.Why UK house prices will fall

These 12 problems will drive house prices lower in 2012 and beyond

By Cliff D'Arcy, lovemoney.com | Yahoo! Finance UK
....

According to the latest Halifax House Price Index, a typical UK home cost £160,063 in December 2011.

 A year earlier, this price tag was £163,665, so the average value of a property has fallen by £3,602 (2.2%) in 12 months.

What's more, most economists and property pundits predict further falls for 2012.

For the record, I also expect house prices to decline yet further this year, because of this toxic cocktail of problems for property prices (in no particular order):

1. Higher unemployment

In the three months to October, UK unemployment rose by 128,000 to 2.64 million, or 8.3% of the workforce.

Although this the highest level since 1994, unemployment is expected to continue to rise throughout this year, before peaking at 2.85 million in 2013.

Obviously, weaker employment puts house prices under strain, as people don't buy homes when they've lost their jobs or fear this could happen in the near future.

2. Feeble pay rises

In the three months to October, average earnings growth was 2% a year.

Excluding bonuses, average incomes rose by just 1.8% in 12 months.

What's more, real (inflation-adjusted) wages have fallen in the past two years, making homes less affordable.

3. Elevated inflation

Inflation is the tendency for the prices of goods and services to rise over time.

The Bank of England's target for the Consumer Prices Index (CPI) measure of inflation is 2% a year.

Alas, CPI inflation was 4.8% in November, which squeezes disposable incomes and, in turn, harms house prices.

4. Government austerity

At present, our Government is spending £10 billion a month more than it earns. Faced with this deadly deficit, the coalition is cutting public-sector spending and lifting taxes.

As well as pay freezes, we can expect 120,000 job losses in the public sector in 2012.

Again, these spending cutbacks will hit individuals and companies across the UK, making them less likely to put more money into property.

5. Credit crunch II

The Bank of England's latest survey of credit conditions revealed the worst squeeze on funding availability since the near-collapse of Northern Rock in September 2007.

The ongoing problems in the eurozone make it increasingly hard for banks to borrow money in wholesale markets.

This forces banks to ration their lending to home-buyers and businesses, worsening the long-standing 'mortgage famine'.

6. Higher mortgage rates

Also, the Bank of England is gradually withdrawing two support schemes for lenders, known as the Credit Guarantee Scheme (CGS) and Special Liquidity Scheme (SLS).

Thanks to this new leg of the credit crunch, lenders' funding costs will surely rise. 

Indeed, mortgages and loans to businesses have already started to become more expensive.

7. Safer home loans

The UK's financial watchdog, the Financial Services Authority (FSA), is poised to tighten the rules governing mortgage lenders and brokers.

Proof of income will be needed for all home loans, finally killing off self-certified and similar 'liar loans'.

Other regulations governing affordability and income multiples will prevent borrowers from taking on loans they cannot afford.

8. A double-dip recession

Many economists and financial forecasters predict a double-dip recession for the UK in 2012.

What this means is that they expect our economy to shrink for at least two quarters in a row.

Even if we avoid this fresh downturn, our economy will still be smaller than it was in 2007, thanks to the deep recession of 2008/09.

9. Negative equity

At least one in 12 homes in the UK (8%) suffers from negative equity.

This is where the outstanding balance of a mortgage is greater than the value of the property on which it is secured.

With few options to refinance, these troubled homeowners are forced to sit tight, sell at a loss or give up their homes – thus weakening the housing market.

10. Rising arrears and repossessions

The Council of Mortgage Lenders (CML) expects 45,000 homes to be repossessed this year, up 8,000 from the 37,000 estimated to have been seized in 2011.

 In addition, the CML expects more borrowers to fall behind on their mortgage repayments in 2012, thanks to mounting pressures on household budgets.

11. Record insolvencies

According to one debt-management firm, 137,500 Brits will become bankrupt or insolvent in 2012.

This works out at 375 insolvencies for each day of the year, which is a tenth (10%) higher than 2010 and the highest number since records began in 1960.

This 'boom in busts' could lead to more forced or 'distressed' property sales.

12. Weak sales

In the 2006/07 tax year, 1,853,000 properties changed hands in England and Wales. In the latest tax year (2010/11), only 981,000 transactions took place.

Given that the property market is running at half its peak level, I firmly believe that this 'phoney market' indicates more weakness to come.

In short, for house prices to rise in 2012, the market must overcome these ‘dirty dozen’ problems, as well as other negative trends. 

Frankly, I don't see this happening, which is why I expect house prices to continue falling across the UK, with the possible exception of 'Fortress London'!

The cheapest regions to buy a home

By Emily Spaven

Posted 27th November 2011

 The regions of England and Wales that have the cheapest homes have been revealed.

Does your area feature on the list?

According to the Land Registry’s House Price Index for October, the North East is the area with the lowest average house price, at £100,674.

This is a stark contrast to London, where the average property fetches £340,308.

While this might seem high, it is a 1.6% decrease on the average of £349,026 recorded in September.

Across England and Wales, the average house price is now £159,999, which represents a decrease of 3.2% from October 2010 and a drop of 0.9% compared with the previous month.

Region Monthly change (since September 2011) Annual change (since October 2010) Average price (October 2011)
East 0.7% -2.4% £173,410
East Midlands 0.4% -3.1% £123,811
Yorkshire & The Humber 0.4% -3.6% £120,526
South East 0.2% -1.4% £206,818
South West -0.4% -2.9% £171,384
West Midlands -0.7% -4.1% £129,500
England & Wales -0.9% -3.2% £159,999
London -1.6% 0.3% £340,308
North East -1.8% -7.2% £100,674
North West -2.9% -7.0% £110,425
Wales -3.0% -6.1% £115,923

How to Clean House Windows
 
By Emma Lee, eHow Contributor updated June 28, 2011
 
Clean Glass  Large outside windows clean faster with a squeegee.

