33 posts categorized "Uk mortgage"

June 02, 2009

Top 10 reasons why you will never bring a No Money Down property deal to completion (at the moment) ...

Still think you can do a No Money Down property deal? It might be time to think again:

1. Lenders have such little appetite to lend that they are cherry-picking who they lend to:
According to my personal reseach only one in 20 mortgage applications
where the person applying has the 25% deposit are going through to
completion. What does that mean for the NMD borrower?

2. Credit rating: Credit reports are now scrutinised more
than ever before by lenders. Any missed payments or adverse credit history, and they will think
twice about giving you a mortgage offer.

3. Source of deposit: Most lenders now ask for the source
and proof of deposit. They are suspicious of where this is coming from
and now check in more detail.  This can include asking to see six month's worth of bank/savings statements.

3. Demise of the deal packager: Many NMD deals used to be
pushed through by packagers who oversaw the whole process and used a
"friendly" valuer who they could "influence". There are no deal
packagers left as far as I am aware.

4. Brokers no longer allowed to choose which valuer goes out:
Brokers used to be able to select a valuer from a "panel" of approved
valuers. This meant they could work with a "friendly" valuer. This
practice has now largely stoppped and many lenders are using an
in-house valuer who cannot be "influenced".

5. Property Valuation: RICS valuers have been briefed how
to spot signs that someone is trying to get a false valuation. If in
doubt, they will down-value. By law, they have to value the property at
the purchase price, or market value, whichever is the lower. By lying
to the valuer about the price, or not disclosing the net price or how
the deal is being structured, you are committing mortgage fraud!

6. Rental Valuation: Rents are dropping, making it harder to get a deal to stack. A down-valuation on the rent will stop any deal in its tracks.

7. Contesting a down valuation: Until recently, you used to
be able to contest a down valuation by supplying comparables. These are
now no longer accepted. The decision of the valuer generally stands.

8. Solicitors and lenders require full disclosure to all parties.
If there is any evidence of non-disclosure, or the lender gets wind of
anything fishy, they will withdraw the mortgage offer. This happened to
one person I know the day before completion, and that person has been
left on a bridging loan of £2K per month. It is extremely risky to buy
anything on a bridging loan for the above reason.

9. "Seasoning" of title: Lenders now require you to have
proof of ownership of the property for a minimum of six months before
remortgaging or re-financing. This means bridging loans are no longer a
vehicle for purchasing NMD, unless you are willing to stay on a very
high interest rate open bridging loan, which again, is a very high risk
strategy.  The number of bridging financiers is also severely limited,
as most have left this arena.

10. Education: The internet has now provided education and
transparency to allow people to understand the truth about NMD deals.
This can only be a positive thing for the property industry as NMD was
simply not sustainable and was largely a factor in causing the first
credit crunch.

Conclusion: No matter how positive a mental attitude, how many
courses you go on, how many NMD mentoring programmes you join, how any
times you pay NMD deal finders for a lead, how many times you pay for a
valuation, if you don't have the 25% deposit, it is very unlikely that
you will be able to buy a property.

Sorry for the cold hard truth. Yes,
sometimes life it tough and it hurts, but better find out now than
waste your money and time on something that is defunct. Strangely
enough, I am in the same boat as you as no lender will lend to me
anymore because I have too many mortgages, so I understand the
frustration. My advice is to keep on educating yourself, get to grips
with social media
, try and set up some JV's, and maybe source deals for
others too time-poor to do it themselves, allowing you to build up your
own deposit.

Do others agree that there is a definitive decrease in "noise" on the
NMD deal front? Is the message that there are no legitimate ways of
doing NMD deals finally sinking in? Are the reports of more and more
people being jailed for mortgage fraud putting people off talking
openly about how they are doing it? With the transparency of the web,
only the most foolish person would post on a forum advertising their
NMD scheme!

We also know that the CML and the FSA are using forsensic accountants
to see which brokers are doing a lot of business in these challenging
times, and doing audits on people buying a lot of property to establish
the legitimacy of the money trail.

Are the purveyors of NMD schemes changing their business model or have
they just gone underground? Will they all start talking about lease
options as the "new NMD"?

I personally believe that the legitimate NMD deal was dead and buried
in April 2008, when Mortgage Express withdrew their bridge/same day
remortgage product. Is this finally having an impact on the NMD

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May 29, 2008




Dear fellow Investor,

Today's broadcast is about a subject very close to our hearts, and our wallets! 

