Tag Archives: Bank Of England

GDP grows 0.8% but still 2.5% below 2008 peak Latest Articles

The Office for National Statistics (ONS) has released 3rd quarter 2013 Gross Domestic Product GDP figures showing the economy has grown by 0.8%.

However the Bank of England remain cautious and do not predict this necessitating an interest rate rise in 2014 with economic conditions unlikely to improve enough to worry the long term target of a sustained 2% annual growth.

In fact the economy as a whole is still 2.5% below the productivity levels achieved in the first quarter of 2008 and with inflation consistently running higher than wage  increases it is unlikely that this growth will cause domestic demand lead inflation, which is the real concern that could affect the Base rate.

House Builders production has grown by 0.5%, but as construction was the hardest hit industry by the recession the level of new homes being built is still 12.8% down and being propped up by the Government’s Help to Buy scheme.

Interestingly the services sector, which represents three-quarters of economic output, grew by 0.7% and is now 0.6% above its previous peak. This just shows how hard other sectors of the economy have been hit by the credit crisis.

Summary of the ONS data:

  • Change in gross domestic product (GDP) is the main indicator of economic growth. GDP increased by 0.8% in Q3 2013 compared with Q2 2013.
  • Output increased in all four main industrial groupings within the economy in Q3 2013 compared with Q2 2013. Output increased by 1.4% in agriculture, 0.5% in production, 2.5% in construction, and 0.7% in services. Output from services is now slightly above its previous peak in Q1 2008, prior to the economic downturn.
  • In Q3 2013 GDP was estimated to be 2.5% below the peak in Q1 2008. From peak to trough in 2009, the economy shrank by 7.2%.
  • GDP was 1.5% higher in Q3 2013 compared with the same quarter a year ago. Remember that the Olympics and Paralympics took place during Q3 2012, raising the level of GDP in this quarter.
  • The preliminary estimate of GDP is produced using the output approach to measuring GDP. At this stage, data content is less than half of the total required for the final output estimate. The estimate is subject to revision as more data become available, but these are typically small between the preliminary and third estimates of GDP. All figures in this release are seasonally adjusted.

Graeme Leach, the Institute of Directors chief economist said: “The outlook looks better than at any time since the onset of the financial crisis. Indeed, our members have more confidence in the economy than at any time since 2008.

However, strong headwinds remain and the annual growth rate year on year is nothing to get too excited about yet. Though inflationary pressures are likely to remain benign, debt and inflation are rising faster than earnings.

By far the biggest challenges remain on the supply side, not the demand side. Supply side constraints mean that the current growth spurt is unlikely to extend beyond next year. This stage of our economic recovery is likely to be short and sweet, instead of long and strong.”ONS


ONS report record average house price now £247,000 Latest Articles

The Office of National Statistics (ONS) have reported the average house price in Britain is now £247,000. This figure reported for August 2013 is 0.3% higher than the previous record in 2008.

Year on year house price inflation increased from 3.3% in July to 3.8% in August this year

However the Bank of England are warning that the Governments Help to Buy scheme could cause an artificial distortion of the market pushing up prices.

Martin Weale, a member of the monetary policy committee (MPC), confirmed average house price rises were “appreciably more rapid” than the Bank of England had expected. Weale said “if the mortgage-guarantee element of Help to Buy is not priced satisfactorily, it will add to demand while supply is weak leading to increased pressure on prices.”

“Rising house prices may make people feel cheerful and more prosperous, thereby supporting household spending, but rising house prices impose a burden on those who do not yet own houses but aspire to in the future. Like government borrowing, rising house prices can crowd out productive investment.”

Sir Jon Cunliffe, deputy governor of the Bank of England said he would keep a “very firm eye” on lenders, but “it is too early to say we are entering into a bubble.”

The Bank of England are however, known to be critical of short term artificial manipulation of the mortgage/housing market in favor of more sustainable long term growth of available lending provided by the finance markets themselves.