There aren't many hands raised when it's time to wash your house windows.

This household chore does go faster when two people are involved, one person outside and one inside.

Two people washing one window is the quickest way to find and eliminate streaks.

A small bit of bribery is well worth it to cut this chore down to half the time.

The end result will certainly be worth it when the sun shines brightly into your home.

Difficulty:

EasyInstructions

Things You'll Need
Bucket
Water
Cleaning solution
Soft brush
Garden hose
Squeeze mop
Squeegee
Cleaning cloth
Spray cleaner
Suggest Edits
Screens
1
Remove the window screens, and wash with water and your favorite cleaning solution.

Use a soft brush and light pressure when washing the screen to prevent dislodging the screen from the frame.

2
Wash the frame that surrounds the screen.

3
Rinse the screens with a hose or clean water and place upright in the sun to dry.

Replace the screens once the windows have been cleaned.

Outside
1
Select a window that is shaded. Direct sunlight on the window will dry the solution and leave streaks.

2
Dip a squeeze mop into the bucket of solution and squeeze to release part of the cleaner.

3
Apply the cleaner to the window starting at the top and moving down until the window is covered.

Use a small amount of pressure while applying the cleaner.

4
Slide the squeegee across the top of the window to remove the cleaner and wipe the edge of the squeegee with a clean cloth.

5
Continue removing the cleaner with the squeegee going from the top to the bottom.

Overlap the strokes to ensure all the cleaner is removed.

Wipe the edge of the squeegee after each stroke.

6
Wipe around the edges of the window with a lint-free cloth to remove any leftover cleaner.

Inside
1
Spray your favorite window solution onto the top of the window and continue down.

2
Wipe the window clean with a lint-free cloth.

Use a side-to-side motion when drying the inside; this will help distinguish streaks being on the inside or outside of the window.

3
Examine the window for streaks that could be on the inside or outside.

Repeat the cleaning process until there are no streaks, or simply try wiping the window again.

4
Raise the window and remove any dirt, webs or bugs that have become trapped in the corners or track.

Act now and get your home winter-ready

The British winter-time can wreak havoc on your home. Unexpected leaks and wasted energy can leave you feeling wet, cold and out of pocket.

Here are five jobs to protect your home

from the worst of the winter weather.

1. Service your boiler

You'll be turning up the heating considerably soon, so now is the time to check your boiler is working fine and doesn't let you down when you most need it.

Gas Safe Register recommends you get your boiler checked annually by a registered engineer.

This protects you and your family from carbon monoxide poisoning, which can cause ill health, and in more extreme circumstances death.

Ask the engineer to advise how you can set your heating controls more efficiently to save on your bills too.

Find your local boiler servicing, replacements and repairs.

2. Clean out your gutters

Post-autumn, gutters can be full of leaves, twigs and general muck. If water can't flow through them and drain away, it will cause gutters to rot or rust. Eventually the debirs weighs them down, pulling them loose from their mountings.

Gutters should be cleaned out twice a year, once in spring and once in autumn, but if they are directly below trees this may need to happen more often. Here are some tips:

•Use a sturdy ladder and NEVER lean it against your gutters or downspouts or stand on the top two rungs.
•Remove any debris with your hands (wear rubber gloves for protection) or a trowel and place in a bag or bucket on the roof.
•Check the downspouts aren't clogged. If they are, gently unblock them with a hose, plumber's auger or unbent clothes hanger.
•Once you are done, use your hose to run water through the gutters to check that everything is flowing freely.

If the gutters are more than 2 stories from the floor, you will probably need a local guttering service to clean them out for you with special tools.

3. Seal draughts to windows and doors

It's no good having a boiler in tip top order if the heat it's pumping out is leaking through cracks and gaps in your windows and doors.

Around a fifth of heat lost from the home is due to draughts, this can be fixed simply by locating draughts and sealing them and is often a much cheaper solution than replacing old windows or doors.

Installing draught proofing will save you around £25 and reduce your CO2 emissions by around 130kg a year, but this is just a rough figure as the amount of draughts in your property usually depends on its age.

Most DIY stores stock a wide range of draught proofing in the form of brushes, foams and sealants in strips or shaped rubber or plastic. They should be able to advise you on what to use and how to apply it. Here are some tips:

•Check for draughts around doors, windows or loft hatches and take their full measurements with you to the DIY store.
•Apply a brush-strip seal to your letterbox.
•For unused chimneys, simply use newspaper to block draughts or buy a chimney balloon, but remember to take these out when you next use it!
•Gaps in floorboards can be sealed with an acrylic sealant.

4. Insulate your loft

The Energy Saving Trust reports houses with un-insulated lofts lose around a quarter of their heat via the roof. There is an associated cost, but as your loft insulation will be effective for around 40 years, you will make back the money over time and start reducing CO2 emissions straight away.

Houses that are most suitable for loft insulation will typically have an accessible loft with no damp or condensation problems. Houses with flat roofs or damp lofts will need professional help.

If you are keen to do the work yourself, you can use loft insulation blankets which are fairly easy to install by a competent DIY-er. For more in depth advice on insulating your loft, see The Energy Saving Trust loft insulation guide.

