Finance news. My opinion.

House prices rose 1.3 per cent in December, defying predictions of a property price crash.

However, data from Halifax shows annual house price growth in the three months to December fell to 5.2 per cent from 6.2 per cent in November and the 11.4 per cent in August.

The prediction for 2008 is now flat house growth, with prices held up by a strong economy – with high levels of employment – and the Bank of England’s predicted interest rate cuts for 2008.

Martin Ellis, chief economist at Halifax, said: “This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market.

“Overall, the housing market continued to slow in the final quarter of 2007 with prices slightly lower than in the preceding quarter.

“Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007 and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity in recent months.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), said the Halifax figures did not mark at turning point for the market.

“Our suspicion is the market environment is likely to remain challenging for at the least the first half of this year and that activity levels will remain subdued,” he said.

“However, unless inflation proves an increasing barrier to the Bank of England’s ability to lower base rates there is unlikely to be a material decline in house prices.”

Mr Rubinsohn went on to explain mortgage lenders were key to the future of the property market – along with the effects of the credit crunch, which are making securing a mortgage harder quick payday loan.

“A key issue for first-time buyers eager to take their first step onto the property market in this climate will be the willingness of lenders to provide finance on attractive terms,” he said.

“The slippage in money market rates since the start of the new year suggests that there is more chance of further interest rates cuts being passed on more fully to borrowers but just as important will be the willingness of lenders to maintain loan to value ratios.”

However, Howard Archer, chief economist at Global Insight, expects house prices to fall by three per cent over 2008.

“While the 1.3 per cent rise in house prices reported by the Halifax is undeniably a surprise, it is likely to be largely a correction after the particularly marked overall fall in prices through the previous three months,” Mr Archer said.

Despite the predicted stagnation of property values, Halifax is reminding property owners that house prices have risen 182 per cent over the last decade – making a £70,000 house in 1997 now worth £197,000.
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WASHINGTON—American Home Mortgage Investment Corp. wants bankruptcy court permission to sell pools of mortgages in which borrowers are behind in their payments and owe $164 million in principal on the loans.

The failed mortgage lender has asked the U.S. Bankruptcy Court in Wilmington, Del., to approve a Feb. 13 auction for the mortgage loans, according to court documents filed last week.

American Home has proposed to sell three pools of 618 non-performing loans in which payments are more than 60 days past due. That total could change if borrowers catch up on their payments or more fall behind.

American Home is one of many mortgage lenders that have been forced into bankruptcy due to the credit crunch. It has been selling its assets and winding down its business free credit reports. In October, the bankruptcy court approved the sale of American Home’s loan-servicing business to Wilbur Ross’ private-equity firm.

According to court papers, a pool of 83 loans are subject to liens by American Home’s bankruptcy lenders, including the entity set up by Ross to buy the loan-servicing business. Another 208 loans are subject to liens by Bank of America Corp. JPMorgan Chase & Co. has an interest in the remaining 327 loans.

American Home has proposed a Jan. 25. deadline for interested buyers to submit indicative bids and a Feb. 11 deadline for formal, binding bids.

The bankruptcy court will consider American Home’s request at a Jan. 14 hearing.

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Sherry Ridge assists the person wanting to eliminate debt, as well as the couple having a tough time paying their mortgage.

Ridge, owner of Sherry Debt Free, teaches people how to get out of debt and create and follow a budget.

“It’s all about choices,” says Ridge, a Round Lake Beach resident for 20 years. For example, Ridge never buys a brand new car. She gives clients easy tips on how to save money. For example, she says that if women don’t wear makeup one day a week, they’ll save $60 a year.

For the past decade, Ridge has led Debt-Free & Prosperous Living workshops. She was certified by and works as an independent contractor for the Wisconsin-based company that sells the workshops.

Ridge is proof that the program works. Before she started teaching the method, she tried it herself. She paid off her 30-year mortgage in less than seven years.
She’s now attempting to help others follow a simple budget.
“Money can’t buy happiness. But your debt can stop a lot of things,” she said.
Ridge said she works with clients living paycheck to paycheck and who don’t have a plan.

