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Archive for the ‘Household bills’ Category
Friday, August 5th, 2011
The debt crisis has sent stock markets into turmoil – painful news for pension savers and investors, but the silver lining is falling mortgage rates
Panic is sweeping through stock exchanges across the world, with the FTSE 100, the Dow Jones and the Asian markets all taking a pounding. Here we look at what it all means to you, and what you can do about it.
Pensions
The closure of final salary-based pensions and the shift to ones dependent on the stockmarket means this week’s falls are more painful than ever for millions of workers. The FTSE 100 has fallen by a tenth in the space of just four weeks, and at the time of writing is tumbling further.
Worst hit are those approaching retirement: they won’t be able to make up the losses. What’s more, the turmoil in markets has sent annuity rates to rock-bottom lows. Annuity rates determine how much pension income you get in return for the money you saved during your lifetime, so this means pensioners retiring today will see a lower income.
Action More of the same: save more, work longer, retire later. Younger workers can ride the storm if markets recover. Older workers may feel compelled to shovel yet more cash into their workplace additional voluntary contribution (AVC) schemes. Someone retiring this week should speak to an independent annuity adviser urgently.
Savings
Last time around, when Northern Rock and then the Icelandic banks crashed, there was real panic about the security of savings. This time around the banks at the centre of the storm – Italian ones such as Unicredit and Intesa – are virtually invisible on the UK high street. If Spain moves centre stage then expect a rumble of concern about Santander, although it has passed stringent EU tests on its capital strength.
Action The UK compensation scheme has been improved since the last crisis, and now guarantees the first £85,000 of any individual’s savings (so a husband and wife or civil partner can protect as much as £170,000). The standard advice, if you have more than that amount, is to spread it around different accounts at providers which are not in the same banking group.
Mortgages
Here’s the silver lining. While the Italians and Spanish have seen money market interest rates shoot beyond 6%, the reverse is happening in the UK. Short-term money has, oddly enough, become cheaper, as markets now think the Bank of England won’t raise interest rates until well into 2012. In the past few days banks and building societies have been rushing out rate cuts on nearly all their deals, so if you’re coming off an expensive fixed-rate mortgage you’re one of the lucky ones.
The rate on a five-year fix has tumbled from about 4.5% to a record low of around 3.7% (see, for example, Yorkshire building society’s deal and others at moneyfacts.co.uk); two-year fixes have dropped below 2.7%; while tracker deals start at 2.89% at First Direct.
But the new banking crisis is probably bad news for first-time buyers, effectively shut out of the market by demands for huge deposits. This is unlikely to ease any time soon as banks do everything they can to preserve their capital.
Action If you’re on an existing tracker deal (which follows the Bank of England base rate) then you’re probably wise to do nothing and enjoy the ride. If you have a large mortgage, cannot afford a rate rise and think inflation is going to return, then jump into one of the five-year fixes.
Petrol, gas and electricity
Good news. The oil price has come back from a peak of about $125 a barrel during spring to about $108, with most of that fall in the past few days. This morning it was up a bit, but if the world economy slows down or even goes into a double-dip recession expect further falls.
Bad news. E.ON this morning raised its prices by 18.1% for gas and 11.4% for electricity. However, if the wholesale price of gas and electricity tracks the price of oil, as it tends to do, maybe households will see an easing off in further price rises. But the utility companies have a long history of failing to pass on price falls in the wholesale market, so don’t expect price cuts in the short term.
Action It’s probably not worth switching gas or electricity provider right now – hang around for better deals in a month or two’s time.
Investments
Bad luck if your fund took a bet on European banks recovering. Ones that can play markets going down (the hedge funds and Ucits III funds) may in some cases have benefited. This morning, financial advisers were telling clients that the important thing is diversification, although one of the features of the 2008-09 market decline is that all asset classes – equities, bonds, property – went down, so diversification didn’t pay off much.
The big play of the past few years – mining and commodity stocks fuelled by voracious demand from China and other emerging markets – will look exposed if global growth slows.
But gold continues to shine. Yesterday it went up another $10 to $1,679 an ounce, and while markets remain in panic, is likely to advance further.
Action If I knew the answer to this one …
Posted in Banks and building societies, Business, Energy bills, Financial crisis, Global economy, guardian.co.uk, House News, Household bills, Investment funds, Investments, Money, Mortgage rates, Mortgages, News, Pensions, Property, Recession, Retirement planning, Savings, Shares, Stock markets, UK news | Comments Closed
Friday, July 29th, 2011
Co-operative living offers a not-for-profit way to avoid the property casino – here’s how one group did it
Housing co-operatives are common in many parts of the world but have never really taken off in the UK. But is that about to change? Community co-operatives have rescued pubs, shops and other vital amenities. Now, with sky-high property prices in many parts of the UK, groups of like-minded people are coming together to form co-ops to buy a property to live in – something they would never be able to do individually.
Robert Morris, 34, is one of eight people of varying ages and backgrounds about to move into a derelict former children’s care home in east London. They set up a housing co-op so they could buy a place to fulfil their dream of living together “collectively” in order to pursue a sustainable, less consumer-oriented lifestyle. Now the dream has become a reality. Planning permission has been granted for a change of use, contracts have been exchanged, and the members will be moving into the 10-bedroom detached Victorian property within a few weeks.
The eight members range in age from 30 to 68. Some are Londoners, but not all. In addition to Robert, who works as a Linux server engineer, the group includes Catherine, a teacher; Liz, associate editor for a national magazine; Phil, a permaculture gardener and community activist; Tricia, who teaches English as a foreign language; Melissa, a university lecturer; Tom, a software tester; and Charles, an industrial engineer, systems analyst and musician.
