What makes your property increase in value?

Watching property prices in Britain is like riding a rollercoaster, one moment you are at the top, the next flying right down to the bottom. Since 1975 prices have increased approximately 3% per year. There were periods of ‘dipping’ such as the early 1990’s and 2008. The prices fell dramatically in this year, leading into a recession caused by the cataclysmic credit crunch.

During the ten year period between 1997 and 2007, property prices rose and fell slightly. What makes these small and sometimes quite dramatic fluctuations?

The main factors which influence property prices are: 

Property supply and demand

There are literally thousands of property markets within the UK; they all contribute to the overall ‘average’ house price surveys. All average house prices are ‘statistically’ average and not based on a specific property that actually exists.

The effect of supply and demand has quite a profound effect upon the market, for example, if we have three potential buyers all looking for a semi- detached Victorian house, and we have only one on the market, the buyers are likely to compete to secure that property. This will in turn increase the property price. On the other end of the scale, a developer down the road may have twelve new properties to sell and only six potential purchasers. He will keep lowering the price until they are sold.

Prices will always rise in the long term, due to the fact that we are an ever-increasing population. The population is rising faster than the number of properties already available and more than the number of homes currently being built.

Unemployment and Confidence in the market

The threat of unemployment or even unemployment itself can have a huge impact on property prices. We are constantly bombarded daily by the media on how dire the economy is. We are told wages will be frozen and homes are to be repossessed. No-one is going to feel confident enough to purchase a new home that may either lose value or if made redundant, mortgage repayments that can’t be met. During this period prices tend to fall.

The reverse is true in a booming economy, falling unemployment and rising property prices, boosts confidence. At this time property prices tend to increase, sometimes quite dramatically.

Property affordability

In times gone by (prior 2000) lenders would let you borrow between two and half times a joint salary or three and a half times a single salary to purchase a home.
Then came so called ‘Irresponsible lending’, where you were lent more money to buy that even more expensive property, one that may have previously been out of your league.
In the previous recession when house prices fell, people couldn’t afford a mortgage due to interest rates being high, raising as much as 15%.
This recession, rates have been at an all time low, lending has not been as readily available, but there has been some movement in the property market.

Throughout the good times, the economy blossoms, financial confidence grows and house prices rise. If a first time buyer couldn’t afford a deposit, there would always be a parent or relative to either lend or give them the money required.
Affordability has a major impact on allowing property prices to rise; low cost money available has meant that property prices have kept rising, where as normally they would have fallen.

To summarise, prices are affected by the actual number of purchasers and sellers, the type of property being sold matching the type desired. This is then all affected by whether people can actually afford to purchase, overall confidence about the economy and job security.

Thank godness for the two-year stamp-duty holiday for first-time buyers

My sister Tasha has moved in with us, tales of her disastrous money management are legendary. Being a much older sister, with two spare rooms, what could I do? So on a snowy Saturday, in she moved, complete with every IKEA accessory known to man! She is a complete disaster to have so close, bags of designer wares are wafted under my nose, my makeup is used and carelessly left strewn over every surface in what can only be described as Armageddon in the family bathroom.

So please imagine my delight upon hearing Alistair Darling announce a two-year stamp-duty holiday for first-time buyers on properties priced up to £250,000. Not having to pay the 1% levy, which used to apply to sales over £125,000, will mean a saving of as much as £2,500. Not a huge sum compared to the other costs of moving, admittedly, but helpful nonetheless: probably enough to buy a few choice pieces from IKEA, a comfortable, bed, sofa and maybe enough for Tasha to buy her own makeup! I passed her the phone to call the bank of mum and dad, deposits are their thing.

The number of first-time buyers has slumped in recent years. In 1999 alone, more than 590,000 people took their first step onto the property ladder; by the peak of the market in 2007, the figure had fallen to 357,000; last year, it was just 198,000. The Council of Mortgage Lenders (CML) estimates that the average person is now 30 before they buy their first home .Tasha is in her twenties, that is way too long for her to be our house guest.
Even modest changes to the tax rate, such as the one announced by Darling, will certainly have an effect — as shown when the government temporarily raised the point at which stamp duty kicks in from £125,000 to £175,000, from September 2008 to the end of last year. The CML found that the number of transactions in the £125,000-£175,000 range last December was an unseasonable. 63% higher than in the previous month but fell back by 80% in January, when the original bands were restored.

