Lawyers warn that Home Reports will be like the new poll tax. They are being introduced for every house sale in Scotland from December 1st.

Every house being put up for sale in Scotland must now have a home report, which costs between £350 and £820 and includes they survey.

Ian Ferguson, of the Scottish Law Agents Society, said: “I predict that home report costs will become as despised as the poll tax.

“Today is Black Monday. It’s the birth of Home Reports but, quite possibly, the death of the Scottish property market.”

Ian Smart, vice-president of the Law Society of Scotland, said the real problem was the seller’s survey.

He said: “To introduce the seller’s survey in the current climate is a policy initiative that makes the poll tax sound like a great idea. It cannot make things better, and I suspect it will make things significantly worse.”

They fear the reports will burden sellers with extra costs they will be reluctant to take on.

There are still questions the lenders would like answered over the report’s acceptance. The Woolwich has said Home Reports are not a reliable indicator of value in a fluctuating market. Other lenders are waiting to see how the new system works in practice before taking a definite decision on the reports.

Mr Ferguson said the Scottish Government had dismissed its calls for the scheme to be postponed for two years and rejected a plea for the scheme to be voluntary rather than compulsory.

He said: “We learned only last week that the Scottish Government does not even have all the major lenders on board to back the scheme. That should have been secured from the outset. To have gone ahead without this was breathtakingly irresponsible.

“What is despicable is the government has broken promises to the public on its website that purchasers could rely on the Home Reports and would not need their own report. Sellers were also told they would pay once only for the sale and not for their new purchase.

“They also now accept that the reports will become dated and will need refreshed, but it is not reflected on their website.

“Those promises are now worthless. By any standard, this is a failure of government.”

The Conservatives also called for the introduction of the reports to be postponed.

David McLetchie, the Scots Tories’ chief whip and a qualified solicitor, said: “It is all too evident that Home Reports are a disaster waiting to hit the Scottish housing market.

“We have continually warned that our already fragile property market would be further damaged by their introduction.”

But the Scottish Government spokeswoman said: “It is essential that those buying a house – one of the most important decisions that people will ever make – receive the best information possible. The home report will provide buyers and sellers with this information.

“The Scottish Government has considered carefully the representations for delay from the legal profession, against the strong representations from other professions and consumer interests to implement Home Reports on 1 December.”

She went on: “The view of the Council of Mortgage Lenders, representatives of the Law Society, the National Association of Estate Agents and the Royal Institution of Chartered Surveyors – which we share – is that the home report will have a neutral effect on the housing market, and claims to the contrary are both scaremongering and irresponsible.

“A significant problem in the housing market at the moment is the relative lack of first-time buyers, and this measure will help hard-pressed first-time buyers by cutting the costs of bidding for a house. As nine out of ten sellers are also buyers, they will benefit too.”

Martyn Evans, of the Scottish Consumer Council, said there was a strong case for the introduction of Home Reports.

He said: “Home Reports is not a legal question – it is about buyers and sellers. The question is whether the reports are there to improve that process, and of course they will. It will give more information, and benefit buyers, sellers and the market.

“The connection to the recession would be much more plausible if Home Reports were not opposed during the boom years, yet they were.

“Home Reports are an unremarkable, consumer-focused introduction into the housing market.”

SCOTLAND has grabbed a once-in-a-generation opportunity to put consumers, rather than the house buying and selling industry, at the centre of the process in Scotland.

At present, nine in ten buyers obtain only the cheapest basic valuation survey – so most Scots make their biggest purchase with very little information. Sadly, it is not uncommon for people to spend thousands in their first few months in a new home putting right problems a valuation survey didn’t uncover.

Home Reports offer a more detailed survey giving information on a property’s condition, accessibility and value. There will also be a report with recommendations on how to improve the building’s energy efficiency and cut bills. A property questionnaire will give practical information such as parking arrangements, factoring and alterations. As the Home Report is commissioned by the seller, first-time buyers will pay nothing. As most sellers also buy, they pay only once.

We are convinced buyers will quickly understand their value, and not having one may place sellers at a disadvantage. They mean people who put a home on the market have something to prove it is worth buying.

• Sarah O’Neill is Principal Policy Advocate, Consumer Focus Scotland

THE Home Report pack, which buyers should receive within nine days of asking for one, will need to include three documents:

• Single survey – this is an assessment by a chartered surveyor or another approved provider of the valuation and condition of the property.