They are looking for a few more people to join them, but say only those with a genuine desire to live collectively need apply: “If you just want a room and cheap rent, this won’t be for you.” The group are aware that, for some observers, talk of creating an “intentional community” based on shared values and communal activities might conjure up images of hippy communes, religious cults and 1970s sitcom The Good Life.
It’s something the group tackle on their website: “This is not about escaping to a rural ideal or trying to create a pretend one in the city. It’s about facing the very real challenges of living sustainably in a large urban centre like London. This means a commitment to living in a different way. It also means being realistic about the challenges. It’s not an episode of Friends! Nor is it a way of getting cheap rent, having free love or joining a cult – and families and children can certainly be a part of the community.”
The co-operative paid £620,000 for the property in Walthamstow, with the purchase financed by loans from Co-operative & Community Finance (which lends to organisations owned and controlled by their members) and a linked organisation, the Co-operative Loan Fund, plus various individuals and other housing co-ops. But the bulk of the money came in the form of a 75% mortgage from Yorkshire-based Ecology building society.
Wannabe housing co-ops face a number of hurdles in setting up. Cath Muller at Radical Routes, a network of housing co-ops, says it is particularly hard to start one in London “because the property market is so skewed”.
With so many people locked out of the market, many would say a co-operative approach to property ownership makes a lot of economic sense. But the Walthamstow members say it would be misleading to view what they are doing as an alternative way for would-be first-time buyers to get a foot on the property ladder.
The Drive housing co-op has been structured as a registered not-for-profit body that owns the property and provides accommodation on a purely rental basis. Only the tenants can be members, and they will pay about £500 a month in rent to the co-op, which will be their landlord. Each member has a single £1 share, and, crucially, individual members can’t gain or lose from changes in the value of the property.
“This arrangement gives individual members the freedom to come and go if their circumstances change, while giving the co-operative as a whole continuity and stability,” says the group. The fact that people are renting rather than buying “is quite an important aspect for some of the members – indeed, a couple of them are actually getting off the property ladder”.
Any theoretical profits – for example, if the property was to be sold for more than the co-op paid for it – would go to the co-operative movement (this was a condition of the funding they received). In reality, says Morris, if everyone ended up moving out, what would probably happen is that a new group would be found to move in.
He points out that “fully mutual” housing co-ops such as theirs give people the chance to experience many of the advantages that homeowners enjoy, such as security of tenure and being able to control spending on repairs and improvements. Also, no significant upfront capital is required to join.
The co-op’s members intend to grow a significant proportion of their own food – “not just a couple of lettuces to make us feel nice” – and buy the rest from local and/or ethical suppliers. They also want to reduce their impact on the environment. Plans include growing a herb garden and learning to treat minor illnesses, organising workshops and other events and collectively reducing their meat consumption.
They are also keen to look into the possibility of selling surplus produce through “crop share” schemes. Longer term, the group would like to move “off-grid” for water and electricity, and may explore making their own solar panels or small wind turbines from second-hand materials.
So how did they all meet? A couple of the members already knew each other, and called a meeting to explore the idea. That was early last year, and things progressed from there, with several members responding to online ads.
Tricia Vickery, who at 68 is the oldest member, joined the group after seeing some information about The Drive co-op on the Radical Routes website. She got in touch and started going to the regular meetings.
Vickery, who lives just outside Nottingham, says she is really excited to be doing this at this stage of her life, and is hopefully helping to disprove the stereotype that living collectively is only for young people. “I’d like to think the co-op will benefit from my life experience. It’s a great group of people and I found it a very exciting thing to be doing. It’s not going to be easy – we’ve never lived together before – but it’s a like-mindedness that is there.”
Now single – she has been divorced for many years – Vickery spent some time living in Italy. “I’ve been trying for some years to get to London [but] the housing situation is impossible,” she says, adding: “My generation need to be thinking outside the box.”
The group had to overcome a number of obstacles to reach this stage, says Morris. It had to find a suitable property, sort out the finance, negotiate with estate agents, apply for planning permission to change the use of the building, and form an “industrial and provident society” to raise additional funds to meet some of the costs and finance the sustainability measures members want to introduce, while at the same time building up a strong group of like-minded people.
“We haven’t received any grants or handouts,” Morris adds. “It’s important to us that we pay our own way and that the whole project is self-funding and sustainable.”
Posted in Environment, Ethical and green living, Features, House News, House prices, Household bills, Housing, Money, Mortgages, Property, Renting property, Society, The Guardian | Comments Closed
Friday, July 29th, 2011
Co-operative living offers a not-for-profit way to avoid the property casino – here’s how one group did it
Housing co-operatives are common in many parts of the world but have never really taken off in the UK. But is that about to change? Community co-operatives have rescued pubs, shops and other vital amenities. Now, with sky-high property prices in many parts of the UK, groups of like-minded people are coming together to form co-ops to buy a property to live in – something they would never be able to do individually.
Robert Morris, 34, is one of eight people of varying ages and backgrounds about to move into a derelict former children’s care home in east London. They set up a housing co-op so they could buy a place to fulfil their dream of living together “collectively” in order to pursue a sustainable, less consumer-oriented lifestyle. Now the dream has become a reality. Planning permission has been granted for a change of use, contracts have been exchanged, and the members will be moving into the 10-bedroom detached Victorian property within a few weeks.
The eight members range in age from 30 to 68. Some are Londoners, but not all. In addition to Robert, who works as a Linux server engineer, the group includes Catherine, a teacher; Liz, associate editor for a national magazine; Phil, a permaculture gardener and community activist; Tricia, who teaches English as a foreign language; Melissa, a university lecturer; Tom, a software tester; and Charles, an industrial engineer, systems analyst and musician.
