Bank Of England governor Mervyn King has warned that the interest rate will not be going up any time soon despite a 1.1% growth in GDP

Appearing before the Treasury Select Committee, he said there was "some considerable distance to travel" before rates could return to normal.

Although economic growth is a positive sign, Mr King said it did not necessarily mean the recovery and improving employment levels would be sustained.

He recommended that the Monetary Policy Committee should keep its "foot firmly on the monetary accelerator" to ensure inflation levels are closely monitored and managed.

Mr King said he looked forward to the point when the Bank of England (BoE) could "ease off the accelerator" and return interest rates to more "normal" levels.

But he warned it would be a while until the word "normal" was used again in relation to the nation's finances.

Low interest rates will be good news for those paying off debts like mortgages, but savers will continue to struggle to find banks and building societies offering good rates.

Mr King was also questioned by the committee about a private conversation he had with Deputy Prime Minister Nick Clegg.

The Liberal Democrat leader claimed the discussion helped change his stance on the Conservative policy of making immediate budget cuts.

Despite allusions that Mr King had revealed additional information to Mr Clegg, the BoE governor denied saying anything beyond public statements made days before.

One of the principal concerns to arise from the committee meeting was the continuing lack of credit available to small and medium businesses (SMEs), despite apparent agreements in place to encourage lending.

Mr King put forward the controversial solution of using the state-owned banks to aid credit.

Although the banks are currently working to return to profit, this could be changed to force them to lend to business owners if necessary, said Mr King.

"If we want to use state ownership there would be a way of doing it, not without cost, it may well affect the way people see these banks in the long run, but I think that is the only other instrument I can imagine."

But, in the long term, Mr King said the "heartbreaking" problem SMEs have getting funding could be overcome by encouraging new entrants into the banking system and increasing competition.

Article from: news.sky.com 29/07/10

LONDON (Dow Jones)--Metro Bank PLC, the brainchild of U.S. entrepreneur Vernon Hill, opened its first branch Thursday in a bid to become a major player in the U.K., but banking experts said its success will depend on how much emphasis customers will put on differentiated services in a highly traditional industry.

The bank received a banking license in early March, and has since gone into an advertising frenzy ahead of opening, promising to provide services that include water bowls and biscuits for dogs that customers bring into branches, free-coin counting at each "store" and speedy account set-ups.

The bank said it plans to build a network of more than 200 branches in greater London over the next 10 years. It will be opened seven days a week and tellers won't be behind security screens.

Another branch will open in London in a month.

"We believe customers simply want a better experience from their bank, the kind they typically get from a great retailer and that's what we intend to give them," co-founder and Chairman Anthony Thomson said.

"The British public deserves a better banking experience."

Metro Bank is competing with heavyweights including HSBC Holdings PLC (HBC), Royal Bank of Scotland Group PLC (RBS) and Lloyds Banking Group PLC (LYG), all part of an industry that lost much of the public confidence during the financial crisis, but that nonetheless continue to have dominant share in the market.

"Metro Bank shouldn't be a threat to the big banks when it comes to market share," said Execution Noble analyst Joseph Dickerson.

"What it could do, however, is raise the bar for service in the industry. And convenience could very well offset better rates offered by competitors," he added.

According to U.K. consumer watchdog Which, Metro Bank fails to match some of the savings offerings from other banks. For instance, its instant-access savings account is offering a return of 0.5%, compared with a current overall average of 0.79%.

On fixed-term savings, its 2.5% return for one-year accounts, compared with 3.1% from the current market leader, ICICI Bank, according to Which.

Metro Bank's other services include credit cards, loans and mortgages.

Metro's "Love Your Bank" model isn't new for founder Hill, who launched similar Commerce Bancorp in New Jersey in 1973 with nine employees and $1.5 million in capital.

That bank's branches were also called "stores" and lacked security screens, had customer toilets and free gadgets including coin-counting machines.

By 2007, Commerce had more than 500 branches, employing in excess of 15,000 people. The bank was sold later that year to Toronto-Dominion Bank for $8.5 billion. Hill made $400 million from his 5% stake.

The entrepreneur, however, faced some trouble with U.S. regulators, who probed the employment of Hill's family owned contractors. As part of a settlement with the regulators, which didn't include any evidence of wrongdoing, Hill stepped down months before the Commerce was sold.

In the U.K., regulators were quick to approve the banking license for Metro Bank, as the government steps up efforts to bring new entrants into the sector, which nearly collapsed during the financial crisis.