5. Inspect your roof and chimney

Your roof is the first point of contact between your house and the elements. Everyone loves a white winter, but if your roof is collecting snow for days on end and has weak points, you could end up with some costly leaks. Now is the time to check that your roof is weatherproof.

Steep roofs or roofs covered with slate or tiles shouldn't be walked on. In this case it's advisable to check from a ladder around the perimeter from the eaves. Always make sure you are using an appropriate roof ladder that is securely fastened at the top and bottom and have someone with you for safety.

Here are some checks you should make and replacements where necessary:

•Look for missing, cracked, curled, broken or rotted slates or tiles. These will need to be replaced and old nails removed.
•Check for any broken or missing points where the roof meets chimneys, walls, vents, dormers, or skylights – roofing cement can fix problem areas.
•Check your chimney is free of any unwanted guests.
 Print Page |  |  |  More Home Improvements

Energy saving tips room by room

•Always prepare carefully, and never rush a task
•Always set up your ladders as per the instructions that come with them - they are one of the main causes of DIY accidents
•Work safely and carefully, packing things away as you go
•Ensure you use the correct tools for each job to avoid expensive mistakes
•If a job is too big for you to handle seek professional help
Useful Links

Adobe

From Wikipedia, the free encyclopedia
 
Renewal of the surface coating of an adobe wall in Chamisal, New MexicoAdobe ( /əˈdoʊbi/, UK /əˈdoʊb/; Arabic: الطوبى) is a natural building material made from sand, clay, water, and some kind of fibrous or organic material (sticks, straw, and/or manure), which the builders shape into bricks using frames and dry in the sun.

Adobe buildings are similar to cob and mudbrick buildings.

Adobe structures are extremely durable, and account for some of the oldest existing buildings in the world.

In hot climates, compared with wooden buildings, adobe buildings offer significant advantages due to their greater thermal mass, but they are known to be particularly susceptible to earthquake damage.

Buildings made of sun-dried earth are common in the West Asia, North Africa, West Africa, South America, southwestern North America, Spain (usually in the Mudéjar style), Eastern Europe and East Anglia, particularly Norfolk, known as 'clay lump.

Adobe had been in use by indigenous peoples of the Americas in the Southwestern United States, Mesoamerica, and the Andean region of South America for several thousand years, although often substantial amounts of stone are used in the walls of Pueblo buildings.

 (Also, the Pueblo people built their adobe structures with handfuls or basketfuls of adobe, until the Spanish introduced them to the making of bricks.) Adobe brickmaking was used in Spain already in the Late Bronze Age and Iron Age, from the eighth century B.C. on.

 Its wide use can be attributed to its simplicity of design and make, and the economy of creating it.[8]

A distinction is sometimes made between the smaller adobes, which are about the size of ordinary baked bricks, and the larger adobines, some of which may be one to two yards (1-2 m) long.
 

 Etymology
Church at San Pedro de Atacama, ChileThe word adobe /əˈdoʊbiː/ has existed for around 4,000 years, with little change in either pronunciation or meaning.

The word can be traced from the Middle Egyptian (c. 2000 BC) word dj-b-t "mud [i.e., sun-dried] brick."

As Middle Egyptian evolved into Late Egyptian, Demotic, and finally Coptic (c. 600 BC), dj-b-t became tobe "[mud] brick."

This evolved into Arabic al-tub (الطّوب al "the" + tub "brick") "[mud] brick," which was assimilated into Old Spanish as adobe [aˈdobe], still with the meaning "mud brick."

 English borrowed the word from Spanish in the early 18th century.

 
Adobe style in Santa Fe, New MexicoIn more modern English usage, the term "adobe" has come to include a style of architecture popular in the desert climates of North America, especially in New Mexico. (Compare with stucco).

 CompositionAn adobe brick is a composite material made of clay mixed with water and an organic material such as straw or dung.

The soil composition typically contains clay and sand.

Straw is useful in binding the brick together and allowing the brick to dry evenly.

 Dung offers the same advantage and is also added to repel insects.

 The mixture is roughly half sand (50%), one-third clay (35%), and one-sixth straw (15%) by weight.

 Adobe bricks

Adobe bricks near a construction site in Milyanfan, KyrgyzstanBricks are made in an open frame, 25 cm (10 in) by 36 cm (14 in) being a reasonable size, but any convenient size is acceptable.

The mixture is molded by the frame, and then the frame is removed quickly.

After drying a few hours, the bricks are turned on edge to finish drying.

Slow drying in shade reduces cracking.

The same mixture to make bricks, without the straw, is used for mortar and often for plaster on interior and exterior walls.

Some ancient cultures used lime-based cement for the plaster to protect against rain damage.[citation needed]

The brick’s thickness is preferred partially due to its thermal characteristics, and partially due to the stability of a thicker brick versus a more standard-sized brick.

Depending on the form into which the mixture is pressed, adobe can encompass nearly any shape or size, provided drying time is even and the mixture includes reinforcement for larger bricks.

Reinforcement can include manure, straw, cement, rebar or wooden posts. Experience has shown straw, cement, or manure added to a standard adobe mixture can all produce a stronger, more crack-resistant brick.

 A general testing is done on the soil content first.

To do so, a sample of the soil is mixed into a clear container with some water, creating an almost completely saturated liquid.

After it is sealed, the container is shaken vigorously for at least one minute. It is then allowed to sit on a flat surface for a day or so until the soil has settled into layers or remains in suspension.

Heavier particles settle out first, so gravel will be on the bottom, sand above, silt above that and very fine clay and organic matter will stay in suspension for days.

After the water has cleared, percentages of the various particles can be determined.