• Energy report – this gives the property an energy efficiency rating and provides advice on improving energy efficiency. This should also be provided by a chartered surveyor or another provider approved by Scottish ministers. The energy reports will be a requirement from 4 January for all property sales across the European Union, although ministers have admitted there are still questions over the enforcement of this new regulation.

• Property questionnaire – this is to be completed by the seller and will contain information on the house such as alterations, factoring costs and council tax banding.

There are no concrete prices, but, as a guide, reports for properties of around £170,000 are likely to cost between £500 and £700, paid for by the sellers, with reports for properties from £500,000 upwards costing up to £820.

Some properties are exempt, including new homes, properties awaiting demolition and seasonal accommodation.

What are home reports?

They are information packs that will have to be provided by the seller of any house in Scotland that goes on the market for the first time from today. The pack will have to include a single survey, an energy report and a property questionnaire giving information on the property. They will cost anything from £350 to £820 depending on the size of the house.

Do they have a shelf life?

Ministers are working on the forecast that home reports will have to be renewed, in part, every three months. But they have insisted this will only involve a revised valuation and an update of any changes, not a new full report.

Why are they being brought in now?

Home reports were first suggested by the former Labour/Lib Dem Scottish Executive and carried forward by the current SNP administration. The European Commission has set a deadline of 4 January for all countries to introduce energy reports for all property sales. As this was coming in, Scottish ministers felt this was the best time to bring in the full home report, including the energy reports.

What are the home reports designed to achieve?

The initial aim was to save house buyers from having to invest in commissioning multiple surveys on properties that they lost through the bidding process.

Their backers also claim the reports will give buyers much more information on properties and so help the market become more transparent and workable.

The inclusion of the energy report is also intended to help improve energy efficiency, with buyers able to see easily which properties are more environmentally friendly and which will cost less to heat.

Will they have any effect on the way we buy and sell houses?

Yes, experts have forecast that the Scottish “offers over” system will now fade away, to be replaced with something closer to the English ‘offers around’ system.

This will be because the home reports will include a valuation submitted by the seller’s surveyor.

It is more likely that potential buyers will offer less than this valuation, rather than more.

The practice of sellers putting their houses on the market with an unrealistically low upset price, in the hope of starting a bidding war, will probably disappear.

Who is in favour of the home report system?

Consumer groups such as Which? and Consumer Focus Scotland have backed the move. Labour and the Liberal Democrats were the first to adopt the new system when in government, and the SNP has taken it forward as well.

Who is against the home report system?

A large number of solicitors and estate agents and surveyors outside the Scottish Parliament, as well as the Scottish Conservatives inside the Scottish Parliament.

What are their concerns?

They believe that the home reports are unnecessary and expensive. They have warned that the reports will not do away with multiple surveys, because buyers are likely to commission their own surveys rather than take one for granted that is provided by a seller.

Also, they warn that the new system will place an added financial burden on the housing market, just when it is going through its worst period for decades.

The fear is that this new change could bring the market to a standstill.

Is there any chance of the Scottish Government changing its mind?

No, by the time you read this, home reports will be part of the home buying system in Scotland.

The drop in house prices slowed a little in November with prices falling by just 0.4%.

The mortgage lender Nationwide said the rate of droops in hose prices “moderated significantly” when compared with October’s 1.3% drop.

House prices have dropped 13.9% from November 2007, easing from a 14.6% annual fall in October.

Nationwide however  warned that the UK  weak economy would continue to pressure the housing market.

“In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market,” Nationwide’s chief economist Fionnuala Earley said.

“With prices falling at their current rate, there is also less incentive for new borrowers to hurry into the market.”

The Nationwide also stated that the  price of an average house now stands at £158,442.

That amounts to a drop of £25,000 in the past year, although the building society says prices are still £25,000 higher than they were in November 2003.

The last year has seen the property market hit a sudden and most dramatic slowdown on record.  They estimated that the UK house building industry has reduced by 50% since the start of the credit crunch last July.

Former head of the HBOS mortgage bank, Sir James Crosby, recommended that the government take direct action to stimulate the flow of mortgage funds to the UK banking industry.

He warned that otherwise new mortgage lending might reduce to zero.

And that in turn would lead to a further drop in house sales and prices which would make the recession even worse.