Metro Bank will likely compete with other new entrants, including Richard Branson's Virgin Money and a vehicle set up by two city heavyweights that plan to buy up banking assets being sold by nationalized Northern Rock and 41%-government owned Lloyds.

"The financial crisis has radically changed the landscape for retail banking, which presents opportunities for industry newcomers to exploit," said Neil Tomlinson, head of retail banking at Deloitte LLP's consulting division.

"U.K. consumers are far more receptive to non-traditional financial institutions than they previously were, so those that can differentiate on other aspects besides price could be winners in this space," he added.

Nonetheless, Tomlinson said, those institutions will face regulatory and funding hurdles that could put them at disadvantage to more established and bigger banks.

Metro Bank said it will have a low loan-to-deposit rate, without wholesale funding and debt. It could also list in the stock market in 2013 to raise more capital.

Article from: online.wsj.com 29/07/10

A lighthouse overlooking the Irish Sea has gone on the market for £1.5m.

Point Lynas lighthouse near Amlwch, on Anglesey, has been put up for sale by owners Robin and Iona Beckmann who have spent 10 years restoring it.

The Grade II listed castellated building, set in 17 acres (6.87 hectares) of headland, comes with three cottages.

The 36ft (11m) lighthouse is fully automated and still functioning and includes a fog horn in low visibility.

The Beckmanns bought the building for around £200,000 when Trinity House began selling off some of its automated sites.

The couple, who live at the property with their two children, told The Western Mail newspaper they had first seen the site more than 30 years ago, before they were married.

It came on the market just as they were planning to move to Anglesey from the south of England.

Mr Beckmann's work commitments have forced the sale, they said.

Tim Goodwin, of estate agents Williams and Goodwin, which is handling the sale said the lighthouse was a first for the firm.

He said: "It is in a lovely position.

"It is a one-off property - it's as simple as that, as lighthouses tend to be in spectacular locations."

Promotional material for the sale includes images of a pod of dolphins passing within yards of the shore beneath the lighthouse.

The 1,000-watt lamp at lighthouse cast a beam over 20 miles to warn shipping about the rugged coastline, while the for horn sounds every 45 seconds when visibility drops to less than two-and-a-half miles (4km).

A lighthouse has operated at the site since 1779.

Article from: www.bbc.co.uk 29/7/10

Homebuyers would be forced to pay thousands of pounds extra in tax if they buy a property that doesn't meet tough climate change targets, under plans being considered by the Government.

The higher rate of stamp duty would hit millions of 'energy guzzling' homes with draughty windows, insufficient loft insulation and old inefficient boilers.

The controversial proposals are aimed at slashing the UK's greenhouse gas emissions.

Yesterday, critics warned that a hike in stamp duty could hit the property market and be disastrous for the economy.

The proposals would be introduced alongside the Government's Green Deal - a £90 billion scheme to cut the fuel bills of 14 million homes.

Under the Green Deal, householders will be offered "free" green makeovers by energy companies, local councils or DIY chains from 2012.

The money spent on new insulation, double glazing or replacement boilers will be claimed back from the savings made in energy bills.

The Government says the green makeovers are essential if the UK is to meet its legally binding targets of cutting greenhouse gas emissions by 34 per cent of their 1990 levels within 10 years.

However, ministers are concerned that the green incentives may not be enough.

The proposals for variable stamp duty to force more people to take part in the Green Deal were raised last month in a report by the Green Investment Bank Commission - an advisory body set up by the Labour Government last year.

The report was authored by Bob Wigley, chairman of the Yell Group and one of the biggest names in British business.

It called for new policies to help green up homes and added: ''Ultimately, either implementing penalty rates of stamp duty for houses purchased where the buyer does not implement available energy efficiency measures or setting minimum standards on properties, will be required.'

Under one scenario being considered by ministers, people who buy a poorly insulated property would have to pay an extra 0.5 per cent levy on top of the normal stamp duty.

If the buyers improve the energy efficiency within a year, they would get the money back as a tax rebate.

Since 2008 all homes put up for sale have had an energy performance certificate, which ranks them on a scale from A for the best, to G for the least efficient.

To avoid paying the higher stamp duty, a home would need to be upgraded to at least a band E.

Last year the UK Green Buildings Council came up with similar proposals - claiming that green loans for insulation would only take off if the "carrot and stick" approach was used.

The Department of Energy and Climate Change confirmed that the Government was considering a variable stamp duty rate to encourage people to green up their homes.

'There are many incentives that we are considering to tackle home efficiency. No final decision has been made, but we are considering it,' a spokesman said.

