The Financial Conduct Authority (FCA) is one of the successor agencies to the Financial Services Authority (FSA) and is currently expected to be established by end-2012.

The FCA’s focus will be to regulate both wholesale and retail financial firms providing services to consumers and to maintain the integrity of the U.K.’s financial markets.

The authority will have the power to ban unacceptable financial products and enforce the withdrawal of misleading promotions, among other regulatory powers.

Much like FSA, the FCA promises to protect consumers by promoting transparency and healthy competition in the financial sector while helping consumers make the right choices; but will it be able to succeed where the FSA arguably failed?

The official “Approach to Regulation” document on the Financial Conduct Authority’s objectives and powers (.pdf, 508 kb) sets out how the authority will approach the delivery of its objectives. However, MPs and experts alike are worried that the FCA will be “more of the same”.

Back in August of 2011, a parliamentary committee announced an inquiry into the accountability of the FCA to be published by the Autumn of 2011 and earlier this week (albeit admittedly a bit late) the Treasury Select Committee published a full-blown report into Financial Conduct Authority. This in-depth report contains a number of recommendations for the Government’s consideration ahead of the drafting and publication of the Financial Services Bill early in 2012.

Among the Treasury Committee’s most significant recommendations are that the FCA is properly accountable to Parliament and that tools are available to enable the required level of explanation from the regulator.

Commenting on the publication of the report, the Chair of the Treasury Committee, Andrew Tyrie MP, said:

“We need a fresh approach to regulation.

The plain fact is that the FSA did not succeed in protecting consumers from spectacular regulatory failures. The mis-selling of PPI and endowment mortgages are just two examples. The FSA is not only expensive, for which the consumer always pays, but many have told us that it has also become bureaucratic and dominated by a box-ticking culture.

The creation of the FCA is an opportunity to create something much better.

If we are not careful, the FCA will become the poor relation among the new institutions. But it is the one that will matter most to millions of consumers.”

Even though there are legitimate concerns, especially given the FSA’s recent mistakes, some experts hope that with careful planning and the Treasury Select Committee’s input the FCA will hopefully turn out to be less expensive and more efficient than the FSA in safeguarding the consumers’ interests.

Virgin money has announced their first two savings accounts since Virgin Money officially acquired Northern Rock plc on 1 January 2012.

The two new accounts, Virgin Easy Access Saver and Virgin Easy Access Cash ISA offer a competitive annual interest rate of 2.85% that remains the same regardless of how the account is opened. This means that customers will enjoy the same benefits whether they open their account online, via phone, post or through one of Northern Rock’s 75 branches. Both accounts require no notice to access funds and customers are required a minimum deposit of £1 up to a maximum of £100.000.

Arguably the most notable feature in both savings accounts is that they are not reliant on introductory bonuses that might confuse buyers. Simply put, the interest rate announced is not inflated for the first year and customers will not be faced with lower rates after that year has passed.

With that move Virgin Money shows that they want to promote long-term financial relationships with their customers as customers will not be baited with inflated introductory rates in the first place and will not be forced to search for other savings accounts after any introductory rates have expired.

Chief executive officer at Virgin Money Jayne-Anne Gadhia said: “These new savings products are designed to be simple, fair and transparent. They have an attractive headline rate, without a bonus, offering good value for customers”.

She continued: “There are no differences in rate whether the customer chooses an ISA or a standard savings account. What’s more, customers can choose to operate their account online, through a branch or over the telephone and still benefit from the same great rate.”

Meanwhile, the two new savings accounts have received positive reviews from financial experts and pressrooms alike.

The financial comparison website Moneyfacts.co.uk praised the two new accounts, awarding them with four out of possible five stars and placing them “comfortably within the top ten of similar products.”

Both accounts Virgin Easy Access Saver and Virgin Easy Access Cash ISA will be available from this Thursday in Northern Rock branches across the country.

Despite the adverse economic climate, positive factors such as the low interest rates offered in the market as well as the promise of safer mortgage lending rules from FSA contributed to house prices rising by a modest 1% in 2011, according to Nationwide, with London prices surpassing the 5% mark.

In reality, the 1% increase in house prices is overshadowed by annual inflation and this is expected to remain true for 2012.

But what will happen to property prices in 2012?

The uncertain economic situation in the EU means that house price changes will be difficult to predict and many property market experts and forecasters have different opinions on how 2012 will play out.

