The UK has been greeted on its return to work today with the news that mortgage approvals rose 4% in the month from January to February this year.  Good news most will say.  However, the question that remains is is the UK market beginning its recovery, or is this simply a blip in an otherwise continuing downward spiral?

A number of property indicators in 2009 have suggested some form of recovery is under way.  From my own network of contacts in the property industry, January and February were certainly upbeat months.  So who is buying?  It seems it is a combination of first time buyers and property investors keen to take advantage of what they see as value in the market. There is certainly an increased level of demand from first time buyers who, having previously not been able to get on the ladder and have saved in the meantime, and now in position to take advantage of lower prices.

Many property investors, who will abide by the “buy low, sell high” philosophy, see an opportunity to buy up stock previously out of their reach.  Due to the increased numbers of repossessions, the Below Market Value (BMV) industry has certainly exploded in the last 3 months, with investors looking to buy at anywhere between 20% and 30% below market value on second hand property, and as much as 60% below market value for unsold developer stock.  These factors, combined with a stabilising in mortgage rates and products has led to increased enquiries, sales, and therefore the improvement in nationwide data released by various bodies.

In addition to this, lower interest rates have meant homeowners, specifically on tracker mortgages, have in some cases more than halved their monthly outgoings.  The government can therefore argue that lowering rates has put more money back in some people’s pockets.  However, it has been well documented that rate cuts have not, in the main, been passed on, so the financial easing has not affected the whole homeowner market.

So where are we?  Well general economic data would suggest the bottom has not quite arrived.  Job cuts are still being made and mainstream lending does not appear to have improved much.  Coupled with the facts that repossessions are still rising and general transactions between homeowners are still low would suggest that there is a blip in the market.  However, supply and demand are still fundamental when looking at the property market.  As prices fall, demand generally increases, and there is no doubt that demand has increased in 2009.  One could take a further view that if property prices continue to fall, the demand will continue to increase from both increased levels of first time buyers and investors looking for even better deals.  Therefore, it is my opinion that the property market will find a natural recovery point in the not too distant future.

It would seem that as the sun comes out, the days are longer and the weather takes a turn for the better, good news seems to be emerging from one of the nations leading Building Societies, with figures showing house prices and mortgage lending rising in March, compared to the previous month.

Nationwide have reported that in February 2009, the average house price was around £147,746, but the March figure has just emerged at £150,946, which is just under a 1% increase, at 0.9%.

I think it’s fair to say this is quite an unexpected rise, but does this really indicate we are heading into calmer storms and leaving the hurricane recession behind us? According to Nationwide, it is very early days, as they described the change as a “surprise bounce” and warned against concluding the market had turned.

Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said:

“Spring brought a surprise bounce to house prices in March. The price of a typical house increased for the first time since October 2007, rising by 0.9% during the month and reducing the annual rate of fall from -17.6% to -15.7%. This brings the price of a typical house to £150,946. The moderation in the annual rate of fall is somewhat distorted by conditions last year and so it would be unwise to draw strong conclusions from the significant slowdown in the annual rate of fall. Equally, while the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached.

The Bank of England has already taken strong measures to ease the tensions in economic and financial markets by cutting rates and commencing quantitative easing. However it will take time for these to work through into the housing market before we can expect a sustained recovery in house prices.”

To add to the good news about house prices, Nationwide also revealed to the country that Mortgage Approvals were the highest since May 2008, with February seeing mortgage approvals rise to 37,900, nearly its highest level for a year.

The more houses that are sold and purchased, the more money is pumped back into the economy, so these two pieces of news are not only a great joy to hear, but also tiny bits of gold dust that we need to start collecting in the years ahead.

So, in a year of mass redundancies, economic doom and gloom and of course the lack of any money to spend on the nice things, we say thank you Nationwide and may you bring us more good news next month, the month after and the following months that come.

You see, we like good news, it just feels better.

Selling properties, especially investment properties and buy to let properties used to be quite easy. Sorry to all the sales people out there, but it did.

