This week once again our Brian Gilmour appeared on his usual slot on BBC Radio Scotland to discuss the Scottish Property market. The callers and texters were varied as usual but the discussion with Kaye started with a review of the potential interest rate rise.
Kaye: Interest rate rises, again we’re talking about the potential for interest rate charges going up. What are the implications for mortgages over this?
Brian: In the short term they’re not too bad, a .25% increase is about £12 on an average mortgage repayment in Scotland, so it’s not huge. Where the issue arises is, lots of people are on things like two-year fixed rate mortgages or tracker mortgages where they’re a certain amount above the Bank of England base rate. Unless they deal with that when they come off the fixed rate or the tracker rate, that’s where the change can be. So a typical tracker rate just now would be somewhere between 1.04, 1.09%. Then they will drop onto a variable rate when they come on at the end of that to about 3.7%.
Kaye: That’s a bit of a jump, isn’t it?
Brian: That’s a bit of a jump. Where it can really start to stack up, if this .25% … They’re talking about a 0.25% rise, which in the grand scheme of things, our interest rates are at a 325 year low.
Brian: Yes. So if you put it in that context, I mean when I first bought my property I was chuffed to bits because I got a fixed rate at 7.84%. If you start putting it in that context, we’re still incredibly low. A .25% rate rise will take us to where we were at the Brexit vote. The bank of England cut at .25% at Brexit. For seven years before that they’d been at half a percent. All we’re doing is talking about going back up to where we were in 2006, so not a major jump. The issue will be … Mark Carney’s big concern is consumer debt in the UK. We’ve come out of recession based on all of us borrowing money, it’s not really been because of a government stimulus or because industry is performing specifically well. Consumer debt is about £1.9 trillion. So we’re all borrowing more money, that’s where his concern is.
Kaye: Because it’s cheap.
Brian: Because it’s cheap. He was actually critical of the banks that they weren’t being as prudent as they should be on things like car loans and credit card debt. So there’s talk of a .25% rise to try and deal with that, which obviously has an impact on mortgages. Where the issue will be is, if you’re on a current two-year fixed rate and there’s a .25% and then in another three months there’s another .25%, and another two, three months there’s another .25%. That 3.79 I talked about is the current variable. It’s 4.79, you can see why that then becomes an extra 60, £70 a month that you are going onto. But if you’re currently on a one-point-something percent, then you’re going up a full 3%. That’s where it starts to be a problem for mortgages.
Kaye: Right. You know as you say it’s at an all-time low. I didn’t realise it was going back 325 years. Those of us who’ve had a mortgage for a long time will recognise that it is very low. But because it’s been at that level for kind of 10 years now, hasn’t it?
Kaye: There’ll be a lot of people coming into the market and that’s what they think mortgage rates are. Of course most mortgages are over 25 and increasingly beginning to be over 35 years now. For those people, if they project forward … Let’s say in, I don’t know, six years time we’re back up to six and seven percent being standard or even higher. They might get the fright of their lives.
Brian: Yeah, I mean if you go back to … Let’s go back 20 years. You go back 20 years then it’s 7-1/4, 7-1/2%. You go back 30 years or 28 years and you’ve got that Black Tuesday of 13 and 14% interest rates. People have got to take into account, as you say, that we are at a 325 year low. There is lots of chat that we’re in a different period now. I think Japan has had low interest rates for 20 years.
Kaye: Yeah, stagnation.
Brian: Yeah, so we are in a different period, but it is always prudent to look back at where we’ve been in the past because there’s always a possibility that we are like that in the future. I mean even at the Labour Party conference last week, the shadow chancellor was talking about they done war-gaming, to use his terminology, of a run on the pound and all the consequence that would arise from that. One of the consequences would be a massive spike in interest rates.
Kaye: Brian, thank you for that, for depressing everybody there. No, no, absolutely, it’s very relevant and important advice. Brian is going to be back just a wee while later to answer any of your questions about property. I’m just sorry, I’m hesitating there because we’ve got a question already in about drain problems. But anyway, so you can look forward to that, Brian.
Brian: Okay, I’ll get my wellies on.
