Reply to: Nationwide House Price Index Jan 2014

[bobspud]

I'm not so sure - I am looking to buy near where I live in Ealing. I went to see a flat last weekend at an open house event which is one of the current preferred marketing tool by agents these days. I can only describe it as a frenzy as there were people queuing up to get in.

Yes but looking never equated to buying and the reason agents like doing it is because it pushes the buttons of idiots that think everyone wants the place. We tried an open house when we moved out of London. There were 3 people that had the cash and 20 that couldn't have bought it if the price was half...

Of the 3 buyers one wanted to offer 80k under the value and the other 2 didn't like the frontage because it was pebble dashed.

I sacked the agent and used someone else, in the first day or so one woman walked in and said yes this is nice and paid asking price.

[Martin@AS Financial]

You mean they were up against a twat of a estate agent that convinced them to bid against themselves

I'm not so sure - I am looking to buy near where I live in Ealing. I went to see a flat last weekend at an open house event which is one of the current preferred marketing tool by agents these days. Yes the estate agent was stood there like he was the lord of the manor but I can only describe it as a frenzy as there were people queuing up to get in.

[Power Mortgages Ltd]

Well this seems the place for this:

Ok so this is all new to me: we got our 1st mortgage on a 4yr fixed term (we went via an advisor as I know nothing about the subject)

Now our 4 years are up, I want to get another fixed mortgage (I know I am paying more than having it on a variable agreement but I rate the stability more than the possible saving)

So my questions are:

Is it best just to go to an advisor & get him to sort it out or do I just contact Nationwide & go with what they have?

I also believe that the LTV ratio will have gone down due to house prices increasing in my area: how do I go about getting a valuation? I don’t want to go to an estate agent & pretend to be looking at selling (A: it’s lying, B: I CBA with all the phone calls after)

Sorry if they are novice questions but real estate is not my forte

Thanks in advance

I'd echo what Martin said, see what Nationwide can offer you to retain your business and then have a look around at what else is available. Nationwide will have an automated valuation on their systems of what they believe your property to be worth based upon online figures and trends but this figure is by no means gospel and if you have done any work to the property in the last 4 years that wont be factored into the automated figure they hold.

Have a look on Zoopla and Right move to see what similar properties are currently selling for. I'd go by sold prices if possible because unless you live in an area where properties are going for the asking prices and above, chances are looking at what price a property is marketed for will not be the same as what a surveyor acting on behalf of the bank would value the property at for remortgage purposes.

Make sure you factor in fees as Martin has said, if Nationwide offer you a fee free option then depending upon the outstanding balance of your mortgage, even if the rate is slightly higher than what you can get elsewhere, the fact you do not have to pay a fee could make it a cheaper proposition overall. Generally you can always find a better rate by shopping around, banks and building societies know a lot of people will simply remain with their current lender for the perceived lack of hassle but in all honesty, switching lenders nowadays is pretty hassle free so definitely worth it if you save money - better in your pocket than a lender's!

The only point I would disagree with Martin on is using the lender's Solicitor. Whilst lender's in house Solicitors or preferred Solicitors are not always who you would to appoint if you were purchasing a property and time was of the essence, to instruct your own Solicitor to carry out the legal work for the remortgage can cost anything north of £300 which will of course eat into any potential saving you may gain by remortgaging away. The in house Solicitors are never normally that bad anyway and I'd even go as far to say that the majority of the time they do a good job (from my experience anyway). If you submit the mortgage application with enough time to spare before your rate has expired they can normally arrange completion for just after the early repayment charges or your current rate ends anyway which is all you need. The mortgage broker will normally deal with the Solicitor and chase them up if needs be too.

[Zero Liability]

How many years have we been saying that for

Note that since the rates first plunged to 1% and then .5%, the rate you actually pay has slowly increased. This applies to fixed rates too - if the bank thinks the rate won't rise, your fixed rate will be very close to a tracker rate. If they think rates are likely to rise, you pay more for your fixed rate.

Rates aren't suddenly going to jump from .5 -> 5%.

I agree with the logic behind your post, i.e. that anticipated interest rate rises will be priced in, but who is to say the banks will properly anticipate them this time?

