New approach to the offer of mortgages

Changes put forward by the Financial Services Authority will introduce some of most significant changes to the mortgage market this country has seen in recent times.

The FSA new rules for banks  to follow on approving mortgages are designed to make sure customers are not able to borrow more than they can afford. They include a ban on self-certification mortgages, new rules for those seeking to remortgage, stricter rules on interest-only mortgages, improved affordability checks, and a change in the rules on how advice is given by mortgage brokers.

These changes have come about prevent another boom in mortgage lending and in house prices. This is what happened in the middle of the last decade and why some right wing commentators say we are now facing one of the worst financial disasters ever witnessed.

So how does the affordability test, as proposed, work?

A lender will consider how much you spend on essential household expenditure such as heating and council tax plus basic living costs and other debt commitments. If these changes are implemented a lender will no longer have to consider how much you spend on discretionary spending such as on leisure activities and holidays as it will expect a borrower to change spending habits if the borrower wishes to succeed with the loan application.

Lenders will also apply a “stress test” on your finances so as to assess your ability to afford your mortgage repayments if interest rates rise in the future.

What about interest only loans?

Borrowers will only receive an interest-only mortgage if it can be proved there is a robust strategy to repay the capital, such as from the sale of a second home or have an Isa (Individual Savings Account) or from regular bonuses.

Replacing existing mortgages will also prove difficult under these new rules though the FSA have introduced “transitional arrangements” to help existing creditworthy borrowers that might not be able to move home or refinance as a result. Lenders will be allowed to waive the new affordability rules for existing borrowers if the borrower has met repayments for at least the last 12 months and have not fallen into arrears. Existing borrowers who need to borrow more will however be subject to the new affordability rules.

These new rules are unlikely to change the current attitude of borrowers and in the short term are likely to keep property prices stagnant.  Whether this will assist first time buyers remains to be seen, though our view is that they will only serve to make it more difficult for those looking to get onto the property ladder and force more people into looking to the rental market.   These rules could very well begin to turn our property market into those markets commonly found on the continent where home ownership is not a priority and indeed a goal of those looking for a home.

The rules will create a more stable housing market but one which will be seeing a reduced number of transactions and one where only those who have financial stability and a track record of proving it will be able to become home owners.  Whether this is good for the country as a whole and will lead to a more stable and balanced society will remain to be seen.

As conveyancers, there will be fewer transactions around and as those borrowing will face higher lender fees and perhaps spend more money to prove their track record and credit worthiness, there may be a temptation to make economies elsewhere, and perhaps look to find the conveyancer advertising the lowest price.

At MJP we understand this, and this is why we offer a competitive price for our moving service, but with the commitment to ensure we also provide a personalised service and one in which we take pride.   We are able to offer a quality service at a discounted price because we operate a unique case management system and have quality checks built into every stage of our process.  All out clients can access the system and receive regular updates straight to their phones.

Each client is also assigned his or her very own case handler who will oversee the transaction throughout its course.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

"David Pett and his team have been excellent - regular updates and speedy responses to queries. Something that has been problematic with other solicitors in the past" 

Louise Stone - December 2011

Conveyancing and Litigation - The differences

I have had the fortune to work in various different areas of the law during my career.  I started like most young lawyers of my time treading the boards of the local Magistrates Court trying my best to represent people who in the main had little appreciation for my efforts.  I then progressed into family law, running from court to court seeking injunctions only to be running back a week later asking for the injunctions to be withdrawn.  

For the majority of my career however I have been involved in the litigation process mainly undertaking personal injury work.  I have also undertaken sport related work acting for professional footballers and boxers.  A mixed bag which has become even more extensive in recent times with my introduction to residential conveyancing.   I have always had an interest in and enjoyed contract based work and therefore found the move into this area not so daunting.