Fifty to 60 percent sand and 35 to 40 percent clay will yield strong bricks.

The New Mexico US Extension Service recommends a mix of not more than 1/3 clay, not less than 1/2 sand, and never more than 1/3 silt.

The largest structure ever made from adobe (bricks) was the Bam Citadel, which suffered serious damage (up to 80%) by an earthquake on December 26, 2003. Other large adobe structures are the Huaca del Sol in Peru, with 100 million signed bricks, the ciudellas of Chan Chan and Tambo Colorado, both in Peru (in South America).

 Thermal propertiesAn adobe wall can serve as a significant heat reservoir due to the thermal properties inherent in the massive walls typical in adobe construction.

In tropical and other climates typified by hot days and cool nights, the high thermal mass of adobe levels out the heat transfer through the wall to the living space.

The massive walls require a large and relatively long input of heat from the sun (radiation) and from the surrounding air (convection) before they warm through to the interior and begin to transfer heat to the living space.

After the sun sets and the temperature drops, the warm wall will then continue to transfer heat to the interior for several hours due to the time lag effect.

Thus, a well-planned adobe wall of the appropriate thickness is very effective at controlling inside temperature through the wide daily fluctuations typical of desert climates, a factor which has contributed to its longevity as a building material.

In addition, the exterior of an adobe wall can be covered with glass to increase heat collection. In a passive solar home, this is called a Trombe wall.

 Adobe wall constructionThe citadel of Bam, or Arg-é Bam, in Kerman province of Iran: The world's largest adobe structure, dating to at least 500 BC

When building an adobe structure, the ground should be compressed because the weight of adobe bricks is significantly greater than a frame house, and may cause cracking in the wall.

The footing is dug and compressed once again. Footing depth depends on the region and its ground frost level.

The footing and stem wall are commonly 24 and 14 inches, much larger than a frame house because of the weight of the walls. Adobe bricks are laid by course.

Each course is laid the whole length of the wall, overlapping at the corners on a layer of adobe mortar.

Adobe walls usually never rise above two stories because they are load bearing and have low structural strength.

When placing window and door openings, a lintel is placed on top of the opening to support the bricks above.

Within the last courses of brick, bond beams are laid across the top of the bricks to provide a horizontal bearing plate for the roof to distribute the weight more evenly along the wall.

To protect the interior and exterior adobe wall, finishes can be applied, such as mud plaster, whitewash or stucco.

These finishes protect the adobe wall from water damage, but need to be reapplied periodically, or the walls can be finished with other nontraditional plasters providing longer protection.

 Adobe roof

The traditional adobe roof has been generally constructed using a mixture of soil/clay, water, sand, and other available organic materials.

The mixture was then formed and pressed into wood forms, producing rows of dried earth bricks that would then be laid across a support structure of wood and plastered into place with more adobe.

For a deeper understanding of adobe, one might examine a cob building.

Cob, a close cousin to adobe, contains proportioned amounts of soil, clay, water, manure, and straw.

This is blended, but not formed like adobe.

Cob is spread and piled around a frame and allowed to air dry for several months before habitation.

Adobe, then, can be described as dried bricks of cob, stacked and mortared together with more adobe mixture to create a thick wall and/or roof.

 Roof materialsDepending on the materials available, a roof can be assembled using lengths of wood or metal to create a framework to begin layering adobe bricks.

Depending on the thickness of the adobe bricks, the framework has been performed using a steel framing and a layering of a metal fencing or wiring over the framework to allow an even load as masses of adobe are spread across the metal fencing like cob and allowed to air dry accordingly.

This method was demonstrated with an adobe blend heavily impregnated with cement to allow even drying and prevent major cracking.
 

Traditional adobe roofMore traditional adobe roofs were often flatter than the familiar steeped roof as the native climate yielded more sun and heat than mass amounts of snow or rain that would find use in precipitous roofs.

Cement may be introduced to prevent moisture from penetrating the composite of mud and organic matter.

Vigas are beams across the roof that support the roof.

 Raising a traditional adobe roof

To raise a flattened adobe roof, beams of wood or metal should be assembled and span the extent of the building. The ends of the beams should then be fixed to the tops of the walls using the builder’s preferred choice of attachments.

Taking into account the material from which the beams and walls are made, choosing the attachments may prove difficult.

A combination of the bricks and adobe mortar that are laid across the beams creates an even load-bearing pressure that can last for many years depending on attrition.

Once the beams are laid across the building, it is then time to begin the placing of adobe bricks to create the roof. An adobe roof is often laid with bricks slightly larger in width to ensure a larger expanse is covered when placing the bricks onto the beams.

This wider shape also provides the future homeowner with thermal protection enough to stabilize an even temperature throughout the year. Following each individual brick should be a layer of adobe mortar, recommended to be at least an inch thick to make certain there is ample strength between the brick’s edges and also to provide a relative moisture barrier during the seasons where the arid climate does produce rain.
 

Attributes

Depending on the materials, adobe roofs can be inherently fire-proof, which is a valuable attribute when the fireplace is kept lit during the cold nights.

The construction of the chimney can also greatly influence the construction of the roof supports, creating an extra need for care in choosing the right materials.

The builders can make an adobe chimney by stacking simple adobe bricks in a similar fashion as the surrounding walls.

Dream of retirement downsizing can often be a waste of money

Downsizing your property can be less lucrative than you think.
 
9:38AM BST 14 Oct 2011

Downsizing to release equity from a property may be an appealing way for many expats looking to generate extra cash for their retirement when they return to the UK, but 4.7 million British homeowners are vastly overestimating how much they will generate this way.

