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Mortgage Rates Cut on Bank Bailout
Mortgage providers have been dropping the cost of their home loans following the emergency cut in UK interest rates. Halifax said it will be reducing its standard variable rate from seven per cent to 6.5 per cent from 1 November, while Lloyds TSB said it would cut its SVR by half a point to 6.5 per cent.  

The CML reckons house prices are still expected to fall but there will be some respite for homeowners. "All this decisive action augurs well for an improving market situation looking ahead, even though no one is pretending the tough times are over yet," said director general Michael Coogan.  

The Bank of England’s half-point rate cut will offer relief for UK householders on existing tracker mortgages, which could prove useful for those trying to find a better deal after coming off fixed rate periods. 

Louise Cuming, head of mortgages at moneysupermarket.com, estimated that a family with a typical £150,000 mortgage will be more than £40 a month better off, a saving of almost £500 a year.

SH Note: We don’t know whether these immediate cuts are a sop to the government’s insistence that the banks help out mortgage-payers. There’s every chance they’ll be temporary or that future base rate cuts won’t be passed on unless the banks are pressurised to do so.

Ian Pearson is New Construction Minister
Ian Pearson will replace Baroness Vadera as construction minister, the government says. The Dudley South MP has already worked as a trade minister at the Foreign and Commonwealth Office, climate change minister at the Department for Environment, Food and Rural Affairs, and more recently as science minister at the Department for Innovation, Universities and Skills.

Housebuilder Shares Rally on £50bn Bank Rescue
The government’s bank rescue has given a good boost to housebuilder share prices.

They rallied immediately on the news by:

·          Taylor Wimpey (32%)
·          Barratt (11%)
·          Persimmon (9%)
·          Redrow (10%)
·          Bellway (6%)
·          Bovis (9%)
·          Berkeley (2%)

Numis analyst Chris Millington said that the rises bucked the trend across the stock market largely because of indications by chancellor Alastair Darling that banks should use the fresh cash to boost mortgage lending.

New Builds to Drop Below 100,000 Next Year

The number of new homes being built will drop below 100,000 next year according to the RICS. It said building by the private sector dropped dramatically in the three months to September, while building in the public sector fell at the fastest pace since the end of 2001.

Overall, construction declined at its fastest pace in the 14-year history of the RICS survey. The figures suggest the government’s target of more than 200,000 new homes each year, is totally out of reach with only 66,220 new homes built so far in 2008 and a fall below 25,000 per quarter likely by the end of the year.

"With finance for projects becoming increasingly difficult to obtain the government's target of two million new houses a year by 2016 is likely to fall well short,” said RICS senior economist Oliver Gilmartin. "The outlook for the construction industry is extremely bleak with the previously strong infrastructure sector now unlikely to step in as the downturn in property markets resonates.

"A rapid solution to the log jam in credit markets is necessary to limit the severity of the current downturn which is starting to affect the country's infrastructure."

RICS warned global financial turmoil could lead to the "very real possibility" that large scale public building projects will struggle to secure the necessary funding and may have to be delayed or scaled back.

Auctioneer Claims BTL Flats Flooding Market
David Sandeman, head of property auction information service EIG, said that Britain’s auction rooms are already filled with buy-to-let flats being sold at a loss. "Repossessions are already going up quite dramatically, and a lot of these are buy-to-let," he said. "There were also some people taking out mortgages and clouding the issue as to whether they were for them or for buy-to-let purposes. These have all gone wrong too."

 

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Repossessions Rise Sharply
The number of repossessions rose to 9,152 from January to March, up from 6,471 in the same period last year, according to figures from the FSA. More than 300,000 homeowners have fallen into mortgage arrears of three months or more, twice last year’s figure.

The statistics bear out warnings that the number losing their homes will reach 45,000 by the end of this year, compared with the 75,500 whose homes were repossessed at the peak of the 1991 housing downturn.

The Chancellor, acknowledged the economic slowdown could be “pretty dramatic” and that collapsing confidence and more expensive borrowing were driving down house prices. He said that he was “looking at a number of measures” when asked about reports that he was considering plans for the suspension of stamp duty.

“It is helping people that is important. I want to look at a range of options that will help people,” he said.

Treasury aides said later that no final decisions had been taken on whether measures would be aimed at all buyers or FTBs only. The options now include an indefinite suspension of stamp duty, a proposal only to defer the tax and a scheme to introduce tax-free savings accounts for those saving for a deposit for a house.

The option of giving all buyers a stamp duty holiday is being pressed strongly by the RICS, which met Treasury officials in May to outline its suggestions and sent detailed proposals to the Chancellor last month. The plan urges Darling to introduce a “short-term holiday” followed by longer-term reform. Under the proposals, no one would pay duty on the first £150,000, there would be a 2.5 per cent levy for homes between £150,000 and £250,000 and a five per cent rate on homes over £250,000.