My initial experience of this field of work has proved insightful. I have always looked upon conveyancing as uninspiring and dull.   A view I know shared by many other litigators.  I must say however that this is not a fair representation of what I have found to be a very demanding and often enlightening area of practice.  The danger, I suppose, of viewing and drawing conclusions from outside observations.

So how does conveyancing and litigation differ?

To begin with and the most noticeable difference is the pace at which conveyancing proceeds.  Unlike litigation where one is working within quite generous protocol and court timetables, the average conveyancing transaction time is around 6 to 8 weeks, during which the pressure to cross the finishing line is immense.  The fear of a transaction collapsing and the general stress of moving has made the process even more pressurized and demanding.  Letters coming into the office need to be answered on the same day otherwise the danger is that by the following day they will have been overtaken by events.

I equate the constant pressure to the buzz and work that goes into preparing for a large trial, making sure all of the witnesses turn up, collating and sorting trial bundles and generally ensuring all of the hard work undertaken during the previous 2 to 3 years is not put to waste.

The other major difference is the involvement of a large number of contacts and the obligation to keep everybody updated.  In litigation there is of course the client, the ‘other side’ and perhaps an insurer at the beginning. In conveyancing you can have two firms of solicitors to communicate with along with the two sets of estate agents and the client.    This has the effect of tripling the number of calls you would normally receive when working within litigation.

The third and major difference is the inconsistency in approach and application of the conveyancing process.  Each practitioner has his or her way of drafting contracts, some firms follow the Law Society protocol, other s follow local protocols.   It is clear that this is a process that is in need of reform.  It is too focused on form filling and administrative tasks and far more cluttered with pointless obligations and requirements than the court process that has benefited in recent years from constructive reform.

The time has come for conveyancers to step out of the ‘smoke and mirrors’ and join together to demand reform and to make the process simpler and far more consumer friendly.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Housing reviews announced

It’s taken the demolition of an industry, some of the worst trading conditions for decades but finally its seems our politicians are beginning to wake up and acknowledge that the housing market is in a complete mess and is in need of reform.

As to when it is likely we will see measures introduced it is not known, though with today’s announcement that Civil servants in the Communities and Local Government department are to carry out a review of the private housing market there is at least some glimmer of hope that change may happen sometime in the future.

The Coalition’s review will be led not by housing minister Grant Shapps but by Oliver Letwin a man whose ideology is unlikely to allow him to subscribe to any change that would involve the imposition of regulation.   

It is not known what areas the review will cover though there are reports in certain publications today that suggest it will cover house building and the state of the housing market.

At the same time it seems Labour will carry out its own review led by Caroline Flint, shadow CLG secretary.  It will be called ‘How do we meet families’ aspirations for good housing and a good home?’ and will last for a year.  It will cover all aspects of housing and interim results are due this summer.

Love or hate it the home information pack legislation represented a brave and progressive move on the part of the Labour Party, a move that will probably not be seen or even attempted for quite some time.

My concern is that for any change to take place and indeed survive it is essential that policy should be conceived with cross party support as without this we will inevitably witness a repeat of the shameless way the Coalition Government put ideology in front of consumer interest when it threw the conveyancing process back in time with the abolition of the home information packs. 

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

The changing face of Housing

Unlike the Continent we are a land where the majority of us aspire to owning our own home. In fact according to the Housing and Planning Statistics 2009 there are 22 million dwellings of which 68% are owner occupied.   There are only according to these statistics around 3 million properties which are privately rented.  Contrast this with Germany where half of the housing stock is occupied by tenants.

So why are we so obsessed with ownership?  For many of us it is how we have been brought up, to do well at school, to find a job and to then look to buy a property, normally as part of settling down and starting a family.  It’s part of our make up as well as being regarded by some as a symbol of success.  For others home ownership is about financial security at a time when pensions and other investments are constantly at risk form economic downturn.  

The tide may however be changing or about to change and there are many reasons for this, the main one of which are the austerity measures taken by the Government and the impact these will begin to have on how we live our lives in the future.

