Housing & mortgage round up: Interest rates, planning rules, house prices & mortgage fees


Housing & mortgage round upA huge week for housing news saw the government unveil its latest initiative to get the housing market moving, a new report shows that mortgage fees are soaring, the Bank of England announced their latest interest rate decision and of course no week would be complete without a house price survey.

Read on for all the details.

Interest rates unchanged

The latest Bank of England decision on interest rates went almost unreported this week, overshadowed by the Paralympics and the latest from the European Central Bank to try and save the Euro.

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As expected the Bank of England’s Monetary Policy Committee (MPC) voted to leave interest rates on hold and announced no increase to the existing program of Quantitative Easing (QE).

The consensus amongst economic experts seems to be that the Bank will reassess the impact of the existing QE measures, and potentially increase the program, later in the year, if the economy continues to struggle.

Planning rules to be relaxed

The big housing news this week came in the shape of the government’s announcement that a number of planning rules in England will be relaxed to “boost the economy”.

The government will hold a short one month consultation, on a range of measures, which it hopes will boost the economy, including:

  • A three year window where larger, single story extensions, can be built without needing planning permission
  • A relaxation on the rules governing extensions to shops and offices
  • Reductions in the percentage of social housing developers need to include within their projects if they can prove it is “commercially unviable”
  • An additional £280 million for the FirstBuy scheme, which is aimed at helping first time buyers get onto the housing ladder

The main headlines were grabbed by the proposals to allow extensions of between six and eight metres without planning permission, a significant increase on the current three metres.

However, perhaps more significantly for the housing market an additional £300 million was unveiled to provide 15,000 more affordable homes as well as making 5,000 empty homes habitable.

The government believes that the extra money put into the FirstBuy scheme will help 16,500 first time buyers get onto the property ladder.

The Prime Minister, David Cameron, said: “This government means business in delivering plans to help people build new homes and kick-start the economy.”

He continued: “We’re determined to cut through the bureaucracy that holds us back. That starts with getting the planners off our backs, getting behind the businesses that have the ambition to expand and meeting the aspirations of families that want to buy or improve a home.”

The National Housing Federation, which represents housing associations was supportive, calling the measures “a major step forward” with “the potential to transform the housing market”.

The group also said: “It will provide homes for some of the millions of families on waiting lists, create jobs and give the UK economy a shot in the arm with a speed and effectiveness few industries can match.”

Critics though were quick to pounce on the announcement, with Ed Milliband, leader of the opposition, saying: “A one-year holiday from the current rules on planning for a conservatory extension of up to eight metres into a garden which is what the government is announcing today, does not represent an economic plan.”

Others pointed out that the planning system was not necessarily a block on new development, with around 400,000 new homes approved but not yet built.

It remains to be seen whether these new proposals will come through the consultation period unchanged and whether they provide the necessary impetus to the UK housing market, although a generation of disenfranchised first time buyers will certainly be holding their collective breath.

House prices fall in August

The latest figures from the Halifax show that house prices fell by 0.4% in August, compared to July, and are down 0.9% over the past 12 months.

The monthly drop of 0.4% is significantly at odds with the 1.3% rise reported by the Nationwide last week.

According to the Halifax the average house price in the UK is now £160,256, around £4,500 lower than the Nationwide’s figure.

The differences between such major surveys emphasises the current volatility in house prices, often caused by the low number of sales, although overall house prices seem to be flat lining.

Martin Ellis, Housing Economist at the Halifax, said: “Overall, there has been little change in house prices so far this year with the UK average price in August at a very similar level to the end of 2011.”

He continued: “A gradual upward trend in spending power, aided by lower inflation, should help to support housing demand in the coming months. Nonetheless, house prices are likely to remain flat over the remainder of 2012 and into next year.”

The figures produced by the Halifax and Nationwide are based on their own mortgage lending, whilst the Land Registry survey, which takes longer to compile, will make interesting reading for August, as it includes all housing transactions during the month.

Mortgage fees rise by 70%

The headlines over the past few weeks have been grabbed by low interest rate mortgage deals, but new research from Moneyfacts has shown that mortgage fees have soared by 70% over the past four years.

According to the research, the average mortgage arrangement fee is now £1,514, up from £899 in 2008. Borrowers opting for two year fixed rates, which are hugely popular, are paying even more with the average arrangement fee of £1,565.

Experts believe that as mortgage rates have fallen lenders have had to increase arrangement fees to maintain profitability.

The research emphasises the need for borrowers to consider more than just the interest rate when working out which mortgage deal is right for them. Whilst a market leading interest rate might look attractive, if it comes with a high arrangement fee an alternative product with a higher interest rate but lower fees might actually work out to be more cost effective in the long run.

Our mortgage adviser, Linda Wood, is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

Your property may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £299 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.