Two successes but we have to make sure we do not allow ourselves to go soft and stop fighting. The Government has announced that it plans to ban builders from selling new houses as leasehold. At Money Fight Club, in the Financial Times and on Share Radio I have long campaigned for the feudal leasehold system to be reformed. The Leasehold Knowledge Partnership has also been brilliant.
Sajid Javid late last night announced that the market was broken and was harming home buyers. Builders and the companies that make fat profits from buying freeholds from property developers to inflate dramatically the cost to home buyers may disagree. Nationwide has already said it will not offer mortgages on new leasehold houses or flats with short leases. Let the consultation begin.
It should take about eight weeks but until legislation passes through parliament, which is home to many vested interests, I will continue to battle to make sure that the good intention is not killed off. And that those lawyers who took the builders’ shilling to smooth through the conveyancing without alerting the leasehold buyers to the dodgy small print need to pay their clients compensation.
The other success is more everyday and local. My local train station in Sussex has updated its ticket machines to enable passengers to buy cheap tickets when the ticket offices are closed.
The offices are open for far fewer hours and the machines until the beginning of the month would not sell the cheapest tickets and were difficult to navigate. It meant good old Southern Trains could save money on staff costs and make more from inflated fares.
Maybe the £13m fine a few weeks ago for poor passenger service over the last year hit home. But there is still a long way to go.
Anyone buying tickets in machines or online have to agree the terms and conditions of travel. Those who actually access these ts and cs will find they run to 36 pages. You can carry three items of luggage and two dogs, even an unloaded gun – with prior permission. That is unless there is not enough room for your luggage. How travellers are meant to establish that in advance is not clear.
You cannot complain and claim compensation if there is no seat – unless you have a first class ticket. Then you can claim the difference between the first class fare and the cheapest standard class ticket.
My next challenge will be to make the terms and conditions fair and reasonable for all. That might require briefer and clearer terms and conditions. Maybe the Southern work experience boy can move on from his social media role.
It’s always the same. It’s the poor what gets the blame and are charged far more than they should be. At the end of September Wonga managed to charge customers twice leaving thousands without money to buy food or pay their rent over a weekend. But that accident was resolved in days.
When it comes to overcharging it is the establishment lenders that know how to double charge their poorest customers over many years and take their time to put their customers back.
The Financial Conduct Authority estimates that up to 750,000 mortgage customers, who had got into mortgage arrears, could have been affected and is asking the lenders to work out the compensation by June next year.
Lenders overcharged those struggling with their mortgage payments by adding the arrears to the mortgage and also adding extra payments for the arrears as well. The problem came to light two years ago when a court ruled that Royal Bank of Scotland had wrongly charged customers in arrears twice.
Since then other banks and building societies representing 66% of mortgage lending have examined their own processes and agreed that they are likely to have overcharged 750,000 customers. But the FCA is not planning to impose any penalties on the lenders, or at least not yet. If the lenders take their time in identifying those affected, contacting them and paying them back they may face penalties.
The FCA told lenders six years ago that automatic capitalisation should not be allowed if it caused borrowers to pay more.
Judging by the number of bank customers who were refused Payment Protection Insurance compensation when they first asked the big banks and who only got the money when they took their claims to the Financial Ombudsman’s office.
And, of course, it is quite likely that the customers struggling to pay were on the lenders’ most expensive standard variable mortgage rate because the lenders would deem that they could not move to cheaper fixed rate loans because they could not afford them. Across all markets – mortgages, energy tariffs, insurance and credit cards the best deals go to the better off.
What do you think about house price rises?
House prices are on the rise. In fact, even the Governor of the Bank of England is worried that this new housing bubble will burst and stall the UK’s financial recovery. Well… what do you think?
Take our survey. Mark each statement with a score from 1 to 5.
We’ll share the results shortly.
Now house prices are rising I plan to sell my home and trade up.
Now house prices are rising I plan to increase my mortage (release equity).
I think the government should do something to stop house prices rising too fast.
I think the government should cut back on the various initiatives designed to help people on to the housing ladder.
Rising house prices make me more likely to spend money on other things.
Rising house prices make me more likely to spend money on my home.
I rely on the value of my home to help fund my retirement.
I am on track to pay off my mortgage before I retire.
Paying off ,or reducing the size of my mortgage is a priority.
Paying off, or reducing the size of my mortgage is less of a priority when house prices are rising.
It’s got even harder to get a mortgage because of changes brought it in under the Mortgage Market Review. So it’s worth making sure your mortgage credit profile is in the best possible shape. Lenders will want to take a close look at your spending and if you haven’t gone for a mortgage for a few years the added level of detail will come as a shock.
If you have lots of credit cards but only use a couple it is worth cancelling the ones you do not use. Lenders will be worried that when you move in to your new home that you may go on a spending spree if you have lots of credit available.