Kaye: Get up to speed on that one, but anything to do with property, Brian is happy to help. 08085 92 95 00 or text him on 80295. We’ve got some people getting in touch with some much more impressive epic journeys that you or I would ever plan. Dave in Blairgowrie climbed Mount Elbrus in Russia, the highest mountain in Europe. Most people think Mont Blanc is the highest. I’ve never heard of Mount Elbrus had you?
Brian: Neither did I.
Kaye: No? Okay. Alexandra from Wigtown says, “My epic journey will take place in December and will take the form of moving to Australia permanently with three kids under six, two dogs and seven months pregnant.” Oh, my goodness, that is an epic.
Brian: Yes, it is, yeah.
Kaye: It is, good luck with that Alexandra. That is very exciting. It’ll be wonderful. It’ll be absolutely wonderful. Your epic journeys, whether they have remained in your head or whether you’ve actually done them, we’d love to hear about them, 80295. Do keep getting in touch with your guesses for name the place. Brian in Stevenston says, “The Treshnish Islands because it sounds like the woman’s name.” Yeah, because that’s the first clue, Trish and the borders often solves. Name the place. You may feel drawn to today’s placename. It’s not, no, it’s not. “Kilbride”, says Peter in Motherwell. “Is it Dalry?”, says Margaret. “Kilbride at Skye”, says Gerry. “Livingstone” says Chris from Stirling. No, it is not. It is 10:20, we have gone past the point that last week we had heard the klaxon. Happy days. 80295. Good morning Alan.
Caller: Hi there Kaye, hi Brian.
Brian: Hi Alan.
Caller: Can I just quickly go back to your previous story about the CSS, and just say that my wife had that just after childbirth. Within 72 hours she’s a blood patch and what a difference it made. But I just want to say that the doctors in the NHS can sometimes be absolutely fantastic. In her case they were brilliant.
Kaye: Well that’s great. So she got a really quick diagnosis and effective treatment and recovered well. That’s great to know.
Caller: Only my next problem which it kind of puts that in perspective. I’ve come into a home which I can’t sell, which value will probably be affected. It’s due to me having two floods at my property. This has been ongoing for three years. I bought the house four years ago, had a great first year. Since then I’ve sent over a thousand emails. I’ve involved councillors, MSPs, it’s even gone up the level of Rosemary Cunningham. I still don’t have it resolved due to the disruption within the estate and the design of that drain system as well, which I’ve since found has been inadequate. But I can’t get the developer to act appropriately. I can’t get the council who were involved in the planning process to fully engage.
Someone with Scottish Water have done some work, including putting a moat around my house for several months. We had to have sandbags outside our house. They promise that they’ll do things. The builder has promised, although he don’t engage with me directly. The council promised they’ll do things to adjust the road, and we’ve still not got a conclusion to it. I don’t know where else to take this.
Brian: So you say this has been going on for three years and you’ve owned the home for four years?
Brian: So it started a year after, it hadn’t been in place before you owned the home?
Caller: Not as far as I’m aware. We bought the house at a year old, so we didn’t but it directly from the developer. The problem actually started, we had noticed a deterioration in the ground, and there seemed to be a sort of ground-slide where about a metre of ground disappeared. We subsequently found out after first flood that what had been happening was, adjacent to our home there was a manhole. There’d been a sub-charge and it had been deteriorating, the water had been deteriorating the ground there. We had Scottish Water involved. We had work done and they said, “That’s it, resolved.” And then a year later we’d the same issue. We’re at the lowest point of the estate. We found out that the storm cells aren’t right. It’s above where it should be. So basically you’ve got a backup. So it won’t properly empty. We believe it wasn’t the right size for a 70-house estate. So there’s all sorts of problems with the bastard. At the end, I don’t know what’s wrong with it.
Brian: It sounds like one of these issues where there’s multiple agencies involved and each agency is passing the buck to the other agency as being the root of it …
Kaye: That’s a nightmare.