Both Halifax and Nationwide predict a mostly stagnant market with stability in house prices.

Halifax’s housing economist, Martin Ellis, commented: “Overall, we expect continuing broad stability in house prices nationally during 2012. Prices are again likely to end the year at levels close to where they began with the market continuing to lack any real direction.”

Nationwide’s chief economist Robert Gardner commented: “2012 isn’t shaping up to be much better than 2011, for the UK economy or the housing market.”

Other predictions have been less optimistic for the coming year with several property market experts forecasting a moderate decline in house prices.

IHS Global Insight, Capital Economics as well as estate agent Knight Frank all predict no less than a 5% dip in house prices during 2012.

IHS Global Insight economist Howard Archer commented: “House prices will fall by around 5% overall from current levels by mid-2012 as weak economic fundamentals outweigh extended low interest rates.”

While Knight Frank said: “Our view is that conditions in the UK mainstream market over the next few years will resemble our “slow correction” scenario, under which the market will experience an extended period of low transaction numbers and price falls in real terms.”

Moreover, a few experts predict dramatic declines in house prices, with some experts forecasting declines of 10% or more.

Jonathan Davis of Jonathan Davis Wealth Management has made the grimmest prediction for the UK house market in 2012: “Fall of 7 to 12%. This year will be down a couple or a few per cent but, in real terms, it will be down around 8%. Not insignificant at all.”

However, a few house market forecasters are predicting a rise in property prices for 2012. Rightmove’s experts predict their house price index to turn a 2% increase over the next year.

Earlier today, the Financial Services Authority (FSA) announced plans for a new set of mortgage lending rules to prevent “a return of the risky mortgage lending seen in boom times”.

The new set of rules should prevent homeowners from borrowing more than they can afford and are likely to come in full effect by 2013.

FSA’s latest mortgage market review paper (pdf, 2.4 MB) outlines the need for all prospective borrowers to get the right information and advice. It also aims to ensure that mortgage lenders will be assessing the affordability of loans more effectively and be thoroughly checking each applicant’s ability to keep up with their mortgage repayments.

Existing borrowers who might have been prevented from remortgaging will also be allowed some degree of flexibility to manage their lending terms under the new mortgage lending rules.

According to the three key proposals of “good mortgage underwriting”, as explained by FSA, borrowers should avoid assumptions on future house prices and lenders should assess long-term affordability. The three key proposals specifically state that:

• Mortgages and loans should only be advanced when the borrower can afford repayments without relying on future house price rises.

• Every affordability assessment should take into account any future changes in interest rates with a minimum five-year outlook and borrowers should not enter contracts based on the assumption that the initial interest rates will not change later on.

• Interest-only mortgages should be assessed no differently than repayment mortgages unless the borrower has a viable option to pay off the loan that does not rely on the assumption that house prices will rise.

Chairman of the FSA, Lord Turner commented on the proposed rules:

“We believe that these are common sense proposals which serve the interests of both lenders and borrowers. While the excesses of the pre-crisis period have largely disappeared from the current market, it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.”

“The three key proposals are, we believe, the most effective way to tackle the problem of risky lending. But it is essential that we understand what their impact would be – how many consumers would be protected from the distress of arrears and repossessions, and, how many consumers who could have afforded a mortgage might have to take out a smaller mortgage or to delay their purchase.”

“The estimates are inherently uncertain, but they suggest that the new rules would have only a marginal effect in current market conditions – and particularly so for first time buyers – but would act as a significant constraint if market practice were in danger of returning to the 2005 to 2007 pattern. That pattern of effect would be a highly desirable one. We are however particularly keen that lenders provide their detailed assessment of the likely impact of these proposed rules. Then the FSA will be able to make appropriate final decisions.”

“The proposals published today reflect the ideas and input of many stakeholders, including consumer groups and lenders. We believe these proposals will hardwire common sense standards into mortgage lending and guard against the risky lending practices of the past – leaving most borrowers unaffected, but better protected.”

The FSA Board will make a decision on the final form of the new mortgage lending rules in summer 2012.

This year’s Christmas period will see almost one in three Britons slip into some form of debt to fund their holiday spending, according to an online survey on Christmas spending by YouGov. (pdf, 815 KB)

The online survey was conducted on behalf of Halifax and yielded some very interesting, if not alarming, results. According to the survey, the average person in the UK plans to spend nearly £38 on gifts for each loved one, with women planning to buy gifts for 10 people whereas men will give gifts to seven people on average.

