Optimism in the housing market

There is a degree of cautious optimism creeping into an apparently recovering property maket, however, like a recovering addict, the emphasis is on 'cautious' rather than 'optimism'.

The Nationwide have released figures indicating that July was the third month running in which house prices have risen. The July figure is a 1.3% rise bringing down the annual rate of decline to 6.2%. The change over the last three months indicates a rise of 2.6%. The figures can only be interpreted loosely as the peculiarities of the current climate are likely to throw up anomalies. Nevertheless The Nationwide are predicting the possibility of prices being higher at the end of the year than they were at the start - a bold prediction..
Why is this prediction so bold?
Whilst demand is pushing prices up in the short-term, supply has been repressed by the evident drop in prices. If prices are shown to be on the increase, the market could be flooded once prospective sellers start entering the market again...this could result in prices being driven down yet again.
Low interest rates are being cited as an incentive, yet many house buyers are finding it difficult to take advantage of the Bank Of England low lending rate through obstructive practices by the mortgage vendors.
Earnings are not rising in line with house price rises, so prospective buyers (already cautious) may be restricted in their buying power.

The news that mortgage approvals are on a high, has to be offset by the fact that throughout the economy, the rate of increase in consumer borrowing is in serious decline. The worry-factor has prevented people from over-stretching their resources in the way that we have become accustomed over the last decade or so. In my opinion, that is not a bad thing, however a decline across the economy is unavoidable if borrowing is to even out to a reasonable level.

Related posts:
When will the property market recover?
25% house price drop expected
Worse-case scenario for house prices
Sub-prime mortgages to blame?

Credit Cards for the Credit Crunch

I have spoken on many occasions about how I have crawled out of the pit of debt by using 0% credit cards and am now very very close to paying the entire original debt off (although I have recently started to build up a balance on my 'normal' credit card which I will now have to work hard to pay off!!).
I am reminded however about my first application for a 0% card... I saw adverts for the wonderful 'Capital One' card which was advertised on the TV and I decided that this was the card for me. I duly applied and was turned down as I had a poor credit rating which turned out to be due to a number of still active credit accounts I had more or less forgotten about. I got a report from Experian or one of those agencies which listed accounts which, although I had not used them for years, were still having an effect on my creditworthiness.
Imagine you have four accounts each with a £10,000 limit that you no longer use - a potential lender can see that you have potential access to £40,000, therefore if he extends your credit even further, you could end up with debts that are beyond your means... So I took the step of formally closing any accounts that I wasn't using. Generally banks do not reconsider once they have decided not to open an account for you, so I went cap in hand (and with a better credit risk) to the nice people at Virgin Credit Card and they took all my debt and placed it in a 0% account, Hoorah for Richard Branson!
However, that is not the end of the story, Oh no... Capital One were still to play their hand. I had applied to them originally, so they knew exactly how much debt I had - they also assumed that I might not be able to get a 0% deal (if my apparent credit risk remained) so what did they do?? They plagued me for months with offers to lend me money (not at 0% I hasten to add). So not only do they NOT give me the account I wanted, they sought to exploit the knowledge they had about my financial position by trying to get me to take out a loan. There's something suspect in my opinion about a bank that thinks you are not worthy of their credit card, and then proceeds to persisently try and get you to take out a loan, and so I have vowed NEVER to enter into any agreements with Capital One under any circumstances. I do not know that any other banks would have behaved any better, but I know unethical practice when I see it and I firmly believe in voting with my feet so to speak... I also resent the implication that I would be so devoid of alternative plans that I would gladly grasp at whatever crumbs Capital One would throw my way. I have news for Capital One - I have had three o% cards in succession over the last few years and am within £100 of seing a zero balance - and have never even had to consider them as a credit provider in all that time.
For anyone who has a debt like this that is on the verge of becoming unmanageble, my advice is to take the same route and explore the possibility at least initially of getting the debt transferred to a 0% card and paying off what you can during the 0% offer (definitely DO NOT SPEND anything on this card...). When the offer expires, don't let the principle attract interest - move it on to another 0% deal straight away. The psychological boost one gets from seeing every penny of your payments coming off the debt rather than being sequestered away to pay off interest, is tremendous and just the ticket to make you want to pay off as much as you can as soon as you can..

related:
more posts on 0% interest
more posts on credit cards
tracking my debt

UK inflation falls below target

Falling food prices have been cited as one of the reasons for inflation dropping below the Bank of England target rate of 2%. The figures have dropped to 1.8% from 2.2% in the last month. The likelihood is that this trend will continue as retailers try to stimulate demand in a slowing market. Some areas of the market, notably electronics and fuel prices have experienced rises, but when recession hits the proportion of our outgoings spent on food is likely to increase as it is far more difficult to cut food consumption than the consumption of non-essentials.
Even credit crunch inflated mortgage fees have dropped this year as mortgage companies try to entice more business, and insurance has followed suit. I have just switched house insurance companies and made a huge saving, it is certainly worth shopping around at the moment - in a telephone conversation one company even said 'what can we do to make this insurance more attractive to you? to which the answer would naturally be 'make it cheaper...'.
The Retail Price Index is naturally linked to inflation but measures the effect on specific goods and services, this month the RPI has just recorded it's lowest ever figure of -1.6% (yes that's MINUS 1.6%).

So things are getting cheaper which is good for consumers, but it also means that companies are cutting margins and may even cut jobs as a result. This is an entirely 'natural' process (in terms of the free market) which forces the manufacturers to make themselves leaner and meaner to compete effectively in the market. Those companies carrying surplus 'weight' will be forced to trim back the waste - hopefully this will see an end (at least in the short-term) to the 'fat-cat' culture of self-reward and lack of concern for the wider business and economy. If only we could extend this concern to the environment too, this recession could have a really positive impact.

Related posts:

Government Intervention
CBI predicts 'shallow' recession
25% house price drop expected
Mortgage safety net
Quantitive Easing
UK budget 2009