Thank godness for the two-year stamp-duty holiday for first-time buyers

My sister Tasha has moved in with us, tales of her disastrous money management are legendary. Being a much older sister, with two spare rooms, what could I do? So on a snowy Saturday, in she moved, complete with every IKEA accessory known to man! She is a complete disaster to have so close, bags of designer wares are wafted under my nose, my makeup is used and carelessly left strewn over every surface in what can only be described as Armageddon in the family bathroom.

So please imagine my delight upon hearing Alistair Darling announce a two-year stamp-duty holiday for first-time buyers on properties priced up to £250,000. Not having to pay the 1% levy, which used to apply to sales over £125,000, will mean a saving of as much as £2,500. Not a huge sum compared to the other costs of moving, admittedly, but helpful nonetheless: probably enough to buy a few choice pieces from IKEA, a comfortable, bed, sofa and maybe enough for Tasha to buy her own makeup! I passed her the phone to call the bank of mum and dad, deposits are their thing.

The number of first-time buyers has slumped in recent years. In 1999 alone, more than 590,000 people took their first step onto the property ladder; by the peak of the market in 2007, the figure had fallen to 357,000; last year, it was just 198,000. The Council of Mortgage Lenders (CML) estimates that the average person is now 30 before they buy their first home .Tasha is in her twenties, that is way too long for her to be our house guest.
Even modest changes to the tax rate, such as the one announced by Darling, will certainly have an effect — as shown when the government temporarily raised the point at which stamp duty kicks in from £125,000 to £175,000, from September 2008 to the end of last year. The CML found that the number of transactions in the £125,000-£175,000 range last December was an unseasonable. 63% higher than in the previous month but fell back by 80% in January, when the original bands were restored.

The effect this time around may not be so obvious, not least because the “holiday” will be enjoyed only by first-time buyers. This is not only a matter of excluding ‘wannabe’ buy-to-let landlords: if you have already owned a property, not just in Britain but anywhere in the world, you won’t qualify. Combining resources with someone else who has bought in the past is also not permitted.

Even more of a problem is the need to raise a deposit, which could be easily, be £50,000 for a £250,000 home. Although there are signs that lenders are beginning to look more favourably on those unable to lay their hands on that amount of cash, deals open to buyers with less than a 20% deposit are rare — and the fees and interest rates charged are, in most cases, consider¬ably less attractive than those on offer to existing homeowners trading up.

It may be that this stamp duty bonus could be the factor that lands Tasha on the property ladder; all she needs to do is find the right property. We have been looking solidly for the past few days; I can’t say that there is an abundant choice out there. Anything that looks somewhat appealing is snapped up within days of coming on to the market, everything else looks uninhabitable and in need of a lot of work. It could be that we have a temporary surge into the housing market from this but with limited properties coming on to the market, this could be a mini blip that drives prices up rather than wiping any savings on tax.

The Budget - a Key Point Breakdown

Stamp Duty and Property

• The stamp duty limit for first-time buyers will be doubled from midnight tonight to £250,000 for this year and next, to be funded through an increase in Stamp Duty to 5% for houses worth over £1m from April 2011.

• The Support for Mortgage Interest scheme will continue at the higher rate for another six months.

• From October next year, the most expensive properties will be excluded from the Housing Benefit calculation in each area, which will - added to anti-fraud measures - save £250m a year.

Economy and Public Debt

• The Chancellor forecast the economy to grow by between 1% and 1.5% this year and between 3% and 3.5% in 2011. This is a reduction. His forecast for the following years is unchanged.

• Borrowing this year should be £11bn lower than forecast at £168bn. In 2010/11, borrowing will be £163bn, falling to £131bn in 2011/12, then £110bn in 2012/13.

• As a share of the economy, borrowing is forecast at 11.8% of GDP this year, 11.1% next year, then 8.5%. In 2012/13 it will be 6.8%, then 5.2%, falling to 4% in 2014/15.

• Public sector net debt will reach 54% of GDP this year. It will then increase to 75% by the end of the forecast period in 2014-15. Net debt, as a share of GDP, will begin to fall the year after that.