ONS key Findings:

  • In the 12 months to August 2013 UK house prices increased by 3.8%, up from a 3.3% increase in the 12 months to July 2013.
  • House price growth remains stable across most of the UK, although prices in London are increasing faster than the UK average.
  • The year-on-year increase reflected growth of 4.1% in England, 1.1% in Northern Ireland and 1.0% in Wales, offset by a fall of 0.7% in Scotland.
  • In August 2013, the UK HPI surpassed its previous peak in January 2008 (185.5) by 0.3%.
  • Annual house price increases in England were driven by London (8.7%), the East Midlands (3.8%) and the West Midlands (3.5%).
  • Excluding London and the South East, UK house prices increased by 2.1% in the 12 months to August 2013.
  • On a seasonally adjusted basis, UK house prices increased by 0.5% between July and August 2013.
  • In August 2013, prices paid by first-time buyers were 4.9% higher on average than in August 2012. For owner-occupiers (existing owners), prices increased by 3.3% for the same period.

However Economist are reporting overall activity to be well below levels recorded before the financial crisis and it is only London prices that are causing a concern as to whether they are sustainable or not.

If you take the weighting effect of high London prices most house prices around the country are still 10-15% below their pre-crunch peak and we are a long way off seeing a market wide housing bubble.average house price


Contra proferentem mortgage conditions Advice, Buy to Let News, Cautionary Tales, Commercial Finance, Financial Advice, Landlord News, Landlords Stories, Latest Articles, Mortgage News, Property Investment News, Property Investment Strategies, Property News, UK Property Forum for Buy to Let Landlords

Unless you are a qualified contracts lawyer who has also studied Latin you will probably not have a clue as to how contra proferentem mortgage conditions affect you. I have spent the last two weeks getting my head around it as it was a key point in the barristers opinion for the Bank of Ireland Tracker Mortgage Class Action which has stalled due to all funds raised for that campaign having been exhausted. Therefore, for the benefit of everybody with a tracker mortgage who may be affected by a hike in their tracker mortgage margin at some point, and in particular to those affected by the decisions of West Bromwich Mortgage Company and the Bank of Ireland I offer this laymans interpretation and my thoughts on how we should progress.

Very simply, the contra proferentum law is created to enable judges to decide which conditions apply if contractual conditions are in conflict. In other words, if the contract has two or more conditions and they don’t all say the same thing one of the conditions will apply and the others will not.

The relevance of this is that West Bromwich and Bank of Ireland have conditions in their mortgage documentation and some conditions contradict others.

The law goes on to say that the judges interpretation of what the contract means will be the condition(s) which are in favour of the person to whom the contract was presented. To put it another way, if your mortgage conditions were presented by West Bromwich or Bank of Ireland the judge will rule against them because they wrote the contract and the most favourable of the conditions will be applied to you. 🙂

There are, of course, several more legal arguments our lawyers could throw at the enemy, however, in my opinion the contra preferentem argument is without any shadow of doubt our best shot

Other legal arguments will only suit some of our Class Action Group. For example, there appears to be no legal definitions of a sophisticated landlord but West Bromwich think it is anybody with more than three properties. Let’s say we win that battle and the Court decides it’s six – anybody with seven or more isn’t going be too happy are they? I will be one of them! Also, what good would that do for those affected by Bank of Ireland or by any other lender who tries this on? Remember, Bank of Ireland has a different criteria and is not using the sophisticated borrower argument. Other lenders will no doubt make up their own excuses too. What we need is a win which will affect ALL mortgage lenders.

Many people are arguing that they didn’t receive the Mortgage Conditions from their lenders. Well sorry folks, maybe you did, maybe you didn’t, but I can assure you that you signed a piece of paper before your mortgage completed to say that you did. The Mortgage Deed I signed for my West Bromwich mortgage states “By signing this Mortgage you confirm the terms of the Standard Conditions of Offer, the Special Conditions and the Mortgage Conditions”.

There are many more arguments which I could play devils advocate with which have been raised on our forums. With a bit of thought I reckon I could win most of the arguments and I’m not even a qualified solicitor. I am, however, in the same boat as you so please don’t shoot the messenger. I’m also affected by these increases and I’m doing everything I can to make sure we win this fight. In my case that’s been 18 hour working days for the last three weeks and a lot more time on the Bank of Ireland case since it reared its ugly head earlier this year.