Having previously worked for a property investment company, I know that it was plausible to push through 4 – 5 deals a week, very rarely without any lending problems and mortgage approvals tended to be easier than finding a Manchester United fan in London. Those were the glory days of lending and up until a year ago the level of lending was at a record high and the amount of buy-to-let mortgages that were being approved was staggering, also accompanied by some of the best rates investors had ever seen.

Some would say this is the reason we are in the midst of a recession and struggling, but that is another blog, one of which we have covered and will cover elsewhere.

Recently, I brought a couple of stunning BMV deals to the table, as we felt that after a year in which we would not touch property, we now had a couple of deals that really did make sense to the investor. This was due to better discounts, newer and an increased amount of decent mortgage rates and just the general feeling that property had hit its lowest level and was now starting to recover, according to reports from leading lenders and banking institutions.

We sold Penn Lane within a couple of days and currently have offers on the further two properties that we have on our books, but we kept hitting a common discussion with some of our investors – “would love to buy it, I am just too old, I wont get the mortgage”.

As with anything, previous misconceptions had started to creep back in to investors minds. Some of our investors tried to get a mortgage just as things were starting to look really bad and were hit with many reasons why they would not be approved, one of them being age which is in fact in relation to risk. This had then been indented into their investment strategy and they were probably now missing out on deals that they really wanted to get involved with.

We work with one mortgage broker and a quick call to them to inform them of this supposed age issue and we were met with they reply that this indeed was not really the case anymore, and in fact we could offer mortgages to people in their late 50’s and beyond. Chris then went back to the investor, forms went in, and he is now waiting to complete on the deal next week, which is a bonus not only for us, but also for the investor that a year ago was simply not able to go through with these deals any more.

In April last year mortgage lenders got edgy, they were panicking, they knew trouble was ahead and they were refusing mortgages for many reasons. In fact, I can not mention the name, but I knew of one mortgage that would not go through this time last year because the property had decking!!

With mortgage lending now recovering, new criteria are in coming into play and some old reasons to refuse are falling away.

Are you too old for a mortgage on an investment property? Ask us, you might just be surprised.

Some good news has been reported from the British Bankers’ Association (BBA) this morning, with early indications showing that mortgage approvals rose in January, with approval levels hitting 23,376 last month, up 4% from 22,416 in December.

But, as it seems with every other story that has some good news in it, there is also some not so positive reports, with the number of approvals in January still 43% lower than the same month a year earlier.

Hardly surprising in the current climate, but the fact that mortgage lending is continuing to rise month on month could be taken as a sign that we are starting to emerge from the gloomy mist which has been partially caused by the lack of lending over the past 6 or 7 months.

BBA statistics director, David Dooks, said of the latest data:

“The high street banks’ mortgage lending is still seeing double-digit annual growth, albeit in a much slower market. Lower borrowing costs and falling property prices have underpinned demand at these lenders, who are providing over two-thirds of all new mortgage lending. There is only limited demand from households for unsecured credit, while a fall in their deposits in January reflects a tendency to draw on cash or to move into alternative financial products.

“Lending to non-financial companies rose after two monthly falls, with modest increases in several industrial categories, while finance for other financial companies reversed the year-end fall in lending.”

The BBA also reported that in January, net mortgage lending rose by £2.9 billion, consumer credit rose in line with the recent average and overall company finance increased by £14.1 billion, reversing the previous month’s fall.

However, personal deposits fell by £2.3 billion as spending drained cash and savers sought alternative deposit products.

It is good to see some positive comments from the BBA, hopefully which will hopefully encourage more people to apply for mortgages who might not have previously considered applying, as they thought they did not stand much of chance in being approved. If we see another month of increased approvals for February, indications would suggest that the housing slump has reached its lowest bottom point and that the only way from here on in is up.

But, until we see the figures from the BBA and other leading bodies next month, we will take the positives from the news today and hope there is much more to come.

My morning started with Take That on the radio telling me this could be the greatest day of our lives, and then a report from the British Bankers Association informing me that the mortgage lending rose in December, indicating the start of a possible recovery for our shattered economy. Coincidence?

