Clarke and Son News

Update from the Chief Economist at RBS (5 July 2010)

Mortgage approvals for house purchase in May dipped marginally compared with April while house prices were flat m/m in June according to Nationwide. This despite the cost of borrowing on new mortgages falling to an all time low, at least for those with some equity. The average market rate for a two-year fixed-rate mortgage with a 25% deposit fell to just 3.78% in May. Monetary policy may now be ‘pushing on a string’, at least in the housing market.  In other words, the impact of lower interest rates may have been exhausted.  Figures from the bank of England also pointed to a slowdown in the supply of credit for buying houses due to concerns about lower availability of wholesale funding, on which bank lending depends.

If you would like information on Buying or selling your home or Re-mortgaging, please contact Jenny Axe on Tel: 01256 320 555.

Under the new legislation introduced in the 2010 budget, first-time buyers’ purchase of a property is exempt from Stamp Duty Land Tax where ALL of the following conditions are met:

1. The property is a residential property, i.e. a house or flat, whether freehold or leasehold.  If leasehold with at least 21 years of the lease term to run.
2. The purchase price does not exceed £250,000.
3. The purchaser (or each of them if there is more than one) must be an individual and not a company, business partnership or trustees. There are limited exceptions to this and if applicable we can discuss this with you.
4. The purchaser (or each of them if there is more than one) is a first-time buyer who intends to occupy the property as their only or main residence.
5. The land transaction is not a “linked transaction” (except, for example, where the linked transactions relate to house and land forming the garden or grounds to the house).
6. Completion of your transaction takes place on or after 25th March 2010 and before 25th March 2012.

A first-time buyer is a person who has not previously:

• Made a “relevant acquisition of a major interest in land” consisting of or including residential property or acquired an equivalent interest in non-UK land. A relevant acquisition includes inherited property.
• Been the person for whom a financial institution made a relevant acquisition of a major interest in land as part of an alternative property finance scheme (under sections 71A, 72, 72A or 73 of Finance Act 2003) or would have been such a person had those provisions applied to a non-UK acquisition.

Further provisions deal with the possiblitily of claiming a new relief in connection with Alternative Property Finance Schemes, where a market value election is made for shared ownership leases and the discounted sale price under the right to buy schemes.

While the relief is only available for the purchase of residential property (not commercial or mixed-use), to qualify as a first-time buyer the claimant must not have previously acquired a mixed-use or residential interest in any property worldwide.

Acquisitions made jointly with family, friends, spouses or partners (where one of them has previously owned a major interest in residential propety - or inherited such an interest - within or outside the UK) disqualify the purchaser from claiming the relief even if they would otherwise satisfy all the conditions for claiming when purchasing alone.

If you require further information on Stamp Duty Land Tax, please contact Debbie Bowey on Tel: 01256 320 555.

An article in the Law Society Gazette On-Line comments on a report that Home Information Packs (HIPs) have reduced the number of failed transactions.

Conveyancer and HIP provider myhomemove said the packs had caused the number of failed property transactions it was involved in to dip to 9% since the full introduction of HIPs last April. The figure was significantly lower than the 23% average failure rate published by the government in 2007, before the introduction of HIPs.

The data for more than 10,000 sales where myhomemove acted for buyers also showed HIPs had speeded up transactions by about six days, with average time taken to complete now 50 calendar days.

However, Richard Barnett, chairman of the Law Society’s conveyancing and land law committee, commenting on myhomemove’s figures, said HIPs were unlikely to have played a significant part in reducing the failure rate.  Instead, he put the drop down to the unusual market conditions.

Paul Cowdery of Clarke & Son comments:

HIPS with up-to-date searches (i.e. usually no later than 3 months old when we receive instructions) can help to speed up the legal investigation of papers, but I still find in practice that they are of little interest to purchasers who only rarely say that they have viewed the HIP before putting in an offer.  If the market is active then HIPs can help but where it is sluggish there can be duplication of cost where buyers have to renew out of date searches. The jury is still out!