That’s why I would like Justin and the barrister to lead with what I believe is our best shot – contra proferentem mortgage conditions.

If we ask our lawyers to look into every legal argument we have presented on our forums we will run out of money before we get to first base. What I would prefer is that we fight the one universal truth which is that our mortgage terms are contra proferentem. If we lose and we still have some money left there’s nothing to stop us appealing on other grounds as well.

For the above reasons, do you agree that we should ask our legal advisers to focus on contra proferentem mortgage conditions?

There are lots of other things we can do as a group to be a thorn in the side of these lenders in the meantime. For example, I love the PR campaigns and lobbying we are sharing ideas on. We must continue to win the hearts and minds of the media and every centre of influence we can think of. I also applaud the tactics being used to make these lenders lives a misery, for example the Subject Access Requests. Perhaps the most important thing we can do whilst we wait for the legal bods to advise us is to spread the word. We need to get every borrower we can find with a tracker mortgage to sign up. There are also plenty of other landlord groups who can help us to do this and it’s in all of our interests to put as much pressure on them as possible to get involved and spread the word amongst their members.

Contra proferentum mortgage conditions as I see it

I owned a substantial number of buy to let properties at the time of my mortgage application and still do. The chances of me proving that I was not a sophisticated landlord are very slim but I do have an argument to suggest that property investment was not my line of business at the time I took the mortgage. All of my properties were professionally managed in order to allow me to focus on my career as a commercial finance broker. I did not consider myself to be a professional investor at the time I took out this mortgage, the purpose of investing into a property portfolio was to provide for my retirement. I don’t want Justin or the barrister to push that angle though, I think it’s a waste of money as everybody’s situation will be very different.

Neither my mortgage broker nor my solicitor were aware of the rights of West Bromwich Mortgage Company to increase the premium they charge on my tracker mortgage rate. I did read the Mortgage Conditions brochure at the time  and at the time I sincerely believed that section 5 of the Mortgage Conditions was not applicable. Note that I am also a qualified mortgage adviser and IFA. I believed that section 5 of the mortgage conditions booklet was only relevant to mortgages written on the building society’s standard variable rates, which do not track the Bank of England base rate. This was supported by the marketing materials being used by the West Bromwich to promote their tracker mortgages. Also, there was no mention of such a vital clause in either their KFI document or their offer letter. Clearly my solicitor was mislead too. I suspect everybody who was affected by the Bank of Ireland rate hike would also say the same thing.Contra proferentem mortgage conditions

So having established that I read the booklet and I signed to agree to all of their terms, including those in their Mortgage Condition booklet, what makes me believe West Bromwich are still in the wrong?

  1. Their website said, and to this day still continues to say “Tracker mortgages give you the certainty of knowing that the rate you pay will move in line with Bank Base Rates.”
  2. My offer letters states “After 30th June 2010 your loan reverts to a variable rate which is the same as the Bank of England Base Rate, currently 5%, with a premium of 1.99%, until the term end”

Logic tells me the above are in conflict with Section 5 of the Mortgage Conditions booklet which I signed and received. On the basis that West Bromwich produced the booklet, their website, and the Mortgage Deed I believe there is a clear case of conflicting conditions and ambiguity, hence the conditions they are relying upon are contra proferentem. On that basis, a judge MUST rule against West Bromwich as they are the originators of the documentation. It’s not like we are asking for the mortgages to be written off, all we want is the terms and conditions we believed we had signed up for.

We MUST win a Court Case before even more lenders follow suit.


Now I’m worried Birmingham Midshires will raise their Tracker margins Latest Articles, UK Property Forum for Buy to Let Landlords

I’ve been following the news on this site concerning West Bromwich Building Society’s increase in Tracker margins and the Class Action. I thought I would check through our ‘Lifetime Tracker’ mortgage offer from Birmingham Midshires. I was in for a shock.