They are looking for a few more people to join them, but say only those with a genuine desire to live collectively need apply: “If you just want a room and cheap rent, this won’t be for you.” The group are aware that, for some observers, talk of creating an “intentional community” based on shared values and communal activities might conjure up images of hippy communes, religious cults and 1970s sitcom The Good Life.
It’s something the group tackle on their website: “This is not about escaping to a rural ideal or trying to create a pretend one in the city. It’s about facing the very real challenges of living sustainably in a large urban centre like London. This means a commitment to living in a different way. It also means being realistic about the challenges. It’s not an episode of Friends! Nor is it a way of getting cheap rent, having free love or joining a cult – and families and children can certainly be a part of the community.”
The co-operative paid £620,000 for the property in Walthamstow, with the purchase financed by loans from Co-operative & Community Finance (which lends to organisations owned and controlled by their members) and a linked organisation, the Co-operative Loan Fund, plus various individuals and other housing co-ops. But the bulk of the money came in the form of a 75% mortgage from Yorkshire-based Ecology building society.
Wannabe housing co-ops face a number of hurdles in setting up. Cath Muller at Radical Routes, a network of housing co-ops, says it is particularly hard to start one in London “because the property market is so skewed”.
With so many people locked out of the market, many would say a co-operative approach to property ownership makes a lot of economic sense. But the Walthamstow members say it would be misleading to view what they are doing as an alternative way for would-be first-time buyers to get a foot on the property ladder.
The Drive housing co-op has been structured as a registered not-for-profit body that owns the property and provides accommodation on a purely rental basis. Only the tenants can be members, and they will pay about £500 a month in rent to the co-op, which will be their landlord. Each member has a single £1 share, and, crucially, individual members can’t gain or lose from changes in the value of the property.
“This arrangement gives individual members the freedom to come and go if their circumstances change, while giving the co-operative as a whole continuity and stability,” says the group. The fact that people are renting rather than buying “is quite an important aspect for some of the members – indeed, a couple of them are actually getting off the property ladder”.
Any theoretical profits – for example, if the property was to be sold for more than the co-op paid for it – would go to the co-operative movement (this was a condition of the funding they received). In reality, says Morris, if everyone ended up moving out, what would probably happen is that a new group would be found to move in.
He points out that “fully mutual” housing co-ops such as theirs give people the chance to experience many of the advantages that homeowners enjoy, such as security of tenure and being able to control spending on repairs and improvements. Also, no significant upfront capital is required to join.
The co-op’s members intend to grow a significant proportion of their own food – “not just a couple of lettuces to make us feel nice” – and buy the rest from local and/or ethical suppliers. They also want to reduce their impact on the environment. Plans include growing a herb garden and learning to treat minor illnesses, organising workshops and other events and collectively reducing their meat consumption.
They are also keen to look into the possibility of selling surplus produce through “crop share” schemes. Longer term, the group would like to move “off-grid” for water and electricity, and may explore making their own solar panels or small wind turbines from second-hand materials.
So how did they all meet? A couple of the members already knew each other, and called a meeting to explore the idea. That was early last year, and things progressed from there, with several members responding to online ads.
Tricia Vickery, who at 68 is the oldest member, joined the group after seeing some information about The Drive co-op on the Radical Routes website. She got in touch and started going to the regular meetings.
Vickery, who lives just outside Nottingham, says she is really excited to be doing this at this stage of her life, and is hopefully helping to disprove the stereotype that living collectively is only for young people. “I’d like to think the co-op will benefit from my life experience. It’s a great group of people and I found it a very exciting thing to be doing. It’s not going to be easy – we’ve never lived together before – but it’s a like-mindedness that is there.”
Now single – she has been divorced for many years – Vickery spent some time living in Italy. “I’ve been trying for some years to get to London [but] the housing situation is impossible,” she says, adding: “My generation need to be thinking outside the box.”
The group had to overcome a number of obstacles to reach this stage, says Morris. It had to find a suitable property, sort out the finance, negotiate with estate agents, apply for planning permission to change the use of the building, and form an “industrial and provident society” to raise additional funds to meet some of the costs and finance the sustainability measures members want to introduce, while at the same time building up a strong group of like-minded people.
“We haven’t received any grants or handouts,” Morris adds. “It’s important to us that we pay our own way and that the whole project is self-funding and sustainable.”
Posted in Environment, Ethical and green living, Features, House News, House prices, Household bills, Housing, Money, Mortgages, Property, Renting property, Society, The Guardian | Comments Closed
Tuesday, July 26th, 2011
Falling costs plus generous feed-in tariffs mean return is higher than ever – but payback will fall in April
Are you a homeowner with some spare cash? A 20%-25% collapse in the price of rooftop solar power units in recent months has turned the government’s feed-in tariff scheme into one of the most lucrative financial propositions for households with the right sort of property.
The scheme was introduced in April 2010, when the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Back then, anyone spending, say, £13,000 up front to fit a 2.5kWp system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills.
It was described as a good investment because payments for each unit of electricity generated were guaranteed for 25 years, paid tax-free, and set to rise each year in line with inflation.
If you were planning to stay in your home and had a suitable roof (unshaded, at a pitch of about 40 degrees, and facing between south-east and south-west), the main question was how big a system to install – assuming you could raise the installation costs. The bigger the system, the greater the financial return.
However, you shouldn’t worry if you put off doing anything because it has emerged this week that waiting has worked in your favour.