With nine out of ten news stories indicating the end of the financial world, it is refreshing and relieving to finally hear some positive news on this cloudy Monday morning.

Figures indicated that approvals for house purchases in December were around 22,000, up from around 17,300 in November. This figure is still 46% down on this time last year, but to see an extra 5,000 mortgages approved in what is traditionally one of the weakest months for selling houses, is excellent news and a sure sign that investors and home buyers are now starting to understand it is a great time to buy, with some amazing bargains on the market.

2008 was undoubtedly a lot harder for mortgage lenders and estate agents than the previous few years, with borrowing at a much lower rate, and the BBA backed this up.

BBA statistics director, David Dooks, said of the latest data:

“This first opportunity to compare 2008 with 2007 shows that gross mortgage lending by the main high street banks totalled £170bn, some 23% below 2007’s total of £221bn. However, lending by the rest of the mortgage market was half the previous year’s total, showing how mortgage lending became much more concentrated during the year. The banks approved less than half the 2007 number of loans for house purchase, reflecting falling demand from households facing greater economic uncertainty and double-digit falls in house prices over the year which led to a wait-and-see mentality.

“Consumer credit was very weak in December as people reined in their credit card spending, despite early Sales and heavy discounting by retailers. This consumer caution was also reflected in personal deposits, which rose strongly.”

There are obvious problems at the moment but we are starting to see a rise in house sales, more mortgage companies offering more products and a general raise in enquiries reported by many estate agents. The question that will be asked is will this continue for the next few months or even the year, or will this rise only last a couple of months before things take another turn for the worse.

We will not know until it happens and I am sure there are more ups and downs ahead, but we must take notice of the fact that more people are now buying homes than in November, which in turn will not only help the economy but also give some relief to the many companies related to property.

With Discover and Invest launching our first Property Investment deals next week, this news is more welcome than a cold beer on a summers evening.

Everybody in the industry, if not the country knew that any report about lending and mortgages would indicate bad news and show a decrease in the levels of lending seen throughout the past year.

2007 saw total lending reach around £363.7 billion, but 2008 saw this drop around 30% to £256.4 billion which was the lowest annual figure since 2002.

Michael Coogan, CML director general, said:

“December is typically a quiet month in the mortgage market, on top of which the market has been constrained by a shortage of funding and reduced demand.

“This week’s package of measures to support the financial system and invigorate new lending was an essential and welcome move by government. The next challenge is to settle the detailed requirements for each measure, so that they can be used by as wide a range of market participants as possible, and as soon as possible.

“A mortgage market solely funded by a few large banks and building societies would be unlikely to have the capacity to match future consumer borrowing demand, or be as competitive in the long term as the UK market has been before the credit crunch.  Increasing the range of active lenders and funding capacity in the market overall is a vital next step.

“Further measures targeted at the housing market are likely to be needed to supplement the welcome intervention to address liquidity and capital concerns.”

So what does this mean for the country?

Early indications for the year of 2009 show that in the early part of the year we can expect the lending to drop even further, but early optimistic reports are indicating the strong possibility that we could see an increase in lending towards the later part of the year.

December has always been a very quiet month for mortgage lending and when combined with the current lending issues and restrictions, the report is hardly surprising. Lending was getting out of control, increasing the national and personal debt, so at sometime it had to lower to a more realistic rate and I think we are seeing that now.

Even though the drop is quite a steep in terms of year by year comparison, we as a country could not of gone on lending at the rates seen from 2002 – 2007, so maybe the report indicates we are now acting on the current problems and by reducing lending we are now beginning to climb the very steep hill of recovery.

And if you’re looking for an interesting fact of the day – according to the CML, There are 11.7 million mortgages in the UK, with loans worth over £1.2 trillion.

It seems listening to Radio 4 at lunchtime is where I get some of my better ideas for blog posts these days.  Today of course was no different.

I nearly fell off my chair when I heard the news that the person to be the new “Minister for Banks”, otherwise known as the newly created Trade Promotion and Investment Minister, is….. a banker!