Figures from Investec Wealth & Investment (IW&I) show that the average overestimate is £22,000, which would put a real dent in the pension plans of returning expats.

A total of 3.52 million homeowners in Britain have already downsized in the past five years, with two thirds aged over 55, said IW&I.

They managed to raise £98,000 on average, but this is still below the expected amount of £120,000.

The main problem is that while the idea of moving to a smaller home may be appealing, in reality it is much harder for people to downsize than they think.

Nick Gartland, senior financial planning director of IW&I, said: “Downsizing may be a popular way to release capital but homeowners are often wildly over-optimistic about the amount they will crystallise.

This gap between expectation and reality can have a significant impact on their financial circumstances.

 “This study reinforces our own experience with clients in that more often than not downsizing turns into samesizing as people find it far more difficult than they thought to move to a much cheaper home.

The situation is often exacerbated because they allow an insufficient amount to cover the costs of moving.

With the housing market remaining in the doldrums, homeowners shouldn’t rely too heavily on downsizing – both in terms of being able to sell and buy a new home and in the amount they generate as a result.”

Location was the biggest hurdle, with few people willing to compromise on where they live.

One in 10 also admitted they ended up spending more than they thought on a new home simply because they “fell in love” with a larger property, which was more than their budget.

Remortgaging up by more than 30%

The number of loans approved for remortgages in August was up more than 30 per cent in August on a year ago, according to the Council of Mortgage Lenders.

In what the industry body termed “welcome signs of life” loans for house purchases were also up, rising to 52,000, against 51,000 in August 2010.

House prices continue to falter

House prices fell 1.3 per cent in August compared with a year ago, according to the Department for Communities and Local Government. According to the official data, which is based on mortgage completions, the average house price was £208,476.

But prices rose slightly, by 0.6 per cent, over the month

Negative equity is back:

House price falls leave thousands unable to move

and stuck on high mortgage rates

By Ruth Lythe

Last updated at 3:33 PM on 5th October 2011

House prices are plunging across Britain. As a result, many families face the financial heartache of being trapped on expensive mortgage rates, while others are unable to move home. Ruth Lythe reports.

It’s the secret nobody will talk about, but is blighting the lives of millions.

Outside London, in streets in every town in Britain, middle-class families are trapped in their homes.

Some of them are stuck in properties that are now far too small for their growing family. 

Others are desperate to move for a new job, to live nearer to elderly relatives or to be closer to good schools — and simply can’t.

They all have one thing in common: their properties have fallen into negative equity after they bought at the peak of the last boom market between 2000 and 2007.

In just four years, tens of thousands of pounds have been wiped off the value of their properties.

 According to the latest house price figures from the Land Registry, average prices across England and Wales have fallen by 2.6 per cent in one year. But this average is buoyed by London prices which have risen by 2.1 per cent.

And towns in some regions are also bucking the downward trend. For example, homes in Merthyr Tydfil in South Wales have risen by 3.6 per cent.

Trafford in Manchester and South Tyneside in the North East have also seen rises of 1.8 per cent and 1.3 per cent respectively, while neighbouring areas have seen prices fall.

In Scotland, prices have dropped, on average, by 1.8 per cent, according to Registers of Scotland.

Gemma Watkins is now snared by negative equity. The 27-year-old nurse bought her home in Coleford, Gloucestershire for £92,500 at the top of the market in 2007.

She borrowed £100,500 from Northern Rock on one of its now notorious Together mortgages, at 6.9 per cent. This loan allowed you to borrow up to 125 per cent of the value of the house.

Miss Watkins used some cash to pay off a £12,500 personal loan and the rest to buy her flat. But her fixed-rate deal comes to an end in May, and she is struggling to find another lender.

Miss Watkins believes this is because the value of her home has fallen by more than £7,000, and due to the structure of the mortgage, which combines a personal and home loan.

She admits: ‘I was naive when I took on the mortgage.’

Ray Boulger, senior technical adviser with mortgage broker John Charcol, says she has little option but to stay with Northern Rock. But her rate should drop to 4.79 per cent when she switches to the bank’s standard variable rate.

Why are prices falling?

The credit crunch in 2008 put an immediate end to the days of cheap and quick home loans.

Banks suddenly found they were unable to get cheap funds to use as mortgages. As a result, they clamped down on whom they were willing to lend money to.

Crucially, this meant anyone with a small deposit, bad debts, the self-employed and those with black marks on their credit history were excluded from taking a loan.

Things have improved, but the current eurozone crisis is also threatening to push up the cost of mortgages — which have just fallen to an all-time low.

With so few people being granted home loans, this is deterring first-time buyers and anyone who wants to move.

This lack of buyers is making it harder for sellers and pushing down prices.

Worst hit are homes worth between £250,000 and £500,000 — typically favoured by middle-class families.

Land Registry figures show sales of these homes have plunged by up to 20 per cent in the past year.

What is negative equity?

Negative equity is when you owe more on your mortgage than your property is worth. Massive drops in house prices now mean it’s a problem affecting hundreds of thousands of people — especially those who bought at the peak of the last property boom in 2006 to 2007.

Worst affected are first-time buyers, many of whom, at the time, were not required to put down any deposit at all on their home. In fact, some took out loans that were up to 25 per cent greater than their property’s value.

Many also took out interest-only deals. With these, buyers only ever repay the interest on their mortgage, and none of the capital.

As a result, they always effectively owe the same amount. So when prices fell, they were more at risk of losing money.

Who's affected?