Solar experts say that as a result of the installation costs coming down, the investment value of the scheme has become even better. These lower installation costs, an inflation-linked increase to the feed-in tariff payments and the prospect of rising electricity prices all mean the guaranteed returns are now above 10% a year, depending on how you calculate it. And if you install before next April – when new payment tariffs look set to come into force – you are guaranteed the tariffs for the next 25 years at the old rate.
Gabriel Wondrausch, who set up Exeter-based PV installer Sun Gift Solar, says the cost of systems has come down dramatically in 18 months. “We’ve been supplying PV systems for almost five years now and the prices have been on an almost continuous downward path,” he says. “A year ago we were selling a large 4kWp system for around £16,000. Today that same one is costing less than £13,000.” (Two years ago the cost would have been closer to £20,000.)
Wondrausch says the volume of sales has been a major factor in UK prices coming down, as has the reduction of feed-in tariffs in Germany, Europe’s biggest PV market. The panel manufacturers, it seems, price their panels according to the returns consumers can expect, and have been lowering prices as a result.
Solarcentury, one of the UK’s biggest solar companies, confirms the view that prices are falling. And even British Gas has reduced the price of its PV systems. A spokesman says business efficiencies and efficiencies in the supply chain mean costs have fallen by about 20% since June last year. “A typical 2.5kWp system cost around £13,383 last year,” he says. “Today it would cost around £10,450. We also need to consider that panel efficiency has increased – panels are 10% more efficient than they were.”
Wondrausch points out that the generous tariffs won’t be around for ever. In September the government is expected to unveil a new – significantly less generous – scheme for those installing PV systems after April 2012, suggesting that if you want to do it, now is the time to act.
Originally, it was thought the payments for new installations would be cut by 9% from their current level of 43.3p per kWh generated.
Solarcentury says the industry is currently awaiting publication of the government’s proposals for tariff cuts. “There is no doubt that the proposed cut for new installations from April 2012 will be higher than the planned 9%,” it predicts.
Meanwhile, if you are thinking of installing a system be prepared to spend some time researching the company you are using to carry out the work.
Cathy Debenham, who runs website YouGen.co.uk, says there is growing evidence of dubious sales tactics in the solar PV market. She recently came across one company that claimed you could make money by installing a panel on a north-facing roof, which is nonsense. The consumer group Which? warned that some claims made by firms selling solar PV could not be substantiated. Its advice is that consumers should be wary of any company that offers a quote without visiting the home to carry out a proper survey, or one that makes grandiose claims about the income you will receive.
Debenham’s site is a good starting point if you’re looking for information, or for a good installer who comes with recommendations from other users. The Energy Saving Trust site has lots of information too.
One thing to ask your chosen installer is which panels they plan to use. Wondrausch, who was one of the first to install PV panels in the UK five years ago, says the panels vary significantly in the electricity they produce – by as much as 12.5%.
Posted in Consumer affairs, Energy, Energy bills, Environment, Features, Feed-in tariffs, Home improvements, House News, Household bills, Money, Property, Renewable energy, Solar power, The Guardian | Comments Closed
Monday, July 18th, 2011
MP accuses London property management company of exploiting safety concerns to raise costs
An MP this week hit out at a property management firm for demanding that flat-dwellers pay for pricey “terrorism insurance”.
Leaseholders in Walthamstow, east London, have been told they must pay around an extra £68 a year, on top of their buildings insurance premium. When one complained, he was told that “terrorist activity has in the past been present in Walthamstow”. Three people living in the area were convicted in 2009 and 2010 for their part in an airliner bomb plot.
It is not clear how many people in Walthamstow have received the demand, though it could be as many as 2,500. Residents of other areas may have received similar demands.
Local Labour MP, Stella Creasy, has accused the company, Freehold Managers PLC, of “seeking to exploit concerns about terrorism to justify increasing the cost of buildings insurance for local residents”. She has called for “an immediate apology” to the residents of her constituency.
Freehold Managers rejects her claims, saying Walthamstow “has not been singled out as a terrorist hotspot”. As a prudent landlord, it adds, it insists all its properties are covered, in line with guidance from the Royal Institution of Chartered Surveyors (Rics).
A spokesman for Freehold Managers told Money that the ultimate beneficial owner of Freehold Managers is the Tchenguiz Family Trust. Mayfair property tycoon Vincent Tchenguiz’s sprawling empire was the subject of a Money investigation in February into allegations of excessive charges at several subsidiaries. In early March he was one of nine men targeted in dawn raids by the Serious Fraud Office as part of its investigations into the collapse of one of the Icelandic banks. Vincent Tchenguiz was released without charge on the day of his arrest.
Those affected are leaseholders of “Warner” properties in Walthamstow, built in the late 19th and early 20th centuries. Freehold Managers has confirmed it manages about 2,500 properties in the district – mainly flats and maisonettes.
A longstanding Warner flat resident, who asked not to be named, told Money he received a letter from an insurance broker, Oval, which stated that he needed to pay £68 for a separate terrorism insurance policy. This would be in addition to his buildings insurance, which cost around £240.
He contacted Freehold Managers to say there was nothing in the terms of the lease to say he must have this cover.
The man received a reply from the company stating: “When these leases were written, terrorism on mainland England was non-existent. In this day and age it is prudent for the landlord to cover any insured peril relevant to their portfolio. The LVT [Leasehold Valuation Tribunal] in the past has confirmed it is reasonable to include terrorism … Please find attached a newspaper article showing that terrorist activity has, in the past, been present in Walthamstow.”