The effect this time around may not be so obvious, not least because the “holiday” will be enjoyed only by first-time buyers. This is not only a matter of excluding ‘wannabe’ buy-to-let landlords: if you have already owned a property, not just in Britain but anywhere in the world, you won’t qualify. Combining resources with someone else who has bought in the past is also not permitted.

Even more of a problem is the need to raise a deposit, which could be easily, be £50,000 for a £250,000 home. Although there are signs that lenders are beginning to look more favourably on those unable to lay their hands on that amount of cash, deals open to buyers with less than a 20% deposit are rare — and the fees and interest rates charged are, in most cases, consider¬ably less attractive than those on offer to existing homeowners trading up.

It may be that this stamp duty bonus could be the factor that lands Tasha on the property ladder; all she needs to do is find the right property. We have been looking solidly for the past few days; I can’t say that there is an abundant choice out there. Anything that looks somewhat appealing is snapped up within days of coming on to the market, everything else looks uninhabitable and in need of a lot of work. It could be that we have a temporary surge into the housing market from this but with limited properties coming on to the market, this could be a mini blip that drives prices up rather than wiping any savings on tax.

The Budget - a Key Point Breakdown

Stamp Duty and Property

• The stamp duty limit for first-time buyers will be doubled from midnight tonight to £250,000 for this year and next, to be funded through an increase in Stamp Duty to 5% for houses worth over £1m from April 2011.

• The Support for Mortgage Interest scheme will continue at the higher rate for another six months.

• From October next year, the most expensive properties will be excluded from the Housing Benefit calculation in each area, which will - added to anti-fraud measures - save £250m a year.

Economy and Public Debt

• The Chancellor forecast the economy to grow by between 1% and 1.5% this year and between 3% and 3.5% in 2011. This is a reduction. His forecast for the following years is unchanged.

• Borrowing this year should be £11bn lower than forecast at £168bn. In 2010/11, borrowing will be £163bn, falling to £131bn in 2011/12, then £110bn in 2012/13.

• As a share of the economy, borrowing is forecast at 11.8% of GDP this year, 11.1% next year, then 8.5%. In 2012/13 it will be 6.8%, then 5.2%, falling to 4% in 2014/15.

• Public sector net debt will reach 54% of GDP this year. It will then increase to 75% by the end of the forecast period in 2014-15. Net debt, as a share of GDP, will begin to fall the year after that.

Banking

• The Treasury has already received over £8bn in fees and charges from banks and the one-off 50% tax on bankers' bonuses has already raised £2bn.

• Need for international systemic tax on banks, which he will urge on international finance ministers in Washington next month.

• A new guarantee will mean everyone can have a basic bank account, giving up to 1m more people access to bank accounts over the next five years.

• Agreement that RBS and Lloyds will provide a total of £94bn of new business loans.

Pensioners

• Tax credit support for older workers is to be extended. To make it easier for those over 60 to receive working tax credit, the Government will reduce the minimum hours they need to work to be eligible.

• The pensioners' higher Winter Fuel Payment of £250, and £400 for the over-80s, will be guaranteed for another year.

Families

• Parents of one and two-year-old children will be helped by increasing by £4 a week money paid through Child Tax Credit from 2012.

Unemployment

• A guarantee of a job or training for every 18-24 year-old after six months out of work is to be extended until March 2012.

ISA

• From next month, the annual ISA limit will rise from £7,200 to £10,200 and ISA limits will increase annually in line with inflation.

Fuel Tax

• Next month's increase in fuel duties will be staged. Fuel duty will rise by a penny in April, followed by a further 1p rise in October and the remainder in January.

• The Chancellor said by the time the full fuel duty rise comes in, in January, he forecasts inflation to be back below 2% and confirmed the Bank of England inflation target remains unchanged at 2%.

• The planned increase in fuel duty and landfill tax will continue for one year from 2014.

Personal Tax and VAT

• The Chancellor made no further announcements on VAT, income tax or National Insurance rates.

Alcohol and Tobacco

• Duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also increase by 2% above inflation for two further years from 2013.

