BoE Slashes Base Rate 1.5%
As all the world knows by now, the Bank of England (BoE) slashed base rates by 1.5% to 3% yesterday. The impact on mortgage rates has yet to be seen, but few expect the cuts to be passed on in full. Indeed, the scale of the cut provides lenders with the opportunity to cut rates by a fraction of that amount and still look good. And it cements the belief that the BoE’s MPC is out of touch with current events. As to how prospective buyers react, we will just have to wait and see.

More than a Quarter of a Million Homes Empty
Almost 280,000 homes are in disrepair or have been left empty for more than six months, according to the Halifax.

The north-west has the highest number of empty homes at 61,450, accounting for 22 per cent of all the empty homes in England. The research comes after an auction in Cardiff of 74 houses and plush apartments failed to sell one lot. Some apartments which had originally been valued at £200,000 were being offered for as little as £30,000 - but there were still no takers.

More then 100 bargain hunters turned up for the auction, but all lots remained unsold.

Housing charities described the number of empty homes as "shocking", and called for more affordable housing.

Adam Sampson, chief executive of charity Shelter, said: "While many of these empty homes are only out of use temporarily, with such a desperate shortage of housing in the UK and 1.6 million households currently on council house waiting lists, it's shocking so many homes are lying empty and unused for years at a time."

Repossessions Jump by 71 per cent 
The FSA reports that 11,054 homes were repossessed in the three months to the end of June, compared with just 6,476 during the same three months of 2007 – a 71 per cent increase.

The average home is now worth £168,814, having dropped 2.2 per cent in September.

The fall left the annual rate of decline for the year to the end of September at 8 per cent, nearly double the 4.6 per cent slide announced in August, which at the time was the biggest annual drop recorded since the series began in 2001.

All regions of England and Wales recorded price falls on both a monthly and an annual basis. Wales saw the biggest slide, with prices diving by 5.5 per cent during the month, making it the only region to have seen double digit annual falls of 10.7 per cent.

The south-west, south-east, north-east and East Midlands all recorded house price drops of more than 2 per cent in September. Yorkshire and the Humber saw the smallest reduction, but even here properties still lost 1.2 per cent of their value during the month.

On an annual basis, the East Midlands and south-west have seen the biggest price slides after Wales, with falls of 9.9 per cent and 9.7 per cent respectively.

London has seen the smallest year-on-year decline at 6.1 per cent, followed by the north-west at 6.3 per cent.

FMB Defends Government Housebuilding Targets
More homes must be built to house the 1.5 million people on council waiting lists, the Federation of Master Builders (FMB) insists.

The report said the government should question whether the target “is still justified on the basis of the latest economic growth projections, fundamental changes in the mortgage market and house prices”.

Brian Berry, director of external affairs at the FMB, said that the government should not discard its housing targets in the face of the global financial crisis.

“The fact that Britain is suffering an economic downturn doesn't take away from the fact that there are thousands of families in this country who still need affordable housing,” he noted.

“It's nothing short of a scandal that we have 90,000 families living in temporary accommodation and over 1.5 million people on council house waiting lists. Now is not the time to abandon housing targets.”

SH Note: Good of the FMB to stick to its guns. But it relies on the government to do the same and given last week’s news that the “target” is now an aspiration, it doesn’t look good. 

Demand for Commerical Property Lowest for a Decade
According to new Rics figures, surveyors receiving enquiries from new occupiers is now declining at its quickest since the RICS Commercial Property survey began in 1998.

Oliver Gilmartin, a senior economist at RICS, said: "Financial uncertainty has impacted upon decision making in the business community with many re-evaluating their demand for commercial property space."

Confidence in the outlook for rental values is also at record lows, the survey found, with the greatest pessimism surrounding Central London.

Mr Gilmartin added: "The ongoing drag from the credit crunch is permeating through rental sentiment across all regions and sectors, especially in the Central London office market where recent worry over the health of the hedge fund industry is only adding to the sense of pessimism. The intensification in credit strains following the collapse of Lehman Brothers will undoubtedly further dampen investment and occupier demand heading into the fourth quarter.”

The worst affected sector is retail, Mr Gilmartin said, with 59% more surveyors reporting a fall in demand rather than a rise in the third quarter and the outlook appearing very poor as consumer spending is reined in.