According to the Council of Mortgage Lenders, 7 per cent of all mortgages, or 827,000 homeowners, are in negative equity.

However, many believe this is a conservative estimate. A study from researcher Standard and Poor’s suggests 40 per cent more homeowners were in negative equity this year than at the end of last year.

By far the worst affected are those in the North — which accounts for one in ten of all homes in negative equity.

In Hartlepool, Co. Durham, house prices have dropped by nearly 16 per cent in one year. So if you bought a home worth £100,000 in August 2010, it would be worth only £84,000 today.

In Rochdale, Lancs, prices have fallen by 13.5 per cent — bringing a £100,000 home down to £86,500 in just one year and Rotherham, S. Yorks., by 10.5 per cent. In Hull, prices have plummeted by 10 per cent, and in Durham by 9.3 per cent.

The South of England has not been immune. Prices in Devon and Dorset dropped by 3.1 per cent and 2.4 per cent over the past year — effectively wiping up to £3,000 off their value.

Despite these plunges, many sellers are in denial about prices falling so rapidly. The average asking price for a home is £233,139. This has fallen just 0.8 per cent since 2007, even though selling prices are actually 11 per cent lower.

In areas where house prices are falling rapidly, the difference between sellers’ expectation and the actual prices homes go for is even more dramatic.

For example, house prices in Hartlepool rose at almost the fastest rate in the entire country during the boom. But four years on, Money Mail has found instances of homes where asking prices had dropped by as much as 40 per cent since they have been  put on the market — just a few months before.

The consequences

The social costs of negative equity are huge. At a time of high unemployment, homeowners will struggle to move to a new area if they lose their jobs.

The Bank of England has even reported concerns from businesses struggling to recruit employees because they cannot move home.

If your family grows, you are unable to move to a larger place and can end up stuck in cramped accommodation.

Plus there is the stress and uncertainty of being stuck with a high mortgage rate and being unable to take a new deal.

Interest rates are low for some people at the moment, with many homeowners paying between 2 per cent and 3.5 per cent. But those who borrowed a lot in the credit crunch could still be paying as high as 6.34 per cent.

When deals such as this end, repayments will fall, but not to the same level as the cheapest deals on the market.

One reader, a recruitment consultant from Leeds, is typical of hundreds of thousands of people, who bought during the boom years. He bought a new flat in a Leeds waterside development for £180,000 in 2005. But, by 2009, he was told the flat was worth between £100,000 and £120,000. He says agents told him it would be at least a decade before he could break even. The flat eventually sold for £120,000 and he is now renting.

He says: ‘The experience has left me quite badly scarred. I will never buy a new- build again, and I am almost sure I won’t get a mortgage again, either. I will save and buy outright or not buy at all.’

What you can do

First, don’t panic. If you plan to stay in your home for many years to come, negative equity should not be a problem.

There are options to combat negative equity. One is to overpay your mortgage — monthly, or in lump sums, depending on how much spare cash you have. This means you will eat into the capital you owe quicker, and reduce how much you pay in interest in the long run.

A second is simply to use your savings and pay off some of the debt when you remortgage or move house.

If you can’t do this and need to remortgage, negative equity does limit your options — however, most banks and building societies should be able to offer a new deal to existing customers.

If your lender’s standard variable rate is low, it is probably better to stay put.

If you need to move home, your lender might be able to offer a specific mortgage that lets you take the debt with you to a new home. For example, Nationwide allows customers to port their mortgage if they are in negative equity, as long as they don’t want to borrow any more money and the negative equity amount remains unchanged. The negative equity is converted into a ‘top-up loan’.

Lloyds has a product that will allow customers who are in negative equity with a property worth 20 per cent less than their mortgage to move. But you will not be able to borrow more than you already have.

If you need to move to a more expensive property, you will have to use your own cash to fund it.

Another option is to clear the negative equity by taking out an unsecured loan. This might be more costly than a mortgage, but will not put your home at risk.

For example, Sainsbury’s Finance will allow you to borrow between £7,400 and £14,999 at a rate of 6.7 per cent. This means that a £10,000 loan, spread over five years, would cost you £11,740 with monthly repayments of £195.

For more advice get in touch with Citizens Advice — 08444 111 444 or www.citizensadvice.org.uk or the National Debt Line — 0808 808 4000.

For more on what you can do if you’ve fallen into negative equity, go to www.thisismoney.co.uk/negative

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-2045281/House-prices-What-home-fallen-negative-equity.html#ixzz1a0197RBn

House Prices and Mortgage rates

These two go hand in hand.

When mortgages are available house prices will recover.

Especially for first time buyers.

Rents are too high and they leave the tenant with no interest in the property.

The radical would like to see more of the percentages market.

Buyer getting a 25% ,50% or 75% share in a property from the mortgage company

The buyer then pays a mortgage on that percentage.

95% mortgages would go !

The rent on the property reduced or rolled up as the value in the property

increases or the value of the pound decreases

The buyer pays the mortgage on the reduced share only.

Valuations based on market forces.

Would that work to kick start the market ?

Summer slide in house prices pushing sellers to put off until Autumn, surveyors report

By Ed Monk
Created 9:17 AM on 13th September 2011

Summer slump: Buyers are staying away out of fear of house price falls.

The number of surveyors reporting house price falls increased last month with fears for the economy overtaking a lack of mortgage availability as the main reason for the slide, according to RICS.

The Royal Institute of Chartered Surveyors said its survey of members showed 23 per cent more reporting falls in August than reported rises, up from 22 per cent in July.