• Duty on cider will increase by 10% above inflation from midnight on Sunday.

• Tobacco duty will increase from today by 1% above inflation and then increase by 2% in real terms each year until 2014.

Inheritance Tax

• Inheritance tax threshold will be frozen for a further four years to help pay for the cost of care for older people.

Business

• The cost of the £2.5bn overall one-off growth package will be met from existing budgets and by higher revenues from the bankers' bonus tax.

• A new Credit Adjudicator will fast-track complaints from smaller firms who say they have been unfairly denied credit.

• A new national investment corporation, to be called UK Finance for Growth, will streamline and improve Government help to small and medium-sized enterprises, overseeing £4bn of support for business.

• A new Growth Capital Fund will provide fast-growing companies with private capital and will eventually provide £500m of finance - with commercial banks so far agreeing to contribute more than £100m.

• Business rates will be cut for one year from October, meaning a tax reduction for over 500,000 small businesses in England. Small businesses will be helped to expand by doubling the annual investment allowance to £100,000. Entrepreneurs' relief for Capital Gains Tax will be doubled to £2m on which the lower rate of 10% will be taxed.

• The Chancellor will offer help to the computer games sector similar to the aid given the British film industry.

The Environment

• To boost a low-carbon economy, the Government will set up a new Green Investment Bank, controlling £2bn of equity. Half the cost will come from asset sales, with the rest matched by private investment. The fund will focus on green transport and energy, including offshore wind power, with £60m offered to develop ports hosting manufacturers of offshore wind turbines.

Extracts taken from Thisismoney.co.uk

The Budget

News is just in on the budget, I have just logged into the Times on line to see their slant on the budget. Rebecca O’Connor reports.

Buyers of homes worth more than £1 million will be hit by a new higher rate of stamp duty of 5 per cent from next year to fund a temporary scrappage of the tax for first-time buyers, the Chancellor said today.

Alistair Darling said he would use extra revenue from sales of the most expensive properties in the country to fund a simultaneous increase in the lowest threshold for stamp duty of 1 per cent from £125,000 to £250,000 for the next two years to help first-time buyers.

Buyers of homes worth more than £500,000 currently pay a rate of 4 per cent.

On a property worth £1 million, the stamp duty bill will rise from £40,000 to £50,000 from April 2011. For a first-time buyer of a home worth just under the new 1 per cent threshold of £250,000, the bill will fall from £2,500 to £0.

However the concession, to be introduced for any purchase completed from tomorrow and before March 25 2012, will only apply to first-time buyers. Home movers who are buying property under the £250,000 threshold will not benefit.

The definition of a first-time buyer will be someone who has never previously bought a property.

The move will be viewed as another tax on bonus earners and cash-rich investors, who have dominated the top end of the housing market for the past year.

The impact of the tax is expected to fall disproportionately on buyers in London and the South East, where 81 per cent of properties worth more than £1 million are concentrated.

Nicholas Leeming, commercial director of Zoopla.co.uk said: “Taxing the rich makes a good headline, but it won’t raise much money for the government’s fiscal black hole.”Only around 3000 homes sold above the £1m mark in the last year.

For a first-time buyer of a home worth just under the new 1 per cent threshold of £250,000, the bill will fall from £2,500 to £0.

The stamp duty holiday on properties worth between £125,000 and £175,000, which ended at the end of December, helped around 260,000 buyers, the Chancellor said.

Housing market experts welcomed the threshold increase, but said it would be of limited use for first-time buyers who are struggling to raise a deposit.

Housebuilders welcomed the move as a boost to the industry, which has struggled to sell homes to first-time buyers for the last two years. Melanie Bien, director of Savills Private Finance, the mortgage broker, said: "'We welcome the doubling of the stamp duty threshold for first-time buyers to £250,000 which should make a significant difference to the majority, who are struggling to get on the housing ladder. But while every little helps, they still need to raise a sizeable deposit to buy their first home. “Greater relief from stamp duty will be a confidence boost to the housing market, helping to ensure the housing recovery does not stall.”

 

Decorating!

At the moment we are knee deep in decorating, we have decided to be sensible and only ‘do’ one room at a time. The lucky room this month is that of our toddler, he has had 1970’s brown wall paper surrounding him for long enough!