The article, from the London Evening Standard in September 2009, reports on the case of a man from Walthamstow, and two others, who were sentenced to life imprisonment after being convicted of planning to lead a squad of suicide bombers in smuggling liquid explosives aboard transatlantic airliners. In July 2010, two more men from the area were found guilty of conspiring to murder in connection with the same plot.
The resident says: “Last year there was no terrorism insurance as a separate policy, but this year they’ve introduced it. I don’t know one example of any terrorist blowing up their own property in the UK. I imagine every Warner property is affected by this. I’ve talked to all my neighbours and they’ve had the same policy included.”
The resident contacted his MP, Creasy – herself a former Warner tenant – who says she is “furious”, adding: “Their representative suggested they believed residents should pay a terrorist attack premium purely for residing in Walthamstow, using an incident from several years ago which did not refer to any activity in the locality to justify this slight.”
While the resident says that, as far as he is aware, this is the first time he has been billed for terrorism cover as a separate policy, other residents may have been paying it for a few years. On a Facebook page, one says: “Well done Stella for bringing this into the public domain. I, along with everybody else, would love to have all our terrorism payments paid back. I believe we’ve been paying for two to three years.”
A spokesman for Freehold Managers told Money that the “ultimate beneficial owner” of the company was the Tchenguiz Family Trust. This owns a large number of residential freeholds. However, Freehold Managers manages freeholds that are not owned by the trust, but by third parties. The freehold of the Warner properties is owned by an unnamed unit trust.
He says that since 1993, terrorism cover has been specifically excluded from most buildings insurance. That year, the government established Pool Reinsurance to cover the risk. “As a significant manager in Walthamstow, and throughout the country, Freehold Managers tries to ensure it adheres to best practice,” he told us, adding that Rics guidance stated that “serious consideration should be given to taking out terrorism insurance”.
He adds: “Any prudent party responsible for taking out adequate insurance … would consider the Rics guidance … as, in the event of an incident, the consequences of not taking out this insurance could be severe to the residents, who would be required, under their leases, to pay for the reinstatement of the property, but without the benefit of any insurance to cover the costs.
“There is also a requirement from insurers to insure whole portfolios and not just selected, or perceived at-risk, properties. This is dictated by Pool Reinsurance … I hope this clarifies why, as a prudent landlord, we insist all our properties are covered.”
The spokesman also highlighted an LVT ruling from 2005 which stated that “we do not find it unreasonable in this day and age for a prudent landlord to include terrorism cover, even though the property might be in a quite (sic) residential area”.
• This article was amended on 18 July 2011 to clarify that soon after his arrest Vincent Tchenguiz was released without charge.
Posted in Consumer affairs, House News, Household bills, Insurance, Money, News, Property, Renting property, The Guardian, UK news, UK security and terrorism | Comments Closed
Wednesday, July 6th, 2011
Halifax reports spike in house prices – but renewed price falls predicted for second half of year as earnings stay low
House prices rose significantly by 1.2% in June, according to figures released by the Halifax.
The bank said the 0.5% decline in house prices during the last three months was the smallest quarterly fall for a year.
Martin Ellis, the Halifax housing economist, said low interest rates, an increase in the number of people in employment and some tightening in market conditions earlier in the year are likely to have caused the recent rise in prices.
Typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earning in mid-2007 to 28% in the last three months. The long-term average over the past 25 years is 37%.
“A slowly improving economy and sustained low interest rates should help to support broad stability over the coming months,” he said.
However Ellis warned that the housing market still faced problems: “The market is, however, likely to continue to face significant headwinds which are expected to constrain housing demand. Low earnings growth, higher taxes and relatively high inflation are all continuing to put pressure on household finances.”
Prices in June were 3.5% lower than a year ago, a rise compared to the 4.2% annual fall recorded in May.
Howard Archer, chief UK economist for Global Insight, has revised his opinion of how much further he expects prices to fall, from 8% to 5% by the middle of 2012. He said: “Despite the surprising spike up in house prices in June reported by the Halifax, we retain the view that modest overall falls in house prices are more likely than not over the second half of 2011 and the first half of 2012.
“On balance, we believe that house prices are likely to fall by around 5% from current levels by mid-2012. However, we have reduced our projected drop in house prices by mid-2012 to 5% from 8%, primarily due to the fact that we now expect interest rates to start rising later and more slowly than we previously projected.
“Specifically, we now expect the Bank of England to hold off from raising interest rates until the second quarter of next year and to only increase them to 1.50% by the end of 2012.”
Posted in Blogposts, Consumer affairs, guardian.co.uk, House News, House prices, Household bills, Money, Mortgages, News, Property | Comments Closed
Friday, May 13th, 2011
The Stoddart family downsized from a comfortable £60,000-a-year life in Brighton to live in west Wales on £16,000 – and they still have to pay a mortgage. Here they tell how they did it
I was sitting in a business meeting a couple of years ago doing what normal people do in meetings at work. There was lots of “blah, blah, blah, financial targets” and “waffle, waffle, waffle, notes from the last meeting” when it dawned on me that, now in my mid-30s, I didn’t want to “do business” any more. I didn’t want to work in an office, in fact.
I started wondering what would happen if we were all thrown into a practically challenging situation, such as the middle of a jungle somewhere; how would we cope and, you know, survive? What good would PowerPoint and Adobe Acrobat skills do then?
Look, I was a bit bored and my mind was wandering, it happens to us all. But the point was I’d had a growing, gnawing sense of frustration at my lack of practical abilities for a while. My young family and I were reliant on others in pretty much every area of our lives. If we wanted something we bought it, if something broke we’d replace it, or get someone in to fix it. I couldn’t even change a plug, for goodness sake. Our lives in Brighton were comfortable but when we stopped and thought, which we increasingly did, deeply unsatisfying.