In the past, we have been big advocates of doing deals in a "no money down" format.  However, those days are now long gone (courtesy of the global credit squeeze), and a wave of change has swept through the U.K. mortgage market with over 600 BTL products being withdrawn in the past two weeks.

Every day, we are bombarded with emails from companies, property clubs, and mortgage brokers telling us that they have found a new way to do so-called "no money down" deals.   And every day, we investigate these deal structures and find them to be fatally flawed on a number of levels.

We are also bombarded everyday with emails from our clients asking us if certain deals structures presented to them by third parties are legitimate. And every day, after we have researched their enquiry, we have to go back to them and tell them that the deal structure is not legitimate.

For novice investors in particular, it is very confusing as one person is saying they can do "no money down", and we are telling them otherwise. At the end of the day, you must decide who's advice you trust.

Since April 2008, it is our opinion that there are now no legitimate ways to do "no money down" deals here in the U.K. with the current mortgage products, and taking into account Council of Mortgage Lenders and Law Society regulations.

(Indeed, our last networking event had a presentation to this effect by mortgage broker, Dan Peacock).

To this end, we have joined forces with our colleagues at Property Traders to bring you the truth about "no money down" deals and to bring into sharp focus the dangers of doing them: not only from a legal standpoint, but also from a tax perspective; something that is never considered by most investors.

This is an unbiased, independent report exposing the serious tax and legal implications of doing deals in this format and it will answer all your questions about whether you should be entertaining these deal structures.  There are issues here which no one else will tell you and YOU NEED TO KNOW THEM.  There is no need to be confused any longer.

The report was co-authored by former Accountant and full time investor, Mark Tolley, and Mortgage Broker and serial investor, Chris Wright, along with support and insights from the Directors of 4 Walls and A Ceiling.

For further information, or to purchase your report for £29.99, please click here

We at 4 Walls and A Ceiling have a deserved reputation for always giving you the best possible advice.  Unlike most other companies with hidden agendas, we have been warning our clients of the dangers and pitfalls of doing "no money down" deals for several months now.  Our very own Nick Tadd (Director) was recently seen on BBC2 on "The Truth About Property", calling for regulation of the BTL industry.  Yet people still want to believe it when someone tells them that they have found a way to fudge the system.   No doubt, you will be asked to use their solicitor and broker.  Ask yourself "why?".  If the deal is legitimate, you should be able to use any broker and solicitor you choose, as transparency is a pre-requisite of any legitimate property transaction.

The bottom line is ... if you are not disclosing the incentive and/or discount to the lender, it is tantamount to mortgage fraud.

Our report dissects all these latest "no money down" systems and exposes their flaws and also flags up the legal and tax implications.  If you are found to have done one of these fraudulent transactions, you can end up with a prison sentence and owing the Taxman thousands of ££££££'s.

Before entertaining doing one of these deals, you need to read our report.

For further information, or to purchase your report for £29.99, please click here

Remember that most of these deal structures require you to get the property valued at the gross price.  That means deceiving the valuer/surveryor in some fashion so that he is not aware of the net price or the discount/incentives involved.  We have one client who was advised by another company to pay for four valuations at £450.00 a shot, and was still unable to get a gross valuation through.  That's a lot of money to waste on a deal that fell at the first hurdle!.  On top of that, there are often significant costs such as bridging finance for the deposit, two lots of solicitors etc.  Hardly "no money down" when you take these costs into account!.  (And please do not even THINK about putting such costs on a credit card ... as recommended by unscrupulous clubs and companies of late ... ).

As much as we love the concept of buying property without putting our hand in our pocket, the time has come for us to take a stand against the "no money down" concept.  Too many unsuspecting people are being seduced into these kind of deals with false promises and a complete lack of understanding as to what they are letting themselves in for.

If you read our report, you will be convinced that it is now not possible to do it here in the U.K. legitimately  -

For further information, or to purchase your report for £29.99, please click here

Please do not waste your money on reservation fees, valuations, solicitors fees etc. This report will explain why and tell you the legal and tax implications of what you are contemplating doing.  The entity trying to sell you a "no money down" deal will never tell you these facts or be able to answer your questions about them.  Indeed, we ourselves have posed as "mystery shoppers" on many occasions and found fatal flaws in these deal structures that the person trying to convince us to use them was unable to explain or overcome!