Over the term of a mortgage, there are so many variables which could be upset, including assumptions re having a steady income, such that hikes in the interest rate could become unaffordable. The fact that interest rates have remained so low for so long would imply that a correction is long overdue for them, and could be sharp; the availability of savings to fund credit hasn't increased and demand for it hasn't really fallen much. Of course, banks don't rely on savings to finance their lending, this is largely a function of what central banks will tolerate re asset(loan):liability(deposit) ratios, yet it does suggest that interest rates have little basis in credit supply/demand fundamentals. Economies reliant on low interest rates provided by central banks aren't exactly healthy. The BoE has got some limited tools to control the situation in the UK, e.g. controlling reserve ratios or LTVs but these only work whilst the credit expansion is taking place, not once it has already transpired. For that they require assets with which to neutralise the effects of prior credit/money expansion, and this in turn depends on how those assets are valued. This problem also faces the US Fed.

There is already a divergence between the stated intentions of central banks to keep rates low and what the market is pricing in, however there is so much distortion in this market that I genuinely wonder how well the banks will price in future interest rate patterns. I hope they do a good job of it.

Personally, I am going to wait for property prices to fall should the market correct, and potentially leave out any property purchases for abroad, since I am considering emigration in the not too distant future.

[bobspud]

It's already happening.

Competition for prime central London property is beyond ridiculous. I had a client last week who in order to get their offer accepted had to go to £80,000 over the asking price. They were up against 14 other buyers.

You mean they were up against a twat of a estate agent that convinced them to bid against themselves

[Platypus]

how do I go about getting a valuation? I don’t want to go to an estate agent & pretend to be looking at selling (A: it’s lying, B: I CBA with all the phone calls after)

A decent estate agent will give you a valuation for mortgage purposes. They might charge for this. Perhaps look out for someone who is RICS registered.

But I happen to know that most of them just look on Zoopla for similar properties in the area.

Your local agent's valuation will not override the bank's valuation. They will appoint their own valuer who doesn't know the area and won't have a clue. He'll ring the local agent for clues and he'll also look on Zoopla.

[Kanye]

Investors both domestic and from overseas do play a big part in the London property market but they are not the only driving force behind this boom.

FTB's are back in the market due to the availability of 95% mortgages

People who currently own are remortgaging their residential homes into BTL's, releasing equity and buying their new home

Bonuses are back in a big way which are being used as a deposit to buy

Confidence in job security is on the up in London


The underlying issue though is that there is simply not enough property to go around those who want to buy.

People must be taking on insane amounts of debt in London.

A £500k mortgage is approaching £3k per month. It's sustainable if the bonuses or the highly paid contracts continue to roll in, but that is a very risky assumption over a 25 year term.

With potential interest rate rises, dips in the market, changes in life circumstances, some people must be really sailing close to the wind - and then leveraging it up even further for a dabble in BTL!

Even if you can do it, who wants to service a monster mortgage for 25 years.

This is all quite depressing for someone in the top 0.5% of UK earners who is burdened with half a brain.

[Martin@AS Financial]

So will the investors ever pull the plug? Surely it will get to a stage where return will be limited and then they will go and put their money elsewhere resulting in all hell breaking lose on the UK property market....

Investors both domestic and from overseas do play a big part in the London property market but they are not the only driving force behind this boom.

FTB's are back in the market due to the availability of 95% mortgages

People who currently own are remortgaging their residential homes into BTL's, releasing equity and buying their new home

Bonuses are back in a big way which are being used as a deposit to buy

Confidence in job security is on the up in London


The underlying issue though is that there is simply not enough property to go around those who want to buy.

[Martin@AS Financial]

Well this seems the place for this:

Ok so this is all new to me: we got our 1st mortgage on a 4yr fixed term (we went via an advisor as I know nothing about the subject)

Now our 4 years are up, I want to get another fixed mortgage (I know I am paying more than having it on a variable agreement but I rate the stability more than the possible saving)

So my questions are:

Is it best just to go to an advisor & get him to sort it out or do I just contact Nationwide & go with what they have?