Banking

• The Treasury has already received over £8bn in fees and charges from banks and the one-off 50% tax on bankers' bonuses has already raised £2bn.

• Need for international systemic tax on banks, which he will urge on international finance ministers in Washington next month.

• A new guarantee will mean everyone can have a basic bank account, giving up to 1m more people access to bank accounts over the next five years.

• Agreement that RBS and Lloyds will provide a total of £94bn of new business loans.

Pensioners

• Tax credit support for older workers is to be extended. To make it easier for those over 60 to receive working tax credit, the Government will reduce the minimum hours they need to work to be eligible.

• The pensioners' higher Winter Fuel Payment of £250, and £400 for the over-80s, will be guaranteed for another year.

Families

• Parents of one and two-year-old children will be helped by increasing by £4 a week money paid through Child Tax Credit from 2012.

Unemployment

• A guarantee of a job or training for every 18-24 year-old after six months out of work is to be extended until March 2012.

ISA

• From next month, the annual ISA limit will rise from £7,200 to £10,200 and ISA limits will increase annually in line with inflation.

Fuel Tax

• Next month's increase in fuel duties will be staged. Fuel duty will rise by a penny in April, followed by a further 1p rise in October and the remainder in January.

• The Chancellor said by the time the full fuel duty rise comes in, in January, he forecasts inflation to be back below 2% and confirmed the Bank of England inflation target remains unchanged at 2%.

• The planned increase in fuel duty and landfill tax will continue for one year from 2014.

Personal Tax and VAT

• The Chancellor made no further announcements on VAT, income tax or National Insurance rates.

Alcohol and Tobacco

• Duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also increase by 2% above inflation for two further years from 2013.

• Duty on cider will increase by 10% above inflation from midnight on Sunday.

• Tobacco duty will increase from today by 1% above inflation and then increase by 2% in real terms each year until 2014.

Inheritance Tax

• Inheritance tax threshold will be frozen for a further four years to help pay for the cost of care for older people.

Business

• The cost of the £2.5bn overall one-off growth package will be met from existing budgets and by higher revenues from the bankers' bonus tax.

• A new Credit Adjudicator will fast-track complaints from smaller firms who say they have been unfairly denied credit.

• A new national investment corporation, to be called UK Finance for Growth, will streamline and improve Government help to small and medium-sized enterprises, overseeing £4bn of support for business.

• A new Growth Capital Fund will provide fast-growing companies with private capital and will eventually provide £500m of finance - with commercial banks so far agreeing to contribute more than £100m.

• Business rates will be cut for one year from October, meaning a tax reduction for over 500,000 small businesses in England. Small businesses will be helped to expand by doubling the annual investment allowance to £100,000. Entrepreneurs' relief for Capital Gains Tax will be doubled to £2m on which the lower rate of 10% will be taxed.

• The Chancellor will offer help to the computer games sector similar to the aid given the British film industry.

The Environment

• To boost a low-carbon economy, the Government will set up a new Green Investment Bank, controlling £2bn of equity. Half the cost will come from asset sales, with the rest matched by private investment. The fund will focus on green transport and energy, including offshore wind power, with £60m offered to develop ports hosting manufacturers of offshore wind turbines.

Extracts taken from Thisismoney.co.uk

Is size everthing?

I have just read an interesting article in the Mail. It caught my interest especially as I have been moaning about how small my new home is….This week, it was revealed that a former London broom cupboard - now a 60.5sq ft micro-flat - in Knightsbridge has been valued at up to a staggering £200,000. That's for a property that's smaller than a full-size snooker table.

 Daft? Perhaps. But it does have one major selling point: its local shop is swanky London department store Harrods. This places it in the heart of one of the capital's hottest locations, with Hyde Park on the doorstep and where even relatively ordinary flats regularly carry a multimillion- pound price tag. 

But is it really worth investing in a property little bigger than the average prison cell, even if it does come with one of the country's most desirable postcodes?