Cut to the present and my partner, Chris, 39, and our two young children, aged two and four, have traded in our tiny suburban-by-the-sea home, affectionately known among friends as “the hobbit house”, for a 2.3 acre smallholding half an hour outside Cardigan in west Wales for virtually the same price – just short of £300,000. We have swapped well-paid and bustling city living to become the skint owners of a small and remote piece of land up a, sort of, hill, where the nearest pub is an hour’s walk away.
Chris is working part time still in an office-based job and I am currently unwaged while writing a book about our often hapless efforts to become all-round useful for a change. We share childcare and smallholding duties, our few savings are long gone, and we still have a large mortgage commitment.
So how’s it going? Well, the challenges this past year and a bit have been immense and at times we’ve felt lonely, frustrated, angry, confused and overwhelmed in equal measure. But throughout it we’ve been able to laugh at ourselves and our uselessness (if not always immediately) and “get on with it”. From cooking off a single gas-ring camping stove for nearly a month to dealing with escaped pigs in the road and frozen water pipes, we’ve come through it hardier and stronger.
There have been days when it’s rained so much the ground is so muddy you can barely wade through it and when the wind has been so cold the phrase “chilled to the bone” takes on real meaning. But there have been many moments of sheer joy and the children love it here, really love it. What child wouldn’t relish being able to play in a field, feed pigs and collect chicken eggs, and then ride on tractors and diggers and the like. Who needs a day in a theme park when you have all that on your doorstep?
The fact the children are of pre-school age has made the move easier. We didn’t have to worry about them having to start afresh at school – their first experience of it will be at the rather excellent new bilingual school just a five-minute drive away.
We hope our new practically minded, thrifty lifestyle, rich in so many ways, will give our boys a solid grounding and fill them with the confidence and strength of character necessary to find their own way in the world.
Our greatly reduced coffers have forced us to start to become the more practically minded people we have long craved to be. I emphasise “start”: we have years of learning and “catching up” ahead of us. From trying to fix a blocked septic tank (thankfully not me that time) and coppicing wood, to repairing an old bike and giving the kitchen cupboards a lick of paint, we are giving things a go, rather than paying to get someone in. We have to.
Some things work, others don’t, and we’re lucky to have patient and helpful neighbours, one of whom has become a mentor in all things “handy” and “country practical”. He knows how to do most things, and what he doesn’t know he has a go at anyway, and this “can do” attitude is greatly inspiring. I think he finds our idealistic and, at times, ill-considered ideas amusing and we are becoming more and more able to help him in return – the fine art of bartering being very much alive in rural west Wales.
If you’d have told me a few years back we’d be living on just shy of £16,000 a year I’d have laughed. Let alone if you’d have told me that we’d have a hefty mortgage to pay out of this and our weekly food budget would be £50. We now spend less on food in a month than we’d have blown in a week in our old lifestyle. But we eat a healthier, more wide-ranging diet than ever before. We’re growing some of our own vegetables and soft fruit and starting to rear our own meat, and buy high quality food staples in bulk – huge sacks of flour and rice and the like which save a lot of money and last many months. I enjoyed cooking before but now I love it, and have become adept at making all sorts of meals, cakes, breads, sauces and condiments afresh.
Things that once seemed essential no longer do. I used to buy a lot of clothes and was always tempted by email marketing. Yet since moving I’ve not bought anything, apart from wellies and a poncho – because this is Wales and there’s a lot of rain and, oh god, the mud. I have boxes and boxes of clothes already, so there’s nothing I really need.
The kids need new clothes as they grow, but our policy of essential items only seems to work. The shopping craving doesn’t go away entirely but has subsided over time. Undoubtedly living rurally has helped. I can’t just stroll into town, I have to drive an hour to the nearest half-decent shops.
Interestingly, by far the biggest challenge has been the reactions of friends and family from our old life to our changed circumstances. They have been great, travelling by coach, car and train to visit, but we can’t just go for lunch, or pay to go on a boat to look at the dolphins in the nearby bay. That would be a week’s food money gone in a few hours. We have got better at explaining to others, and I think most people “get it”.
The truth is, our needs and wants have gradually reduced over the time we’ve been here and we are becoming much easier to please. When a bottle of wine is a luxury for just a few times a week, rather than a two-minute hop to the nearest shop because you’ve run out, it matters more. It’s a treat rather than a given, and the same goes for so many other areas of our lives. The desire to get a cheeky takeaway subsides along with your bank account and since living like a peasant you’ve learned to cook really well, so the half hour drive to pick up food hardly seems worth it.
If you were to ask me why we have done this, I’d say because it felt like it would make us happy in a real sense – there is no farming or alternative living background in my family. My former high-earning lifestyle was me just trying to be normal, to earn enough to buy nice things and then to work some more to buy more because that’s what we are supposed to do, right? But the truth is, it didn’t do it for us any more. We had an increasing sense of there must be more to life than “this”.
The closest Chris and I had come to farm animals before was a city petting farm. Our upbringing was more of the Findus crispy pancake and frozen mixed vegetables nature.
And before you ask, we’re not hippies, although I like hippies. We’re not doing any yoghurt weaving … yoghurt making maybe. We just wanted a stab at a lifestyle that may have the potential to offer us and our children long-term fulfilment.
With the help of our generous neighbours we are learning fast, from how to kill, pluck and gut a turkey to driving a tractor. It is exceptionally hard work and it can feel a bit overwhelming. There are also so many ideas and projects that we can’t wait to start; from making our own dairy and beer, to building an underground cold store. It’s exciting and positively life affirming. Who knows how useful our continued new found skills might turn out to be in the future, whatever it holds?