Despite the financial crisis it seems that only 31% of the people surveyed have cut back on Christmas spending compared to previous years while 32% have increased their spending, with many of them going into debt to fuel their holiday purchases.

YouGov’s latest survey also found that more than 52% of the consumers do not save any money for their Christmas spending, while only 14% of the people surveyed said that they save money throughout the year to fund their Christmas spending.

Arguably the most alarming fact is that 31%, almost one in three, will go into debt to fund their Christmas spending, with 10% using their credit card to buy presents and planning to pay the money back later.

This year in particular more people than ever consider taking out a payday loan and 20% of all UK adults who plan to buy Christmas presents believe they will need to directly borrow money to pay for some of their purchases.

Rob Wood, Head of Halifax Savings, commented on the survey’s results: “It seems Christmas spending has not slowed down as we head into the holiday period and only a small number of people have felt the need to save throughout the year to cover the costs. It is encouraging, however, that most consumers will have the money [upfront] to cover the costs of Christmas presents. Christmas can be a tough time financially for families and advanced planning and saving is the best way to ensure there is enough money to go around for all the extra costs.”

Loan expert Tim Moss at MoneySupermarket.com also commented: “This year has been incredibly tough for consumers with the rising cost of living really hitting the nation’s wallets hard. It comes as no shock that such a high number of people will be tipped into debt this festive season, particularly as Christmas is a time when people generally increase their spending. With many people also being paid early in December, January payday may seem a long way off, so planning ahead is vital to avoid carrying over the debt burden into next year.”

Addressing the less financially secure people, Tim Moss added: “For the large number of people who are unable to save, there are a number of ways they can reduce the Christmas spending hangover by the New Year, and it is essential to use the right product to meet their needs. For example, a credit card offering zero per cent interest on purchases might be the sensible option if they are able to pay off the balance in full within the zero per cent period. Dipping into the unauthorised overdraft may prove costly for those unable to pay this off, particularly as the charges for dipping in the red may not hit until January.”

Payday loans are small, unsecured loans with sky-high interest rates, aimed at people who struggle to make ends meet each month until their payday.

Payday loans usually range from £300 to £1000 and since they are supposed to be short-term their interest rates can soar up to 30% or more for some providers. This translates into sky-high annual percentage rates (APR) of 3,000%, 4,000% or more!

3.5 million Britons are considering taking out a payday loan within the next six months, according to a recent research by insolvency trade body R3.

R3, also known as the Association of Business Recovery Professionals, “promotes best practice for professionals working with financially troubled individuals and businesses”. R3’s insolvency practitioners have been raising concern about payday loans and a new kind of “zombie” debtors who only pay the interest charges on their debt and not the debt itself.

R3 president Frances Coulson commented on the issue of payday loans voicing his concerns:
“Payday loans are not the best way to resolve debt struggles. We know that many who take them out find them to be a negative experience, often escalating financial troubles.”

“We hear talk of ‘zombie’ businesses, but seeing individuals run their finances in the same way is troubling. ‘Hanging on’ each month simply cannot be maintained forever. This group will have very few options should interest rates rise or their circumstances change.”

“Having a financial buffer is crucial to weathering periods of difficulty. If struggling to payday becomes a regular occurrence, seeking financial advice should be a priority over short term high interest credit. ”

Of the 2,000 people interviewed by R3, 45% struggle to make their money last until their payday while 60% of those who had taken a payday loan have already regretted the decision. Moreover, 48% claim the payday loan had negative impact on their financial situation and only 13% believe their payday loan impacted positively on their finances.

According to house equity withdrawal (HEW) data released by the bank of England on Wednesday, households are paying back a record amount on their mortgage.

During the second quarter of 2011 alone, consumers paid back £9.1bn on their mortgages, amounting to 3.5% (-3.5% of HEW) of their post-tax income. This is the largest figure ever paid back in a three-month period since the Bank of England started collecting data.

To put these figures in perspective; in late 2006, house equity withdrawal had peaked at 5.6% of post-tax income, as compared to -3.5% from April to June of 2011. Simply put, house owners were remortgaging their properties a lot more before the recession.

Today, as home owners are cutting back on spending and house prices continue to fall, remortgaging does not have the appeal it had during the “boom” years. Since June of 2008 a grand total of £92.9bn has been paid back instead of being spent by home owners.