Within this, 79 per cent of surveyors blamed 'general economic uncertainty' for the falls, while 66 per cent blamed a lack of mortgage finance.

The survey results added to evidence that the number of transactions falls away. This was most apparent in London where 74 per cent of RICS respondents blamed a lack of stock for the subdued housing market.

RICS reported activity levels as being flat in August, with the average number of sales per surveyor (branch) at 14 (a 26 month low). Also, the average amount of properties on surveyors’ books fell in the month by 4.6 per cent to 67, with anecdotal evidence from surveyors suggesting many sellers are taking their properties off the market until Autumn.

Most house price measures have turned negative during the summer. August's Halifax report puts prices down 2.6 per cent annually, Nationwide has them down 0.4 per cent over the same period and the Land Registry has them sliding 2.1 per cent in the year to July. 

According to the RICS data, every region saw falls in house prices apart from London where the balance of surveyors who saw an increase reached a 15-month high. East Anglia and the West Midlands saw the most severe declines, with a balance of 62 per cent and 63 per cent respectively reporting falls.

Graph shows the trend for falling prices with a balance of surveyors reporting falls.

RICS housing spokesman Alan Collett said: 'For the time being, our indicators suggest that demand for homes remains broadly steady, albeit at relatively low levels, despite the renewed bout of economic gloom.

'However, the risk is that the worsening economic picture will gradually begin to have a more material impact on sentiment and discourage potential house purchasers even where mortgage finance is available.'

A balance of 3 per cent of surveyors reported a decline in new buyer enquiries, signalling that demand is set to continue falling.

Surveyors had become more pessimistic about future house prices, with a balance of 23 per cent expecting prices to fall over the next three months, up from 13 per cent the previous month. But surveyors were hopeful of a modest pick-up in activity over the coming months

Sharp rise in foreclosure notices

•  

by: Joe Sims

September 15 2011

Notices of home foreclosures increased sharply in August, a marked 33 percent rise after slowing to a trickle over the last year. This was the sharpest rise in four years.

The increase suggests that loaning institutions  may again be aggressively reclaiming defaulted properties in the wake of the "robo-sigining" scandals where banks anxious to maximize profits forged signatures on foreclosure documents or allowed them to be signed without adequate scrutiny.

State attorneys general have filed suit against the big banks for such practices.

While labor, community groups and civil rights organizations called on banks like JP Morgan Chase, Bank of America and Wells Fargo to declare a moratorium on foreclosures, the delay was due to efforts to avoid legal entanglements.

The Obama administration has sought to address the mortgage crisis by providing struggling home owners with financial assistance and urging banks to renegotiate contracts. Such efforts, however,  have had meagre results.

Additionally, the GOP earlier in the year attempted to gut the administration's mortgage assistance programs.

White House officials, however, have not given up and included in their new jobs bill a proposal that will provide employment repairing foreclosed homes: "A measure in President Obama's jobs bill, which is being considered in Congress this week, could relieve some of the downward pressure on the housing market caused by the abundance of foreclosures.

The measure, known as Project Rebuild, calls for $15 billion to be set aside for refurbishing foreclosed and vacant properties, including residential buildings."

Over 800,000 homes are expected to be foreclosed upon by the years end.

The troubled Bank of America, which recently received a several billion dollar bailout from Warren Buffet, is leading the pack in seizing distressed homes in states where court action is not required.

For example, in  "California, Bank of America ratcheted up the number of notices of default on homeowners by 182.4 percent  from July to August ..." 

Similarly JP Morgan Chase has resumed foreclosure action in 43 states.

The mortgage crisis began with defaults on sub-prime loans but as the recession deepened quickly spread to standard loans.

As a double-dip recession looms, nagging high unemployment is now the chief cause of home loan defaults

 Why Britain is heading for a property crisis

By Mitchell B. Feierstein

Last updated at 9:34 AM on 29th August 2011

  Riots in London, fear in France and Italy, meltdown in Greece and downgrades in Washington.

These are worrying times for anyone with half a brain and terrifying for anyone with a whole one.

Give or take the occasional riot, we in Britain have tended to think we’re relatively safe from these storms.

Overvalued: UK house prices are about 40 per cent too high in relation to incomes

Yes, the government managed to get into serious debt, but we’re starting to work our way out.

The ratings agencies view George Osborne as Mr Credible. And, hey, at least we’re not in the Euro.

  But the British economy is stalling badly and our financial system is much weaker than the authorities would have you believe.

Worse still, the biggest threat to our financial system is one that most likely affects you personally. British property prices are far too high and set for a fall.

Transaction volumes are still unbelievably sluggish, mortgage approvals still in a slump – but the problem isn’t volumes, it’s prices.

There are two main ways of measuring whether property is fairly valued or not.

The first is to compare house prices with average earnings.

The second compares house prices with average rents.

On both measures, the UK market looks screamingly overvalued.

British house prices are around 40 per cent too high in relation to incomes and about the same amount in relation to rents.

That’s not all of it. Housing markets are volatile.

That means they overinflate in a bubble, but they crash too far in a slump. If prices are 40 per cent above their fair value, a collapse of more than 50 per cent is well within the realms of possibility.

Crazy? Think about where on earth the housebuyers of tomorrow going to come from. A recent report in the Mail quoted some young people as saying they ‘don’t think they will ever be able to afford to buy a property. ’ At these prices – they’re right.

That’s why the average age of a first-time buyer has been soaring and why the ‘Bank of Mum and Dad’ remains essential to so many new buyers today.

Then think about what’s happening to interest rates. The Bank of England has been in existence for more than 300 years and it has never once operated a monetary policy which is as slack as the one that has now been in place since 2008.