Well, that depends on what you're after. While small studio flats in London's best areas can go for less than £200,000, they're little more than tiny pied-a-terres, and are unsuitable for anything more than a single, and very tidy, resident.

But they are a worthwhile option for those willing to sacrifice space for a posh address or people who work in the capital but have a main home out of town. Indeed, by buying a weekday bolt-hole, commuters can save a fortune on travel costs and time.

According to the Land Registry, the average property price in Kensington and Chelsea is a mind-boggling £821,496. It has a designer kitchen and bathroom, an entertainment system and a truly fabulous address. There's even a window.

The only catch? The living/kitchen area is 10ft by 8ft, with the bed on a mezzanine. Cluttons has a slightly more spacious studio on salubrious Sloane Avenue. On the market for £225,000, it is under offer.

Again, size is limited: it features a 16ft by 15ft living/ kitchen area with a separate bathroom. But for location, it's more or less unbeatable.

Studio flats are often very small, but upmarket areas benefit from a strong market, making any property within them a good investment. In some Central London areas, prices are almost back to where they were at the peak of the market.'

While national property prices have increased by 5.2 per cent in the past 12 months, Kensington and Chelsea has outperformed, rising by an extremely healthy 11.2 per cent. Marylebone, north of busy Oxford Street, has one of the capital's most idiosyncratic shopping streets and is another good bet.

 

Hips 'unsatisfactory'

I have just picked up one of the many legal publications that arrive monthly onto my desk.

An interesting article caught my eye.

 

Almost a third of estate agents provide unsatisfactory home information packs according to a survey by Birmingham Trading Standards. Results of the study carried out at the end of last year revealed that, of the 37 packs examined, 70% were rated satisfactory or reasonably satisfactory, and 30% rated unsatisfactory when measured against the HIP regulations.

The most common faults included: no information provided on the complaint or redress procedure; no consumer information; no company contact details; technical issues with the search; and HIP index-related issues.

 

This comes as little surprise to me that a third of all HIPS were found to be below par. As they have no value to the buyer, they were always going to be done on the cheap.

In my opinion instead of upgrading them, surely the government should scrap them instead.The packs were supposed to hurry along the buying process, as they contain all of the property details, searches and an Energy Performance Certificate in one place. Unfortunately much of the documentation in the HIP is out of date on the day that it is produced and hence there is no cost saving as the purchaser needs to renew this documentation, leading to a duplication of costs.

The government has been accused by the Conservatives of stifling the property market with yet more red tape, creating a headache for those wishing to sell their homes, in an already tricky market.

 

 

A future with no keys?

I have recently converted to an iphone and now I wouldn't be without mine; so an article in the Sunday Telegraph entitled 'Introducing the iKey: Apple's answer to the humble door key' grabbed my attention.

Apple are developing technology, nicknamed the "iKey", which will mean that rather than carrying around a bunch of keys, people will be able to use a single electronic device to unlock their car, front door and gain access to their office. You would simply have to enter a pin code and wave the device over an electronic pad fitted beside a door to open it. According to the article Apple have already filed the application with the US Patent Office and the application states: "The device can communicate with an external device to open a lock. By way of example, the electronic device may be a model of an iPhone".

Apple hope to replace cards and keyfobs by allowing the iPhone to be used instead to unlock doors to buildings and cars. In a home, householders would need to install electronic, computer controlled locks to their doors. The iPhone would need to be registered with the locks so that they could communicate with each other. By rotating the iPhone near the electronic lock, consumers then select their pin numbers on a dial displayed on the screen, as if entering a combination on a safe. If the combination entered matched the one held by the electronic lock, the door would open. If not, an alarm could be sounded or alerts sent to the householder to indicate someone was attempting to gain unauthorised entry. The patent also proposes encrypting any information that passes between the iPhone and the computer-controlled lock to prevent hackers from "listening in".

I thought that keyless systems for vehicles through key fobs would never catch on and I was wrong there - but no more keys? After reading the article on the iKey, it doesn't seem that it won't be long before conveyancers could be emailing pin codes out to clients on completion days rather than letting them know that their keys are ready for collection.