We won’t be living on less than £16,000 a year for ever. As I say, I’ve spent this past year writing a book about our often bumbling experiences and so have been unwaged during this time. But neither is this some middle-class experiment. Our real-life experiences have shaped our outlook forever and our needs and wants have simplified. Regardless of how my writing career takes off, and whether our finances lift, we are in this thrifty peasant living for the long term. It’s our definition of normal now.
The highlights …
• Finally passing my driving test at the age of 37. I’d never even had a driving lesson prior to moving.
• The beautiful countryside and working outside.
• The fresh home-reared food: pork sausages, bacon, strawberries, eggs, turkey, peas …
• Watching our eldest son herd a neighbour’s sheep down the road.
• Keeping pigs – they’d be a big “pig-shaped hole” in my life if we didn’t.
… and the lowlights
• Having a tractor drive over the front on my car when I was in it just six weeks after passing my test.
• Unless you were at the Somme, you’ve never seen mud like west Wales in November.
•Dealing with an invasion of rats.
• Saying goodbye to our first “eating” pigs. I used to be a vegetarian so this is really the sharp end of rearing your own meat.
• Knowing that if something breaks and we can’t fix or repair it ourselves, we have no money to buy a replacement.
Posted in Family, Family finances, Features, House News, Household bills, Life and style, Money, Property, Saving money, The Guardian, Work-life balance | Comments Closed
Tuesday, March 22nd, 2011
Brace yourself for this week’s budget. Anna Tims does the maths as Mark King and Jill Insley look at how to bridge the income gap
Spring will bring a chill for most of us – a combination of at least 45 tax and benefit changes will ransack household budgets already depleted by soaring food and fuel prices, and predicted interest rate rises will tip many mortgage holders into the red.
On average, households are already £480 a year worse off following tax changes introduced in January, according to the Institute for Fiscal Studies. April’s reforms, including increases to fuel duty and national insurance contributions, will add an extra £200 burden.
The problem of making ends meet is particularly acute for families. Last year households with dependent children needed an additional £650 a month just to cover everyday living costs compared to those without, according to the Consumer Credit Counselling Service (CCCS). Families with more than three children are, on average, £45 short of the money they need to live each month. No wonder, then, that 28% of Britons are spending more than they earn each month, according to Cooperative Insurance and homeless charity Shelter.
Joanna Parsley, associate director of charity Credit Action, said: “Even people who have had a marginal increase in their salaries will find it is cancelled out by rising living costs. Those with no children or on lower incomes might be better off because of an increase in the personal allowance, but for most of us there really is no way to avoid the squeeze. It is vital that everyone looks to revisit their finances and get them in order.”
Homeowners are likely to be more precarious than renters, the CCCS said. On average, clients who own their own home have more than £30,000 in unsecured debts on top of their mortgages. And although interest rates on credit cards and personal loans don’t usually move in line with bank base rate, a 2% rise would lead to a £307 increase in monthly mortgage payments.
“It is the lull before the storm,” said CCCS spokeswoman Una Farrell last week. “Mortgage holders have managed quite well because interest rates have been so low, but we are expecting a big influx of new clients as rates rise.”
No section of society is safe. CCCS chairman Lord Stevenson said: “It seems likely that many more families, including better-off ones, will be increasingly prone to over-indebtedness in the months ahead.
“It is also not a uniform picture: public sector cuts in terms of jobs, spending and benefits will weigh disproportionately on certain groups, and the incidence of unmanageable debt bears down harder on specific parts of the country, such as London and Yorkshire.”
It is easy to blame inflation and tax rises, but are we also to blame for expecting too high a standard of living? Apparently not, if research by First Direct is anything to go by. It found that young people would have to increase their income by 55% to enjoy the lifestyle their parents had at the same age. The figures show that someone in their mid-twenties would have to earn £39,720 to buy a house, fund a wedding and afford a first child; the average salary for 20-somethings is nearer £25,000.
In November the Office of National Statistics released its latest data on the cost of UK lifestyles, which showed that in 2009 the average household spent £16 a week less than the previous year – the first time expenditure has fallen since current recording methods were introduced in 2001. “In statistical terms that’s quite a robust change,” said ONS statistician Giles Horsfield. “We noticed that a greater proportion of the weekly spend went on food, and less went on transport and recreation.”
Figures for 2010 won’t be released until the end of the year, but transport and food will almost certainly swallow even bigger slices of the weekly budget thanks to an increase of about 18 % in fuel costs over the past year, according to PetrolPrices.com, and a 4.2 % increase in groceries, according to shopping website mySupermarket.
The average disposable household income in the UK of £28,354 is clearly not enough to meet a household’s daily outgoings.
So, the Observer decided to look at typical and – in most cases -essential household costs to work out exactly why we are so broke, whether the situation is likely to get better or worse – and what you can do about the income gap.
Motoring
The expense of running a new car rose to £5,869 last year, with fuel (£1,300) and depreciation (£3,072) the most significant costs, according to the RAC. Owners of used cars faced an average cost of £4,441 in 2010, including £1,396 in fuel and £1,040 in depreciation. With the average cost of a litre of standard unleaded now costing 133.34p and a litre of diesel hitting 139.71p, according to PetrolPrices.com, it will come as no surprise that the cost of running a car is expected to soar this year.
Fuel duty is set to rise by inflation plus 1p on 1 April (the ninth tax increase since December 2008), adding between 3p-4p a litre at the pump and around £50 to the average annual bill.
