We had a play in the new studio this week and you'll notice I've been magically dropped onto the news articles... SCARY!! Let me know if this has increased your viewing pleasure. :-)

Bank of England predicts inflation will be below its 2 per cent target by 2012. Also confirming the economy is well and truly on the road to recovery and with no double dip insight. What will this mean in terms of interest rates and the economy as a whole?

Find out why the CML and FSA aren't meeting eye to eye? We'll take a close look at some of CML's thoughts on the mortgage market and work out if they make any sense.

Finally, we see house prices rise for the sixth successive month. Is this realistic or just another artificial price increase? And why Savills is bursting our bubbles by telling us their price fall predictions for 2010.

As always if you have any questions or want to have a chat about current opportunities call the team on 0207 812 1255.

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Transcript of video 'The battle between the CML and the FSA'

Hello and welcome to this week’s Property News Update with Brett Alegre-Wood, your source for everything that’s happening in property in the UK, Australia and around the world.

Hey guys and welcome to Weekly Property News Update. I’m Brett Alegre-Wood and today is Wednesday the 11th of November 2009.

So today what we’re going to cover first of all – Week 2 of Movember. So as you can see I’m sporting a rather horrible moustache and I’m going to show you what the rest of the guys look like and obviously as they grow through the weeks we’ll see the growth. We’ll look at the Bank of England and predicting growth next year and their latest inflation report for the quarter has come out and just what Mervyn King is saying about that. CML, their thoughts on the mortgage market and looking at that in a bit of detail because I actually agree with what they’re saying in a lot of ways. Unemployment surprise drop of about I think it was 40,000 or 4,000 – we’ll take a look at that. House price rise again for the six months, now last week it said four months – this is a different index so six months now and we’ll have a look at that one. 6.6% drop in house prices expected in 2010, now that’s a Savills report so we’ll have a look at that.

My thoughts for the week – look you know finally some reality coming back. We’re starting to see some news talking about the fact that actually this isn’t a sustainable, this isn’t a realistic price increase that we’re seeing. So we’re really been in a daze of recovery. You know we’ve been hoping and believing that it is but you know as I’ve been saying – hibernate from the news for the next six months and you’ll be fine. And certainly with the Savills report 6.6% - you know that sort of backs that up in what we’re saying is… The other thing is I was going to make a point is that we’re not into a double dip; I don’t think we’re going to be in a double dip and you’ll see what the guys are saying about that.

So first of all let’s have a look at the lovely team and all the boys and the one Mo-sister who has joined in which is Sophia. So you can have a look there at the photos and you’ll see they’re coming along quite nicely for a lot of them. James is still trying hard. Okay guys onto the serious stuff now.

Look UK Economy Recovery ‘Highly Uncertain’: Forget that, the main thing I wanted to get across was this, you know: Based on the City’s expectations for interest rates and a £200 billion boost to the money supply from quantitative easing which is what they’ve announced (the Bank of England) the bank predicts inflation will be at below its 2% target in two years time. Now what that means for us is interest rates will stay quite low. So this is what the Bank of England are predicting. Now there’s a whole heap of variables affecting that so it’s not a case of this is what’s going to happen. If you have a look at the theory of what they’re talking about you know this is where they’re saying we are currently, and there’s this lovely fan chart that goes from worst case to best case and what they’re saying is the middle case which is what they expect to happen, the beautiful thing is is rather than it looking like this where the best case is about even and the worst case was horrible, it has started to move up. So recovery is definitely on its way and you know it doesn’t matter what anyone says, they can say prices will drop by 30% but I don’t see that, certainly not.

Boom-time coming, says Bank of England: This is another thing, the actual report on what they’re saying and what I’m talking about when I’m talking about this you know, they’re saying contraction of 4.5% this year 2009, 2.1% growth in 2010 and 4% in 2011. Now 4% growth is you know well, a 2.1% growth or any growth is good now. Boom-time? Yeah, well okay, this is a massive upward revision from the 2010 to 2011 that they announced in August which was 1.9% next year and 3%. So things are starting to look up and certainly the Bank of England, they’re predicting that things are getting better and we’re getting back on the track to recovery and in fact the next boom if you like. And obviously that’s what this article goes into there.

Now Council of Mortgage Lenders: So I want to spend a little bit of time here and I just want to go through these points because I think they’re really important points. First of all, and this is their summary of the markets, now you’ll notice a lot of things there’s a division between the FSA and the CLM – they’re not meeting eye-to-eye. The FSA very much I think is off in their own little world and I agree with the CLM with a lot of things they’re saying. Some lenders and intermediaries have already left the market, perhaps never to return, given the levels of activity will be much lower in the future: So they’re predicting because these people have left, they’re not likely to come back in. A growing number of borrowers are – or will be – excluded from entering or transacting in the market. Among this group will be first-time buyers without deposits, customers whose credit ratings have been affected by the recession. Okay? And self-certified borrowers who are at a risk of being denied access to the market [by a change in FSA rules] because of what the FSA changes are doing. Lenders, as a whole, do not have enough funding for mortgages to help promote the economic activity: So what the CLM is saying here is that actually it’s going to be a long time getting back into what it was pre-2007 because of a lot of these factors.

A mortgage market in which there is a thriving range of [different] types of lending institution – banks, building societies and specialist lenders – has largely disappeared. This is a key challenge is to reverse this trend. So they need to get more competition back to the market. Again we’re taking about competition which is a good thing. Alright? The development of innovative products capable of delivering real consumer benefits is being constrained: There’s just no choice out there. We need that choice back.

Mortgage costs have risen, and will remain higher than before the credit crunch: And you know we’ve seen that already as a buy-to-let investor you know you’re paying a 3% arrangement fee plus you’re paying 3% above base, or 4% above base (whatever it is). You know it’s ridiculously extortionate.

Also a final point here: There is a risk of regulatory intervention: And this is the CLMs little dig at the FSA and I totally agree with them. You know what they’re going to do is restrict the marketplace by regulating it and over-regulating it. So that’s sort of the CLMs view of what’s happening and why things aren’t just going to jump back on and create a boom-time straight away.

So good news: Unemployment rate fell in September. It fell! Alright, now if you think about it it’s been going up for quite some time now. Unemployment is generally the last indicator out of a recovery. Now I don’t think this is necessarily realistic but it is good news in that what will start to happen, and what always starts to happen towards the end of a recession, is that we start to hear about unemployment recovery, so the fact that it’s dropped by 4,000… Now we’re taking about 4,000 on 2.465 million so it’s not a huge amount but it’s good news from that perspective.

House prices rise for sixth successive month: Now last week I said four successive months – I was using a different, I was using Halifax or HBOS, now I’m using the Department of Communities and local government which also has a house price index. So they’ve seen six month rises. Remember they’re using different – it’s not apples for apples, it's apples and oranges. Okay?

Now I thought I’d end on this which might be a bit sobering but I think it’s important to bring some reality back to the market. More house price falls next year. Property prices will soften 6.6% next year according to Savills: Now the important thing here is you know what we’ve been saying for a long time is I think this is artificial, all these price rises, and I think what that report and what Savills is saying is the prices are going to come down to where they should actually be before recovery. And they’re actually saying that you know: Research team expect prices to rise 2.7% in 2011 before increasing 27% between 2012 and 2015; which is great news. So it’s… Well it’s bad news it’s dropping 6% but I think it’s just going to bring it back down to reality.

So guys hopefully that’s created, or it’s got the creative juices happening. I’m Brett Alegre-Wood and I’ll see you next week!

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