However, rest assured, the second a
LEGITIMATE mortgage product or deal structure becomes available in the U.K. to do "no money down", we will be the first to tell you about it, because we will be using it ourselves!  Until then, extreme caution and a healthy dose of skepticism is advised.

For further information, or to purchase your report for £29.99, please click here

Finally, its worth noting that one in six property investors is going to be audited by the Inland Revenue.  Therefore, you need to be whiter than white, and your deals and accounts need to stand up to scrutiny.  Many of these "no money down"/cash-back formats have yet to be tested through doing a tax return, and when that happens, these deals will start to be exposed for what they are and a lot of people who got involved with them will start to find it hard to sleep at night.  Don't be one of them!.

If you are interested in the truth about "no money down" deals, you NEED this report.  It could save you from financial ruin in the future. It's everything you need to be aware of, but didn't know to ask about.

Every investor interested in "no money down" deals should read this report and make up their own mind whether to get involved or not. 

You can only make an informed decision on anything when you have all the facts and fully understand all aspects of what you are attempting to do!

Now, more than ever, education is vital to make sound investment decisions. This report will educate you as to the truth about "no money down" deals. 

We at 4 Walls and A Ceiling promote education and networking as we believe they are vital to your success.   This report is another example of us helping you increase your knowledge base and make informed decisions to secure your financial future.

Property investment is like taking part in a marathon - not the 100m sprint!. In other words, you need to take a mid to long term view and not be seduced by deals that seem too good to be true.  There is no "short cut", or "get rich quick" and be wary of anyone who is telling you there is!

For further information, or to purchase your report for £29.99, please click here

March 27, 2008

Warning to banks as King hints at April cut

Warning to banks as King hints at April cut

4wallsandaceiling.com Newsletter

Source: - Simon English, Evening Standard

Nick says…

This is good news.

As expected Merv King has “hinted” at a rate drop from 5.25% - 5% (which is expected to go down further before the end of the year).

There is a delicate balancing act that he has to achieve to keep our economy on the straight and narrow, and clearly he has some work to do to keep it as such.

I’m glad I don’t have that job!

However, there are x2 points that I have pulled out of this body of writing that are refreshing.

1.    King said there were 'two quite different policies and two separate sets of circumstances' in Britain and recession-bound America. This, in my opinion, has always been the case… not that we can be arrogant about the situation but as a country, economically we are still in a commanding position.
2.    King said “Closer regulation of financial services is inevitable in the wake of the crunch…the pain that will be suffered by the financial institutions this year will keep minds focused on it for a number of years”. Great, bring it on.

What does this mean to us Landlords?

Financially we are in a “consolidation” period in this country at the moment, but as the year progresses and goes into 2009, in my opinion, it will get better as time goes on.

It’s not going to be as easy as it has been to find the financial products that we have been used to over the last few years, however, that does not mean that it will be impossible either. It’s just that we are going to have to work a bit harder.

Having said that because of this situation it means that “sellers”, who ever they are will be finding it tough to sell their property/ies… which is goo for us.

More importantly the knock-on effect is that, in theses conditions, rents will have a tendency to rise. My own circumstances can confirm this.

A few weeks ago we received a document from Mortgage Express, who did a survey of 2000 landlords, of which the conclusions were quite intriguing: -

1.    For rental statistics over the last 12 months 52% stated it would stay the same, 38% said it would rise and only 2% said it would be lower. (The rest were don’t know or not stated)
2.    For rental statistics over the next 6 months 33% said it would rise, 62% said it would remain the same and only 1% said it would go down (the rest were “don’t knows”)

From what this tells me is that the market place is still buoyant and confidence is still there.


The Bank of England today paved the way for a reduction in interest rates next month but warned it will not follow the aggressive cuts seen in the United States.

Governor Mervyn King said the financial crisis has 'moved to a new and difficult phase' as the deepening credit crunch increases the risks of a sharp slowdown in the economy.

He said 'Yes' when asked by MPs on the Treasury Select Committee if the tighter lending conditions mean interest rate cuts are more likely.

Economists said King's dovish comments suggest he could vote for a rate cut as early as April after resisting such calls this month. The Bank has already reduced rates from 5.75% to 5.25% since December.