Mixed messages from lenders as rates fall, rise and stay the same

WHICH RATES ARE GOING UP?

A flurry of lenders are writing to customers to tell them that their standard variable interest rates are on the way back up.

Skipton Building Society borrowers are set to get the biggest shocks: their rates are going up 1.45 per cent – adding £101 a month to repayments on a typical £125,000 loan.

Holmesdale and Norwich & Peterborough are bringing in smaller rises, while Nationwide has increased the standard rates charged by its The Mortgage Works and UCB subsidiaries.

WHICH RATES ARE BEING CUT?

High Street players HSBC, Nationwide and Woolwich, as well as regional names such as Yorkshire Building Society, have announced lower fixed rate deals.

HSBC now has two-year fixes from 3.84 per cent and five-year fixes from 5.44 per cent, while some of Yorkshire’s new fixes are set at 0.6 per cent lower than its old ones.

Northern Rock is offering two year fixes at 3.69 per cent.

WHICH RATES ARE STAYING THE SAME?

Bank of England base rate was held at 0.5 per cent in the first week of February, despite predictions about a possible rise.

Payments on most trackers are linked to base rate so they have been held steady for the 11th month in a row.

WHICH RATES ARE WORTH CHOOSING?

Experts say more lenders will increase standard mortgage rates and cut fixed rates later this month. But the consensus is that you still pay too high a price for security on most fixes.

A better strategy is to compare the rates you would pay on your chosen lender’s best fix and tracker deals.

If you opt for the tracker, budget for the fix and put the difference between the two payments in a savings account each month.

That gives you a decent buffer fund if interest rates rise dramatically.

If you have a £125,000 mortgage with Halifax and go for its two-year tracker rather than the two-year fix, then you’ll have a war chest of £840 after the first year if you save the difference between the two repayments.

At the moment, best trackers come from HSBC, Santander and Woolwich.

Extracts from an article by Neil Simpson Daily Mail

Overpay your mortgage and save money

In these times of economic gloom, we are constantly looking to save money, and get the best deals available.

We are constantly looking for advice on all aspects of our financial lives.

Perhaps our biggest financial burden is our mortgage, and it is probably the one we are most laid back about. The payments are viewed as a ‘given’, they fly out each month and we all accept that we will have this debt for at least 25 years.

 

At this time of incredibly low interest rates, it would be prudent to ‘overpay’ the mortgage.

Any borrower who has seen their monthly mortgage rate drop, due to a very low interest rate (0.5%) Should just keep on paying a ‘standard level’- this could lead to overpaying your mortgage by many hundred of pounds per month.

The benefits to be had from overpaying the mortgage can be so significant that it is surprising how few borrowers actually do it. Overpaying also increases the amount of equity you have in the property, this in turn allows you access to better deals when you are shopping for new mortgage finance. It is worth noting that once the spare cash is paid in to the mortgage it is gone and cannot be used for anything else. This is the reason many of us put out surplus cash into savings etc, as it can be easily accessed at very little notice.

 

In the real world we don’t overpay our mortgages, because we’re already at the top end of what we can afford. If there is spare cash, we use it to pay off debts, save it or fund other purchases.

Most lenders will only allow a certain amount of overpayment every year, usually 10% of the overall mortgage amount, they may charge you for this privilege, this is known as ELC (early repayment charge) if you have a flexible mortgage the 10% rule will probably not apply.

With normal savings rates being particularly low, many borrowers with significant savings would benefit from offsetting, as they would earn the equivalent of the mortgage rate on their savings. This method of overpaying also allows the borrower to keep their savings ‘liquid’ as they can always access the money from the offset pot at any time. It is also worth bearing in mind that any interest you earn on your savings is taxable at your highest rate of income tax, which might be 20%, 40% or, as of April 50% for the highest earners. If you use your savings to overpay your mortgage instead, not only are you effectively earning interest on them at the mortgage rate, but because they no longer technically exist as ‘savings’ you do not pay any tax.