Nationwide: Prices Falling Almost £80 a day
The average house price has dropped by £27,000 in the past year (£80 a day) says Nationwide. This means homeowners are now losing more money through falling prices than they are earning at work.

The latest decline of 14.7 per cent in October means the average price has now dropped to £158,872, compared to £186,044 a year ago.

Nationwide expects the decline in house prices to continue into next year as the looming recession forces some home owners into selling their properties.

Fionnuala Earley, Nationwide's chief economist, said: “A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices.”

The survey also said sellers refuse to lower asking prices and buyers remain reluctant to trade because they don't believe the market has found a bottom.

Howard Archer, an economist at Global Insight, said: "Even though we expect the Bank of England to cut interest rates, this is unlikely to lead to any quick pick up in the housing market's fortunes."

Ed Stansfield, a property economist at Capital Economics, said: "With unemployment rising and expectations that house prices have much further to fall still widespread, lower interest rates will not stimulate housing demand. Lower interest rates will also do nothing to loosen mortgage lending criteria.”

Government’s Stamp Duty Suspension Fails
The number of property sales recorded by HMRC in September plunged to just 59,000 from 126,000 last year. The figures cover property sales across the UK worth £40,000 or more.

"September was the first month following the chancellor's change to the stamp duty threshold," said Henry Pryor, a housing analyst. "The Chancellor's dithering over whether he could announce the changes to stamp duty removed any hope that this alone would be enough to improve things."

The chancellor announced a temporary increase in the stamp duty threshold from £125,000 to £175,000 on September 2. The change came into effect immediately and will last for a year.

Mr Pryor is pessimistic about the market's prospects. "Forget what the figures from Halifax and Nationwide are saying," he added. "Like the official Land Registry figures for July, these are all out of date. This market is falling fast, with many homes now worth over 20% less than they were at the peak of the market.

"We can expect values for many homes to fall further, perhaps to 2002 levels. This means that for some they will have fallen by 50% – 5.7m people have bought since then and those who borrowed more than 90% of the property value will be in negative equity."

Nearly Half of all FTBs under 30 get Financial Help From Parents
The CML says almost half under-30s rely on parental help with deposits compared to just 38% in 2006. It said this was a knock-on effect of lenders demanding higher deposits.

"In the current market environment, 100% mortgages are not so widely available so even though the total needed to buy a house is declining, first-time buyers are facing a new affordability challenge in the shape of a higher deposit required by lenders."

The average first-time buyer had to put down a deposit of £19,000 during the second quarter of this year, according to the CML's figures, up from £14,500 the year before.

The CML found previously that in 2006, 80,000 buyers - 20% of all first timers - were putting down deposits that they could not obviously afford from their own likely savings.

London, the south-east and Northern Ireland are the regions in which first-timers have to rely the most on their parents or other relatives for hand-outs.

"In London, the typical assisted first-time buyer had a £67,000 deposit and an average income of £42,000," the CML reported.

"In very stark contrast, unassisted buyers in the capital had a typical deposit less than a third of this size - just £19,000 - but typically need a much higher income of £57,000."

Lenders warned that the recession might put the brakes on this trend.

Abbey Raises Mortgage Rates
Abbey has raised the rate on its two-year tracker mortgages from 5.79% to 6.29%, and three-year rates from 5.69% to 6.19% - in the same week that the BoE slashed base rates.

Abbey says it is responding to similar moves by its competitors and says it has recently cut some fixed rate deals. It also says that in the first nine months of 2008, its net lending mortgage market share was 28% – so it has been taking a large share of new lending.

Most mortgage lenders are increasing the margins on tracker deals, as well as making it tougher for borrowers to get them by asking for better credit ratings and bigger deposits, By way of example, both of Abbey's tracker mortgages are only available with a 25% deposit.

Meanwhile, researchers at moneysupermarket.com have criticised mortgage lenders who have so far not passed on last month's Bank of England 0.5% interest rate cut.

It claims that thirty lenders have not yet passed on the cut to their customers on standard variable rate mortgages. In addition, of those who have passed on the reduction, 34 have not passed on the full amount.

The British Bankers Association was unapologetic and said banks' rates will now always be more than the Bank of England's base rate.

SH Note: If proof was needed that the banks are sticking their fingers up at the BoE, this surely is it. The bottom line is that banks don’t have to pass on base rate cuts. And they’re not going to.

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