Property: October Home truths

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THERE are plenty of housing experts sitting behind the line like generals in a war, ready with opinions about the length and depth of the recession. But what is actually happening out there on the battlefield?

Chris Bain is money adviser to Birmingham Settlement, the city's local money advice centre and headquarters of the National Debt Line, which fields 200 to 300 calls a week from people caught in the crossfire between interest rates and house prices. 'There is a lot of forbearance from the lenders,' Mr Bain says, 'and the rate of repossessions is slowing. But the size of the arrears is worsening. Three years ago I would raise an eyebrow if people had debts of pounds 1,500 or over. Now it's more likely to be pounds 7,000 to pounds 8,000.'

The current debt mountain will cast quite a shadow into the future. Courts and creditors are now allowing people to catch up with their repayments over periods of up to eight years (the average is 18 months to two years). Chris Bain is worried about what will happen when prices do pick up. 'Will this forbearance continue, even when it makes financial sense for the institutions to step in and force a sale?'

Another distressing problem is the number of people who have taken out second mortgages. 'There was this illusion of prosperity. People took out advances for home improvements. It has happened so often, it is just appalling, and it doesn't just concern back-street lenders, quite large finance companies are involved.'

Help can be obtained from local money advice centres or Citizens Advice Bureaux, as well as from the National Debt Line (tel: 021-359-8501), which will provide a self-help pack (free of charge to those in debt).

THE paralysis of the housing market is still bolstering lettings as frustrated sellers move on and put their former homes out to rent. Determined buyers also strengthen their negotiating power by selling up and moving into rented property until they can make a strike with cash in hand.

The rentals market is subject to enormous local variations, however. You can get a good return for your money only if your property is in an area favoured by large companies which are prepared to meet the cost of housing their employees. A recent survey by Hamptons, the letting agents, revealed a kind of league table.

Within London the areas most popular for company lets were Hampstead, at an average of pounds 617 a week, Kensington at pounds 572, and St John's Wood at pounds 562. Areas such as Islington and the City, on the other hand, have to rely on private lets, ranging from professional couples to families and students prepared to pay only pounds 183 a week.

Top of the English county league is Surrey, where companies are prepared to pay through the nose at an average of pounds 2,750 a week. Next come Buckinghamshire at pounds 1,565 a week and Berkshire at pounds 1,194. The poor relations are Essex, at pounds 425, Kent at pounds 440, and Wiltshire at pounds 350. Averages are drawn from a range of three-bedroom semis to six- bedroom houses.

IN THE late Eighties it was actually chic to have a huge mortgage. As City- speak leaked into the everyday language of home-owning folk, it became known as being 'highly geared'. Now, it seems, the clever thing to do is to try to make lump sum payments to reduce your mortgage - or 'deleveraging'.

Adrian Coles, chief economist at the Council of Mortgage Lenders, is doing this very thing. 'House price deflation of 7.5 per cent added to mortgage interest rates of around 10 per cent means you're now paying a real interest rate of 17.5 per cent, which is very high. So it makes sense to pay off some of the mortgage if you can.' If no lump sums are available, you can reduce your mortgage debt more quickly every time interest rates go down by carrying on paying at the higher rate.

FALLING house prices have already made the bands for the new council tax out of date. It is more than likely that the value of your house may have slipped into a lower band by the time you are informed how much your house is worth for local tax purposes.

But according to the Royal Institution of Chartered Surveyors, this should not cause undue worry: all houses will have been affected in the same way so the differentials should remain the same. 'People may think their houses have been valued on the high side but they should remember that valuation took place well over a year ago,' said Chris Shaw, chairman of the RICS Residential Valuation and Survey Skills committee.

Whether the banding levels in turn start to affect house prices remains to be seen. 'It is interesting to speculate whether they will change people's perceptions of values. But I believe market forces will dictate prices, and people will sell their houses for what they are worth in the market place, not according to which price band they are in.'