Prices have already fallen more than 15 per cent from their peak despite a Bank of England rate of just 0.5 per cent.

When interest rates return to sane levels, as they’ll have to if the Bank is to cope with runaway inflation, people are suddenly going to start finding that their mortgage burden becomes rapidly insupportable. All this at a time of high inflation, high fuel prices, high food costs.

You only have to look at the US to realise what happens when you get a cycle of mortgage defaults, repossessions and distress sales. In America, prices have already fallen at least 30 per cent and they’re still headed down with no bottom in sight.

No? You still don’t believe me? Then look at it this way. Can you name any occasion in history when a developed country simultaneously faces savage government cuts, swingeing rates of tax, high inflation, rising unemployment, depressed growth abroad, rising interest rates, huge levels of debt, and doesn’t have a housing crisis?

In the UK housing slump of the early 1990s, the world situation wasn’t nearly so bleak as it is now, yet prices (in real terms) still fell by well over a third from peak to trough.

These thoughts aren’t comfortable ones. Not for me, not for you, still less for George Osborne and his colleagues. But you don’t avoid disaster by wishing it away.

Mitchell B. Feierstein is chief executive of the Glacier Fund. He has been in the financial markets for 30 years. He is the author of Planet Ponzi (due out in February 2012), which argues that the credit crisis has only just begun

House prices see biggest leap

in 19 months

but are still down on last year

By Daily Mail Reporter

Last updated at 9:38 PM on 26th August 2011

Good news: The average price of a home increased 1.3% between June and July to £163,049

House prices rose last month in every region of England and Wales apart from the North East, figures showed yesterday.

The average price increased 1.3 per cent between June and July to £163,049.

 It was the biggest month-on-month difference since January 2010.

However, the average is still 2.1 per cent lower than a year ago.

Every region of England and Wales has seen prices drop over the past year apart from London, where prices are up 1.3 per cent to £346,416.

London prices are up 1.9 per cent over the past month.

The South West saw the biggest monthly rise, with prices up 2.2 per cent to £174,946, although they are still 1.9 per cent lower than a year ago.

In the South East, prices are 1.1 per cent lower than a year ago at £209,309, despite a 0.9 per cent rise in the past month.

But there was a 2.3 per cent decline in prices in the North East, where the average home costs £101,143 – 8.8 per cent lower than a year ago.

Property prices are particularly volatile at the moment because there are fewer transactions than before the recession.

The figures from the Land Registry showed that the number of completed home sales dropped 10 per cent to 46,870 in the year to May, the most recent month for which those figures are available.

Nick Leeming, of property website zoopla.co.uk, said: ‘Low transaction levels and the year-on-year decline in average prices is representative of the caution gripping buyers and mortgage lenders alike.

‘In addition, the cost of day-to-day living is squeezing peoples’ ability to save for deposits and get on to the housing ladder, leaving a vast backlog of first-time buyers anchored to the rental market.

'Until people feel more confident about their personal finances and are able to put aside money to build even the smallest of deposits the market will continue to stutter.’

Two in five home sellers

forced to cut asking prices

as reality bites

By Simon Lambert

Last updated at 12:10 PM on 15th August 2011 

Two in five properties currently up for sale have had their asking prices cut at least once, a new report has revealed, as home buyers play the waiting game.

Buyers taking advantage of the continuing slump in home sales to test sellers’ resolve are seeing their strategy pay off – with the average price reduction of £18,500 shaving 7.1% off the original asking price.

The 38.6% of properties sitting on estate agents’ books that have had their prices cut is up from 37% three months ago and 32% a year ago.

The research by property listing website Zoopla.co.uk shows that even Millionaires’ Row is not immune from the buyers’ market – with 27% of all £1 million-plus homes on the market having had their asking price cut.

This is up from the 25% three months ago and 22% a year ago that had seen cuts.

On sale: Homes are seeing their prices cut as buyers play the waiting game

The cuts come as many initially over optimistic home sellers find that they must lower their expectations if they actually want to sell up.

Nicholas Leeming, of Zoopla.co.uk, said: ‘Vendors continue to have to lower prices due to weak buyer demand. Sluggish economic growth has hit buyer confidence and tight-fisted lenders are currently making it impossible for swathes of would-be buyers to benefit from the price reductions. 

‘For those who can get mortgages, now is as good a time as there has been in over a year to bag a property bargain.’

The gap between sellers’ ambitions and buyers’ realistic purchasing power has been repeatedly highlighted in the Royal Institution of Chartered Surveyors’ monthly house price reports, compiled from its member estate agents’ experiences.

Typical of many comments in the most recent RICS report for July, John Frost, of The Frost Partnership in Beaconsfield, Buckinghamshire, said: 'If property is priced sensibly there is still strong interest. Those vendors who are not realistic will receive little interest in this market place.'

This attitude from sellers has been reflected in asking prices managing to consistently rise year-on-year, on the Rightmove index, while at the same time falling annually on major house price reports from the Land Registry, Halifax and Nationwide.

However, there are suggestions from agents that sellers may be becoming more realistic as economic reality bites and the latest Rightmove survey for the four weeks to the middle of August has actually shown a slight annual dip in asking prices.

It showed that August’s sellers dropped average asking prices by 2.1% (£5,054), and year-on-year prices edge down for the first time since September 2009 (-0.3%)

However, the report added that despite transactions having slumped and mortgages become much harder to get, in the four years since the onset of the financial crisis asking prices have fallen by only 4.1% (£9,930).

 Where are prices being cut?