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Mortgage lending to house buyers picked up again in May, according to the Council of Mortgage Lenders (CML).
The number of home loans for house buyers rose by 4% in the month to 37,400, although that was still 28% lower than a year ago.
First-time buyers are still having to put down an average deposit worth 25% of their home’s value.
But the CML said 80% of first-time buyers under the age of 30 were receiving finance from their parents.
“The bank of mum and dad remains an apparently important source of help for young first-time buyers,” said CML economist Paul Samter.
“Some mortgage products specifically reflect this fact, and again we may begin to see more products that echo this phenomenon,” he added.
Rationing
The past year and a half has seen a dramatic rationing of mortgages by lenders, in response to the shortage of funds sparked by the banking crisis.
However, the CML predicted that lenders might become slightly more relaxed in the coming months.
“We might expect to see a modest easing over the summer, as some higher loan-to-value products came onto the market in recent months,” the CML said.
“Lenders reported that they intend to increase lending at higher loan-to-value ratios in the Bank of England’s recent Credit Conditions survey.”
Nearly three-quarters of all new mortgages are being taken out at fixed rates, the highest proportion since August 2007.
The CML said borrowers were protecting themselves against possible interest rate increases in the future.
With mortgage approvals still rising, the number of loans granted, and completed sales, are all likely to stay on their upward trend over the summer.
Channel 4 News has seen evidence that up to £100 could be being added to the price of a Home Information Pack because of secret payments to estate agents. Bridgid Nzekwu reports.
HIPs were introduced in England and Wales in 2007 and since April this year it has been illegal in England and Wales to put a house on the market without having a HIP in place first.
The average pack costs £300 to £400 and includes various documents, including a description of the property, an energy performance certificate, searches and a property information questionnaire completed by the seller.
The government has always insisted that HIPs improve the home buying and selling process, yet they have been consistently criticised as a waste of time by estate agents, surveyors and solicitors.
Channel 4 News has obtained documents which show an agreement between a HIP company and an estate agent to add an undisclosed commission to HIPs.
In one, the HIP provider suggests a deal in which the company will supply HIPs at a cost of £220 + VAT “on the basis of being your sole HIP supplier” and suggests that the agent can add any margin onto the pack “which is totally hidden from the vendor”. The HIP company states that this undisclosed fee “will be paid to the estate agent on the last working day of the following month from order”.
A second document, a leaflet given to the seller by the same estate agent, recommends the same HIP provider and states that the price of the pack will be £350 + VAT. So the price paid by the seller is almost £150 more than the price originally stated by the HIP provider.
Peter Ambrose of The Partnership says he is approached regularly by estate agents requesting secret payments in exchange for recommending his company to sellers.
He told Channel 4 News: “We think the idea that someone is paying an estate agent without telling the consumer is almost tantamount to bribery in some ways, in that saying to the agent use us and we’ll pay you for doing this and they’re paying them anything in the region from 50 to 150, 200 pounds. We’ve even had situations where people are paying £50 of M&S vouchers… it may not be illegal what people are doing, but it’s definitely unethical.”
Approximately 80 per cent of HIP companies belong to the voluntary trade association AHIPP. The body accepts that undisclosed commissions are commonplace and has told Channel 4 News it sees nothing wrong with the practice which it believes to be “the nature of commerce”.
In a statement AHIPP said: “In collecting the agent’s mark-up as part of the retail price of the HIP, the HIP providers is not in the same position as a solicitor who pays a referral fee in return for receiving work. The fundamental difference here is that the HIP provider acts as an agent for the estate agent in the preparation of the HIP. It is the estate agent who determines the retail price of the HIP.”
However the President of the Law Society in England and Wales, Paul Marsh, insists that secret commissions are “quite wrong” and that solicitors around the country are complaining to the Law Society about it.
He is urging the Government to take urgent action: “We always made it very clear when we were speaking to Yvette Cooper [former Housing Minister] and the ministers at the time when HIPs were introduced that they were introducing a business which was going to be worth half a billion pounds a year and that business needed to be properly regulated.
“We believe the Government should put in place effective regulation to make sure there is transparency throughout the system so the public know what they’re paying for, who’s getting what and that they are getting value for money.”
The Chief Executive of the National Association of Estate Agents, Peter Bolton-King, has condemned practice of adding commissions to HIPs without the seller being informed. Any estate agent that receives such a commission without informing a client selling their home is breaking the Association’s Rules of Conduct.
Mr Bolton-King warned that the NAEA would fine or expel any member found taking undisclosed commissions. He told Channel 4 News: “We can take somebody in front of a disciplinary panel. If they’re found guilty then we fine them up to £1,000 per breach. If it’s very serious we chuck them out.”
Such is the concern at the widespread anecdotal evidence about secret commissions between HIP companies and estate agents that the Royal Institution of Chartered Surveyors is now investigating the issue as part of a wider review of commissions across the entire property industry. It is inviting anyone with evidence to come forward by July. A report and possible recommendations will follow later this year.
Source: http://www.channel4.com/news/articles/business_money/agents+get+hips+aposhiddenapos+payments/3153672
* House prices increased by 0.9% in March
* House purchase activity reaches highest level since May 2008
* Welcome signals of market improvement but too early to talk of house price recovery
Headlines March 2009 February 2009
Monthly index * Q1 ‘93 = 100 301.5 298.7
Monthly change* 0.9% -1.9%
Annual change -15.7% -17.6%
Average price £150,946 £147,746
* seasonally adjusted
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.
Mortgage Approvals highest since May 2008
“Mortgage approvals have started to increase after reaching levels which were thought out of the question two years ago. February saw the number of monthly approvals increase to 37,900, its highest level since May 2008. This is still far below the long run average of the series which started in 1993 of 94,000 per month, but is a significant improvement on the average for the second half of 2008, which was only 32,000. The upturn is welcome and is certainly a signal that there is some movement in the market. The sales-to-stock ratio, which is a good indicator of movements in house prices, has begun to stabilise in 2009. However, it is still too soon to say that this will be the beginning of sustained house price rises and a reflection of a wholesale return of confidence to the market. The ratio remains at very low levels and house price expectations are still very weak. The current upturn in activity is therefore more likely to reflect the return of buyers who have delayed purchasing through the worst of the financial turbulence at the end of 2008 rather than the beginnings of a swift recovery. Nevertheless, the willingness of borrowers to return to the market is encouraging and likely to in part reflect the falling cost of borrowing.
Source: http://www.nationwide.co.uk/hpi/?source=nationwide&campaign=homepage&execution=hpi_lhs_01122008
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Gary
Abbey Estates
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