An article by Kate Reinold of the Bank’s structural economic analysis division (.pdf, 70 MB) published with the 2011 Q2 Quarterly Bulletin explained that the fall in HEW since the recession is “likely to reflect a fall in the number of housing transactions, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past.”

IHS expert Howard Archer said: “The record net injection of housing equity in the second quarter points to a strong desire and perceived need of many people to improve their personal financial balance sheets given high debt levels and serious concerns over the economic situation and jobs.”

“Furthermore, extremely low savings interest rates have made it much more attractive for many people to use any spare funds that they have to reduce their mortgages. In particular, many people may be using the extra money that is resulting from their very low mortgage interest payments to reduce the balance that they still owe on their houses.”

In an effort to attract new buyers and motivate current customers during holidays, Halifax announced the extension of the 0% introductory rate deal on its all-in-one credit card to 15 months (up from 13 months) for both purchases and balance transfers.

This is the longest combined balance transfer and purchase card deal currently in the market but what does that mean for potential customers?

Simply put, customers won’t have to pay interest on any new purchases until March 2013 and any balance transferred from another card will receive a 15-month interest-free period starting when the card is issued.

All balance transfers from any other card are charged with a rather typical 3% handling fee that needs to be factored in when moving existing debts over to the all-in-one.

Such a strong promotional offer may tempt customers to frequently use the all-in-one card for all their spending during the interest-free period. However, specialists strongly advise paying off your debts within the promotional period to avoid “being hit” by the much higher interest rates that follow.

After the 15-month interest-free period, the Halifax All-in-one comes with a representative APR (annual percentage rate) of 17.9%.

Also, cash advances such as withdrawing money from ATMs are charged with an annual rate of 27.95% which can and should be avoided as customers benefit a lot more if they use the card for direct spending instead.

Head of banking at MoneySupermarket.com, Kevin Mountford commented: “There is no doubt that a long term dual purpose credit card is a welcome addition to the credit card market as it allows consumers to spread the cost of shopping and debt consolidation. The appetite for lenders to attract new credit card customers continues despite the current economic climate.”

Mr. Mountford also warned that “It is worth bearing in mind that although many customers will receive the 0pc offer for 15 months, this card is ‘risk-based’, so if you have a less than good credit profile you are unlikely to get this specific deal and may be offered an alternative.”

Forbes analysts explain that the mortgage crisis of 2007 had forced Northern Rock to turn to the Bank of England for liquidity support to meet short term debt obligations and unable to an acceptable offer from the private sector, Northern Rock was eventually nationalized on February 17, 2008.

Now, the British Government is selling Northern Rock plc to Sir Richard Branson’s Virgin Money for £747m. Completion of the transaction is expected on 1 January 2012.

The official announcement states that “The sale is in the best interests of the taxpayer, secures the long-term future of the company and will increase competition in the banking sector. This is part of the Government’s wider strategy for the banking sector with safer ring-fenced banks and more competition for customers.”

As part of the sales agreement Virgin Money has committed to:
• No further compulsory redundancies, beyond those already announced, for at least three years from the completion of the transaction.
• Retaining and expanding the total number of branches currently operated by Northern Rock.
• Extending support for the Northern Rock charitable foundation for a further year.
• Making Newcastle the operational headquarters for the combined business.

According to the press release from Virgin Money the transaction will create a significant new competitor in UK retail banking and, in doing so, it will help increase diversity in the retail banking sector as Virgin Money seeks to innovate and expand into new market segments.

Virgin Money stated that the transaction has the potential to eventually raise more than £1bn for the taxpayer in the long term along with numerous other benefits including the return of public sector stakes in banks to the private sector.

Sir Richard Branson, Founder of the Virgin Group said: “Banking in the UK needs some fresh ideas and an injection of new competition. I’m delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market. Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking”.

While many analysts have commented positively on these developments others are skeptical and some have warned that Virgin Money products must become more competitive in order to revitalize the stagnant banking market.

Adrian Coles, director general of the Building Societies Association, said that Northern Rock’s sale was a “bittersweet moment” with both positive and negative effects on the market.

According to FSA (the Financial Services Authority), 52% of people find it too complicated to compare financial products and another 46% are unsure whether they are getting a good deal on a financial product or not.

In an effort to help consumers choose between financial products Her Majesty’s Treasury has created a new steering group focused on promotion and development of “simple” financial products such as simple savings and protection insurance products to be brought to the market.