Brian: … and they’ve to find the issue. If you strip it all back from … Scottish Water obviously have an involvement. You’ve written to MPs, MSPs, but if we strip this all back from what you’re saying to us, the issue for me at least seems to lie in two places. It’s the developer who has been at fault in what they’ve done, then the council whose role it is to enforce and make that the developer complies with all the criteria that will have been set out when they went through the planning stages of creating this estate. I mean that’s a common complaint if you go to speak to a builder or property developer, it’s how long it will take to get planning. I’m dealing with a builder just now he’s been promised by a local authority fast-tracking of planning, and that fast-track will be nine months. So it gives you an idea that-
Kaye: It also makes you realise that it’s often for good reason.
Brian: Yes, and it’s for these types of reasons. You’ve always got Scottish Water involved in a new development, because what they’re concerned about is the bulk of the water infrastructure and drainage infrastructure in Scotland is, particularly in urban areas, can be over 100 years old, so you can’t just plug in a new development and then you’re connecting up to an older infrastructure. So a lot of the time builders will often estimate that 25 to 30% of the cost of a site will be underground that people don’t see, because it is often Scottish Water requiring that it’s not just the drainage at the new build site is up to standard, but also they will then need to upgrade the subsequent infrastructure that that’s feeding into.
So it sounds like Scottish Water have been involved, stripping it all back. As I say, the people you need to pinpoint and get in the room with are the developer and if it’s a larger firm, make sure you write into the CEO. If it’s a big enough firm and you’re really not getting any traction here, and this might seem a lot of hassle but turning up at an AGM is something that larger PLC firms don’t want to happen. The other really important thing, it sounds to me, it’s the officials of the council that you need to be getting dealing with this as well.
Caller: Can I just come back in?
Caller: I’ll be honest with you, the builder is complicated with the fact that he has said he took on the site and the drainage was already in place. The estate was started being built during the time of all the problems we had financially, builders going out of business. It is in a sense the same person, but under a different name. So he is passing the buck in regards that. I’ve tried all that, to be honest with you. I’ve had assistance now with experts. Had I been still on myself, I don’t think I would have got anywhere. What I find is, with the whole planning process is that planning can come up with some wonderful system, drainage system, whatever it is, nobody is monitoring it. I’m not comparing to your end sell in terms of the repercussions but it seems to be self-regulationary by the builder. Basically we have council can see we want this type of design, this type of drainage system, but as soon as it’s under the ground, the builder can place a bit of rubber under the ground and nobody will know. He’s lucky. He gets away from the estate, which he’s done in this instance.
Kaye: Can he take legal action, Brian?
Brian: Yes, I would be going to see the lawyer. I don’t think it’s any defence of the builder to say, “I took over the estate from somebody else.” I know the point you’re saying, the builder would have had one company that went bust and started a new company and has bought this asset, would be in the part-build site of the administrators for his new company. But the fact is, he has bought it and it’s his responsibility when he’s finishing it off to make sure that legislation is complied with. It is a common complaint that people have that … If I move this to another area, the private rented sector is currently going through the biggest change in 30 years in terms of new legislation and new enforcement.
One of the criticisms you will hear people saying is, “There’s new legislation coming in to try and deal with an issue but actually if they enforce the existing rules the issue would be dealt with.” A lot of the time it is the enforcement. If you speak to local authorities they’ll say, “It’s reduced budgets since the crash, which we don’t have the time to enforce it so we require sign off.” But at the end of the day the council, and Scottish Water, and other authorities shouldn’t be signing something off which results in what you’ve got here.
Kaye: Yeah, Alan, listen I mean there’s never going to be an easy way of tackling this, but as you say there are so many people involved. It’s about focusing your attention on the person that you think you can kind of stick to the wall.
Brian: Yeah, it’s the builder. The builder will not like a bad reputation if he’s now got a new company that he’s moving on to another site. He’ll not want bad word-of-mouth reputation.
Kaye: Yeah, on another story that we did … What was it? I’m just trying to think. Somebody who was taking issue with a company over something and they went around and they stuck up flyers. Good old fashion flyers around about the lampposts … Not that I’m advocating guerrilla tactics, Alan, but around this builders next development. They just wrote down the facts and made people aware of it and that prompted some fairly swift action. So sometimes maybe the old methods work most effectively.