John O’Connell, deputy research director of the TaxPayers’ Alliance, said: “Just when the housing market is starting to pick up, it would be madness to throw in a punitive tax like this that could put people off buying altogether.

'Offering a rebate on the duty if new homeowners make the government’s required upgrades is useless as buyers will still have to stump up for arbitrary upgrades.

'Requiring expensive upgrades to people’s homes now, when so many people are struggling to just get on and stay on the property ladder, is particularly awful timing.

"This will completely distort the market and mean buyers will have to lower their expectations. It’s clearly more stick than carrot and the idea should be thrown in the recycling bin immediately.”

Article from: www.dailymail.co.uk 29/07/10

Article from: www.bridgingandcommercial.co.uk 29/07/10

SEXY Blue Peter presenter Konnie Huq is locked in a legal battle with a major firm of estate agents.

Konnie, 31, is being sued by Foxtons for refusing to cough up when they demanded thousands of pounds for repairs carried out on a property.

The row began when Foxtons ordered "emergency" work on a flat she rents to tenants in Chiswick, west London.

She was said to be furious over the demand, claiming that Foxtons, which manages the property on her behalf, should not have gone ahead with the work without checking with her first.

Konnie refused to pay the bill, which was issued last December, and has now been hit with a summons to face Foxtons at Brentford County Court in July.

A pal of Konnie said last night: "She is very angry about the whole thing."

The dispute has broadened and Konnie is now challenging other Foxtons fees.

Foxtons' lawyer Karl Daly said: "This is the subject of ongoing court proceedings, so it would be inappropriate for us to comment." 

Article from: www.dailystar.co.uk 09/07/10

According to official figures, a total of 234,000 households in the social tenant sector are overcrowded while 456,000 are under-occupied, meaning people have more than one extra spare room.

A further 1,159,000 households have more rooms than is standard for a family of their size.

The Work and Pensions department is now drawing up plans to slash housing benefit payments to those tenants who live in houses that are too big for them - meaning many will have to move into smaller properties. 

If they could afford to pay the difference themselves to stay where they are it will raise questions about their eligibility for housing benefit in the first place.

The move is likely to prove controversial, since 'empty nest' couples who have lived in council houses for decades and seen their children vacate rooms when they leave home are among those who will be affected.

But Welfare Reform Minister Lord Freud told the Daily Mail: 'We cannot continue with this absurd situation where some of our poorest families have to live in overcrowded conditions while others are subsidised to live in big homes with plenty of spare room.

Lord Freud said the restrictions, which will come into effect from April 2013, will only apply to people of working age, sparing pensioners from the trauma of having to move from their homes.

The Government plans to work with local authorities to ensure that the housing stock is more 'sensibly utilised' and that entitlement to social housing reflects family size.

Specific detail is yet to be agreed, but the principle would be that working-age housing benefit claimants who are living in a property that is too large for their household size will have their benefit capped.

It is expected that overall weekly caps will be set at £250 for a one-bed property, £290 for a two-bed, £340 for a three-bed and £400 for a four-bed.

This means the highest amount people will be paid in housing benefit will be just over £20,000 a year, rather than the current highest level of £104,000. In total, 3.3million tenants- 70 per cent of housing benefit recipients- live in the social sector at an annual cost of more than £12billion.

In last month's emergency Budget, Chancellor George Osborne also announced that instead of people on housing benefit being able to claim rent of up to half of the local average, they will instead be only able to claim up to one third.

And unemployed people who claim JobSeeker's Allowance for 12 months will also see their housing benefit cut by ten per cent.

Campaigners claim the draconian nature of the benefit reforms will put 750,000 people at risk of losing their homes in London and the South East.

But the Chancellor insists large cuts to the housing benefit bill - which doubled under Labour - are essential to help shield key public services from spending cuts.

source: MailOnline

More than half a million people could be added to housing waiting lists – and 283,000 construction industry jobs lost or not created – if the Government slashes the affordable housebuilding budget by 40%.

The National Housing Federation has warned that ministers - who are looking at making cuts to departmental budgets of up to 40% - risked shutting the door on an entire generation of families on lower incomes by withdrawing billions of pounds worth of funding for affordable housing schemes.

Waiting lists are already at record levels with 4.5 million people currently waiting for a social home in England, while an estimated one million children are living in overcrowded housing.

But just as the demand for new homes has reached new highs, the number of homes being built has slumped to its lowest level since the Second World War with just 123,000 built in 2009/10.