For further information on legal services when buying or selling your home or for the preparation of or consideration of a HIP then contact Paul Cowdery or Jenny Axe on Tel: 01256 320 555.

On 26 January 2010, the FSA published a consultation paper entitled ‘Mortgage Market Review: Arrears and Approved Persons’.

In this paper, the FSA sets out a package of measures designed to strengthen its current rules on arrears handling and approved persons.  These were identified by the FSA in its October 2009 mortgage market review discussion paper (DP09/3) as priority areas that need addressing.

 The FSA proposes a number of measures to help to ensure that mortgage holders in arrears are treated fairly.  The key measures proposed clarify the FSA’s existing arrears handling rules and introduce some new provisions.  They include:

• Clarifying that firms must not apply a monthly arrears charge where a firm and its borrower have agreed an arrangement to repay the arrears. Any charge imposed should represent the cost of additional administration work.
• Clarifying that firms must not add early repayment charges (ERCs) on arrears charges and interest levied on those charges.
• Clarifying that payments by borrowers in financial difficulties must first be allocated to clearing missed monthly payments, leaving charges to be paid later.
• Requiring firms to consider all options for borrowers, with repossession always being the last resort.
• Obliging firms to record all arrears handling telephone calls and to keep all arrears records for three years.

If you have any questions about mortgage payments contact Paul Cowdery on Tel: 01256 320 555.

Zurich Insurance plc has confirmed that Zurich Building Guarantee has decided to withdraw from the new home warranty and building control markets. It will honour its existing commitments to its customers, but is closed to new business.

Zurich has confirmed that its decision took effect from 30 September 2009, but the decision has not been widely publicised by Zurich or widely reported. This is an important development in the market for new home warranty products, as Zurich were one of the main providers of those products.

If you are a residential property developer, you will no longer be able to obtain the Zurich Building Guarantee for new sites.  If you are purchasing a new residential property, or a property which has been converted, where a Zurich Building Guarantee is on offer, Zurich has confirmed that it will issue policies and certificates in the normal way, as sites and properties already registered with it are commenced and completed.

For further information on Moving Home, Mortgage and Property Services, contact Paul Cowdery on Tel: 01256 320 555.

You will no doubt be well aware of the main provisions of the Chancellor’s pre-budget report. However the following are of particular significance:

• VAT is to return to 17.5% from 15% from 1st January 2010.  The 15% rate can still be used for services provided up to 31st December 2009.  When we are preparing our bills for you we will, where appropriate, provide apportioned accounts.

• The increase in the Stamp duty land tax threshold on residential properties from £125,000 to £175,000 will come to an end on 31st December 2009. The critical date is the completion date of the transaction which is normally (although not always) the date on which the purchase money for the property is paid and the buyer moves in.

Please note this office will close at 5pm on Wednesday 23rd December 2009 and re-opens on Monday 4th January, 2009 at 9am. The last date we would recommend for completion of a property purchase would be Tuesday 22nd December 2009.

For more information on moving home, mortgage and property services, please contact Paul Cowdery on Tel: 01256 320 555.

Falling house prices may seem like something of a memory, at least for some.  The Nationwide index showed a seventh consecutive monthly rise in November, by 0.5%, taking the price of an average house to £162, 764.  This is 2.7% higher than this time last year and means prices are back where they were in early 2006.  But improvement in the housing market is not uniform across the UK.  According to Hometrack, the strong growth in sales and prices is concentrated predominantly in London and the South East.  Buyer demand does appear to be softening though, which could mean the upward pressure on prices may weaken in the months ahead.*

 Paul Cowdery, Partner & Head of Conveyancing comments:

“Although the market has been stronger than anticipated in the past six months, the feedback we have from most local agents for the year ahead suggests that there is still a large amount of caution as to prospects for the housing market generally and for price stability in the year ahead.  What is causing concern is the impact of a number of uncertainties (e.g. the election, unemployment, the extent of tighter credit controls) which will come into play.  At Clarke & Son, we are continuing to focus our efforts on reviewing the title and supporting paperwork promptly to ensure everything is satisfactory and then moving transactions forward as smoothly as possible to exchange and completion once we are satisfied and our clients are happy to proceed.”