Howard Archer, of Global Insight, said: 'We now expect the Bank of England to trim interest rates by a further 25 basis points to 5% in April rather than in May as we had previously forecast. Further out, we expect interest rates to fall to 4.5% by the end of the year and to 4% in the first half of 2009.'

However, King was adamant that the UK will not follow the same path as the US, where the Federal Reserve has slashed rates from 5.25% to just 2.25% in recent months, including a cut of 75 basis points last week.

King said there were 'two quite different policies and two separate sets of circumstances' in Britain and recession-bound America. 'This is not an economy that has ground to a halt,' he said, adding that conditions in the US are 'materially worse' than in the UK.

He added that inflation is still a major concern, having hit 2.5% in February and now heading towards 3% - well above the 2% target.

King said the Bank faced 'a difficult balancing act' between rising inflation and slowing economic growth. 'We are not going to lose control of inflation in this country,' he added.

He also signalled that the era of unfettered liberalism in the banking system is coming to an end, condemning the 'hubris' of bankers whose bad decisions had brought crisis to the City.

'There's a lot of hubris around in thinking expansion of financial services was a good in itself,' he said. 'It's not, it's a means to an end.'

King said closer regulation of financial services is inevitable in the wake of the crunch. Financial institutions 'will have to hold more capital in the longer run', and have their activities 'monitored more carefully' - although he said it was not the time for 'knee-jerk reactions'.

'I think the pain that will be suffered by the financial institutions this year will keep minds focused on it for a number of years,' he said.


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March 26, 2008

Seeing signs of a British Recovery...

Seeing signs of a British Recovery...

4wallsandaceiling.com Newsletter

Nick Says...

Even the Germans and the Yanks see the light!!!... after all it's not rocket science!

After record losses in property investment, some see buying opportunities.
Source:- Los Angeles Times


Calling the bottom of the British property investment market is a high-stakes game no one wants to get wrong.

The risk of "catching a falling knife," experts said, has stopped any widespread return to the market. Most investors are looking to buy into a market on the way back up -- even if they miss the turning point.

But this is causing a Catch-22: Without deals, it is difficult to obtain an accurate understanding of where the market is; yet without that understanding, there are few willing to risk doing the deals.

So far, it has been equity-rich investors, such as German funds, and the brave, such as the opportunity funds, that have been making the early moves in a British market that has been indiscriminately hit by a fall in prices over the last 12 months.

But with these leading the way, there are signs that some mainstream investors are poised to return to the market. Some are even predicting that prices are set to rise again.

It would be a remarkable turnaround if that proves to be the case after record losses in British property, and the view remains contrarian. Total returns -- the combination of rental income and capital growth -- dropped 7.6% last quarter, the biggest fall in the history of the benchmark Investment Property Databank index. Capital values were down 8.7%.

But Robert Houston, chief executive at ING Real Estate Investment Management, said his company was ready to spend money in Britain again as value has now returned.

"We think that there is a buying opportunity," Houston said. He believes the latest average yield of the IPD index of 5.25% represents the British market's basic fair value.

"Anything more than that we think is fair value, and that is pretty much every sector right now. We don't see prices going down any further, and, if anything, they could go up in the next six months."

Houston said that circumstances were very different from the last severe fall in property prices in the early 1990s, when the market was hit by a three-year downturn.

"The fundamentals are sounder this time, as we don't see tenant demand falling off," he said.

Martin Moore, managing director of Prudential Property Investment Managers, said the nation was now past the crisis point.

"Last year was an extraordinary period even for my 35 years in the industry," Moore said. "We had been surprised how long the market had continued up, but it has corrected so hard that the market is fairly priced. Now is an interesting time to put money back in."

The fact that the sell-off in the market was so indiscriminate has meant that there are opportunities in many parts of the market, he said.

"As we look to the future, we cannot see any clear indications of why we should favor one sector over another," Moore said, though he warned that London had further to fall and that there were question marks over the "more average shopping centers and bulky goods parks."

There are still many who are nervous about returning to the market until there is more evidence the correction is over.

Agents said that the equity-rich German funds can justify paying prices at yields of 5.5%, for example, but are unlikely to go any lower, and so are unlikely to drive further compression of yields in Britain.

This leaves the opportunity funds, which have yet to show any real appetite to buy significant amounts, and sovereign wealth funds, which have so far been content to cherry-pick trophy assets.

"We see prices being cheaper at the end of the year than now," said Andy Rofe, managing director for Invesco in Europe.

