Here is a recipe for disaster. You have a large fixed rate mortgage which is going to come to an end next year. And you have a very high loan-to-value (LTV).

When you come to the end of the fixed deal, not only do you risk an interest payment hike, but you may not be able to get a new fixed deal at all. The lenders may insist on a larger cash or value element than you have available.

The big danger is being stuck on a lender’s standard variable rate. It used to be the case that if the Bank of England cut its base rate, all the lenders cut their interest rates. But since the credit crunch, any interest rate cuts are not being passed on by lenders, because they urgently need to recapitalise their businesses. Halifax, Nationwide, Britannia, Skipton and Cheltenham & Gloucester have all raised their rates recently. So even if the Bank of England lowers interest rates, you can’t rely on the benefit being passed on to you.

What can you do to hedge or protect your position next year? One solution is to reserve a rate 6 months in advance. When you get a mortgage offer, the lender will often guarantee to lend to you at a particular interest rate and the offer can remain open for as long as 6 months. You have to pay a fee which might be 2½% of the loan, but balance that against the risk that if you leave it till 6 months time to renegotiate your mortgage, interest rates may have gone higher than ever making it impossible for you to afford the new mortgage rates. The beauty of this approach is that if offers you some protection if rates go up, but you don’t have to take it up. If everything changes in six months and there’s a better mortgage deal available at the time, you can take that instead. All you’ve lost is the fee. That may be a fair price to pay to secure yourself in an uncertain future.
It may be worth it if you are in negative equity, so you can’t sell or raise a mortgage elsewhere.

Some deals also come with a “drop lock” option which allows you to switch from a tracker deal to a fixed-rate deal without paying a penalty. The advantage of this  is that you can initially go on a tracker mortgage if you see interest rates dropping, but if they rise, you can switch to a fixed rate to avoid getting caught by a very high interest rate.

Apparently one large law firm has told its conveyancing solicitors that they will be made redundant - unless they want to take a post in Eastern Europe. I suppose it’s better than most property lawyers are getting. Some of the largest firms in the country are is simply laying people off with no more than statutory minimum redundancy pay.

One sure sign that the property market is not just going through a short term blip is that even the Land Registry is having to lay off staff. . This is because the number of properties changing hands has fallen so markedly. Apparently about 1,250 staff in the various Land Registry offices around the country are being offered redundancy terms. The Land Registry employs 8,300 people, so it’s laying off a sixth of its workforce. The Land Registry have the best data possible on what is happening in the property market – prices and deals. So if they are judging that there will be no quick return to a vibrant market any time soon, that is depressing news.

Solicitors had to pay their indemnity insurance premium in one lump on 1 October, and it can be a hefty chunk of the projected turnover for the year. Apparently a lot of firms have just closed rather than pay it, because business is so bad.

According to “industry professionals”, in addition to the firms who just gave in and closed, up to 500 solicitors’ firms fell into the “Assigned Risks Pool” - the ARP - which is a kind of self-funded insurance pool for solicitors who can’t get insurance cover in the marketplace. [Thanks to whoever you are, for putting me right on what ARP stands for.] This could mean they simply didn’t get it arranged in time, or they were relying on a quote from just one insurer which didn’t come. But it does sound like an awful lof of solicitors’ firms couldn’t afford the one-off premium when the deadline came, or couldn’t arrange financing for it.

Until now, personally I have not seen much evidence of firms going under, but 500 firms going into the ARP sounds fairly catastrophic to me.

The Law Society Gazette also says indemnity insurance premiums were up 40% this year, which couldn’t have helped either. But maybe not all firms were hit. Our premiums were actually 10% down on last year.

I have been reading about the mortgage frauds on a very large-scale which are being uncovered in flat developments in Thamesmead. No one notices mortgage frauds when the market is going up, only when it crashes and the lenders don’t get paid.