In evidence to a Parliamentary committee, Mervyn King, the governor of the Bank of England, said no issue was more important at the moment than the restoration of general bank lending.

David Miles, chief UK economist at the investment bank Morgan Stanley, said there had been some good news in the past few weeks.

“We have had some very substantial cuts in interest rates from the Bank of England,” he said.

“That will feed through to lower costs of mortgages, for those who already have a mortgage anyway, pretty soon,” he added.

“November’s moderate fall in house prices is not a sign that the housing market is bottoming,” it said.

“With the economy set for a deep recession and unemployment rising steeply, we expect the sharper downward trend in house prices of recent months to reassert itself,” it added.

The gloomy outlook was supported by the West Bromwich building society, the UK’s seventh largest.

Reporting a 65% fall in half-year profits to £8m, it forecast that house prices would fall further in 2009.

Fearing that some of its borrowers may start defaulting on their mortgages in increasing numbers, the society set aside a further £7.5m to cover potential bad debts, even though its arrears are currently lower than the industry average.

New information from the BBA shows the amount of mortgages approved in October  was more than 50% down on the same period last year.

They stated 21,854 mortgages were approved for house purchase in October, the second lowest on record. The number was slightly up on August figures which were  the worst month on record, but mortgage lending is down 52 % than that of October 2007.

The amount of mortgages approved for remortgaging fell by 6.4 per cent over the year, to 52,425. Net mortgage lending rose by just £2.9 billion, compared with £3.5bn in September and an average for the previous six months of £3.9bn.

The BBA said the government’s support for banks, along with lower interest rates, would help consumer demand in th future.

But recovery prospects remain along way off, according to Howard Archer, chief UK and European economist at IHS Global Insight.

He stated “Even if the government measures to tackle the financial crisis work on a sustained basis, it will clearly take time for confidence to improve and mortgage lending to pick up significantly.

“On top of this, affordability ratios in terms of house prices to earnings are still relatively stretched despite coming down significantly in recent months.”

There is a possibility that new mortgage lending in 2009 may fall to less than zero, according to a report commissioned by the former chief executive of HBOS, Sir James Crosby.

The warning from Sir James is  that as homeowners are pay off their  mortgages, banks will not be putting as much mortgage funds back into the market.

This represents a collapse in mortgage finance for the British housing market and Sir James says it’s probably going  to lead to further drops in house prices and lead to a rise in unemployment.

This year  new mortgage lending has already fallen from £108bn to a forecast £40bn in 2008.

Net new mortgage lending has never been negative, since records began.

Sir James is particularly worried about  the collapse in available mortgage finance on Britain’s housebuilders. He says that they are dependent on mortgages worth 85% LTV, and that the amount of these mortgages has tumbled.

Part of the lack of funds is that banks are having to pay back £160bn of bonds backed by mortgages over the coming three years, when it expects to receive just £150bn in deposits from ordinary savers.

Sir James is recommending that the Treasury auction £100bn of insurance to wholesale providers of funds, which banks would then lend in the form of mortgages.

Alistair Darling said yesterday that he’ll provide the support, if he’s allowed to do so by the European Commission.

The number of repossessed houses has not been this high since the early 1990s and there is a chance it will get worse before it gets betteras more home owners fall behind with their mortgage payments.

The new figures  come as Alistair Darling prepares to announce measures in the pre-Budget report today to help out home owners.

He is expected to bring in new rules that for anyone who miss a mortgage payment will be given a minimum term of three months to work with the lender to sort out the problem.

The amount of people being evicted from their homes rose 12 % in the last three months, according to the Council of Mortgage Lenders.

11,300 people had their houses repossessed in the three months to the end of September, compared with 10,100 in the previous quarter.

Borrowers who went into arrears on their mortgage also increased, reaching 168,000 cases by the end of September - 8 per cent higher than the 155,600 at the end of June.

The latest set of figures is almost the same as  the 170,000 that the CML had previously forecast for the whole of 2008.

It comes as unemployment is rising and concerns about how people will afford their mortgage if they lose their job.

Despite the rise in the amount arrears, the CML still expects about 45,000 repossessions this year. Taking into account the possessions figures announced so far this year, it leaves 26,100 people who are expected to lose their home before the end of the year.