For more information on moving home, mortgage and property services, please contact Paul Cowdery on Tel: 01256 320 555.

*Source: The Chief Economists Weekly Brief from the Royal Bank of Scotland

On 19 October 2009, the Financial Services Authority (FSA) published a discussion paper setting out its proposals for major reforms to the UK mortgage market.  The discussion ends on 30th January 2010.

The FSA’ proposals include:

• Introducing a “targeted degree of production regulation” for high-risk mortgage products.
• Requiring verification of the borrower’s income for all mortgage products.  This would mean that self certified and fast track mortgages would no longer be available.
• Making the lender ultimately responsible for verifying whether the borrower can afford the loan.
•  Prohibiting loans to borrowers where there are a combination of high-risk factors (for example, a high loan-to-value ratio and a borrower with a poor credit rating and unstable income).

 Shortly, Paul Cowdery, Property Partner, will be publishing details of a survey of local agents regarding the state of the residential property market in Basingstoke including comment on the implication of the FSA’s proposals.

For more information on buying or selling your home, please contact Paul Cowdery on Tel: 01256 320 555.

On 21 April 2009, the Prime Minister, Gordon Brown, announced the launch of the UK Homeowners Mortgage Support Scheme (HMS), which is now available to borrowers.

The Scheme is designed to give homeowners suffering from a temporary loss of income breathing space. Eligible borrowers will be able to reduce their monthly mortgage interest payments for up to two years without being at risk of losing their home during that time.

The Lenders participating in the Scheme are: Lloyds Bank Group (which includes Halifax and Bank of Scotland), Northern Rock, the Royal Bank of Scotland (which includes NatWest and Ulster Bank), Bradford and Bingley, Cumberland Building Society, and the National Australia Bank Group (which includes Clydesdale and Yorkshire Bank).

A number of other banks, building societies and specialist lenders have also confirmed that they will offer their customers HMS as soon as possible. These are Bank of Ireland (which includes Bristol and West), GMAC, GE Money, Kensington Mortgages, the Post Office and Standard Life Bank.

Lenders offering HMS will have the security of a Government guarantee if the borrower defaults.

At the same time, four other high street lenders, Barclays (including First Plus), HSBC, Nationwide and Santander (including Abbey and Alliance and Leicester) have all confirmed today they will offer comparable arrangements to HMS to their customers, while opting not to take up the Government guarantee. Customers of these institutions experiencing a reduction in income and willing to make regular monthly payments will receive a similar level of support and be encouraged to seek independent money advice.

Borrowers who are interested in applying for Homeowners Mortgage Support, or finding out about comparable arrangements should contact their lender in their first instance to check their eligibility.

For lenders offering HMS with the Government guarantee, the borrower must:

• Have bought their home before 1st December 2008;
• Be an owner-occupier - the scheme is not open to buy-to-let or investment properties
• Have an outstanding mortgage of less than £400,000 and savings of less than £16,000.
• Have a regular household income and should be able to make a minimum contribution of 30 per cent of the total interest payment
• Have talked through other options with their lender and have been making regular payments for at least five months.
• Have sought independent money advice.

The Government will continue to work with smaller lenders to encourage them to either offer the Scheme to their customers, or put comparable arrangements in place.

For more information on Buying and Selling your Home or Re-Mortgaging, please contact Paul Cowdery on Tel: 01256 320 555

The Government has announced a new Homeowner Mortgage Support Scheme (the Scheme) which is intended to allow those who suffer a “significant and temporary” loss of income to defer part of the interest payments on their mortgage for up to two years.The Government will guarantee the deferred interest payments in return for co-operation from the banks. The deferred interest payments will be rolled up and added to the principal sum which the borrower will pay off when their circumstances improve.The Government hopes to introduce the Scheme early in 2009.

If you would like advice on HIPs or any aspect of buying or selling your home, please contact  Paul Cowdery or Tel: 01256 320 555