Some questions in for you, Brian. Let me remind you of the number to speak to Brian, 08085 92 95 00 is the number. Texting is on 80295. This one’s saying, “I’m an 88-year-old man. Two years ago I decided to get my flat into a more manageable state. The contractor was recommended to do very poor job. My nephew who has relevant experience says my flat is a mess. I wrote to the contractor with my complaints without result, except an offer of £1000 to settle, which I rejected. I’m discussing my complaint with the department who recommended him, but they prefer to discredit me. What more can I do?” That’s a very unfortunate situation to be in.
Brian: Yeah, again, with many of these things it’s go and speak to a lawyer. Go and speak to citizens advice. The fact that he’s offered £1000 already implies to me that he-
Kaye: Well it’s kind of good news in that there’s some kind of suggestion of liability.
Brian: There’s some acceptance. Even just getting a lawyer’s letter involved might just move that £1000 to £2000.
Kaye: Yeah, and try and budge it up. It’s the flip-side of property isn’t it? When you look at all the programmes that we have on television etc., it’s all about your new home and the excitement and creating your forever home. I think Alan used that expression there. But this can be the grubby stuff.
Brian: Yeah. Where there’s money involved and there’s humans involved, humans make mistakes and humans get greedy. So people can see an opportunity. The other side of it is the TV programmes with the cowboy builders that you’ll see on. So try and get, if you’re looking for tradespeople … It sounds as though the 88-year-old texter there did try to do this, but try and get some word-of-mouth recommendation from people before you get any work done. Sometimes people make mistakes, and sometimes there’ll be errors and sometimes those errors and mistakes aren’t noted. Sometime down the line you get a new heating system and you get it installed in April and it’s not until October, November that you find that there’s a problem with it. It might just be error, other times it’s cowboy builders.
Kaye: Absolutely. Well lots of people do get into sticky situations with their property, including Johnny Depp. We’ll find out about that in a second.
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Kaye: Right we’ve got some questions in for you, Brian on property. But before we do, I mentioned Johnny Depp there. He was selling his horse farm this month. Probably outside most people’s budget. It went on sale for $2.9 million but it didn’t sell, I don’t think. So he decided to put it to auction. Now auction sales really, really fascinate me. I mean when is that a good way to sell your property, or indeed to buy a property, if ever?
Brian: Buying a property, one of the things, Caveat Emptor, let the buyer beware. You’ve got to be careful when you’re buying a the property. Do your research. Make sure that the legal paperwork … There’s been an issue in Scotland recently with somebody buying a property and then finding it was set to be condemned after they’d bought it. So you’ve got to be careful of things like that.
Kaye: But do you get a chance to do that if you’re buying something at an auction?
Brian: Well yes, you do. It’s actually a dilemma for auction houses, because most auction houses will produce the catalogue and the owner just wants to sell. They’ve gone to the auction because they perceive that it’ll be a quick sell. They just need a sale. I think there’s an auction this week with a property for sale for a pound, starting price is at a pound. So that’ll be an owner who’s thinking, “I just need to get rid of this, so somebody’ll pay something.” The dilemma for the auction house is, the person just wants it sold so you can put in an offer before the auction for a lot of properties that are up for auction. But if you’re an auction house, you don’t want … This is the downside of selling from an auction. It’s in their interest to keep the bulk of properties available on the auction day. Nobody is going to turn up if that company has a reputation for, you turn up on the day and there’s only three properties left.
So that’s the dilemma if you’re selling through an auction. You’ve got an auction house who’s got mixed requirements. They want to get your house sold, because that’ll give them a good reputation, but they also want to save it up for the day. The benefit of the day, if you’ve got a busy room with people with money in it … People listening to this might not have been to a property auction. Lots of people might have been to some form of dinner with a raffle or auction happening in the room and you can see prizes that get a lot of money if it’s a good room, then a prize that hardly gets anything if it’s a bad room. It’s the same with a property auction, if you’ve got a good room with good property developers in that room, then you might get some good prices. If you’ve got a good auctioneer, I’ve seen auctioneer bouncing prices off the walls to get close to the reserve price that you agreed to sell at. All of those are factors that come into play, but at the end of the day for Johnny Depp, property will only sell at the price that someone is prepared to pay for it.
Kaye: Yeah. As a seller, can you walk away?