Possessions were last this high during the second half of 1993, at 26,800. They reached a height of 38,900 for the last six months of 1991, according to the CML.

Ed Stansfield, property economist at Capital Economics, said: “Given the economic outlook, we suspect that possessions will also get pretty close to their previous record highs.”

Howard Archer, economist at Global Insight, said: “The number of repossessions seems sure to rise substantially further over the final quarter of 2008 and, more especially, in 2009, however sympathetic lenders are.”

The figures also showed possessions on buy-to-let properties were maintained at the same level as the two previous quarters at 900. But the CML expects this figure to rise amid falling rents and an oversupply of rental properties.

The Government has warned lenders to ensure that repossession is only ever a last resort.

However, even Michael Coogan, director general of the CML, said: “Looking ahead, conditions in the wider economy suggest a worsening picture for mortgage arrears, however carefully lenders handle their treatment of borrowers in difficulty.”

Repossession figures have also been released by the Government, which showed 29,516 mortgage possession orders were made in courts in England and Wales in the three months to the end of September.

The figure is 24 per cent higher than the same period in 2007 and 3 per cent higher than the second quarter of this year.

However, 47 per cent of orders were suspended and not all of them will lead to a home being repossessed.

Banks have been told they must start lending again to households and businesses in a statement from the Treasury Select Committee chairman.

John McFall threatened full-scale nationalisation of more banks if they did not start lending.

The government announced last month  a £37bn injection of funds for three major banks last month, but lending has not picked up.

“Banks have a responsibility to society which they must fulfil,” Mr McFall wrote in the Daily Telegraph.

“They should acknowledge that responsibility and start lending - now”.

But the British Bankers  Association said that the banks had not received the funds  yet  and that some of the capital was needed to absorb their losses.

Small and medium-sized businesses are finding it hard to obtain funding due to the global credit crisis.

The government is expected to announce a new scheme to underwrite small business loans made by banks.

Part of the conditions of the government recapitalisation was that money be made available for lending but Mr McFall said that “pessimism” meant this was not happening.

“If the banks believe that more businesses are going to go bust, and they believe that more people will become unemployed and default on their debts, then they will lend less to those businesses and individuals,” he said.

“As a result, many of these businesses will go bust and people will be rendered unemployed. We need to find ways to make banks loosen the purse strings.”

He added there was also a “nuclear option” - where “the demand for full-scale nationalisation may well grow”.

Northern Rock and Bradford and Bingley have already been fully nationalised while several other High Street banks are being propped up by government cash.

BBA chief executive Angela Knight said that it was a difficult time for banks, but that businesses were “not being stone walled” and that lending was continuing.

But she said banks needed to to decide if it made good financial sense to lend money to firms.

“There’s no desire for banks to lend to companies that are not viable,” Ms Knight added.

Interest rates on loans had risen because banks’ borrowing costs had also climbed sharply, the BBA said.

BBC business editor Robert Peston said that because the bail-out had been described as temporary, the need to pay it back was a “massive drag on banks’ ability to lend and is therefore also a ball-and-chain on economic growth”.

“But if we don’t demand our money back, we’d be formalising that there’s been a semi-permanent nationalisation of the entire banking system,” he added.

“And that would massively encroach on the ability of our banks to operate as independent commercial entities.”

Mortgage went up a little in October, according to the Council of Mortgage Lenders.

Total mortgage lending rose to £18.7bn, 7% up from September.

However, Octobers lending was still 44% lower than in October 2007.

The CML said mortgage lending would slow in the next few months, despite cuts in interest rates in October and November .

“Consumer confidence is now being affected by the worsening economic outlook,” said the CML’s director general Michael Coogan.

“However, any recovery in lending is also being held back by the continuing shortage of mortgage funding.”

The gross mortgage lending figures are unstable and have twice shown monthly increases this year.

Despite this al this 2008 is set to go down as the year which saw the biggest slump in home sales and prices on record.

Some experts beleive that the drop in mortgage lending may now have reached the bottom.

This week the Royal Institution of Chartered Surveyors pointed out that its own surveys had shown there had been a recent increase in enquiries from potential new buyers, an accurate indicator of future trends in home sales.

But even if mortgage lending and home sales stabilise at current levels, other experts are forecasting that prices will continue to fall, with some suggesting that they could go down by a further 15-20% in 2009 after a likely drop of around 15% this year.

