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The report highlighted changing attitudes to debt and borrowing

Borrowers who believe rising house prices or insolvency will solve their debt problems risk “financial suicide”, a report has warned. The Personal Finance Research Centre found young adults relied increasingly on borrowing for day-to-day spending.

The report said parents also felt pressured to borrow to provide for their children.

But it warned against a mistaken belief that rising house prices or insolvency provided an easy route out of debt.

‘Disconnect’

According to the research, increased expectations about living standards, coupled with the ready availability and relative cheapness of credit, mean many borrowers have little desire to seek an alternative.

Pinning your hopes on housing equity or thinking that insolvency is the easy way out of debt is financial suicide Anne Gunther, chief executive, Standard Life Bank

The report said using credit to meet everyday expenditure was a way of life for many young adults, with the difference between needing something and merely wanting it often “virtually indistinguishable”.

The research also highlighted what it called a “disconnect” between the perceptions and reality of potential debt solutions.

A core minority of young adults see debt consolidation and insolvency as offering easy routes out of problem debt.

And all age groups see property as the ultimate solution to future financial needs.

‘Seismic’ change

The chief executive of Standard Life Bank, which commissioned the research, said consumer attitudes to debt had changed “dramatically” in recent years.

“Credit is not only freely available but considered a way of financing lifestyles rather than reflecting need,” Anne Gunther said.

“A seismic change in mindset is required to begin to unwind the chronic debt issues we face in the UK.

“Pinning your hopes on housing equity or thinking that insolvency is the easy way out of debt is financial suicide,” she added.

Standard Life is calling for current initiatives on financial education and capability to be reinforced and strengthened.

Borrowing is a sensible way for 93% of people to mange their financial lives Malcolm Hurlston, CCCS

The Consumer Credit Counselling Service (CCCS), a debt advice charity, pointed out that although the amount of consumer debt has risen in recent years, only about 7% of borrowers get into financial difficulty.

It also wants a more coordinated approach from government, regulators and individual providers.

“Borrowing is a sensible way for 93% of people to mange their financial lives,” said CCCS chairman Malcolm Hurlston.

However he stressed the importance of seeking professional help as soon as debt problems arise.

And he agreed the assumption that an increase in property prices would act as a “get out of jail card” was worrying.

In fact, he argued that owning a home could leave some borrowers at greater risk of debt.

“It’s time to put an end to the old shibboleth that buying a house is always good for you,” he said.

“A large proportion of the people who turn to us for help are those who have taken out mortgages which they cannot afford, leaving them highly vulnerable to interest rate volatility,” he added.

from the BBC news website 

 Info from the BBC news website.

House prices dip 1.1% in November

Higher interest rates have taken their toll in recent months

UK house prices fell in November as higher interest rates and increased mortgage repayment costs took their toll, the Halifax has reported. According to the lender, house prices fell by 1.1% in November, taking the annual rate of growth down to 6.3%, compared with 8.9% in October.

The Halifax calculates that the average residential property across the UK now costs £194,895.

It added that activity in the housing and mortgage markets was also slowing.

Pressure

The fall is the largest monthly drop since December 2006. It is also the first time since 1995 that the Halifax figures have shown house prices falling for three successive months.

Halifax chief economist Martin Ellis said the increase in interest rates between July 2006 and July 2007 had taken effect.

“Higher mortgage repayments and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity,” he said.

But he said he believed the housing market still had a “very solid foundation”.

“Strong market fundamentals, a structural housing supply shortage and pent-up demand from a large number of potential first-time buyers will support house prices, preventing a sustained and significant fall,” he added.

Halifax argues the market is further underpinned by the fact that employment levels are at a record high.

Consensus

It supports the latest figures from Nationwide, which showed house prices suffering their biggest fall in 12 years during November.

According to its measure, annual house price inflation now stands at 6.9%.

At the same time, the Bank of England has revealed that the number of mortgage approvals has fallen to a near three-year low.

The Halifax data provides significant late support to the case for the Bank of England to cut interest rates Howard Archer, chief economist, Global Insight

The Halifax data is just the latest to reveal a slowdown in the property market.

The Bank’s latest report showed 88,000 new mortgages for home buyers were approved in October, 12% lower than in September and down 31% from October 2006.

Surveyors have also reported a continuing drop in enquiries from would-be buyers.

HAVE YOUR SAY Would it really be such a disaster if the average house price reduced from seven times average income Steve Thornhill Send us your comments

Howard Archer, chief economist at Global Insight, said the Bank of England’s interest rate setting committee should pay close attention to the Halifax data when it meets this week.

