because of the effect that the Tories are having on people`s confidence and also the abolition of HIPs is making it easier to be a seller. But surely most of those people who sell will then become buyers?
I become further worried and depressed when I see BBC programme that says that interest rates will begin to rise sooner rather than later and that we should expect rates to be around 6% as that is the norm. 6% would definetely blow us out of the water and we would probably lose both houses. This is very worrying indeed.
Some good news combined with some bad news. A large accountancy firm predicts that because of the Tory deficit plans, interest rates will need to stay at 0.5% until 2014. 0.5% will become the norm. This is great news but the report also predicts that house prices will fall by nearly 25% over the next 3 years. That would be a disaster for me and my family but I don't see how anybody can predict such a big movement, it must be guess work.
Its official, according to the Nationwide house prices have fallen by 0.5% in July. Is this the beginning of a big slide? Should I start to panic now? Should we be thinking about selling our second property while we still can?
I am torn between trying to relax and take things as they come but risk being too complacent or constant worrying which seems to be a by-product of monitoring the situation closely.
June 2010
The Tories are in government and just like the early 1980s the economy and jobs are looking bleak. This is having an adverse effect on people`s confidence to make a house move.
A memeber of the BoE committee votes for a rate rise but it still looks likely that there will not be a rise for some time.
On the plus side, also, I get a small bonus at work and we manage to rent out our garage which will be a welcome further source of income. I am able to pay off a further chunk of the money I owe to my Mum.
A memeber of the BoE committee votes for a rate rise but it still looks likely that there will not be a rise for some time.
On the plus side, also, I get a small bonus at work and we manage to rent out our garage which will be a welcome further source of income. I am able to pay off a further chunk of the money I owe to my Mum.
May 2010
We have a few days holiday at Butlins, I would have preferred to have gone without a holiday this year and put the money towards the family budget deficit but I can't deny my wife and kids so we go and have quite a good time. I am bit annoyed that there is so much extra to pay out for as the ads all impled that most things on the site would be free.
The Bank of England are now hinting that interest raters will be on hold until next year so things are looking good.
I manage to transfer most of our credit card debt onto interest free cards so am able to pay back some money to my Mum. The family budget deficit is coming down slowly but I had hoped that it would come down a little bit faster than it has so that makes me a little uneasy.
The Bank of England are now hinting that interest raters will be on hold until next year so things are looking good.
I manage to transfer most of our credit card debt onto interest free cards so am able to pay back some money to my Mum. The family budget deficit is coming down slowly but I had hoped that it would come down a little bit faster than it has so that makes me a little uneasy.
Friday 30 July 2010
April 2010
The Nationwide are still saying that house prices are creeping up. This is some comfort but I am still thinking about our rented property which appears to have fallen in value.
March 2010
I saw that the house next to our old house was up for sale at £205,000. This was a big blow to my confidence as our house had been valued at £225,000! The estate agent said that our old neighbour wanted a quick sale. Also ours had a conservatory so that would add a few thousand to the value. Nevertheless it was a bit depressing.
February 2010
We had been in the house for around six weeks, it was beginning to feel like home and I had decided to stop worrying about things that might happen and just deal with things if they did start to go wrong.
January 2010
I was in the car on the way home when the newsreader said "The Bank of England has decided to ........... keep the base rate on hold at 0.5%" . Phew what a relief. I remember thinking to myself am I going to have my heart in my mouth at this time every month?
My Family
We have been married for just 3 years and have a three and a half year old boy and a two year old girl. They are gorgeous but mischievious, especially our little girl who is into everything and has a wicked laugh. We are in our early forties so the children can be a bit tiring. I work full time in a semi management clerical position and my wife works 2 shifts a week in a call centre.
The Financial Tightrope
So in order to move into our new home we needed 2 mortgages, the buy to let mortgage cost us £5000 (what a rip off) and was a whopping 4.70% tracker - remember the Bank of England base rate is 0.5% (what a joke.) Technically we were "letting to buy" not "buying to let" but the administration charge was still an extortionate £5000. The second mortgage for our new home was a much more reasonable 2.70% tracker. We could afford the repayments quite comfortably but had credit card debt and a family loan to pay off. If interest rates went up by 1% then things would get tight, if they go up by 2 % we will be badly struggling, if they go up by 3% we will have to abandon ship.
We convinced ourselves that even if we gave it a year and things got difficult then at least we could sell the buy to let and put some more money into our new home to reduce our monthly outgoings. For this though we needed house prices to at least remain stable or we would lose all of our equity in the rented property. There would also be a £5000 penalty to pay so it would be an expensive experiment.
In December 2009 I read that most people surveyed thought that house prices would continue to rise for a while yet and the media were saying that interest rates would stay at 0.5% at least until late 2010.
So we decided to risk it. It was the only way to secure our dream home and if house prices rose gently then it could end up being a good investment for the future.
We convinced ourselves that even if we gave it a year and things got difficult then at least we could sell the buy to let and put some more money into our new home to reduce our monthly outgoings. For this though we needed house prices to at least remain stable or we would lose all of our equity in the rented property. There would also be a £5000 penalty to pay so it would be an expensive experiment.
In December 2009 I read that most people surveyed thought that house prices would continue to rise for a while yet and the media were saying that interest rates would stay at 0.5% at least until late 2010.
So we decided to risk it. It was the only way to secure our dream home and if house prices rose gently then it could end up being a good investment for the future.
Thursday 29 July 2010
The Dream House
We had been looking to move for a few years but couldn't find anything that was affordable but better than what we had already got. Our old house had 3 large bedrooms but the downstairs layout was not good, a small kitchen and an awkardly shaped lounge. Most houses that we had viewed had fallen down on bedroom size, usually the third bedroom was just too small.
Finally we found a house that had 3 reasonably sized bedrooms, a good kitchen and lounge and the bonus of a large garden for our children. The location was not fantastic which I suppose brought it within our budget but even then it had plenty of parking which was another plus point compared to our old house.
We didn't think that an opportunity like this would come along again so we were determined to get it, almost at any cost.
Finally we found a house that had 3 reasonably sized bedrooms, a good kitchen and lounge and the bonus of a large garden for our children. The location was not fantastic which I suppose brought it within our budget but even then it had plenty of parking which was another plus point compared to our old house.
We didn't think that an opportunity like this would come along again so we were determined to get it, almost at any cost.
Wednesday 28 July 2010
Background
In January 2010 I found the perfect house. The owner was about to rent it out but said we could buy it but only if we could complete within 6 weeks. The only way we could possibly do that was to rent out our own house and get a buy to let mortgage to buy the new house. We therefore became reluctant landlords at the mercy of the UK housing market.
Our finances were severely stretched. We had to borrow a few thousand pounds from my mum and we had to borrow another few thousand from our credit cards. We started life in our wonderful new home with £9000 worth of debt and two mortgages totalling £322,000 but owning 2 houses with a combined value of around £426,000.
With the rent from our old house and the low mortgage rate on the new house we could pay off our immediate debt within a few years and live comfortably as long as interest rates didn't go up too quick and the value of houses didn't fall dramatically.
Our finances were severely stretched. We had to borrow a few thousand pounds from my mum and we had to borrow another few thousand from our credit cards. We started life in our wonderful new home with £9000 worth of debt and two mortgages totalling £322,000 but owning 2 houses with a combined value of around £426,000.
With the rent from our old house and the low mortgage rate on the new house we could pay off our immediate debt within a few years and live comfortably as long as interest rates didn't go up too quick and the value of houses didn't fall dramatically.
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