I also believe that the LTV ratio will have gone down due to house prices increasing in my area: how do I go about getting a valuation? I don’t want to go to an estate agent & pretend to be looking at selling (A: it’s lying, B: I CBA with all the phone calls after)

Sorry if they are novice questions but real estate is not my forte

Thanks in advance

Hi Halo

I would start by seeing what Nationwide can offer you and then comparing it to the rest of the market. Remortgages are handled by banks in exactly the same way purchases are in that any new bank will carry out a survey on your property to ensure that it is good security to lend on.

A solicitor will also be involved as they will have to carry out local authority searches as well as writing to the management company to check things like the balance of the sinking fund. If you decide to leave Nationwide, many lenders today offer a free survey and also free legal work. I would advise that you take advantage of the free survey but instruct your own solcitor as the free ones tend to be beyond awful.

The most important thing to do though is to look beyond the headline rate and look at the total cost of borrowing. For example HSBC currently have a 1.49% 2 yr fixed rate which carries a £2000 arrangement fee. Depending on your loan size this could either save you thousands or completely front load the real rate.

Hope that helps.

[Halo Jones]

Mortgage Advice

Well this seems the place for this:

Ok so this is all new to me: we got our 1st mortgage on a 4yr fixed term (we went via an advisor as I know nothing about the subject)

Now our 4 years are up, I want to get another fixed mortgage (I know I am paying more than having it on a variable agreement but I rate the stability more than the possible saving)

So my questions are:

Is it best just to go to an advisor & get him to sort it out or do I just contact Nationwide & go with what they have?

I also believe that the LTV ratio will have gone down due to house prices increasing in my area: how do I go about getting a valuation? I don’t want to go to an estate agent & pretend to be looking at selling (A: it’s lying, B: I CBA with all the phone calls after)

Sorry if they are novice questions but real estate is not my forte

Thanks in advance

[NorthWestPerm2Contr]

It's already happening.

Competition for prime central London property is beyond ridiculous. I had a client last week who in order to get their offer accepted had to go to £80,000 over the asking price. They were up against 14 other buyers.

So will the investors ever pull the plug? Surely it will get to a stage where return will be limited and then they will go and put their money elsewhere resulting in all hell breaking lose on the UK property market....

[Martin@AS Financial]

One thing I wonder is how long the London market can continue to sustain the current prices. We know that cash buyers are the majority of the buyers in central London - so what happens when those guys pull their investments and put it elsewhere? On the other hand London is an important capital so maybe the population will move further and further out leaving only the super rich in the centre?

It's already happening.

Competition for prime central London property is beyond ridiculous. I had a client last week who in order to get their offer accepted had to go to £80,000 over the asking price. They were up against 14 other buyers.

[NorthWestPerm2Contr]

How many years have we been saying that for

Note that since the rates first plunged to 1% and then .5%, the rate you actually pay has slowly increased. This applies to fixed rates too - if the bank thinks the rate won't rise, your fixed rate will be very close to a tracker rate. If they think rates are likely to rise, you pay more for your fixed rate.

Rates aren't suddenly going to jump from .5 -> 5%.

True say. Currently paying 3.69% as a FTB. Hoping to remortgage to something a lot better in the summer.

[d000hg]

But most of these mortgages are short-term fixes. What will happen when the rates rise, as they inevitably will?

How many years have we been saying that for

Note that since the rates first plunged to 1% and then .5%, the rate you actually pay has slowly increased. This applies to fixed rates too - if the bank thinks the rate won't rise, your fixed rate will be very close to a tracker rate. If they think rates are likely to rise, you pay more for your fixed rate.

Rates aren't suddenly going to jump from .5 -> 5%.

[NorthWestPerm2Contr]

I've been looking at places in Devon and Cornwall, and they seem to have crept up a bit since 2007 (although no doubt many properties on Zoopla and RightMove are overpriced).

But I think vendors in the price range I've been looking at (£500K - £600K) are caught between two stools: Locals, who would gladly pay can't afford it; but these days richer people in the south east, who can afford a nice second family property or a retirement place, would rather buy in France or Spain.

One thing I wonder is how long the London market can continue to sustain the current prices. We know that cash buyers are the majority of the buyers in central London - so what happens when those guys pull their investments and put it elsewhere? On the other hand London is an important capital so maybe the population will move further and further out leaving only the super rich in the centre?