A lot of money is coming from German and U.S. investors, he said, but it won't be spent until later this year.

"The U.K. has parallels with the U.S., and investors are wary of catching a falling knife," Rofe said.

Given the levels of uncertainty, however, it will be several months before an accurate picture emerges -- and that will depend on the wider economy.

"Overall, our observations are that, as best it can, the commercial property market is adopting a wait-and-see approach," said Jim Tucker, a partner at KPMG. "There are bound to be asset-specific problems for some stakeholders, and there are opportunists already seeking any assets that come up for sale.

"The next quarter, and the one after that," he said, "is likely to give a much better indication of how far and fast the market will fall, and how widespread the problems will be."

March 24, 2008

Buy-to-Let investors boost the health of the whole market.

Buy-to-Let investors boost the health of the whole market.


Nick Says...

No one gives this much credibility, however, it's true we are "propping up" the market.

Take out the "doom mongers" rants and put together the stats, all you have left is fact.... the market place is strong.

Buy to let investors should ignore commentators' suggestions that they received favourable tax treatment, said the Association of Rental Letting Agents (ARLA).


The ARLA Review and Index, published last week, said buy to let investors were vital to the health of the whole housing market, and without them there would be little or no choice in housing.

The latest quarterly results showed that 42 per cent of all investment landlords had one or two properties to let, while one out of ten landlords had more than ten in their portfolio.

Results showed that four out of ten investors in the buy to let market had mortgage borrowings with a loan to value ratio between 51 and 75 per cent. A further quarter had borrowed that account for less than half of the value of their residential property investments.

Six out of ten of these investors expected to acquire further properties over the next twelve months and the average life expectancy of these investments was longer than seven years.

Adrian Turner, chief executive of ARLA, said, "Again, our quarterly figures show that investment landlords are in the business of residential letting for the long term. This is vitally important. Without these investors, who have helped to save the private rented sector by re-financing it, there would be little or no choice in housing.

“If that had happened, the probability is that house prices would have risen further and the social rented sector would have buckled under the pressure. So, we must ensure that investors are neither misled nor panicked as a result of ill-informed criticism of the sector."

"Also, it should be made perfectly clear that these investments are taxed on profit and capital gains in precisely the same way as any other investment or business," he said.

March 20, 2008

What the Budget means for property investors

What the Budget means for property investors

Worried that the Chancellor might back-track on plans to cut capital gains tax (CGT) on property?


Investors - worried that the Chancellor might back-track on plans to cut capital gains tax (CGT) on property - will be heartened that Alistair Darling is pressing ahead. From April, people who own second or rental homes will have their CGT bill cut from as much as 40 per cent of their profits to just 18 per cent.

Agents are divided on whether buy-to-let investors, who favour the cheaper homes once snapped up by first-time buyers, will choose to exit the market or will sink the extra profits into yet more properties for renovation and eventual resale.

Some believe that the new rules may offer overwhelmed amateur investors a way out. Neil Chegwidden, head of residential research at Jones Lang LaSalle, notes that the new regime will most benefit those who purchased within the past two years (and would have been liable for the highest rates of CGT under the current system). It is this group of investors - many of them beginners, seduced by the easy money others made in the housing market, but now aware that the market is shakier - who will be most grateful for an opportunity for a low-cost exit.

Sadly, owner-occupiers who might have been hoping to join the fray are increasingly frustrated by a lack of easy credit. Buyers are increasingly facing sudden demands for larger deposits from lenders, a factor that has caused some transactions to fail.

The buying and selling that the CGT changes will probably prompt in cheaper postcodes may also be reflected in agencies in Central London. After years of growth, the health of the market for prime property has been unsettled by changes to non-domicile taxation rules. Estate agents in Mayfair, Kensington and Chelsea have reported that many foreign homeowners are proposing to sell up rather than trust the Government's assurances that it does not not intend to tax them too heavily.

Foreign nationals accounted for 50 per cent of all buyers in prime Central London last year. Jonathan Hewlett, head of residential sales in London at Savills, says: “A substantial proportion of prospective overseas buyers and existing overseas owners have been reviewing their options, pending the outcome of the Government's deliberations.”

Any hope of a reversal of that policy, due to take effect next month, was scuppered with the Budget. Now all that remains is to estimate who will feel the pain most acutely. Lucian Cook, director of research at Savills, says: “The extremely wealthy are unlikely to baulk at the scale of the charge, and so the major concern has been among the brokers, bankers and hedge fund managers.”