To combat rising fuel costs, drivers should make sure tyres are well inflated and should drive sensibly, get their car serviced regularly to maintain engine efficiency, avoid unnecessary use of air conditioning, and get rid of roof racks to improve aerodynamics. Also consider lift-sharing, try to find the cheapest local petrol – PetrolPrices.com is a useful source – and take advantage of discounts and supermarket deals.
To reduce insurance costs you should shop around for the best deal; consider buying a smaller car; pay your premium up front; park in a driveway or garage; consider a third party fire and theft policy if your car is low-value; and don’t overestimate your mileage.
Young female drivers, who are expected to be hit by soaring premiums following the recent European ruling banning the use of gender in underwriting, may benefit from the introduction of “black box” based policies which are based on the safety of a policyholder’s driving habits.
Mortgages
Thanks to the Bank of England base rate staying at 0.5% for the past two years, monthly mortgage payments have dropped to their lowest levels in 10 years. The average mortgage borrower, according to the Council of Mortgage Lenders, owes £109,110 at an interest rate of 3.5%. The vast majority of mortgages are set up on a repayment basis, and the monthly premium for a loan this size would be £546.23. However, most experts expect the base rate to rise very soon, which will increase the cost of all variable rate deals. Each 0.25% rise in base rate will add £15 to a £109,110 repayment loan, according to moneysupermarket.com.
David Hollingworth of mortgage broker London & Country says most people will opt for a fixed rate to protect themselves against rises. Nationwide building society has a five-year fix at 4.39% with a 70% loan-to-value (LTV) ratio and £999 application fee, while Norwich & Peterborough building society has a five-year fix at 5.38% with an 85% LTV and £995 fee.
However, those who are more confident that their finances can absorb some extra costs may prefer to take the risk that the base rate will rise slowly, opting instead for a tracker mortgage. HSBC’s lifetime tracker is set at 1.79% above base and has an LTV of 60% and fee of £99.
Food
The FAO Food Price Index rose for the eighth month running in February, up 2.2% from January and at the highest level since January 1990 when the index began. In the UK, certain foods climbed in price at the beginning of the year as VAT rose from 17.5% to 20%, but other items – tea, ground coffee, butter, pasta, fruit juice, bread and vegetables – have shot up still further, according to mySupermarket.co.uk.
Dalia Mays, a spokeswoman for the site, says there to reduce the cost of the weekly shop. Try swapping your regular supermarket for a cheaper one: buy your staples at Asda rather than Sainsbury’s or Waitrose. Try setting a budget and shopping online: it means you can buy everything you normally would but you won’t be tempted by off-list extras. She adds: “Everyone has the brands they will never swap, such as Diet Coke or Heinz ketchup. But for things you’re not too bothered about, try the supermarket own brand, or better still the supermarket value range.”
Mysupermarket calculates the VAT increase will cost food shoppers an extra £66 in 2011 compared to 2010. But you can avoid VAT altogether by making crafty substitutions: buy tortilla chips instead of crisps, cream gateaux instead of arctic roll and chocolate chip biscuits instead of chocolate covered ones, unshelled salted nuts instead of shelled ones.
Utilities
Although households benefited from price cuts in 2009, the proportion of the household budget spent on energy rose substantially in 2010 thanks to freezing weather at the beginning and end of the year, and prices have risen by an average of 6.5% over the past 12 months. The average annual dual fuel bill was £819 in January 2008, but now stands at £1,132, according to uSwitch.com. Spokeswoman Ann Robinson said that if Ofgem considers current profits being made by energy companies as reasonable, and oil prices remain high, there is “a reasonable chance energy prices will go up later this year”.
Consumers should check whether they can save money on bills and cut the amount of energy they use. Consider fitting an energy efficiency device to help reduce use, and turn things off when they are not in use. Insulating a home or installing an energy efficient boiler can produce longer-term savings.
Paying by direct debit each month will help reduce bills (suppliers offer discounts for paying this way) and consumers should make sure take regular meter readings as estimated bills can be disporportionately higher. Anyone who is concerned about paying their energy bills should contact their supplier to discuss the options.
Council tax
The average band D household is expected to pay £1,438.87 for council tax in 2011, down 35p on last year, according to the Chartered Institute of Public Finance and Accountancy. The government has stumped up £650m to local authorities to allow them to freeze bills this year, although some are still imposing increases.
There’s not much you can do to reduce the size of your council tax bill. But if you are the only adult in the household, you may qualify for a 25% discount. Other adults may be “disregarded”, including full-time students, student nurses, young people on government training schemes or those following apprenticeships, and live in care workers. If everyone who lives in the property is disregarded there will still be a council tax bill, but it will be discounted by 50%.
Check whether your household qualifies on the Citizens Advice website.
Credit cards
The most vulnerable to debt are those with children because they have less flexibility to reduce their expenditure, which means they are more likely to take out credit to meet living costs.
If you want to reduce the interest you pay help may be at hand with MBNA’s recent introduction of an 18-month 0% balance transfer card. This sparked a card price war with Virgin Money entering the fray with a deal to match the MBNA card. Barclays then stretched its own 0% interest period on balance transfers from 18 months to 20 months.
While the credit-scoring might be tougher on new cards, switching your debt to a card incurring no interest is a sensible move. Decent deals are also on offer from M&S (0% for 15 months) and Nationwide (0% for 17 months) – but make sure you compare the balance transfer fees and check the length of the offer for new purchases made on the card – the reversion interest rate is always markedly higher.
Posted in Borrowing & debt, Consumer affairs, Council tax, Credit cards, Energy bills, Family finances, Features, House News, Household bills, Money, Mortgages, Motoring, Property, Tax, The Observer | Comments Closed
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