SH Note: These Stamp Duty proposals are a bit of a side issue. The only real difference will come if lending eases and rates are cut. Then of course there’s the problem of rising unemployment…

Taylor Wimpey Debt Deal Delayed by Talks

Taylor Wimpey's negotiations on refinancing its £1.7 billion debt mountain look set to go to the wire after it said it did not expect to have new covenants in place until early next year. It has already warned that it is set to breach its existing banking covenants when it next carries out a valuation.

The company said that although its banks had indicated they intended to relax its covenants, the delay was caused because the discussions now included eurobond holders.
 

It said: "Events in world financial markets have reinforced the board's cautious view of the short-term outlook for UK housing. Securing a comprehensive financing structure that is robust under all reasonable downside scenarios is essential."

Taylor Wimpey has seen its shares dive more than 80 per cent so far this year while Barratt and Redrow have had to renegotiate their banking covenants, resulting in increases in interest repayments.

Although the company seems to have an agreement to extend it covenants, it could face a trickier negotiation with the owners of the £450 million of eurobonds as they are traditionally more demanding.

Chief executive Pete Redfern said: "I would not pretend we would be doing this if we did not think there was a future risk of having to do it. We don't think we have a difficult position with those bonds."

The company was hoping to complete the debt negotiations over the next two months. However, with the bondholders now party to the talks, it hopes to complete them before it announces preliminary results early next year.
 

Debt Pressures Build at McCarthy & Stone
McCarthy & Stone creditors are in a stand-off with shareholders over the future funding of the company. Holders of tens of millions of pounds of mezzanine debt in McCarthy & Stone are bringing in Houlihan Lokey, a specialist restructuring firm, to advise them.

Recent proposals put forward by debt-holders and separately by HBOS, which owns 20 per cent of the company, are understood not to have gained traction with other investors.
At a recent board meeting at McCarthy & Stone it was unclear whether significant progress was made on the debt restructuring talks. NM Rothschild, the investment bank, is advising the McCarthy & Stone board.

Richard Desmond, owner of the Daily Express, is among a group of high-profile backers of McCarthy & Stone, and said: “I am a shareholder and I’m not very happy.”

The company’s other celebrity shareholders include David and Simon Reuben, the real estate billionaires, who are understood to own a large chunk of the subordinated debt; Nick Leslau, the property developer; and Sir Tom Hunter, the retail tycoon and philanthropist.

Homeowners Will Still be Paying off Mortgages in Retirement
A third of middle-aged homeowners will still be repaying their mortgages on retirement, with more than a million people over 55 still having more than ten years left to pay on their mortgage term.

Even those over 55-year-olds who have less than ten years to pay off their houses still have an average outstanding mortgage debt of £55,046, equating to repayments of around £725 every month, according to mortgage adviser website Impartial.co.uk which commissioned the research.

Meanwhile other research showed that growing numbers of people could be forced to delay their retirement after racking up crippling levels of unsecured debt.

The average person aged between 50 and 60 who has taken out a debt management plan owes £41,400 through credit cards, loans and other unsecured borrowing, according to debt solutions group Payplan. The figure is 25 per cent higher than the amount of debt accumulated by other age groups, which averages £32,700.

Taylor Wimpey Extends Talks With Lenders
Taylor Wimpey has extended negotiations with lenders and said some of its banks have already signalled they will offer new loan terms.

The company’s shares have lost 83 per cent of their value this year on concern the slump in sales will lead the builder to breach its banking covenants. The company had net debt of £1.4 billion last year, far in excess of its current market value of about £364 million. It had said talks with lenders would be completed before the end of the year, but this week extended that to early 2009 after widening the pool of debt-holders it needs to renegotiate terms with.

"In the current environment, securing a comprehensive financing structure that is robust under all reasonable downside scenarios is essential,'' the company said, while insisting it is not in danger of breaching its covenants as they stand and has "adequate'' financing in place.

The covenant negotiations already under way are continuing, and the co-ordinating banks have said they intend to replace the existing loan terms with covenants "more appropriate to the current market environment”.
 

Wren Homes Raises £4 million for New Developments
Retirement housebuilder Wren Homes has raised £4 million through a share issue and loan deal with investment group Wainford Holdings.

In an announcement to the stock exchange this week, it said: “The net proceeds of the proposed investment will be used to fund development of the company's extra care accommodation schemes and for general working capital purposes.”

A total of £1 million will be raised through the issue of ten million shares at 10p each to Wainford. The remaining £3 million will be in the form of a five-year loan from the company at a five per cent rate of interest.

Paul Treadaway, chief executive of Wren Homes, said: “I am delighted to announce this very significant investment into Wren Homes and at a premium to the current share price. It represents a strong endorsement of the company.”

As part of the deal, Dominic Wainford, founder of Wainford Holdings, will be appointed to the Wren board – along with Wren's company secretary, James Butterfield.

In May, Wren announced a pre-tax loss of £393,970 in the half-year to 31 January 2008 after failing to sell a single home in the period.

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