Financially savvy criminals agree to buy a load of new flats from a developer off-plan at a very steep discount to the published price - perhaps even 30% lower than the developers are advertising the flats to the public. The crooks then sell them on at the published price. Nothing wrong so far. They are perfectly entitled to take the gamble of signing up at a discount and they do pay their 10% deposit to the developers. But they don’t rely on finding real buyers, although they may find a few. What they do is come up with a load of phoney buyers who take out self-certifying mortgages – “lie-to-bet” mortgages as they are now amusingly called. The crooks don’t even need bent surveyors for this. The surveyors can see what price the developers are offering the flats at, so they can certify that figure as the appropriate value to the lenders.

Then at completion the ultimate buyers use the mortgage money to buy the flats off the crooks, who simultaneously buy them off the developers as the agreed discount. When the buyers are phoney they never pay the mortgage, the crooks merely let the flat and pocket the rent till the lenders repossess, up to a year later.

The fraud was essentially in not taking the risk of buying off plan and then having to find real buyers, but setting it up so that the mortgage companies would be financing the whole thing anyway with they realised it or not.

Developers helped this process along, because they refused to reveal to banks what discounts they had offered to other buyers. So lenders were always assuming unrealistically high values for the flats, because they were going by published intended values, not real deal prices. When the potential for fraud was revealed, the banks threatened to stop lending on new blocks of flats altogether. The deal they have now done with developers is that the lenders must be told the amount of any discounts.

Probably no one will ever get prosecuted.

With banks seemingly collapsing every day, and thousands being put out of work, mortgage payment protection insurance sounds like a brilliant idea. What it does is pay your mortgage when you can’t, due to losing your job through redundancy or ill-health. Sometimes payments start immediately, and sometimes after a couple of months. Policies usually only pay your mortgage for 12 months. After that, even if you haven’t got a new job, the State gives you protection to some extent because it meets some of the interest on your mortgage.

The ‘con’ is that a lot of banks and building societies have been offering the insurance at vastly inflated prices - sometimes five times what you might have to pay if you shopped around. Some banks have been getting people to pay an annual premium of 5% of the year’s mortgage interest which is the maximum payout. That’s equivalent of having a £500,000 house and paying fire insurance premiums of £25,000 a year! And you might go on paying this year after year. After 10 years you would have paid half the amount you might need if you then got made redundant. At those rates, you’re better off just relying on savings.

However, there are some much cheaper deals around. The law says that solicitors aren’t allowed to recommend specific policies, so all I can say is that you shouldn’t just look at those comparison web sites because they only list companies they have a business relationship with. You should check around on the web a lot more carefully for the best deals. If you shop around, you can find prices which are about one fifth of the cost of the deals offered by mortgage lenders. By the way, a lender isn’t allowed to make taking out this kind of insurance through them a condition of the loan, so you can always shop around.
You can get separate cover for redundancy or for health problems. You don’t have to cover every risk, and that can make it cheaper as well. (This whole sector of the market is called “payment protection insurance” or “ASU cover” for accident sickness or unemployment.)

It’s well worth looking at the Financial Services Authority website which has a
section called “Money Made Clear” which explains payment protection insurance in simple words.

Gazundering is good. It spreads the pain. It allows the sellers to take their reality medicine in easy to swallow quantities.

It suppose it’s a bit unkind if someone get into a chain and then, just at exchange, threatens to withdraw unless he gets another 5% off the price. But it is just business after all. Buyers and sellers aren’t relatives, they’re just people doing a financial transaction . But even if you think that’s really immoral, which I don’t, that type of behaviour only makes up a very small part of the gazundering phenomenon. Mostly it’s just people who genuinely feel they are paying over the odds – and, if you’re an estate agent, I think you should see this as positively beneficial.

Sellers are putting their properties on the market at unrealistic prices because they just can’t accept how much the market has fallen. It’s very hard for estate agents to talk them down from 2007 dinners party prices. So what seems to happen now is that buyers succeed in knocking something off the price when they agree the deal. But they’re just not happy with it. The sellers aren’t happy with the price either, but they have to stomach it because after many weeks on the market they do eventually come round to the fact that they have to accept a lower price. So the sellers come to terms with it, but the buyers don’t. The buyers go ahead with the higgling feeling that they haven’t got the discount which they read in the papers everyone else is getting. So it’s no surprise really that they come back for a second bite later in the transaction, either because something comes up which justifies a price reduction (usually something in the survey report), or just because they can’t bring themselves to exchange contracts at the price they had agreed (as they see it, in a moment of regrettable weakness).

