A new report calls for greater regulation of estate agents

June 16th, 2008

The former head of the Office of Fair Trading has released a new report claiming that estate agents, letting agents and managing agents, who handle residential property, should be subjected to much more formal regulation.

Anyone can set up in business as an estate agent, but Sir Bryan Carsberg says a basic qualification is needed. He also suggests that Home Information Packs (Hips) should become voluntary.

Sir Bryan’s report, which contains 30 recommendations to improve the way the residential property market works, was commissioned last year by a number of bodies.

They included the Royal Institution of Chartered Surveyors (Rics), the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (Arla).

The report’s aim was to look at ways to improve regulation, standards and methods of redress for people buying or renting property. Rics welcomed the report as the basis for “major reform” of the industry. Many people are now chooosing to work on their own homes instead of moving and they are using home improvement loans in the UK to facilitate this.

The biggest change in England and Wales to the sale of residential property has been the introduction of Home Information Packs. These were originally designed to provide much for more information upfront to potential house buyers and to cut short the often frustrating process of buying a home.

But despite saying that more information for customers is one of his key aims, Sir Bryan recommends that Hips should become purely voluntary. And he said that they should not, as was once intended, include a survey of the property that is being sold.

“It would not be helpful to introduce new measures through legislation or regulation to require the production of surveys, home condition reports or valuation reports at particular times,” he said.

“I think that the markets for estate agencies, letting agencies and managing agencies are not working well because clients are not well informed about the qualifications of different agents and about what to expect from them in the way of service,” he added.

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UK growth forecast cut, but is it recession?

June 16th, 2008

UK economic growth will slow to its lowest level since 1992 next year, employers’ group the CBI has warned. In March, the CBI lowered expected GDP growth for 2009 from 2.1% to 1.7%. It has revised the number downwards once more, now putting expectations at 1.3%, as households tighten belts due to higher food and fuel prices.

The CBI’s forecast is well below that of the government, which is still expecting the economy to recover to grow at around 2.5% next year. The Chancellor is expected to address the growing strains on the economy when he delivers his Mansion House speech to the City of London on Wednesday.

And just as significantly, the CBI also warned that inflation was likely to breach the government’s 2% for some time to come, driven by higher oil prices. It predicts that inflation will peak at 3.8%, and says it expects it to rise to 3% when new figures are released on Tuesday.

If inflation is 1% higher than the government’s target, then the governor of the Bank of England must write a letter to the Chancellor explaining why he has failed to meet the target.

High inflation will make it more difficult for the Bank of England to cut interest rates to prevent a possible recession. Indeed, financial markets now expect the Bank to raise rates by the end of the year.

And there is also little leeway for the government to increase public spending, as it already facing a record public sector deficit. However, the slowing economy will eventually reduce inflation.

That slowdown may not be a full-blown recession. There are a number of definitions of a recession, with economists often differing on what is required. However, the most-used definition of a recession is when there are two quarters in a row of economic contraction, or negative growth.

The CBI says consumption growth will be down to only 0.7% in 2009, also the lowest since 1992. Inflation, which the CBI expects to hit 3.8% within four months, will limit the capacity for the Bank of England to cut interest rates and increase spending, it says.

Ian McCafferty, the CBI’s chief economic adviser, said: “The profile still suggests the UK will avoid a recession, in the sense of two quarters of negative GDP growth, but it is a very prolonged period of very sluggish growth in prospect.”

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The Competition Commissison Calls Time on PPI Scams

June 9th, 2008

The Competition Commission has suggested that overpriced Payment Protection Insurance (PPI) plans are costing consumers £1.4 billion each year. PPI is insurance for loan repayments if someone loses their income due to ill health or unemployment.

Lenders are able to get away with such extortionate deals because they are tied to the loans they are insuring. This ensures there is no competition in the market. The commission now suggests that firms may be banned from selling PPI policies to customers when they take out loans.

The Competition Commission has been investigating PPI after being asked to do so by the Office of Fair Trading and has said it was considering imposing temporary price limits on the policies, until competition brings their prices down.

The OFT had concluded that PPI was often a poor deal because the level of cover was less than customers thought. It in turn was responding to a “super-complaint” by Citizens Advice which was first lodged in September 2005.

The sale of PPI polices has been under severe attack in the past three years, with Citizens Advice describing their sale as a “protection racket”. The main financial regulator, the Financial Services Authority (FSA), has fined numerous banks, insurance companies and brokers for mis-selling the insurance.

In May the FSA fined the furniture retailer Land of Leather, and its chief executive, £224,000 because staff selling PPI policies had not been properly trained.

The main problem, according to the commission’s analysis, is that people are given no choice of potential insurance policies at the point of sale when they take out a loan, credit card or mortgage.

Many people do not know they can shop around and are unable to work out the real price of the policies, which are sometimes bundled into the cost of the loan. The policies are often complex and opaque and may be bought because the customers think that doing so will improve their chances of being given the loan.

The Commission suggests that advertising and marketing material should be in a standard form to explain PPI properly, to make different polices easily comparable, and to tell customers that they can shop around.

To help people switch to cheaper policies the regulator suggests that they should be renewed annually, with the provision of an annual statement of the policies’ costs and a reminder that they can be cancelled.

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