We’ve loved our trackers from Birmingham Midshires (BM) and have been enjoying rates less than 0.5% above the Bank of England Base Rate, which the ‘Illustration’ document reported would last ‘For Term’. Of course, we paid a handsome arrangement fee to secure the rate. The tracker margin seemed unchangeable, but West Bromwich Building Society’s move to increase their tracker rates suggests that anything is possible. Birmingham Midshires BM Solutions

The mortgage offer from BM in October 2006 does say “The mortgage will be charged interest at: a variable rate which is 0.4% above the Bank of England Base rate, currently 4.75%, for the term of the loan..” The accompanying Special Conditions do not seem to mention interest rates. It was the Standard Offer of Advance Conditions (2004) that contained the shock. Under the section ‘Interest’ it states that

“Unless you have a fixed rate mortgage …… we may change the interest rate payable on your loan at any time for any of the following reasons:
(1) to reflect changes in market conditions outside our control
(2) to reflect changes in the cost to us of raising the money we lend to customers:
(3) to reflect changes in general lending practice by other major lenders (including the terms on which mortgages are offered by them);
(4) to maintain or improve the general market position of our products in all areas of our business;
(5) ……….”

So BM can change the interest rate almost at their whim? In particular reason (3) is scary if West Bromwich and the Bank of Ireland get away with changing their tracker margins to BTL customers.

The text seems strange to me to describe their freedom to change a tracker margin. It seems to be the considerations for changing a traditional Standard Variable Rate of a mortgage. If it related to a Tracker margin I would expect phrases like ‘exceptional circumstances’ to be used. Also why does it refer to the interest rate rather than the more relevant tracker margin? The obvious reason to change the actual interest rate is to track a BoE base rate change, but this is not included. Why?

(The accompanying General Mortgage Conditions 2004 booklet merely refers to the ‘offer document’ on changing interest rate.)

A further confusion arises because there is no text that I could find which explains which of the various documents take precedence. The odious Standard Offer of Advance Conditions started with the instruction to “read them in conjunction with ..” the other documents and then the statement “Together these form the offer letter ..”.

Other Property118 posts suggest that West Bromwich had an even more messy set of documentation for the tracker offers which are now being changed. For example, they didn’t refer to their special conditions booklet, which BM got right in my case.

So I’d guess BM are waiting and watching on the outcome of the West Bromwich’s move.

Are you worried as well? I have contributed to the funding of the Class Action campaign despite not having any West Bromwich or Bank of Ireland mortgages.


Will Mortgage Express copy BoI and West Brom and raise their rates? Latest Articles, UK Property Forum for Buy to Let Landlords

Is there a trend? First the Bank of Ireland raised their Tracker rates and now West Bromwich Building Society have followed suit, will Mortgage Express copy and raise their rates?

We borrowed a tidy sum from Mortgage Express and have been enjoying the “Product Variable Rate” of 1.75% above the Bank of England Base Rate. The rate seemed secure but West Bromwich Building Society’s recent move to increase their tracker rates worries me.

If West Bromwich BS get away with this, then will Mortgage Express have a punt as well? Their reputation these days is of doing all they possibly can, fair or foul, to get borrowers to re-mortgage to other banks.

I’ve looked back at my mortgage offers from Mortgage Express and it looks hopeful for us. The mortgages started as either discount or fixed rates and then reverted to the “Product Variable Rate”. The first one we took out in 2001 and then we renewed the deal with various extra drawdown loans and new discount rates etc. On first impression, the renewals all seem to refer back the original contract rather than start new ones. The key phrase in the original 2001 agreement was straight: “the interest rate will be 1.75% above base rate”. I trust it still stands.

Another Mortgage Express mortgage offer (2004) states “a variable rate of 6.5% (which is 1.75% above the Bank of England Base rate – currently 4.75%)” and later it states that the rate “will revert to the variable rate …. for the remainder of the term”. The separate “Conditions 2004” booklet did contain a section on Mortgage Express’s rights to change the interest rate but it started “If the interest rate is one which we can vary at our discretion …”. So again this looks good.

However, I hear from Property118 that West Bromwich have no clauses in their offer letters referring to their rights to increase their tracker margin. Also they didn’t refer to their special conditions booklet (which presumably did have some text providing for when and how the tracker margin might be changed). Finally, they ignored the October 2004 mortgage regulations cut off date.

