Houses with low energy efficiency will lose value under government plans to intervene in the property market to help cut greenhouse gas emissions from homes by a third by 2020.

Estate agents will be given guidance telling them to take more notice of energy efficiency when deciding the value of homes. Ministers believe that homeowners are more likely to pay for efficiency measures such as solar panels and insulation if their investment clearly increases the property’s value.

The Department of Energy and Climate Change said in a strategy document that it had asked the Royal Institution of Chartered Surveyors for recommendations to ensure that a home’s energy performance was “better reflected” in its value. Council tax rebates of more than £100 a year will be offered to homeowners who improve insulation. Landlords will be barred from letting poorly insulated properties and will have to upgrade them to a minimum standard of energy efficiency.

Councils will be able to require energy companies to work with them to insulate social housing. Banks and shops will be encouraged to offer loans of £10,000 per home to householders who install solar panels, heat pumps and insulation. The repayments will be covered by savings in energy bills.

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Legislation will allow the loans to be linked to the home rather than the owner, meaning that when the home is sold the new owner will inherit the debt. The National Association of Estate Agents said that such debts could make business more difficult.

John Healey, the Housing Minister, said that action was needed to reduce energy wastage in privately rented homes, which tended to be older and in poorer condition than owner-occupied homes. It is proposed to make the installation of loft and cavity wall insulation a condition of renting out a property.

by Ben Webster, Times Online

Jane Donaldson spent £200,000 doing up her bungalow but like many vendors can’t find a buyer

by David Smith - Times Online

Competition is a good thing, so the break-up of Britain’s rescued banks, announced last week, should be a positive move for the housing market. Although nothing is imminent, the disposals approved by the European commission will increase choice. Lloyds TSB-HBOS has a mortgage-market share of about 30%, so the split should be beneficial, and has been lauded by Which? and other consumer groups.

Marrying the proposed break-up with the Financial Services Authority’s regulatory reforms, it seems clear that the mortgage market of the future will look different. Competition is not all one way — in the past couple of years, smaller building societies have been absorbed by bigger competitors — but there is the prospect of new players.

The key issue remains: will there be enough mortgage capacity to support reasonable activity in the housing market? The big picture on approvals for house purchase is that they are still rising. The Bank of England’s latest monthly figure (for September) was 56,215: up by 68% on the same time last year, and more than double the November 2008 low.

That has been enough to support the rising house prices of recent months, perhaps surprisingly. Halifax reported a 1.2% increase in October, a fourth consecutive monthly rise. Prices are up by 2.9% since the end of 2008 and by 7.1% from the April 2009 low. Yet approvals remains well below pre-crisis norms. In all bar one month from January to June 2007, they were more than double the latest figure.

The drop in mortgage activity — despite the recent recovery — is even more striking when you look at all approvals, including remortgages. At just under 110,000 a month, it is barely more than a third of pre-crisis levels.

So this is not merely a question of competition in the mortgage market; there is the important issue of how much lenders can lend. Nobody expects a return to the levels of the first half of 2007, but a proper recovery in the housing market requires considerably more lending than now. And it is not clear we are going to get it.

* Average price falls of 6.6% are likely in the property market next year, as the backlog of pent-up demand that has brought recent growth is gradually eroded, while supply increases and economic growth remain weak. In its market forecast last week, Savills estate agency said that a gradual return to house-price growth is expected once the economy starts to recover and unemployment falls — with a probable 2.7% rise in average prices in 2011, steadily growing to 5.5% in 2015.

New rules proposed by the Financial Services Authority threaten to exclude even more aspiring owners
Paula Hawkins


Conditions for buyers in need of a home loan have rarely been bleaker — but new rules on mortgages threaten to exclude even more aspiring owners.

TimesOnline-Regulations proposed by the Financial Services Authority (FSA) this week, as part of a mortage review, aim to strengthen the market. They include stricter affordability tests for borrowers, an end to self-certification loans and a ban on “toxic combination” loans, such as a mortgage offering a high loan-to-income ratio to someone with a poor credit record. But industry brokers say the plans could make borrowing more expensive for all and almost impossible for a significant minority.

“The FSA says the plans are ‘designed to tackle the problems identified while maintaining a vibrant and sustainable market’. But this mortgage market is not vibrant by any standards,” Melanie Bien, director of the mortgage broker Savills Private Finance, said. “Not only that, but regulation costs, and this cost will be passed on to the consumer in the form of more expensive mortgages.”

Of particular concern is the decision to ban self-certification loans. Ray Boulger, of Charcol, another broker, said: “The full-frontal attack on self-cert mortgages seems based on a major misunderstanding by the FSA.”

Boulger said that the FSA was treating all “income non-verified loans” as self-certification deals when only a small proportion of these are; most are simply fast-tracked. “This is the process where on a mainstream mortgage, the lender exercises their right not to ask for paper proofs because they determine that the mortgage is low-risk.”

However, the proposals will not be implemented for some time — and may not be introduced at all. “This is a discussion document,” Boulger said. “If the responses to it are sufficiently robust, then the FSA will have to take another look at the issues. I think most brokers and lenders will say that the FSA has gone too far.” Interested parties have until the end of January to respond to the proposals. For many, the process of getting a mortgage will remain the same, although you may have to give a more detailed breakdown of your financial situation on an application, so the process could take longer. The FSA has said that lenders need to “calculate the free disposable income a consumer has to pay for the mortgage” — this could include not just income after tax, but all debt repayments, utility bills, the cost of eating out, alcohol and cigarettes. Lenders would also be encouraged to “stress test” an applicant’s ability to pay, by assessing how the borrower would cope if interest rates were to rise.

“To check this accurately would be very difficult and very intrusive,” Boulger said. It would also be bureaucratic and expensive and this would likely raise the cost of borrowing. However, it would not be without precedent — similar affordability tests are already used by lenders in France.

“Thankfully, the proposals did not include caps on loan-to-value,” Bien said. There are no caps on loan-to-income or debt-to-income either. But it is unlikely that high loan-to-value loans will become plentiful — or much cheaper — for some time.

The self-employed, particularly those who have only recently gone solo, face a much more difficult mortgage market. If self-certification loans are banned, you would need to come up with two years of accounts or two years of self-assessment forms to prove your income. If you do not have these, you will not be able to get a loan. “A sizeable majority of borrowers would be at serious risk of being denied a mortgage,” Boulger said. It would also mean that those who have a mortgage on a self-certification basis might find it difficult to remortgage without the proper accounts.

There is some good news for borrowers: banks and building societies will no longer be allowed to levy arrears charges if a borrower is already repaying their debts.