We’re always finding this with clients who get our report, sign the contract, and then start asking us what we think about the price and how the market has gone in the last few weeks, and so on. They don’t really think that the price of the property is directly related to some index run by Nationwide Building Society, and they aren’t really scared by whatever it is they make a fuss about in the survey report. That’s really just the excuse they give themselves. The reality is that feel they never negotiated the right price in the first place.
 
So, back to why this is a good thing for estate agents. In an ideal world, the best thing estate agents could do to achieve a sale is to force the sellers to lower their expectations and to accept a price which may be 5% or 10% below their hopes, and to do it right at the start. But the problem for estate agents is that, if you give realistic advice, you risk the sellers deciding they prefer another firm.

So gazundering does the dirty work for you. You get the property under offer at a price which is acceptable to the seller, and then the real price negotiation happens just before exchange of contracts. It doesn’t cause the deal to fall through, because the sellers can’t afford to back out at that point. Gazundering really can help you keep a deal in place. And although they don’t appreciate it, that’s good news for the sellers too.

In Mediaeval times Earls Court was a small hamlet roughly where the tube station is today. The Lords of the Manor were the Earls of Warwick and Holland, and the area took its name from their courthouse which was in this part of the manor. James Gunter, a successful pastry chef, bought farmland in Earls Court in the early 18th century. His sons and grandsons benefited from this decision as housing moved west. The station for the Metropolitan Railway was built in the 1860s on what was then still farmland. But the railway connection made the area very attractive for commuting to the centre of London and the present roads and terraces were created by the 1880s as fashionable new homes. After the First World War, most of the larger houses were converted into flats or tenements, or used as hotels. In the 1960s Earl’s Court was called Kangaroo Valley because so many Australians lived there on a temporary basis.

South Kensington has two parts. One starts near South Kensington tube station and then runs west between Old Brompton Road and Fulham Road. The second part runs between Cromwell Road and Old Brompton Road. The first part starts just east of South Kensington tube station, between Brompton Road and Cromwell with the Thurloe Estate, consisting mainly of Thurloe Square, Alexander Square and Thurloe Place, and containing very attractive stucco-faced houses from the 1840s. West of South Kensington tube station is the main part of the old Smiths Charity estate (or the Wellcome Estate as it later became). The most exclusive houses here are in Pelham Crescent, which is a beautiful crescent of terraced houses still mainly in single family occupation. Pelham Place is not quite so exclusive but contains attractive houses from the same era. Development of the estate moved westwards with ‘the Onslows’ - Onslow Square, Onslow Gardens and adjoining streets such as Sumner Place, Cranley Gardens and Cranley Place – which are mainly huge terraced houses, built in a distinctive light-coloured brick, as well as some more typical stucco-faced buildings. This area is now mostly converted into flats. Many of them back onto large communal gardens. The houses were originally built with mews at the back for horses and carriages, and these have also been converted in recent decades into attractive small family houses. These include Cranley Mews and Onslow Mews East and West.

Further west, and the next stage of Victorian building embraced the red brick style, and there are very ornate red brick faced blocks of flats in Evelyn Gardens and Cranley Gardens. That is the end of the Smiths Charity estate. There are then a series of attractive streets with a mixture of formal stucco-faced buildings and smaller family houses and mews properties in Roland Gardens Thistle Grove, and surrounding streets. At Drayton Gardens there are later Victorian mansion blocks with Dutch gables. The Boltons is about the end of the South Kensington area, after which it is more accurately described as Earl’s Court, although some say that West Brompton is an area in itself. The Boltons is considered one of the best addresses in central London. The houses are spectacular and they come with large front and back gardens. The Little Boltons and streets between there and Tregunter Road contain less impressive, but still very desirable, semi-detached houses.