Has it occurred to anyone that when the banks decide that they require another bailout, (and many are sure there will be another one), the taxpayer, who is funding this, does not seem to have anyone acting on their behalf?  That a position in government to discuss banking solutions is not filled by a public servant, elected by the majority, but by a banker?  Ultimately, that the decision to use more taxpayer money will be taken by someone representing the banks??

On a positive note, Mervyn Davies’ bank, Standard Chartered, has kept its reputation through the crisis, so hopefully some decent advice can be passed on.  However, the idea was to keep a tight ship before the crisis happened, not after.  Ultimately, it will be interesting to see if lending does improve and on what basis.  It is still my strong belief that the levels of personal debt needs to be debated and tackled before we see any significant improvement.

It is not every morning you get a thought of the day from a computer questionnaire about your lifestyle. But today I had just that.

Every so often I take part in official surveys and questionnaires, ranging from questions about my life to what I think about certain products and even well known people.

One question on the questionnaire today had me thinking. It was such a simple question but left me feeling a little bit annoyed, worried, anxious, perplexed and many other adjectives and the reason for this will become clear.

The question was a simple “Do You Own Your Home” – with the options as follows –

• I own my home
• I rent my house
• I live with parents / relatives
• Prefer not to say

I live in a 2 bedroom house with two parking spaces outside that has a mortgage on it. It is my mortgage, I paid my deposit, filled in the forms, pay a monthly payment to the mortgage lender and yes, I would call this my home. But, logically, this is not my home, I only own 10% of it, which might allow me to say half of the kitchen is mine but the rest is owned by the mortgage company.

Effectively, if you have a mortgage you do not own your home, the lender, in most cases the mortgage company does. It is a bit like buying a car on hire purchase, the lender will own the car until you pay the loan back and housing is no different.

If you are on a repayment mortgage, over time you start to own more and more of your home, but until that mortgage is complete you will never be in full control. Of course, should you be on an interest only, you never own your home; you are basically just renting it from the mortgage company.

Such a simple question provoked a thought I have never had before, despite living here for three years. I would go as far to say I am renting, just not from a landlord or agent, from a mortgage company.

Maybe I am looking at things from a somewhat simplistic view, but next time someone or something asks me if I own my home, I am sure my answer will always be yes, but in the back of mind I will know that I will never own my home, I am just a glorified tenant.

In early 2008, Birmingham Midshires became the last lender to ditch the controversial, yet rather popular, 125% mortgage. These mortgage and loan deals, allowing people to borrow more than the value of their home, were often criticised for letting borrowers take on large debts, most of which is really starting to backfire in the current climate as people really struggle to cope with the payments.

It is estimated that around 20,000 people a year opted for these types of mortgages since they were introduced, mainly first time buyers who have struggled to get onto the housing ladder and were left with little other option but to effectively borrow beyond their means with these types of mortgages.

They were also aimed at older single people, most likely divorcees who have left the family home and have no savings and therefore were left with no other option, if they wished to buy rather than rent.

Fast forward just under a year and the mess, devastation and problems this type of mortgage left behind is only now really starting to hit home.

With house prices dropping month by month, these types of mortgages are starting to become a noose around the neck of their borrowers, with many now struggling to cope with the repayments, or certainly beginning to fear the worst over the next couple of years.

Northern Rock and Abbey National came under massive criticism and scrutiny for offering these types of mortgages a few years ago, and many others followed suit, but the beginning of 2008 saw every one of these products removed from the shelves, possibly and lesson learned but too late for many?

The mortgage immediately locked the buyer into huge negative equity, owing more than their property is worth from the very first day they moved in. Did these mortgages and this type of borrowing contribute to situation thousands of home owners find themselves in now? I think the answer has to be yes, but for the mortgage companies to take all of the blame is somewhat naïve, after all, would you pay 25% more for products in a shop, or would you just wait until you can afford them?