So, how do you go about achieving that perfect child friendly haven (minus Thomas the Tank wall frieze)

 

You need to bear in mind that children’s rooms will over the years go through various changes as the child grows, fads will come and go.

Simple layouts and a basic colour scheme are best; these schemes can either be added to or completely changed with little effort.

 

There are three stages that your child will go through, baby to small child, pre-teen, and teenager. Planning is key in getting exactly what you want, staying to time and on budget.

Before decorating the following elements need to be considered, structure, storage, lighting, flooring and overall colour scheme.

 

Furniture should be sturdy and simple. This type of furniture will grow with your child.

Once the basic room layout has been decided and executed (walls moved, windows added etc) it’s time to consider storage. Try and keep all the storage to one area in the room as this leaves plenty of space to play, and gives the room a feeling of space.

Fitted selves are a good idea, under the bed is always good for hiding things away, you could invest in some big wide containers to keep all toys together.

 

Lighting is very important, all decisions about what will be needed electrically, needs to be thought out in the planning stage, ensure you have enough sockets and switches ( before you know it, a computer, I pod docking station and TV will be the requirement, taking over from all soft toys)

As in most rooms there will be areas where task lighting will be necessary (from baby change to homework)

Dimmer lights can be good, they can allow for soft baby lighting and bright task lighting.

 

Flooring should be considered carefully, it needs to be practical and hard wearing. Hardwood floors are good but you will need to soften it with a rug, little ones spend a considerable amount of time on the floor. Consider the colour of the carpet, too light and it will be a dirt magnet, too dark and every bit of fluff is clearly visible. A lightish neutral colour is best.

 

Keep the colour scheme complimentary, use of one colour for the walls, another for all wood work (skirting, door and window surround) If you are considering a bright, bold colour, keep it to one wall, this can look very effective. The same idea can be utilised with fun wall papers.

Light colours are easy to adapt and change. Adding accessories can change and update any room.

 

When purchasing furniture, think long-term, it’s great fun having the odd specialist child piece, but bear in mind they grow quickly! Use pieces that can be adapted, for example a toy box can be converted in to a storage chest, a baby changing table can be recycled later for a chest of drawers.

 

Well we are starting on the weekend… wish us luck!

Mixed messages from lenders as rates fall, rise and stay the same

WHICH RATES ARE GOING UP?

A flurry of lenders are writing to customers to tell them that their standard variable interest rates are on the way back up.

Skipton Building Society borrowers are set to get the biggest shocks: their rates are going up 1.45 per cent – adding £101 a month to repayments on a typical £125,000 loan.

Holmesdale and Norwich & Peterborough are bringing in smaller rises, while Nationwide has increased the standard rates charged by its The Mortgage Works and UCB subsidiaries.

WHICH RATES ARE BEING CUT?

High Street players HSBC, Nationwide and Woolwich, as well as regional names such as Yorkshire Building Society, have announced lower fixed rate deals.

HSBC now has two-year fixes from 3.84 per cent and five-year fixes from 5.44 per cent, while some of Yorkshire’s new fixes are set at 0.6 per cent lower than its old ones.

Northern Rock is offering two year fixes at 3.69 per cent.

WHICH RATES ARE STAYING THE SAME?

Bank of England base rate was held at 0.5 per cent in the first week of February, despite predictions about a possible rise.

Payments on most trackers are linked to base rate so they have been held steady for the 11th month in a row.

WHICH RATES ARE WORTH CHOOSING?

Experts say more lenders will increase standard mortgage rates and cut fixed rates later this month. But the consensus is that you still pay too high a price for security on most fixes.

A better strategy is to compare the rates you would pay on your chosen lender’s best fix and tracker deals.

If you opt for the tracker, budget for the fix and put the difference between the two payments in a savings account each month.

That gives you a decent buffer fund if interest rates rise dramatically.

If you have a £125,000 mortgage with Halifax and go for its two-year tracker rather than the two-year fix, then you’ll have a war chest of £840 after the first year if you save the difference between the two repayments.

At the moment, best trackers come from HSBC, Santander and Woolwich.