“Few people will take heart from the fact the latest lending figures are marginally up on September, as they are still massively lower than October last year,” said Andrew Montlake, of mortgage brokers Cobalt Capital.

“You have a double whammy where consumer confidence is shot to bits by a rapidly weakening economy and the mainstream lenders are only accepting “quality” applicants with big deposits.

“I hate to say it but it could be some time before things start to improve,” he added.

Some of Britain’s biggest  mortgage lenders are continuing to charge higher interest rates for new customers and neglecting to pass on the falls in market lending rates, which have been easing a little over the past several weeks.

We are all aware the Bank of England slashed its main interest rate to 3 per cent last week, the lowest it’s been in more than 50 years and that further interst cuts are expected shortly, possibly as soon as December. New information received this week shows that inflation is falling faster than expected.

The Office for National Statistics yesterday stated inflation, fell to an annual rate of 4.5 % in October, down from 5.2 % in September. Economists had been expecting a smaller drop but a combination of falling petrol prices and a slowdown in the growth in food prices helped to bring the rate down faster than first thought.

Homeowners with tracker rate mortgages are set to see massive drops in their monthly payments after this month’s 1.5 % cut in the Bank of England interest rates, new customers looking for new tracker mortgage deals are likely to be paying a bigger margin above the Bank rate than they would have done just a fortnight ago. Libor, the rate at which banks lend to each other,has fallen, from about 5.7 per cent at the end of last month, to a little over 4 %.

However, as the gap closes between Libor and the Bank rate, lenders are still increasing the margin on new mortgages. Halifax released a new range of trackers mortgages the other day, which charge between 1.99% and 2.39 % above the Bank rate. Last week, Lloyds, Abbey and Alliance & Leicester also released new trackers – all priced at least 1.79 % above the Bank rate.

“The margins are very wide – much wider than they were a month ago,” said David Hollingworth, of London & Country Mortgages, the independent broker. “But for many consumers, a bigger problem will be that most of the products available at the moment are only for those with a low loan to value [LTV].”

Almost the whole range of new tracker rate mortgages available are only open to borrowers with more than 25 % deposit available or current equity in their property. For homeowners who have a mortgage worth 80 % LTV or higher of their property’s current value, it is almost impossible to get a tracker mortgage. And for those with a 90 per cent LTV, there are only a few products on offer – mostly at much higher interest rates more than double the Bank rate.

Mr Hollingworth said a rising number of borrowers may be forced to revert to their bank’s standard variable rate (SVR). This may not be as unappealing as it once was, as many banks have slashed their SVRs by 1.5 percentage points since the start of the month, after the Chancellor put pressure on them to pass on the full Bank rate cut.

Sue Anderson, of the Council of Mortgage Lenders, defended the banks’ decision to increase the margin on their trackers. “It reflects the mix of business levels that lenders now have,” she said. “A lot of lenders fully cut their SVRs by 1.5 percentage points, even though their own funding cost would not have been cut by that amount.”

Lower transport costs led to a record fall in inflation from 5.2% in September to 4.5% in October.

The 0.7% fall in the CPI is the largest  drop
since January 1997 when records began and the largest
since April 1992.Transport inflation fell to 4.3% in October, from 7.6% in September.

This  deceleration is the largest slow-down since CPI records began. It was triggered by a dramatic fall in the price of crude oil.

The average price of petrol fell by 7.1p per litre between September and October this year, to stand at 104.5p, compared with a rise of 2.7p last year.

Diesel prices fell by 7p per litre this year, to stand at 116.3p. There was also a fall in the price of both air and sea  transport.

The effect from air fares came mainly from the cost of European flights.

There was another large downward contribution from food and non-alcoholic
drinks.

Buy to let landlords could be set to buy up an increasing number of properties over the next 12 months, according to new figures released.

The Mortgage Works, a subsidiary of Nationwide Building Society recently released figues which found that almost 50 per cent of “professional investors” expect to purchase two or more properties over the next year.

The Sunday Herald stated that 65 per cent of brokers are predicting that demand for rental properties will rise over the next six months.

Brian Adair, executive chairman of Ryden Lettings, told the newspaper the interest from renters is “particularly acute” towards the lower end of the market.

“There is strong tenant demand for properties between £400 and £700 a month, mainly from would-be first-time buyers who cannot get a mortgage,” he added.