But at the same time you need to have a record of handling a credit card properly so if you have no credit available you should take out a card and then make some purchases and pay them off sensibly over a few months.
But don’t make lots of applications to find out what is the best deal you can get. Once again lenders may think you want to go on a mega spend.
Prepare a budget that lists all your spending and saving. You need to show what comes into the household and what goes out. Itemised bank statements and credit card bills will help support this budget. How much do you spend on transport, food, gas and electricity,child care, going out, staying in, clothes, hairdressing or hobbies?
If you plan to cut your spending on one of the above to afford the mortgage it is best to start now to demonstrate that you can save the money.
You also need to make sure that there will be no double counting. For example, people who use credit cards to buy all their food need to be able to show the food shopping in their credit card bill, so the lender doesn’t assume all the credit card spending is on extras and luxuries – this is another good reason for preparing your own detailed budget to show the lender.
Lots of people have credit blips on their records even when they are totally responsible. These can make mortgage application difficult. Mortgage brokers can help you to make a better case and know which lenders are more likely to accept your application. The broker charges a fee that they should tell you about upfront but if it gets you out of an expensive rented property into a home you can afford it will be worth it.
As well as the pension changes, the Budget also announced a new breed of tax-free Individual Savings Accounts, which will allow £15,000 in cash or shares, or a mix of the two, to be invested each year. They’ll be launched in July.
Check that the charges on the investment ISAs do not outweigh the tax benefits. Remember there will be no tax to pay on gains up to £10,900 even outside an ISA wrapper.
And if you want to play safe with a cash ISA remember that banks like to lure in savers with high rates for the first year and then drop them dramatically at the end of the period. Or they encourage people to tie their money up for several years when the likelihood is that interest rates will rise and savers will lose out.
Those with modest incomes might be better with an ordinary savings account. The 10p tax rate for savers will not be scrapped until April 2015. This rate applies to those whose savings income is £2,880 or less above the personal allowance. In 2013-14 the personal allowance is £,9,440. From April 6 it will be £10,000.
From April 2015 there will be a new £5,000 allowance for tax-free savings. The personal tax allowance will be £10,500 and if total income from savings and earnings is less than £15,500 then you can apply for tax-free savings.
If you’re planning ahead for holidays, the Air Passenger Duty (APD) on long haul flights is being reduced from April 2015 and will save £26 per person. In the meantime if you have to cancel a long haul flight and have paid the tax, apply to the airline or travel company for a refund of the APD. Some add an administration charge that is equal to the tax but others play fair. Check first!
Local authorities are to get £200m to fix potholes. If your car is damaged by potholes, take pictures and challenge the council to pay for the damage. Most councils keep a log of complaints about potholes that will establish they knew about the poor state of the road and will pay up.
Help to Buy is extended until 2020, which allows would be home buyers time to build up a deposit using tax-free ISAs or other savings. It also gives buyers the chance to make sure that their credit history is sparkling clean when they come to apply for a loan.
Tax returns will begin to be sent out in a couple of weeks’ time. They have never been more important. Fill them out accurately in good time. HMRC has new powers to claim tax first and ask questions later in its battle against tax evasion and tricky tax avoidance schemes, but there are fears that people who have genuine reason not to pay an inflated tax bill could find they will have to pay first and then argue.
It has never been more important to keep good records of any gifts to family, investments, sale of second homes or foreign bank accounts.
Any other budget moves you want to draw to our attention?
Lenders have a new wheeze when it comes to lending money to home buyers. Now interest-only loans have been outlawed for all except buy-to-let borrowers they have moved to the next best thing (for lenders, that is, not borrowers) – 40 year mortgage loans.
In particular, lenders are circling first time buyers who are back in the market. According to the mortgage statistics for last year, mortgage approvals rose by 122,000 to 734,969. First-time buyer numbers are well up. For example,they took out 27,000 loans in November, 2013, a rise of just 0.7% compared to October, but up 24% compared to November 2012.
First time buyers are more likely to be into the 30s rather than in their 20s. And you need to keep this in mind when you look at the so called benefits of 40 year mortgage loans.
Lenders may well sell these long loans on their affordability and this may look very attractive to the thirty-somethings entering the property market after years of paying rent. After all, a £220k loan at 4% over 25 years will cost around £1,160 a month while its 40 year equivalent will be £240 a month cheaper at £919.
This is sounds like a bargain but the lenders are the ones that win with these loans. Just think how much more you pay in interest over the longer period? Almost 50% more.
Those desperate to get on the housing ladder need a strategy if they take out a longer-term loan. They need to use every opportunity to pay off more from their loan, particularly in the early years, so they can start to consider a shorter loan period. And they need to be constantly on the look out for better deals as their ability to pay improves (perhaps as they climb up the career ladder).
Bite the hand off a lender waving a 40 year loan at you and that’ll just be another reason why you have to carry on working until you’re well into you 70s – to pay the darned thing off.
There are even a couple of 50 year options out there. Beware.