Brian: What you would do as a seller, you give the auctioneer the minimum price that you are prepared to sell for. The downside again of an auction … The good side, a full room, it keeps getting bid up. The downside is there’s no scope for negotiation. So you have to make sure that that minimum price you’ve given the auctioneer is not, “Well, actually I probably would accept another £1000 below there.” If you would probably accept another £1000 below there then reduce your reserve price because the auctioneer will go around the room and if your reserve price is £100,000 and the best bid he can push the room to is 97, you’ve not sold and he moves on. It’s important that you do your sums, know your absolute minimum price that you’re prepared to take in the auction and then it’s in the hands of the auctioneer in the room on the day to get that price up.
Kaye: I don’t know, it sounds like a situation for professionals rather than just a regular person.
Brian: I dealt with professionals. I’ve dealt with professionals who they will have their reserve price and if the property doesn’t sell, they just stick it in the next auction that’s coming around the corner and they will keep it there reserve price until the property that they want to sell goes.
Kaye: Until they get the good room.
Brian: For a buyer the good thing … Or the seller, rather. The good thing about it is, when the hammer falls that’s missive signed.
Brian: Deed done.
Kaye: All done and dusted, nice. Jackie Sheridan says, “Can you ask the property expert how long home reports last as I was told when we were selling the flat that if it didn’t sell within 12 weeks we would have to pay for a new report?”
Brian: You need to refresh the value after 12 weeks.
Kaye: Right, okay.
Brian: That’s three months for the value. It’s to do with the markets changing.
Kaye: But it’s not an entirely new report?
Brian: No, it’s a refresh report, so it should be a reduced cost. You need a home report to get it on the market. Then after three months, you need a refreshment on the value.
Kaye: Right, but it’s still going to cost you money?
Brian: But it’s still going to cost you money.
Kaye: Ben is saying, “Could you please ask Brian, I stay in a block of flats in the upper floor. The roof needs repairs. Do all four of us need to pay for it?” So presumably there’s four in the block.
Brian: It’ll be in your title deeds, but probably, is the answer. All four of you will need to pay.
Kaye: Right, okay. Somebody else asking, can I get a mortgage after finishing a trust deed? Somebody has stumped him.
Brian: Stumped me.
Kaye: Somebody has stumped him.
Brian: Best speak to a mortgage advisor.
Kaye: He’s blushing. There’s not much that stumps Brian, I tell you. Well you know there’s no point in giving advice on something you’re not entirely sure, absolutely.
Brian: I’m not going to give the wrong advice.
Kaye: No, absolutely not. Earlier on Alan called in and he was telling us his fairly nightmare situation with his house flooding. Somebody has chipped into that saying, are the houses under an NHBC guarantee?
Brian: Yes, which is the other thing NHBC guarantee lasts for 10 years. So he said it was a four year old property, because he’d owned it for three years and it was a year old when he bought it. So I’m pretty sure it will be under an NHBC guarantee, so yes.
Kaye: Right, so would that be a good route to go down?
Brian: So that would be a good route to go down. Yes, go to the NHBC. There’s-
Kaye: That’s a new house builder’s-
Brian: House builder’s certificate. It’s like an insurance policy, to rectify any issue. It actually deals with a situation where a builder might go bust.
Kaye: I think Alan sounds as if he’s tried everything, but you haven’t tried that Alan, it might be worth it. Quickly just before I let you go, Laura says, “I live semi-rural. However planning permission for housing approved by Taylor …” Well it says “Taylor Wimp” to write out. I think it must be Taylor Wimpey.
Brian: Taylor Wimpey.
Kaye: “… Right in front of my house. What rights do you have as the whole outlook is changing, the view and the house price. Privacy will be hugely affected but no one has given us any information and are not consulting with us. Could you advise us of our rights?”
Brian: She should have a neighbour notification, if she’s close enough to it. But if it’s already been … If the outline planning permission has been granted, she might still have a case before it goes to detailed planning permission. But if detailed planning permission has been granted then she’s got some challenges.
Kaye: Right okay. Not good news, but sometimes unfortunately that’s the case. Brian, thank you very much indeed. We’ll see you in a couple of week’s time. That’s Brian Gilmour our property expert.