The Bank’s Monetary Policy Committee is already under pressure to cut borrowing costs amid growing signs that nervousness about the economy is hitting consumer spending.

“The third successive, and deeper, fall in the Halifax house price index in November raises concern that the housing market is headed for a sharp correction - particularly as it follows very weak Bank of England mortgage approvals data for October,” Mr Archer argued.

“The Halifax data provides significant late support to the case for the Bank of England to cut interest rates by 25 basis points to 5.5% on Thursday.”

Nationwide predicts large regional variations next year

House price growth is set to stall next year as the market witnesses a “significant slowdown”, building society Nationwide has warned. It predicts that annual house price inflation in the UK will slump from its current level of 9.7% to 0% by this time next year.

Nationwide blames a slower economy, stretched affordability, tighter credit conditions and lower buy-to-let demand.

Almost all surveys suggest the market has been cooling since the summer.

Loss of ‘momentum’

The building society expects there will be a large regional variation in house price growth in the coming twelve months.

As we move into 2008, economic tailwinds are increasingly being replaced by headwinds Fionnuala Earley, chief economist, Nationwide

Scotland is forecast to do best with prices rising by 4%. In Northern Ireland, which has been enjoying “phenomenal” price growth of 40% plus year-on-year, Nationwide believes prices will fall by 5%.

Fionnuala Earley, Nationwide’s chief economist, said the “momentum” that had kept prices strong in 2007 was now fading.

“A slowing economy, tighter credit conditions, stretched affordability for first-time buyers and lower house price expectations appear likely to reduce the level of activity,” she explained.

“As we move into 2008, economic tailwinds are increasingly being replaced by headwinds,” she added.

‘Significant slowdown’

Nationwide is also predicting a cooling in the buy-to-let market.

“Poor yields, lower house-price expectations and tighter credit conditions are all likely to take some froth out of buy-to-let and limit its contribution to price growth,” said Ms Earley.

But Nationwide believes recent fears predicting a “mass exodus” from the sector appear “overdone”.

On Thursday, in its latest quarterly inflation report, the Bank of England also warned of a number of risks to the UK economy next year.

Analysts argue that the Banks comments may point to a lowering of interest rates in coming months.

Nationwide believes that further interest rate cuts - added to the continuing lack of housing supply - could provide “some support” to price growth but are unlikely to prevent a “significant slowdown”.

Expert views

The building society is the latest group to publish its house price predictions for 2008.

Property website Hometrack and the Council of Mortgage Lenders have both forecast that prices will rise by 1%. Capital Economics believes prices will fall by 3% during both 2008 and 2009.

Jonathan Moore

The past decade has seen phenomenal increases in property prices across the whole of the UK, making buy-to-let an attractive investment option.

Buy-to-let lending in the UK now accounts for 12% of all mortgage advances, compared with just 3% five years ago.

It has never been easier to invest in property, from solid terraced homes to city centre new build apartments, property investment clubs, and even companies offering investment in hotel rooms.

But with so much advice on offer to property investors it can be difficult to make an informed decision before taking the plunge.

(more…)

Only in London are prices still rising, says Rics

The slowdown in the housing market is becoming more pronounced, says the Royal Institution of Chartered Surveyors (Rics). Its latest survey of members in England and Wales suggests prices in October fell for the third month in a row, and at the fastest pace since July 2005.

London was the only region where prices did not fall during the month, according to the Rics survey.

Almost all other surveys have pointed to a slowdown since the summer.

“The housing market is seeing the awaited slowdown that many had been expecting, with modest falls reported across most UK regions,” said Rics spokesman Ian Perry.

“Credit market turmoil has yet to put downward pressure on prices in the capital, although prices have now stabilised even here,” he added.

A combination of high prices and increased interest rates have finally reined in the housing market, with the unaffordability of homes, relative to average incomes, having risen to record levels.

Enquiries from new buyers also fell, for the 11th month in a row, as other factors came into play.

“Interest rate rises, the recent credit crunch and the subsequent tightening of lending conditions have all had an impact upon demand,” said Rics.

Overall, 22% more surveyors in England and Wales in October saw prices fall than rise in their locality.

Although prices are still rising slightly in Scotland they are now falling sharply in Northern Ireland.

(more…)

Hips having an ‘adverse effect’

Hips have been widely criticised by some in the property industry

Home information packs (Hips) are continuing to distort the housing market, according to estate agents. The National Association of Estate Agents (NAEA) says fewer large properties are on the market than would be normal at this time of year.

Since September, all properties in England and Wales with three or more bedrooms have required a Hip before they can be sold.