The steering group will bring together government representatives and specialists from trade, industry and consumer organizations. Together they will consider how “simple” products should be developed and forwarded to the market, starting with simple savings and protection products as well as simple investment products.

Former chief risk officer at Lloyds Banking Group, Carol Sergeant, has been appointed to chair the group which will submit its final report to Mark Hoban, Financial Secretary to the Treasury, in July 2012.

Ms Sergeant commented on the formation of the steering group: “Simple, easy to understand products need to be a viable commercial proposition for the industry, while offering consumers a straightforward benchmark that gives them the confidence to make good decisions in an often bewilderingly complicated market place.”

She pointed out that the success of this project “will require the involvement of consumer groups, financial regulators and the Money Advice Service, as well as the savings, investment and protection industries.”

Financial Secretary to HM Treasury Mark Hoban said: “Simple financial products have the potential to help many consumers make decisions that will help them save for the first time and plan for a secure financial future for them and their families. I am delighted that Carol Sergeant has agreed to chair a steering group to develop the thinking on simple products further and to work with industry and consumer groups to bring them to fruition.”

Thousands of holidaymakers are running the risk of spending thousands of pounds on medical bills as they travel abroad without insurance.

According to the 2011 ABTA travel trends report, 21% of British holidaymakers travel abroad uninsured, mistakenly believing the government will cover their medical bills in case of an accident. This figure rises above 25% for young adults under 25 years of age.

Moreover, 17% of Brits travelling abroad rely solely on EHIC, the European Health Insurance Card to cover their medical bills and believe that an EHIC will cover their journey back to England should they become ill. However ABTA warns that the EHIC only provides access to basic medical care and does not cover repatriation costs.

Lynda St Cooke of the Foreign & Commonwealth Office commented on the findings: “If British travellers get into difficulties overseas, there are things the nearest British Embassy or Consulate can do, including contacting friends and family for them and giving them information on how to safely transfer money from the UK. But consular staff cannot pay hospital bills for British travellers, nor fly them home if they run out of holiday money.”

John de Vial, ABTA Head of Financial Protection said: “It is very worrying that so many people are putting their health and finances at risk by travelling abroad without insurance. Many wrongly assume that it is the Foreign Office’s responsibility to pay for their hospital bills, particularly younger travellers. In the current economic climate customers should be careful to purchase insurance at the time of booking their holiday to obtain cancellation cover for redundancy as well as any potential illness prior to travelling. ”

These high numbers of uninsured travellers can be partially attributed to FSA (Financial Services Authority) regulations on insurance sold by travel agencies. Since 2007, these regulations boggle travel agents down with extra costs and red tape dissuading them from selling travel insurance. Therefore travel insurance sold through travel agencies now account for less than 17% of the total sales since agencies chose not to sell travel insurance because of the regulations.

Greg Lawson, spokesperson for the travel insurance company Columbus Direct said: “No one wants an unexpected bill and certainly not on holiday. We would join with Association of British Travel Agents and the Foreign Office to recommend that, as well as an EHIC for travel in Europe, travellers take out insurance whenever they travel overseas or in the UK.”

Average house prices across the UK have been steadily declining throughout the year and according to a survey by Halifax consumers expect house prices to drop even more in the foreseeable future.

According to the survey, thirty percent of the people surveyed predicted a further decline in prices over the next twelve months while a quarter said that prices will not change in the coming year. All the while a house price expectations index by Halifax fell to -2 from this year’s highest value of +9 in April.

Halifax economist Martin Ellis commented: “It is unsurprising that confidence in the housing market has been shaken a little over the last few months given the increasing uncertainty about the current economic environment, together with pressure on householders’ finances,” and he added: “We expect little change in both prices and activity over the next few months.”

Forecasts on house prices by analysts have also been pessimistic, predicting house prices to drop by as much as 5% in 2012. The generally weakened economy combined with substantial fears that the economy could start shrinking again point to further decline in house prices over the next twelve months.

However, as residential property prices across the UK continue to fall, prime central London prices continue their steady climb. According to the Land Registry house prices in London have increased by 2.7% since September 2010 and are now at an all-time high.

Many observers question the stability of those inflated figures, especially at the top end of the market, while others argue that these figures reflect a growing tendency for buyers, both local and overseas, to purchase central London property as a long-term investment.

Earlier this month, the Bank of England’s Monetary Policy Committee voted to give the economy an additional cash injection of 75 billion pounds.