Extracts from an article by Neil Simpson Daily Mail

How to stop your home being repossessed

If you are finding it increasingly difficult to meet your mortgage demands, don’t bury your head in the sand… It won’t go away. Here are a few tips to help you.

There are, according to the FSA (Financial Services Authority) one in five mortgage holders who are increasingly worried about meeting their mortgage repayments in the next twelve months. A quarter of these stated that they had no contingency plans in place in dealing with this.

The numbers of repossessions grew to 50,000 last year, more are expected this year as the economic fallout continues. The most vulnerable groups at the moment are first time buyers, those with 100% mortgages, and all of those due to come off fixed rate mortgages.

Problems are far easier to resolve, if addressed early. Mortgage meltdown doesn’t have to end in repossession. If tackled at an early stage, the lenders or indeed the court often come to an arrangement where the borrower is able to pay off the arrears.

Financial problems may be just for the interim period, if so, consider asking your mortgage lender to reduce your monthly payments for the time needed. If your financial problems look like becoming long term, re-mortgaging over a longer period or indeed even selling your property for a smaller, cheaper one may be an option.

Knowing your financial situation is vital in moving towards a resolution. A debt plan should be drawn up. You have to be able to work out what payment you can reasonably repay to your lender to cover the repayment and any arrears that have be incurred.

Once you have the debt plan, write to your mortgage lender to negotiate an affordable repayment plan.

All lenders have different policies with regard to mortgage arrears; some are more understanding than others. You must be proactive and compliant, how you deal with this situation will certainly influence any judge should this come to court.

If you have any complaints about the way your lender has treated you, they should be handled by the lenders own complaints procedure and then on to the Financial Ombudsman Service.

Court action should always be the last resort, unfortunately if an agreement can’t be reached between you and your mortgage lender, they will be allowed to serve you with a repossession order.

Your property may be sold off at auction quickly. If the property sale doesn’t cover the mortgage, you will be liable for the deficit.

It is often preferable to sell your property personally; you may get a better price than the lender selling in haste.

Don’t panic, hand the keys over and walk away, unless the property is sold or you are being legally evicted. Unless either of these happens, you are still responsible for mortgage payments and building insurance.

A word of caution, there are an increasingly large number of property companies, who are targeting financially pressured home owners, buying their homes for ridiculously low prices and then renting them back to them. You could end up paying a high rent and worse case scenario, be evicted.

Overpay your mortgage and save money

In these times of economic gloom, we are constantly looking to save money, and get the best deals available.

We are constantly looking for advice on all aspects of our financial lives.

Perhaps our biggest financial burden is our mortgage, and it is probably the one we are most laid back about. The payments are viewed as a ‘given’, they fly out each month and we all accept that we will have this debt for at least 25 years.

 

At this time of incredibly low interest rates, it would be prudent to ‘overpay’ the mortgage.

Any borrower who has seen their monthly mortgage rate drop, due to a very low interest rate (0.5%) Should just keep on paying a ‘standard level’- this could lead to overpaying your mortgage by many hundred of pounds per month.

The benefits to be had from overpaying the mortgage can be so significant that it is surprising how few borrowers actually do it. Overpaying also increases the amount of equity you have in the property, this in turn allows you access to better deals when you are shopping for new mortgage finance. It is worth noting that once the spare cash is paid in to the mortgage it is gone and cannot be used for anything else. This is the reason many of us put out surplus cash into savings etc, as it can be easily accessed at very little notice.

 

In the real world we don’t overpay our mortgages, because we’re already at the top end of what we can afford. If there is spare cash, we use it to pay off debts, save it or fund other purchases.

Most lenders will only allow a certain amount of overpayment every year, usually 10% of the overall mortgage amount, they may charge you for this privilege, this is known as ELC (early repayment charge) if you have a flexible mortgage the 10% rule will probably not apply.

With normal savings rates being particularly low, many borrowers with significant savings would benefit from offsetting, as they would earn the equivalent of the mortgage rate on their savings. This method of overpaying also allows the borrower to keep their savings ‘liquid’ as they can always access the money from the offset pot at any time. It is also worth bearing in mind that any interest you earn on your savings is taxable at your highest rate of income tax, which might be 20%, 40% or, as of April 50% for the highest earners. If you use your savings to overpay your mortgage instead, not only are you effectively earning interest on them at the mortgage rate, but because they no longer technically exist as ‘savings’ you do not pay any tax.