There are of course other factors such as affordability. The National Housing Federation reported an eight per cent rise in house prices and the continuing squeeze on lending means that would-be buyers in Cornwall now need to earn more than £54,000 a year to set foot on the property ladder.

The Government’s housing policy however is the main cause for change in the way we look at housing and could well see the end of the Country’s property owning democracy. The Government has as part of its recent Spending Review slashed the building budget for affordable homes by 60 per cent, and given only 140,000 new private houses will be built in the UK this year, we will soon be facing a major shortage of new housing stock.

The shortage of new housing combined with limited mortgage lending, insecurity about jobs and the worry of making long term lending commitments, and in some areas the high cost of getting onto the property market, can only lead to large property institutions seizing the opportunity this presents to invest in the building of property designed only for rental.

‘Build to let’ is the latest buzz phrase and we have already seen the likes of Legal & General, Aviva and ING making overtures in this direction.

Some private investors have already begun to purchase land in London with a view of creating ‘no thrill’ three bedroom family flats in complexes where heating and other services are shared.  Rents would be set at around £300 a week – surprisingly, just below the £340 housing benefit limit to be introduced next year for three-bedroom accommodation.  To me this all sounds similar to the Council Estates which exploded onto the scene in the 60’s and 70’s.

The Government’s agenda hidden in part behind the Spending Review is quite clear; it wishes to reduce the role of the State in housing and to open the door for the private sector to fill the gap.  The challenge for the private sector is to decide where demographically it will pitch its investment.  The risk is that those who were at one time looking to get on the housing ladder and who may be looking for rental property could be overlooked with the focus being on those eligible for housing benefit given the financial security and guaranteed return this presents.  Those who fall in between low income and the level of wage needed to purchase a home could find themselves even further out in the cold.

For this reason there must be stricter controls exercised through planning restrictions to ensure we do not end up as we did in the past with parts of the country where all those occupying property are from the same social background.  We must strive for a fairer distribution of our ever shrinking housing stock otherwise we face the risk of creating even deeper cracks in the social fabric of our country.

David Pett is a partner with Morgan Jones and Pett and can be contacted  HERE: CLICK TO E-MAIL

How can I help my solicitor make my home move less stressful and quicker?

 Solicitors despite the image some may give through poor client relations do understand that moving home is stressful and for the client is one of the most important lifetime experiences.   We know that you are worried about the transaction falling through before contracts are exchanged; we also know that making arrangements to move in to a home are fraught with complexity and expense.      We recogonise that you expect given this anxiety to be regularly informed about what is happening. This is understandable.

So what can you do to help?

To begin with you should at the outset receive a ‘pack’ of information from your solicitor containing documents of various description for you to read and in some instances complete.      I bet some of you think that we do this on purpose, that we send what may seem to be hundreds of documents in the hope that this will impress you and justify our modest fee!     The true answer however is that we are obliged to send some of these documents because of obligations placed upon us by the organization that regulates our profession.  Other documents are necessary as part of the home moving process.   Most forward thinking solicitors like us believe that the system for moving home is antiquated and requires reform. Unfortunately until a progressive looking Government changes the system we have to work within the constraints of a system that was designed when far fewer land transactions were taking place.  So this brings me to the first tip – please read the papers we send and do your best to complete the forms etc fully and ensure they are returned promptly.   Time is often lost having to chase for information and documents that are requested at the outset.  The more you can supply the quicker the process will be.

The other advantage of reading the ‘pack’ in full is that it will contain an explanation of the process and should answer a number of the questions you have about timings and the stages of the procedure.