This was the second round of quantitative easing (QE) as the bank had already injected 200 billion pounds back in 2009 in an effort to increase commercial bank lending.

While answering questions on the current status of economy to a parliamentary committee, Bank of England governor Mervyn King commented on the decision to increase QE and the impact that might have on bank lending:

“I can’t guarantee that it means that bank lending will rise, but what I do believe is that it won’t fall as far as it might otherwise have done and it may start to rise now we’ll see. But I think the action will make a difference to the amount of lending, but it certainly doesn’t guarantee that lending to the real economy is positive.”

Mr. King acknowledged that Britain’s economy has been problematic and mostly stagnant for the past year and warned that it could start deteriorating again as he commented on inflation and the causes of the “very large squeeze on household income”:

“Now that’s not the result of inflation being high, inflation is the symptom. The causes of that squeeze on living standards are real causes, they are a change in real prices of energy, and utility prices of gas, electricity at home, they are the consequences of higher Value Added Tax, higher food prices, and consequence of a fall in the real exchange rate which was necessary to enable us to be able to rebalance our economy in a way that was… after quite a long period, and of relatively overvalued exchange rate.'’

Finally, when asked why the Bank of England did not increase the QE plan earlier, possibly stimulating commercial bank
lending, the governor replied that the deterioration of the Eurozone and world economy could not have been predicted earlier.

“I don’t think the scale and the immediacy of how the problem deteriorated in the euro area was obvious at the beginning of the summer”, he replied.

The bank of England approved 52,410 new mortgage loans in August, marking the highest number of mortgage approvals since December 2009.

The director-general of the Building Societies Association, Adrian Coles commented: “Approval figures continue to look promising as consumers take advantage of the competitive mortgage rates.” But he also forewarned: “However, the outlook for the economy has deteriorated over the past month as has consumer confidence, which could well spill into the housing market, causing further weakness”

The number of new mortgages approved for home buyers in August was nearly 3,000 more than in July and over than 5,000 more than the previous six-month average.

Meanwhile, the Nationwide reports that: “UK house prices changed little in September” rising by 0.1% in the month but still being 0.3% lower than one year ago.

As new mortgage approvals are expected to continue in the coming months experts believe that sales funded by mortgage loans will see an increase during autumn and this could be reflected in the coming updates to the House Price Indexes across the country.

However, according to the Bank of England’s latest credit conditions curvey (2001/Q3) a lending squeeze to households and small businesses might be imminent due to the eurozone crisis.

According to the Bank’s Q3 survey, lenders “pointed to adverse wholesale funding conditions as a key factor which might constrain future lending.” And recent discussions with some of the major lenders suggested that “although these factors had not yet led to reduced credit availability, a period of sustained tight funding conditions could act to constrain their ability to extend loans going forward.”

Between the rising number of mortgage approvals and the adverse wholesale funding conditions reported by the Bank of England there might be a relatively small window of opportunity before 2012 for households and small businesses to take advantage of an optimal mortgage loan.

A recent survey in England and Wales showed a continued decline in house prices in September as well as a nation-wide decline in the number of sales for the first time in almost a year.

House prices have been falling for 16 consecutive months and fell by 0.3% in September following a difficult August. The average British home lost £594 in value in September alone according to the latest LSL Property Services/Acadametrics House Price Index.

The Royal Institution of Chartered Surveyors (RICS) outlined a stationary housing market saying that homeowners are reluctant to sell and are pulling their home sales because of the current economic outlook might force them to drop their prices.

The seasonally adjusted house price balance calculated by RICS remained at -23 in September, one point higher than the figure expected by analysts but still indicative of a weak housing market.

The latest RICS UK Housing Market survey (11 October 2011) showed the balance for newly agreed sales falling to -4 from +2 in August and new vendor instructions also declining to -5 from -1 while new buyer enquiries rose to +3 from -2.

Members of RICS said that house prices are expected to continue their decline in the coming months while mortgage rates will remain relatively low.

Tom McClelland of RICS said houses were selling “at prices not seen for seven or eight years” and that “sellers who understand and accept where the market is are being successful and are finding buyers.”

RICS spokesman Michael Newey commented on the situation:

“Generally speaking, while it is hard to see what will give the market a lift in the near term, the announcement of a further raft of quantitative easing from the Bank of England will help to at least keep mortgage rates down. This, if nothing else, should ease the pressure on existing homeowners and limit the risk of a material pick-up in repossessions”.