The Treasury has ordered Government departments to budget for cuts of 40% ahead of October’s comprehensive spending review.

A 40% cut to the affordable housebuilding budget would mean the budget between 2011/12-2019/20 would be reduced from £28.6billion to £13.1billion - a fall of £15.5billion.

The Federation, which represents England’s housing associations, warned that if the housing budget was cut by 40%:

* Around 230,000 affordable homes would not be built up to 2020;
* 570,000 people would be added to waiting lists for an affordable home;
* Around 283,000 jobs in the construction industry would be axed or not created by 2020;
* And the wider economy would also suffer, with the cuts reducing economic activity by around £50billion over the next ten years.

The Federation warned that the poorest communities would be hardest hit by the proposed cuts to housing and would have a series of damaging knock-on effects. Research has consistently found a link between bad housing conditions and poor health, low educational attainment and higher crime rates.

Cutting funding for desperately needed social homes would also call into question the Prime Minister’s pledge to "always looking after the poorest in our country".

The Federation estimated spending cuts of 40% would reduce the number of affordable homes built between 2011/12 and 2019/20 from 426,000 to 197,000.

The number of jobs losses sustained as a result of the huge reductions in grants would total 31,500 a year.

Federation chief executive David Orr said: "It is clear the amount of public money available to fund various activities in the future is going to be tight. However, given the scale of the nation’s housing crisis, it is critical that the nation keeps building affordable housing.

"If we don’t safeguard the building of affordable homes then hundreds of thousands of vulnerable people will be added to waiting lists already at record levels.

"Brutal cuts of 40% to the housing budget would effectively shut the door on an entire generation which would be left with little hope of ever being allocated a social home.

"Over 31,000 jobs would also be lost from the construction industry every year and cost the economy £5.6billion a year in lost activity – if cuts on this scale were introduced.

"We would urge the Government to closely consider the huge human, social and economic cost of failing to invest in affordable housing."

Article from: propertytalklive.co.uk 27/07/10

The FLA believes consumers are taking a “wait-and-see” approach and  are reluctant to make credit commitments in the current economic climate.

Unsecured loans fell by 45% whereas short-term credit arrangements like credit cards are only down 7% in the 12 months to May compared with the previous year.

The statistics show that consumers used 8% less credit in the 12 months to May than than between May 2008 and 2009.

Fiona Hoyle, head of consumer finance of the FLA, says: “In uncertain economic times, consumers want to take even more control over their financial commitments. This is reflected in a more cautious approach to consumer credit spending. Many consumers will also be waiting to see what effect the proposed VAT rise and spending cuts will have on their household budgets.

“The consumer credit market plays an important role in the economy and the government needs to help maintain consumer confidence.  So we urge the Treasury and the Department for Business to pause while lenders make the regulatory changes to the market that are already in the pipeline, before risking any more uncertainty by proposing new ones.”

Article from: www.mortgagestrategy.co.uk 27/07/10

The cost of renting and buying luxury properties in the capital is being pushed up by a combination of a surge in interest from wealthy Chinese tenants and the return of City bonuses.

According to investment agent Curzon Investment Property, average rents in upmarket parts of west London have soared by 9.2% in the last year alone.

It believes the jump has been fuelled recently, at least in part, by wealthy Chinese tenants taking advantage of the strong Yuan, which has gained since shedding its dollar pegging on 19 June.

At the same time, big City bonuses are prompting London’s highest earners to seek out top end properties to buy.

However, Curzon warns that the property purchase market is still a long way off its pre-crash 2007 peak, mainly because mortgage lenders are still demanding very large deposits.

But it says that among overseas investors who still benefit from around 30 percent discounts on prices (due to the weakness of Sterling), interest is edging closer to those pre-2007 levels.

James Moss, director at Curzon Investment Property, believes the London market will return to form in 2011.

He said: “Almost three quarters of our customers are bankers who are spending anywhere between £1 million and £5 million per property. Often, they will have 30-50 percent of this in cash, although this will depend on the kind of funding structure they are using. More often than not there will be an off-shore company or trust with private bank finance involved.

“While London properties are immensely popular, they are just one global asset class that wealthy individuals invest in. If they are expat bankers then maybe up to 25% of their investment portfolio will be here. For most clients probably around, over 75% of their overall investment portfolio will be in other things.

“Unlike other asset classes, property can be geared meaning that lower equity levels are invested than many people would think so this greatly increases their buying power. So while you can borrow millions of pounds to buy a property, you would not be able to borrow similar amounts to buy shares or invest in gold. That’s what makes property unique and so popular.” 