Property118 also reports that Bank of Ireland did keep to those 3 rules and they seem to be getting away with it. So, now West Bromwich have gone further than Bank of Ireland and we all wait to see if they’ll get away with it.

Mortgage Express would need to push the boundaries further still, I guess. I suppose they are first waiting on the outcome of the West Bromwich’s move. Will Mortgage Express copy BoI and West Brom and raise their rates

Are you worried as well?

EDITORS NOTE

Property118 is leading a Class Action group to fight back by taking a test case to Court if necessary to prove once and for all that amending the margin on a tracker rate mortgage is breach of contract. If you are worrying whether your mortgage lender will follow the lead of Bank of Ireland or West Brom please READ THIS and complete the form below to support this campaign.


Housing Bubble fears – genuine or an overreaction? Latest Articles, Property News

There has been a great deal of commentary in the press the last couple of days raising fears of a housing bubble.

Rightmove increased its forecast for the year from 4% to 6% leading to headlines calling for government to do something about concerns of a debt fuelled crisis in the housing market.

Yes prices are rising, but we are seeing sustained recovery for the first time since the credit crisis outside the economic microcosm of London?

It is this recovery for most of the country, in areas where prices have fallen or been static for a long time and not just one area, that has surely seen the forecast rise recently.

Rightmove report asking prices in London are up 8.2% on a year ago with:

West Midlands up 6.8%

South East  up 5.6%

Wales up 3.8 %

East Anglia up 0.8%

The North 0%

Yorkshire and Humberside fell 1.3%.

Overall in the UK asking prices are 4.5% higher than this time last year and have increased on average by £16,000 so far in 2013.

So the questionare:-

  • are we right to be worried?
  • what factors are involved
  • and can we do anything about it?

First of all we need to consider what is really causing prices to rise. Is it demand lead where we are all earning more money, unemployment is down and mortgages are easier to obtain?

Alternatively is it the lack of supply in new housing that is putting the upward pressure on prices?

In terms of industry sector contribution to GDP (Gross Domestic product – the output of the economy) it is the building industry that suffered the worst during the recession and is taking the longest to recover.

In terms of scale, the supply side of new housing has suffered more than any recovery in the economy recently, so it may be this which is the biggest factor for the country as a whole. However, in London there have been many reports that foreign money, especially from Arab states and China, is being invested into the London housing market and could be an external factor fuelling demand lead increases that we can’t control.

At some point limiting factors such as purchasers income and the size of deposits required will come into play with income multipliers and maximum LTVs only able to sustain a certain level of house prices before demand slows back down. This is where regulation of lending could dampen an over heating market putting in place restrictions on lending criteria.

One of the biggest and most immediate fears of property investors is the Bank of England increasing the Bank Base Rate to curb any house price inflation. This is now less likely as the BofE are no longer just targeting inflation levels, but also have the wider remit of encouraging the growth of GDP. Therefore it is less likely that they would consider harming the recovery by increasing interest rates, and more likely that they would look to use regulation of lending to control this specific inflationary pressure.

The Bank of England’s Financial Policy Committee will meet tomorrow, when it will reportedly discuss the issue of a housing bubble and what action it could take.

I certainly see no evidence that we need to panic yet, but it would be very interesting to get readers thoughts on this subject.Housing Bubble


Rics want a 5% annual price rise cap House Prices, Latest Articles

The Royal Institution of Chartered Surveyors (Rics) want a 5% annual price rise cap for houses that triggers restrictions on mortgage  income multipliers or maximum Loan to Value.

Although Rics did say that sellers  under their plans would not face a limit on how much they could sell their homes for.

Joshua Miller, senior economist at Rics, wants to halt a debt-fuelled house price advance and said “the Bank of England now has the ability to take the froth out of future housing market booms, without having to resort to interest rate increases. Capping price growth at, say, 5% is one way of doing this.”

“This cap would send a clear and simple statement to the public and the banking sector, managing expectations as to how much future house prices are going to rise. We believe firmly anchored house price expectations would limit excessive risk taking and, as a result, limit an unsustainable rise in debt.”

Sir Howard Davies,  a former deputy governor of the Bank, does not think this kind of cap would work and said “The problem is that we are not building enough homes.”