In recent years as many as 4 out of 10 mortgages have been taken out on an “interest only” basis. Many of these borrowers expected that assumed growth in house prices would help them pay off their loans – but something went wrong. Instead of house prices increasing they went into reverse. Over the last two years many properties have lost as much as 25% of their pre credit crunch value.

The Financial Services Authority (FSA) has estimated that as many as 4.2 million borrowers have to face the possibility that their interest only mortgage could mean that they’ll not be able to move for some years to come as the sales proceeds from their home would not leave them with sufficient to fund the deposit for their next home. Indeed, some would be left still owing money to their lender after selling their home due to negative equity.

To make the situation even worse, as unemployment has risen, it is inevitable that some of these borrowers will have become unemployed or have been forced to take new employment on lower wages.

At the moment many mortgage advisers are advising clients to switch from interest only deals to conventional repayment mortgages. But if they cannot afford to do this they should either over pay on their current mortgage or start up a regular saving plan.

If you are caught in this “interest only” basis then please do not ignore the problem. It’s a ticking time bomb.

Economists say that the average age of a first time buyer who isn’t receiving financial help from their parents is 37 compared to 31 for those who are lucky enough to get help from Mum and Dad.

This is not surprising bearing in mind that the latest figure from the Council of Mortgage Lenders shows that the average deposit for a first time buyer has increased from £13,194 in September 2007 to £31,875 now.

And even when a buyer has their offer accepted, the problems don’t stop. Despite recent increases in sale prices, surveyors are still down grading house values and frequently the value they attach to the house for lending purposes is lower than the agreed sale price.

The Halifax has reported that house prices grew by 1.5% during the summer but the price of flats and maisonettes popular amongst first time buyers grew by nearer 2.5%. This is due to a shortage of affordable properties suitable for first time buyers.

The figures also show the affect of the lenders tightening up on lending multiples combined with lower prices post credit crunch. The average advance to first time buyers has fallen from £118,750 to £95,625.

All this is not good news for the property market. A healthy property market relies on all sectors of the market being buoyant.

Millions of people in overdraft will see their overdraft charges cut. The Halifax, with more than 5 million customers with current accounts, ha instead introduced a daily penalty of £5 if you go into the red. The bank previously charged £35 for a refused payment due to insufficient funds, £35 for authorised transactions whilst in the red, and £28 for using an unauthorised overdraft.

This all amounts to a month is £155 rather than £238 A DAY under Halifax’s previous charging arrangements.

The NatWest has announced that it was cutting the charges for a bounced cheque from £38 to just £5.

This all seems to have resulted from pressure from the Financial Services Authority although letters we have seen from banks imply that it is simply as a result of a “long-term review”.

No matter what the truth, it is a fact that banks need to be more transparent in their charging and customers need to be given a fairer deal.

Building Societies are beginning to introduce some cheap mortgage deals – but you’ll have to get up early to bag one.

The Newcastle B. S. and the Coventry have stolen a march on their competitors by launching some fantastic rates but there are signs that the Newcastle could their deals very soon and the Coventry withdrew theirs after just seven days,

The basic problem is that the building societies are unable to borrow in the money markets and all their mortgage lending have to be funded by investors savings and mortgage repayments from their clients. So if their deals turn out to be very popular, the money runs out in a flash.

And first time buyers still shouldn’t get too excited either. They may be the first to get out of bed and queue at the building society, but all these deals still require a deposit of at least 20% and a near perfect credit history.

The credit crunch remains with us.

Just imagine. You’ve been to the show house, fallen in love with the housing development and signed up to buy a house off plan for £500,000 and paid the 10% deposit. The only problem you may have thought was that you’d have to wait 12 months to move in.

Ten months later the letter arrives to say that the house will be ready in 8 weeks. But things have changed. House prices have fallen and the building society values the house at £425,000 and, as business is not so good, your income has fallen too.

What do you think the building society will say? Yes, you guessed it – no mortgage! But you have signed a contract to pay the balance of £450,000 for your new home and the builder wants his money and you’ve signed a legal contract to pay.

This sort of situation does happen. Berkeley Homes is in the process of taking an unknown number of it’s clients to court to recover the money they are owed.

So please be very cautious if you are tempted to buy a home off plan especially if you are having to raise a hefty mortgage to complete the deal. And also be aware that, despite the recent upswing in house prices, some commentators are still forecasting that house prices will go into reverse again next year.

Please be careful.