February 25, 2008

Mortgage Fraud...

Mortgage Fraud...

4wallsandaceiling.com Newsletter

You must read this article I found on the Financial Times web-site, Click here. It illustrates why you should ALWAYS obey the law when it comes to finance... and for that matter anything in my mind.

Ironically enough this is something that we covered, in depth, last weekend (17th Feb 2008) by Andrew Callen our favoured Solicitor at our networking event.

The problem with mortgage fraud is deeper than the initial fraud itself. Not only does it ruin peoples lives (by selling property to people on the grounds that it is a "no money down deal", only to hang these people out to dry because they have no business acumen to cope with the acquisition - thus causing reposession). This is morally wrong. Finally as and when the lenders/FSA clamp down on the situation, which they will do,  it makes our (you and me as professional landlords) lives harder... and that annoys me!

The only person that gets "stitched up" in a fraudulent transaction is the one you see in the mirror!

You can make a good living out of property without "dodgy" transactions.

This is why it is so important to understand what you are stepping into. All these property clubs that sell all those wonderful deals: the first thing you need to understand is how are they doing the finance or writing the contracts... if you don't know how to do this it is tantamount to buying a formula 1 car when you don't have a driving licence!

Ignorance is not an excuse in a court of law. You have to take responsibility for what you are doing, even if you are paying someone else to do it for you.

If you want to know more about the legal aspects of finance then please stay in touch. As I said earlier, last weekend we had a whole section on the Law Society and The Council of Mortgage Lenders Hand Book. By understanding this (and it's not rocket science) you will understand what you can and can't do.

Come along to our networking events, we tend to cover most topics that have relevance to lives as a landlord and usually more besides... you can never learn less!

Click here to attend our next networking event 16-3-08

February 08, 2008

Lenders call for buy-to-let mortgage regulation

Lenders call for buy-to-let mortgage regulation


Source: - Homemove

Nick Says…

This can only be a good thing as this whole market place, in my opinion, needs regulating. However, the regulating should not just be for the mortgage advice it should also cover the advice given by so called “property clubs” and “finders”. The good ones will have no problem but the “sharks” will get a kicking… and that can’t be a bad thing.

According to research by legal firm and repossession specialists, Moore Blatch, almost nine out of ten mortgage lenders want to see regulation introduced specifically for buy-to-let mortgage advice.

The results of a recent survey suggest that some new buy-to-let investors are ill prepared for the financial implications of their investment, prompting lenders to call on the Government to regulate buy-to-let mortgage advice as if it were an investment product.

In its research, Moore Blatch found that 68% of lenders expect buy-to-let repossession to increase, while 50% of respondents thought buy-to-let borrowers were extremely vulnerable to repossession.

Eighty-one per cent of respondents agreed that repossessions will increase overall in 2008, while 31% expect to see shortfalls increase following sales of repossessed properties.

Of the 68% of respondents who agreed that buy-to-let repossessions would increase, 38% expect this to be by up to 10%; a further 31% predicted a rise of between 10% and 15%.

Thirty-five per cent of lenders questioned believe that void periods (periods when a property is unoccupied) will be the most likely reason for repossession; 27% expect the rise to be fuelled by landlords’ inability to subsidise their mortgages.

Finally, the survey found that 54% of lenders expect an increase in litigation against mortgage brokers by landlords claiming they were not given risk-based advice.

The Government, which is responsible for determining the scope of regulation by the Financial Services Authority, has not yet indicated that it will consider regulating buy-to-let mortgage advice.

January 15, 2008

Property investment news: A look at the interest rate decision

Property investment news: A look at the interest rate decision


Source: - Equity

Nick says…

This is exactly as it should be. All it means to me, other than the focus on mortgage products, is that builders will still find it hard to shift stock as the lenders will find it hard to release new products until the bank makes up it’s mind.

As I write this, we already have a whole day’s worth of visits to building sites booked in… note we did not phone the builder they phoned us! This just goes to show the motivation.

News Image On Thursday, the Bank of England's monetary policy committee (MPC) voted to keep the UK's base interest rate at 5.5 per cent. The move went against the demands of the retail industry, which for the most part wanted a cut in order to boost sales after a weak Christmas shopping period. Despite the high street's calls, however, the Bank's decision was in line with most experts predictions. A poll of eight of the country's major financial institutions found only one who was expecting the rate to change.