This is a good point as it is clearly the lack of supply that is pushing up house prices especially in the capital rather than increased demand because we are all better off now than before the recession started.

Then there is the question of regional differences. Do you smother any potential housing market recovery in areas outside London that have not seen the same rises and if not how do you tell an National high street bank to have different criteria and systems in different parts of the country.

This would be clearly unrealistic, unworkable and unpalatable for lenders.

The Housing Market is very mature and almost free to work on the pure economic principles of prices being dictated by supply and demand. It is therefore very difficult to control directly without looking at all the factors that influence it.

Rics may be naive in thinking simplistic one sided controls like this are the answer to the problems of a very complex housing market and its demographic and social issues.Rics


Development Finance – Where do you start? Commercial Finance, Latest Articles

Borrowers are still being frustrated by the banks’ continued reluctance to lend on development finance projects, but reality is that if you know who to ask they are actually eager to lend on profitable projects to experienced developers.

It is navigating a way around the maze of lenders, different products and finding the finance that enables your project to be finished that can seem impossible. Many new lenders have entered the market since the Credit Crunch which has increased competition and resulted in various pricing structures.

I get to chat with many readers about their development projects, but the simple fact is that unless you do it day in day out, which I don’t, it is impossible to know which lenders have funds to lend, and on what type of projects and industry sectors they want to lend on.

I know the basics to ask, such as purchase price, planning permission, development cost, Gross development value, working capital, previous experience etc. This then gives a picture of whether a project is likely to be considered as viable for development finance, but is only really the first step on the ladder.

This is where my Colleague Cliff from Brooklands Commercial Finance comes in as he can navigate this maze of knowing which banks are lending. Cliff has established strong links with many lenders based on the quality of our introductions over many years and understands how to present robust propositions to lenders, each of whom have a specific target audience. This is the key to putting you, in front of the lender who is most likely to offer a finance package to support your project.

Cliff can help with:

  • Residential and commercial property development – rates from 4% over base
  • Structured loans from £75,000 to £25,000,000
  • Development projects throughout England, Scotland and Wales
  • Individuals, companies, partnerships
  • Terms from 1 month to 3 years
  • No exit fees
  • Flexible underwriting and the best deals
  • Unusual proposals
  • 90% property development loans available
  • Mezzanine finance and second charges
  • Joint venture funding
  • Guaranteed exit strategies
  • Residential, mixed use, leisure, health, offices, industrial, etc.
  • Conversions*

*There has been a relaxation in planning regulations in respect of office conversion to residential accommodation.

Brooklands Commercial Finance are Whole of Market Independent Commercial Brokers and if you would like to chat with Cliff please Click Here

or email info@property118.com

or call us on 01603 489118Development FinanceDevelopment Finance


DOWNLOAD the Aug 2013 Bank of England Inflation Report HERE Buy to Let News, Landlord News, Latest Articles, Property Investment News, Property News

This is the first Bank of England inflation report since Mark Carney took on his new role of Bank of England Governor last month.

Bank of England Inflation Report DOWNLOAD - Aug 2013

The media are calling this the most revolutionary day in the recent history of the Bank of England.

Given that the inflation report is heavily focussed on what’s likely to happen to interest rates and the BoE hope to stabalise them and the financial markets moving forwards this inflation report is likely to be extremely interesting to everybody in property.

You will see the headlines all over the mainstream media as this is a big thing and of National interest.

If you want to get into the detail, you can download the report free by completing the form below.

As always, your feedback in the comments section below this post will be much appreciated.

Oops! We could not locate your form.


Choosing the wrong letting agent could cost YOU thousands! Latest Articles, Letting, Lettings & Management

Choosing the wrong letting agent could cost YOU thousands!It’s devastating when you put your trust and faith into a letting agency, you pay them a monthly management fee; and all of a sudden they disappear with rent and the tenant’s deposit.

This week saw Smith & Jones Lettings in Market Deeping made bankrupt without a warning to their clients or time for them to act. Continue reading Choosing the wrong letting agent could cost YOU thousands!


Property Forum and News website where UK landlords and letting agents share best practice