Wednesday, October 27, 2010

Sage Advice From Mike Woodfine

When everyone is diving in then it's probably best not to be buying. The reverse is often true but Mike Woodfine from The Money Centre advises would be investors on the correct attitude to borrowing mortgage money. Read the Yorkshireman's advice here !

Thursday, October 14, 2010

Tory Minister Vows to End Era of House Price Booms

Tory Minister Vows to End Era of House Price Booms

The latest nonsense to issue from the mouth of a Con-Dem minister has left me agitated, not to say irritated!

The Daily Mail of 13th October reported Grant Shapps’, the Housing Minister, speech to the Housing Market Intelligence conference. Read in full here if you are suffering from low blood pressure.

He stated: “...middle class families ... should not rely on their homes to fund retirement”. We have had a Labour Government mount a several billion pound raid on pension funds, a stock market lose our pension funds a fortune and now we have a Tory telling us that property as a pension is a mortal sin! I suppose if you are an MP or a senior civil servant then you won’t need to worry about the investment in your property as you have a gold plated, brass constructed pension that the middle-classes have, and are still being asked, to fund from their heavily taxed income, whilst paying into their poorly performing personal pension schemes.

Someone quoted the ‘middle classes’ as wanting falling prices to enable their offspring to get a foot on the property owning ladder. These would be the same people funding the 20% plus deposits required by lenders these days. Where are they doing that from? Personal savings? or from re-mortgaging the properties they have paid, or have  virtually paid, off loans on. Announcing that government policy will actively seek to erode prices is unthinkable!

The conference was also treated to a suggestion that Building Regulations will be relaxed to make the construction of more new homes easier. What? The reason the UK only built 142,000 new homes last year was because builders went out of business and those that remained managed to rein in their construction to match demand. The building / property industry is governed by supply and demand. To spell it out:  Low demand = reduced supply! No mortgage funds at reasonable loan-to-value ratios = No buyers!

If the government starts to talk about major cutbacks, unemployment in the public and private sectors in July but also says it won’t actually announce the detail until the 20th October then it will produce a property market that has stalled.

The reports coming out of the recent Conservative party conference have sounded like a party using the platform as a sounding board for it’s proposals but at the same time feeding a Public looking for a lead and positivity with more to fear and worry about. To paraphrase Franklin D Roosevelt: “Only Thing We Have to Fear Is Fear Itself” . Oddly enough he made this comment during the USA’s 1932 elections when the depression reached it’s depth in 1933.

Another of Mr Shapps’ proposals is to help the market by holding interest rates down. Low rates are what are preventing repossessions increasing. They are not helping first time buyers as they don’t have access to the lower rates unless they have large deposit funds available to them. House prices fell after October 2007 and throughout 2008 by as much as +/- 20% which has made them attractive to first time buyers. Then the lenders, under the cover of “more responsible lending” doubled the deposit required. In common with many 50+ year olds we bought our first house at the age of 22 with a 10% deposit that we had saved and cobbled together. It was bought as a first ‘home’. Mr Shapps then states: ‘Calling for an end to the ‘lottery’ of the housing market, he said: People should think of homes as a place to live rather than a pension’

Well, the news is the vast majority of this country’s home buyers buy their property with this uppermost in their minds. The idea of buying is to end up mortgage free and at the same time rent free. The continuing remark was “buying a house shouldn’t be like playing the lottery”. Short term profit taking is the reserve of a small minority and professional developers. I think he is trying to say that people should not suffer market highs and lows, but that is not a reason for attempting to create a market that is permanently flat.

He has obviously touched a nerve as the Mail Online version of the article had attracted 327 comments by the 14th October! We are all, with a minority exception, looking at a pension short-fall and now they want to take away the ability of a large majority (bearing in mind 60+% home ownership) to add funds from their property that they have personally paid for.