Overpay your mortgage and save money

In these times of economic gloom, we are constantly looking to save money, and get the best deal available.

We are constantly looking for advice on all aspects of our financial matters.

Perhaps our biggest financial burden is our mortgage, and it is probably the one we are most laid back about. The payments are viewed as a ‘given’, they fly out each month and we all accept that we will have this debt for at least 25 years.

 

At this time of incredibly low interest rates, it would be prudent to ‘overpay’ the mortgage.

Any borrower who has seen their monthly mortgage rate drop, due to a very low interest rate (0.5%) Should just keep on paying a ‘standard level’- this could lead to overpaying your mortgage by many hundred of pounds per month.

The benefits to be had from overpaying the mortgage can be so significant that it is surprising how few borrowers actually do it. Overpaying also increases the amount of equity you have in the property, this in turn allows you access to better deals when you are shopping for new mortgage finance. It is worth noting that once the spare cash is paid in to the mortgage it is gone and cannot be used for anything else. This is the reason many of us put out surplus cash into savings etc, as it can be easily accessed at very little notice.

 

In the real world we don’t overpay our mortgages, because we’re already at the top end of what we can afford. If there is spare cash, we use it to pay off debts, save it or fund other purchases.

Most lenders will only allow a certain amount of overpayment every year, usually 10% of the overall mortgage amount, they may charge you for this privilege, this is known as ELC (early repayment charge) if you have a flexible mortgage the 10% rule will probably not apply.

With normal savings rates being particularly low, many borrowers with significant savings would benefit from offsetting, as they would earn the equivalent of the mortgage rate on their savings. This method of overpaying also allows the borrower to keep their savings ‘liquid’ as they can always access the money from the offset pot at any time. It is also worth bearing in mind that any interest you earn on your savings is taxable at your highest rate of income tax, which might be 20%, 40% or, as of April 50% for the highest earners. If you use your savings to overpay your mortgage instead, not only are you effectively earning interest on them at the mortgage rate, but because they no longer technically exist as ‘savings’ you do not pay any tax.

Are we double dipping?

After a disastrous welsh defeat on Friday, I decided to ignore all sports news and concentrate on that subject that is so close to my heart… property! My two year old, after being given chocolate, (hopefully his mother won’t read this) settled down just long enough for me to peruse the musings of David Smith.

 Are we double dipping? David asks. The Nationwide reported on Friday that prices have fallen by 1% this month (it takes its readings from the middle of the month), after nine consecutive increases. The market is still 9.2% up on a year earlier, but could this be the beginning of the second leg of the house price fall?

The article went on to say that, according to the Bank of England monetary policy committee’s expert, the recent strength in house prices were unlikely to last due to mortgage lending still being so restricted. She claims that she was surprised by the strength in housing figures last year. David Dooks, head of BBA’s statistics, tell us that it was no surprise to see the January mortgage figures falling back from December; transactions were being pushed through to beat the end of stamp duty relief. The bad weather further suppressed market activity.

 The Land Registry reported a 2.1% jump in prices for January, although its figures are regarded as more backward-looking than Nationwide, since they come at the end of the house-buying process. Approvals should bounce back over the next couple of months, but the strong upward trend of most of last year was beginning to tail off even before the snow struck. That fits with other evidence that the supply of mortgages, having come back from its lows, is unlikely to rise much this year.

In my opinion, prices may well plateau this year.It is hard to see any wild swings in house prices coming up. This stability is no bad thing. After the roller-coaster ride of the past couple of decades, a period of consolidation could be just what the housing market needs.

Tasha's overdraft

My sister rang tearfully last night to tell me that she could no longer come up to the smoke for our annual sister bonding shopping trip. She explained that she was up to, and possibly overflowing from, her overdraft limit. This is not a new conversation with Tasha, my much younger ‘shopoholic’ sister. She has absolutely no will power, she sees it, likes it and then, really must have it!