The government insists the packs are bringing benefits to consumers.

Anomaly

The NAEA asked its members to compare the market this October with the the same time last year.

There is an anomaly between instructions on properties where a Hip is required and where one is not Peter Bolton King, chief executive, NAEA

More than three-quarters of those who responded said instructions for properties with three or more bedrooms were down by more than 10%. Of those, almost half had seen a drop of more than 30%.

There was a much smaller reduction in the number of instructions received for one or two-bedroom properties.

“Clearly everyone accepts that there are a number of financial and economic factors that have caused the market to take a breather after seven hectic years,” said NAEA chief executive Peter Bolton King.

“However, these figures show that there is an anomaly between instructions on properties where a Hip is required and where one is not,” he added.

PACKS INCLUDE:   An energy performance certificate Copies of planning, listed building or building regulations consents Local searches Guarantees for any work on the property Q&A: Hips explained

The survey also asked agents to compare their overall levels of stock with October 2007. Seventy-six percent said their stock was either at the same level or less.

“With sales slowing and normally a traditional autumn bulge in instructions, it would be normal to expect stock levels to be significantly higher,” said Mr Bolton King.

‘Futile campaign’

“This once again appears to show the adverse effect Hips are having on the market, the lives of consumers and indeed the overall economy.”

The Association of Hip Providers (Ahipp) accused the NAEA of waging a “futile campaign” to try to get the packs scrapped.

“With the ongoing credit squeeze, the first run on a bank since the depression and three interest rate rises since the beginning of the year, it is not surprising that the market has experienced some turbulence,” said deputy director general Paul Broadhead.

A spokesman for the Department of Communities and Local Government also rejected the NAEA’s analysis.

“All serious commentators recognise that it is wider issues, such as interest rates and other economic facts, that are impacting on the housing market,” he said.

“Hips are providing more early information into the market for consumers - that is a good thing.”

THE ABOVE ARTICLE, LINKS AND IMAGES ARE BY THE BBC AND NOT BY US HERE AT NPA!!!!! THIS ARTICLE IS PUBLISHED FOR DISCUSSION PURPOSES ONLY AND WE DO NOT INFER THAT WE WROTE IT!!!!

Well i never! As predicted by me 2 years ago, the housing market is showing many signs of slowing down, but reports in the media are giving mixed messages. Some organisations are predicting doom and gloom, some people are saying its still going up, but if so, who are buying these houses? Its definately not first time buyers, there are hardly any left!!!!!!!!!!!!!!!

Most of the lower end of the market used to be bought by people like me to get on the first run of the ladder. These new proud owner occupiers often spent a lot of time, money and care on their homes. Not any more………….

In our experience, and from quite a bit of research, the first time buyer is rapidly becoming redundant, and the cheaper homes, the “doer uppers” are , or at least have been up until now, been bought by “buy to let” landlords, but with the market showing clear signs of slowing down, and with plenty of interest rate rises, more and more people are now sitting tight to see what happens. Anecdotal evidence also suggest that homeowners, faced with interest rate rises, declining prices in some areas (especially for flats), they aren’t so keen anymore!!!!!!!!!

On the bbc website, we found the following mixed messages. Report number 1 issued on the 30th August indicated that “There are now “clearer signs” that demand in the housing market has slowed, according to the latest property survey from the Nationwide.”

http://news.bbc.co.uk/1/hi/business/6969904.stm 

…however, on THE VERY SAME DAY THEY REPORTED THAT ”

“The number of new mortgage approvals in the UK remained steady during July, the Bank of England has reported. A total of 115,000 new mortgages were agreed last month, surprising analysts who had been expecting a fall as a result of rising borrowing costs”

http://news.bbc.co.uk/1/hi/business/6970393.stm 

So if the bbc dont know whats going on, how do the rest if us?????????

And today (10th September), they print this ”

Average house prices in the UK are accelerating again, according to the Department of Communities and Local Government (DCLG). Its latest survey shows that in July prices across the country rose by 2% to an average of £218,479.”

http://news.bbc.co.uk/1/hi/business/6986770.stm

…….does anyone know whats going on with the british housing market? I blimmin dont!!!!!!!!

My own predictions are thus………………..

Houses are at their most unaffordable, despite their being strong demand (as the government has let into this country millions of people without any thought as to where they should live), interest rates are starting to bite and could rise further, gullible people who don’t understand economics have thought that house prices will ALWAYS go up (they wont), and people have been very greedy. Buy to let landlords have flourished, (easy money eh?) and , well, I could go on, but wont as a tenant myself I am getting quite angry writing this!!!!!!!!!!!!!

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