The second tip relates to trust and understanding.  Although your move is the most important thing to you, it must be kept in mind that for a solicitor to be able to quote a competitive price for the job, he is obliged to take on and process a number of other transactions.  It is not uncommon for a busy practitioner to handle at any one time around 80 live transactions.  Though an equal amount of time is devoted to all of the cases, as far as that can be achieved, it is inevitable that there will be times when you case does not receive daily attention.  If a practitioner were only to handle say 5 to 20 cases at any one time, he would probably have to charge around £800 to £1000 for each transaction to make it pay. Many of you would not sadly be prepared to pay a premium of that level for personal attention of this type.   So an understanding of the practicalities of a modern day conveyancing firm does I am sure help.  As does the fact that where there is a ‘chain’ of transaction taking place it is more often the case that the process of you case is hampered by the slowness of someone else within the chain.   This is frustrating as it often gives the impression that your solicitor is slow.  So as for my second tip please can you show some understanding by trusting your solicitor to do the best he can for you and to allow him to get on with the work he is undertaking for you.   I know from personal experience that having to take phone calls during the day can prove very disruptive and cause delay.  I am not advocating that you should never call your solicitor; all I am saying is that before picking up the phone just ask yourself whether the call is necessary.   Many solicitors prefer and find e-mail communication less disruptive.

This brings me to my final tip and one that I consider would help tremendously if followed.  One of the largest groups of callers into conveyancing departments is that of estate agents.  I recogonise that they are keen to see a transaction completed quickly for obvious reason, but I simply do not understand why some persist in calling every day to find out about progress.  I can perhaps understand an agent calling on behalf of a client of that agent but when we get as we do calls from the agent of the other party it is, at least in my view, unacceptable and very disruptive.  So if you could speak to you agent and make sure they do not call without your approval this would be very helpful.

At the end of the day the client comes first and the need to keep the client updated is paramount.  We have to work in a system that is inherently slow and which is akin to an age when telegrams and manual type writers were prevalent.  Clients expect a professional and quick service but at an affordable price.  The question whether the high street lawyer can continue to meet this demand is a question for debate on another day.

David Pett who is a partner with Morgan Jones and Pett wrote this Blog Entry.  His role involves the supervision of the firm’s Residential Conveyancing Team.  He also runs the Business Development and IT Team. He can be contacted at davidpett@m-j-p.co.uk

Your feedback would be appreciated – davidpett@m-j-p.co.uk

Why the Law Society’s Conveyancing Quality Scheme is the final nail in the coffin for the high street conveyancing solicitor

 Buying a home can be stressful and often leads to anxiety.    Those like myself who work in the industry understand this and though we work hard to take steps to ensure the stress is kept to its minimum, we are often left feeling equally frustrated. 

Most solicitors working in this sector are working 70 hour weeks plus if not longer trying to make some money out of what has fast become a very competitive and in the main profit losing area of legal work.

Those who understand conveyancing will know that given the antiquated system for conveying property in which we are forced to operate the only way to stand any chance of making some money is to commoditize the product, keep the price low and have in place good technology.    At the same time quality and client relations must be maintained.

The constant battle between competiveness and quality often makes it difficult for the solicitor to deliver the type of service that one would expect from a supplier of professional services. Whether the client is paying £600 or £200 the level of expectation is the same as are the demands of the client. 

Given the client is expecting high standards of service but at a low price the future for the solicitor as a provider of this service looks grim unless something is done to make the process more slim line and less cumbersome. The Law Society that purports to be an organization that exists to promote solicitors interests seems more preoccupied in bringing in more stringent quality standards for conveyancers than putting pressure on the Government to modify the home moving system.

The Labour Government introduced Home Information Packs, and although they were not well received, they did go someway towards speeding up the process and making it less stressful.  The Law Society was presented with a golden opportunity to build on this initiative but failed to respond positively. Unfortunately our current government lacks the insight (and indeed the motivation) to bring in measures to improve the system and the signs are that we will not be emerging from the dark ages for sometime.

David Pett who is a partner with Morgan Jones and Pett wrote this Blog Entry.  His role involves the supervision of the firm’s Residential Conveyancing Team.  He also runs the Business Development and IT Team. He can be contacted at davidpett@m-j-p.co.uk

Your feedback would be appreciated – davidpett@m-j-p.co.uk