I calmed her down, and eventually managed to drag out of her the true extent of her debt…

She has a £12,000 overdraft limit at Natwest, £8,000 at Lloyds (they really are there for the journey!) She also owes £36,000 on credit cards! Tasha is not a high earning entrepreneur, oh no, she is a primary school teacher. She has become so used to being in debt that she actually sees her overdraft facility as her money.

In real terms what is this actually costing her? Natwest charges 12.73% annually, if my sister exceeds her overdraft limit it goes up to 20.50%. If she writes a cheque, which takes her over her overdraft limit, the bank charges £35 to honour it.

For every ten people there is one (just like Tasha) who lives in the red, pay our banks the equivalent of a kidney each month, and are forced onto the scrapheap of higher rates on credit cards etc.

So I have decided upon a plan of action for Tasha, I am going to take her under my wing.

I have told her to cut up her credit cards, perhaps keep one, with a low limit of say £500.

She needs to be honest with her bank manager; it’s his job to help her. She needs to have realistic expectations as to what she can actually afford to pay back. Tasha effectively needs a payment plan.

I have asked her to write down a list of all outgoings and the amount she has going in. It’s a good idea to go shopping with cash, the amount being spent is much more visual, and when it’s gone, it’s gone!

She needs to take control, admit there is a problem, and start to live within her means and above all walk past those designer shops!!

Eventually, I told her that she may even be able to save a little.....well all journeys begin with a single step.

Mortgage approvals drop sharply

Figures revealing a sharp drop in mortgage approvals in January have confirmed that the UK housing market made a slow start to the year. The Bank of England said that the number of home loans approved for house purchases in January fell by 17% compared with the previous month.

The 48,198 approvals was the lowest number for eight months, but still 43% higher than a year earlier. Experts have said the end of the stamp duty holiday was behind the drop. The stamp duty threshold dropped back to £125,000 on 1 January, prompting a rush on mortgage approvals and completed home sales in the final months of 2009.

The government concession, which had temporarily pushed the threshold up to £175,000 for just over a year, had been aimed at halting the rapid slump in the property market.

Housing dip

Gross mortgage lending fell from £13.5bn to £10.2bn in January, with commentators also pointing to the severe winter weather as affecting housing market activity. A range of groups, including the Council of Mortgage Lenders and the British Bankers' Association, have said that lending and activity dropped at the start of the year. Last week, Nationwide building society pointed to the slowdown in lending as the reason behind the first fall in UK house prices for 10 months.

The Nationwide said average property values dropped by 1% in February compared with January, with the average home worth £161,320. All sectors - including the mutual sector - had felt the effects of the slowdown at the beginning of the year, according to Adrian Coles, director general of the Building Societies Association (BSA).

"Activity was subdued and this has been felt by all lenders. Low activity in the month was expected following the surge of buyers aiming to beat the end of the stamp duty relief in December," he said. "The adverse weather conditions experienced at the start of the year have further suppressed market activity."

Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (Rics), said: "Our judgement is that this downturn in transactions will prove temporary and that buyer interest will have rebounded in the February data."

The Bank of England figures also indicate that the record low Bank rate of 0.5% - and low variable mortgage rates - has deterred people from signing up to new fixed-rate mortgages. The number of homeowners remortgaging dropped to 23,611 in January, from 27,322 in December.

Savers' flight

Borrowers' safety-first approach to borrowing on credit cards, personal loans and overdrafts appears to have eased, consumer credit figures show. Some £500m was borrowed above repayments in January, up from £265m in the previous month. Within this, net credit card borrowing increased by £171m and other loans and advances increased by £330m. Repayments had outstripped borrowing for most of the second half of 2009 as borrowers also found it difficult to secure further loans.

For the 11th month in a row, savers took out more money than they deposited in building societies. This reached £755m in January, in figures which now include the mutually-owned Co-op Bank - which owns the former Britannia Building Society.

"January is typically a challenging month for savers as many start to repay debt accumulated over Christmas," Mr Coles said. "Nonetheless, mutuals will continue to find it difficult to attract savers as long as the Bank rate remains low and the market is distorted by part-nationalised banks."

He welcomed the move that would end the 100% guarantee on savings held with Northern Rock. In three months' time, the safety net will revert to the first £50,000 for each saver in Northern Rock that is offered under the Financial Services Compensation Scheme.

Article from BBC News Website 01 03 2010