"Despite some evidence of a sharper-than-expected deterioration in business and financial services, overall data developments during the past month do not seem sufficient to force an earlier policy response," said Ross Walker, spokesman for the Royal Bank of Scotland.

Giving a possible reason for the MPC's decision, he added: "A follow-up rate cut in January would risk signalling that the MPC had abandoned its November Inflation Report central projection and soft-landing narrative." Mr Walker also said that the general feeling is that the cut will come next month, sentiments shared by Global Insight and HSBC.

As property investors may be aware, February will see the release of the UK's quarterly inflation report, which Mr Walker referred to. Inflation is always a major factor in the MPC's decision making process as it can use the interest rate to try and control it. The holding of the base rate at 5.5 per cent would appear to be an anti-inflationary measure amid high oil prices, soaring energy costs and a floundering US economy, but obviously the committee will have a better view of these things when the report comes out next month.

This idea is shared by Trevor Williams, Lloyds TSB's chief economist for the UK, who said before the decision: "My view is that they should leave it until February; because then they will have the new forecast of inflation which [looks ahead] two years, gives them a better feel for how the economy has performed over the last few months - and how it may perform through the next two years - and what implications this has for the inflation target."

People in the property investment market, who may have been monitoring the interest rate decision closely because it can affect their mortgage repayments, should be aware that while many predict a rate cut next month, further cuts are also expected later in the year.

Barclays Capital spokesman Simon Hayes - the one expert in the poll who did move for a 0.25 per cent rate cut this month - said his organisation also expects a reduction next month, followed by another in April. His forecasts would see the base rate set at 4.75 per cent by the start of May.

January 07, 2008

Interest rates to fall again - and to carry on doing so this year

Interest rates to fall again - and to carry on doing so this year

4wallsandaceiling.com Newsletter

Source: - Stuart Law, Assetz

With rates dropped before Christmas in December's Bank of England rate decision we saw the beginning of what we expect to be a fairly quick series of base rate reductions. The talk this month between the members of the MPC committee will mainly centre on whether to drop rates this week or at the beginning of February instead. Just like last month there will again be discussion of whether to drop half a point rather than quarter of a point. Our overall expectation is that it is extremely likely rates will be dropped by another quarter of a point this month and if not this month, certainly at the beginning of February. There will be another quarter point drop by the beginning of April at the latest.

This will take base rates back to 5% which we've always said was around the neutral level but with the American sub prime market problems still reverberating around the financial world we would not be surprised to see base rates going slightly below 5% and 4.5% or 4.75% are likely to be where rates level out by the end of this year.

There's been much talk of these base rates not being passed on to mortgage holders - this is only partially true and mainly with regard to sub-prime/ adverse clients rather than good-credit clients. There has also been much talk of mortgage rates remaining high even if base rate drops due to LIBOR, the interbank lending rate, being artificially high recently with the credit problems. What most commentators have got wrong is that most buy to let mortgages are not related to LIBOR and also LIBOR has come back over the New Year to be much closer to its normal premium over Base Rate. Don't believe everything you read in the press, in fact at the moment believe very little as is almost entirely hype from dyed-in-the-wool property bears.

We still say the best mortgage products to purchase at the moment are the base rate trackers - with base rates coming down so fast and hard you're going to see some pretty good payable rates later in the year. Our Assetz Finance division has plenty of great products so at risk of repetition don't believe the press comments that great mortgage products don't exist at the moment provided you've got a decent credit rating - they do.

The fundamental upward pressure on rents continues and details of all of the market participants confirming that this is happening are in my previous blog entries. In summary, the majority of adverse credit history mortgage applicants are being turned down, homebuyer mortgages are more expensive than buy to let mortgages now, the housing shortage hasn't gone away and is being made worse by developers slowing down their build programmes due to more difficult credit conditions (EC Harris, the global property development project managers are the latest to confirm this).

Combine this with developers giving bigger discounts against current RICS market valuations, and some private vendors agreeing to 'cheeky' bids and the net combination is an excellent buy price versus rental yield versus mortgage cost combination leading to a profitable acquisition for your portfolio.

May we take this opportunity to wish you a prosperous and happy New Year and may 2008 provide you with excellent property investment opportunities - we are sure we will be bringing you many.

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