Mainly working with couples, Ridge said she meets with clients twice, once to create a budget looking at all expenses, from manicures to golf outings free credit report without a credit card. She creates a budget tailored to the client’s needs and then creates a debt-elimination plan.

Ridge, 44, said the cost for the two-session consultation is $399.

She also holds a variety of workshops at area schools and park districts, including the College of Lake County, Harper College, Libertyville and Mundelein high schools and the Gurnee Park District.

Beginning in January, Ridge is attempting to reach more people. She will host a new weekly radio show addressing household budgeting, debt elimination, personal cost-cutting efforts and more.

The show airs at 1 p.m. Wednesdays on WRLR 98.3-FM or via the Web at www.wrlr.fm.

The first four shows will address the housing market. She will talk to mortgage brokers who will discuss foreclosures and what a new homeowner needs to look for when getting a mortgage. February will address tax returns.

Ridge also wrote a book titled “Practical Household Budgeting.” She sells it for $25 on her Web site at www.sherrydebtfree.com.

Ridge, who grew up in Las Vegas, also volunteers in the community. For the past seven years she has taught English as Second Language classes at Mono A Mono Family Resource Center in Round Lake Park.

She hopes to soon launch less costly Internet sessions addressing how to get out of debt.

For more information, call (847) 740-9178.
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Realtor Lori Naese calls it the worst kind of loan.

It’s the kind structured so that, if the mortgage-holder doesn’t refinance by a certain date, he or she will be locked in at some extraordinary interest rate, to the extent that a $1,000 monthly payment soars to $1,800 overnight.

That’s because few of the borrowers using those kinds of predatory loan instruments are able to qualify for refinancing, especially as credit has tightened and the number of foreclosures mounts.

“I know several families that this has happened to,” says Naese payday advances. “They have really struggled.”

Holders of the aforementioned loans — in addition to the near-doubling of their mortgage payment — also lose big in the fee structure of the default financing.

“When that day hits for these families, you’d have to be a millionaire just to afford the fees,” she said. “I’ve seen a case where the fees ate up all of the $11,000 the owners had in equity in their house.”

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From the moment queues started to form outside branches of Northern Rock in the middle of September, the stock market has been asking questions about the other second-line mortgage banks Alliance & Leicester and Bradford & Bingley.

Now by magnificent coincidence they have shed some light on their affairs on the same day. The good news for savers is that both banks have managed to secure their sources of funding well into next year without having to rely on the Bank of England.

A&L has organised more than £10bn of funding with the assistance of Credit Suisse, which has taken a chunk of its mortgage book as collateral.

B&B revealed last week it had secured £4.2bn of extra funding, through pre-planned asset sales, and has covered its wholesale funding requirements well into 2008.

This is all just as well. A&L has disclosed that it is having to take a charge of £55m against investments in America’s ailing sub-prime mortgages. It is also concerned about the true value of complex debt instruments and is writing these down by a further £110m.

With so much uncertainty still surrounding slice and diced packages of debt known as ‘ collateralised debt obligations’, we cannot be sure this is the end of the story.

As of writing leading audit firms are still struggling to come up with a common policy for dealing with on and off-balance sheet debts in the approaching reporting season.

As big a challenge for free standing mortgage lenders like A&L and B&B in 2008 is the state of the housing market bad credit payday loan. The latest data from the Nationwide suggests that prices are in reverse, falling 0.8% in October, the first monthly drop since February 2006 and the biggest monthly fall for a decade.

The house price indexes from Hometrack, Rightmove, RICS and the Halifax are all pointing southwards. So far, despite reports of foolish lending during the boom years, defaults look to be modest.

The Council of Mortgage Lenders doesn’t think this will last and is predicting a 50% rise in defaults next year. All of those who lived through previous bust cycles will recognise how rapidly the mood can change and the impact that could have on future profits.

It may be that some high street banks might see the opportunity for what RBS’s Sir Fred Goodwin once described as ‘mercy killings’. That may be the only realistic hope for any sustained share price recovery.

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