Should the mortgage companies have been allowed to do this or does it lie with the individual borrower to sit back and really debate whether the idea of over borrowing was really worth it? Ironically, if these 125% mortgage buyers had waited until now, not only could have entered the housing market, they could have done it so much cheaper and could have afforded so much more.

Although this type of borrowing helped thousands of first time buyers get on the housing ladder, as history continues to be made, the 125% mortgage will probably fall into the category, which should be titled “We Really Shouldn’t Have Done That”.

It’s early January 2009, and talk of the economic “downturn” (don’t you love how no-one can say recession anymore) continues apace.  What strikes me most is that we continue to go over the same points about why we are where we are, instead of coming up with and debating a number of solutions to get us going again economically.

Therefore, I am going to stick my hat in the ring and put forward my somewhat controversial 3 point proposal, which I believe would not only have us up and running quickly, but also provides a long term solution to mismanagement of money:

1.    Cancelling of a large % of credit card debt

We all know the country to an extent is “maxed-out” on credit.  It is my belief that one of the main reasons the banks aren’t lending is because so many people simply do not qualify for further lending from them ie. The risk has risen astronomically.  This problem is not going to go away anytime soon.  Huge numbers of the population pay off only the minimum amount each month, which eventually leads to defaults over credit limits.  It is all very well to say that we need to start paying off this debt, but it is my belief that many simply cannot.  Wages have not increased at a decent rate over the last 10 years and with rent, living, transport and credit commitments, many are really struggling to make ends meet.  They simply have no leeway to start saving to pay this increasing debt off.

There are many points to debate about this route, but I cannot see a better alternative.  Either the population goes bankrupt or we find a solution to put money back in people’s pockets. Credit companies have been profiting for years at 20%+ interest rates.  Either a hit is taken by them in the short-term, or consumer credit is lost completely in the long term.

Some will argue why bailout people who can’t budget properly?  Good point.  Firstly a precedent was set with the financial and carmaker bailouts.  The bigger the danger to the economy (banks/deposits, carmakers/jobs) the better chance of a bailout.  Isn’t the population and total consumer demand too big to go under too?  As mentioned in a previous blog at length, clearing most debts will enable a large % of the population to have an increased level of income, and therefore kick start the economy again.  Therefore an immediate consumer bailout is needed if this “consumer demand” is to be saved.

However, the next question is: how do we stop this crisis occurring again once credit is again available?

2.    Regulation of the credit system in particular credit cards!

Once credit is back to acceptable levels, the levels of credit have to be managed so that the population is protected from over borrowing and the economy can grow at more realistic levels of actual growth, not false bubbling.  Credit could be solely issued under banks, who are able to match bank account track records with the acceptable levels of debt.  A points system or a number of cards for different purposes could be in place to ensure that individuals do not buy too much of one thing or over commit themselves.

This is however a very political question; how much trust should be placed in the general public to manage their own funds?  Based on the current evidence, one has to say in general, not much!  It is quite true that many know how to run their finances correctly, but it is also true that many more do not.  I believe this is down to the lack of money management classes in schools, which is the topic of point number 3.  The fact therefore remains that if you don’t regulate, you end up in situations like the one we face today, which in the end affect everyone…

So to my final point and a long term solution I hope to the consumer credit disaster:

3. Make money management classes compulsory at all schools from the age of 15-16.

Perhaps this can be a compulsory GCSE.  As mentioned earlier, many are not good with money because no-one has taught them.  Combined with a culture of buy now pay later and an at times staggering belief within the population that property prices will never be subject to falls again leads us down this treacherous path. Let’s get good money management skills in the classroom, and not just for kids.  It could act as a qualification for more favourable lending conditions in tandem with proposals in point 2.

Another solution could be intern programs at a variety of businesses from the age of 16 to understand how they work.  The owners of shops are well known for introducing their children to the business at a young age and it can surely do no harm for this to be expanded through the population.  Some learn in the classroom, some learn on the job…

So there we go: some early proposals to get us going.  Whatever you make of the government’s actions, they are trying to come up with solutions.  I believe it would also help if we were more active in trying to find solutions too.