Your mortgage and remortgage

A new green tax being considered by the government could add £850 to the cost of buying a typical home – and it would require the new owner to spend at least £15,000 on improvements before they would trigger a rebate.

The plan, being considered by the Coalition but commissioned by the last Labour government, would make buyers pay an additional 0.5% stamp duty if the home they purchased had a poor energy rating. If they sharply improved the rating within a year – by fitting insulation and perhaps solar panels – they could reclaim up to twice the amount of the green tax from a so-called Green Investment Bank.

The property industry has branded the idea as unworkable and a stealth tax, which risks throwing the housing market into turmoil.

There is already a mandatory energy assessment undertaken by inspectors on all homes before they go on sale. Ratings range from A down to G and each gives tips on how to improve the home's rating; these assessments are given to prospective buyers and included in the property's sale details.

The green tax would apply to homes sold with F and G ratings, giving buyers the incentive to bring them up to E or better. It would be part of a government programme to cut greenhouse emissions by 34% from their 1990 levels, by 2020.

But property experts believe any further expense heaped on buyers would damage the market. Steve Thomas of Townends estate agency calls the idea "madness", pointing out that buyers would have to pay both the tax and "stump up for the upgrades".

Nicholas Leeming of sales website Zoopla.co.uk says: "Some 65% of UK homes were built before 1965, and in London 27% before the first world war. This would clearly be unworkable."

Rosemary Rogers of www.reallymoving.com, which arranges energy inspections, says the young and low paid would be hit, as would unusual properties, and the tax would "stop the already fragile recovery in its tracks".

The measure would also "seriously jeopardise" the buy-to-let industry, which relies on investors buying low-cost poor-condition houses to turn into rental properties, says Anita Mehra of Benham & Reeves Residential Lettings.

An average UK home now costs £170,000 according to the Nationwide's house price index. The 1% stamp duty of £1,700 would rise by £850 to £2,550. But to improve the energy efficiency rating enough to secure a rebate of £1,700 it would cost £10,000–£15,000 for wall and roof insulation and a new boiler.

If the home required double-glazing, window firms estimate at least £8,000 for a mid-sized semi-detached house. One firm, PRP, warns it would be much more for larger homes, or those in poor condition. It recently worked with Cambridge council to retrofit a 1940s three-bedroom house. The process took eight weeks and cost £50,000. The end result was an A rating and the firm says that eventually many of the systems installed on the property may reduce in price if they are used in greater numbers.

The two government departments considering the proposal – Energy and Climate Change, and Communities and Local Government – say the idea is only one of many measures under consideration.

If the measure does eventually go ahead, wealthy buyers will benefit most. Someone paying £2m for a property with a poor energy rating would pay £10,000 green tax on top of the £80,000 stamp duty. If renovation work improved the rating to E or better, the owner would get a £20,000 rebate.

An even wealthier purchaser investing in a £5m estate would receive a rebate of £50,000. Enough to make the rest of the home-owning population go green ... with envy.

source: Observer

British property tycoon jailed

His imprisonment comes two years after he bought the 11-acre island that is part of the World, a man-made archipelago of 300 reclaimed sandbanks in the Gulf, fashioned into the shape of the globe's landmasses.

The islands, praised by some as an architectural miracle and condemned by others as an environmental disaster, were built in 2003 two miles off Dubai and can be seen from space. They have become a symbol of Dubai's fading economic power in the global economic downturn. Built during the boom to be used as secluded playgrounds for the super-rich, they remain largely unused.

Qurashi, 41, the son of a Pakistan-born travel agent, was a successful businessman in London, developing one of the first internet cafes in Soho. In 2004 he moved to Dubai, where he flourished, friends say. Four years later, his company, Premier Real Estate Bureau, turned over £400m and employed 80 staff.

source: general

Londoners pay a significant premium for the luxury of living near a tube station, according to the latest research.

Those living within 500m of an underground station pay on average an extra seven per cent for their home, when compared to a similar property that is 1,500m away from a station, according to Nationwide.

Considering current house prices that equates to an extra £20,300, while houses 1,000m away from a station are 3.4 per cent more expensive.

The lender has also established that this premium is at its highest around the stations on the Circle Line.

Reacting to the figures, the lender's chief economist Martin Gahbauer said that considering 34 per cent of London's use rail services to commute to work, it is no surprise that there is such a premium.

The average house price in the UK now stands at £168,719, according to data from Nationwide, reflecting a quarter-on-quarter rise of 1.9 per cent.

source: aboutproperty