The second part of South Kensington runs between Cromwell Road and Old Brompton Road. Part of Queens Gate stabs through the middle of it, but Queens Gate is essentially part of Kensington itself to the north. This is an area of garden squares. Stanhope Gardens, which runs through the middle of this area, has mainly stucco-faced terraced houses. Clareville Grove contains very sought-after period houses in a quiet area. Hereford Square similarly has stucco faced houses around an attractive square. The style becomes later Victorian red-brick on the west side of Gloucester Road, with Wetherby Gardens Harrington Gardens and Collingham Gardens, to name only a few, built in the late Victorian Dutch style with gables and ornate red brick. Behind the main streets, there are attractive mews such as Laverton Mews and Gaspar Mews, where there are small family houses.

The heart of Notting Hill is the area of Ladbroke Grove and the crescents around it. Streets are laid out in concentric circles with Ladbroke Grove running through the centre to Holland Park Avenue. Blenheim Crescent runs off Clarendon Road in the northern part of the area and contains terraces of Victorian houses. Elgin Crescent, the next street down, also has highly desirable terraced houses with stucco facades. Lansdowne Road, the next street down, runs all the way to Holland Park Avenue in the south and crosses Ladbroke Grove to become Arundel Gardens on the east. Similar terraces of houses are to be found here, with some villas but in the Arundel Gardens section houses have brick and stucco facades. The inner part of the concentric circles is made up of Lansdowne Crescent and Stanley Crescent. This is the summit of the hill. The curve of houses is particularly ornate and attractive, with Greek style columns holding up entrance porches. There are also some modern townhouses. St John’s Gardens and Kensington Park Gardens run across below the circle. Lansdowne Walk and Ladbroke Square run beneath that. Lansdowne Walk has more Victorian houses with brick and stucco facades, and a mansion block of flats called Bartok House. Kensington Park Gardens and Ladbroke Square contain more terraces of large Victorian houses, many divided into flats. This whole area has large hidden communal gardens lying behind the streets. The largest gardens are Kensington Park Gardens and Ladbroke Square Gardens and the extent of the Gardens is almost unmatched anywhere else in prime London. At the south end of the area, there are a number of small streets and mews, such as Willby Mews and Horbury Mews. Horbury Crescent which fills the angle between Ladbroke Road and Kensington Park Road contains curving terraces of large Victorian houses with brick and stucco facades. Kensington Park Road marks the boundary of this area and below it is mainly commercial, as well as 1930s mansion blocks such as Princes House, Buckingham Court and Matlock Court. There are also some large and highly sought-after houses on the west side backing onto the gardens.

East of Kensington Park Road is the Pembridge area of Notting Hill. This runs from Kensington Park Road to Chepstow Place in the east and to Westbourne Grove in the North. Portobello Road runs down beside Kensington Park Road and makes this a colourful area with its weekend market. Denbigh Close and Denbigh Terrace which run off it are attractive streets with small terraced houses, some painted in distinctive pastel colours. Chepstow Villas which runs across the area contains some of the most desirable houses in the area, with paired villas, many still family houses. Chepstow Crescent which runs off it has smaller terraced houses and some modern blocks of flats. Denbigh Road and Pembridge Crescent run down through the area. Denbigh Road contains a council estate as well as Victorian to modern houses. Ledbury Road also runs down through the area and shares stucco faced houses with shops and bars. Pembridge Villas is a main road running round to Westbourne Grove and contains some large houses. Pembridge Crescent crosses it to reach Pembridge Square on the east which contains large detached villas. Linden and Clanricarde Gardens to the south are cul-de-sacs with pairs of stucco faced houses. Two mews, Linden Mews and Garden Mews, are also to be found here. Pembridge Place and Dawson Place to the north contain large semi-detached stucco faced houses with glass and cast iron canopies over the entrances much like the most sought-after houses in neighbouring Holland Park.

Above Westbourne Grove is a rather different part of Notting Hill. The Portobello Court estate (council) lies on the corner of Lonsdale Road and Portobello Road. But further east, Lonsdale Road contains attractive houses, from the junction with Colville Road onwards. Colville Road itself contains terraces of large stucco faced Victorian houses, some semi-detached. Colville Terrace has similar large houses. Colville Gardens contains the Pinehurst Court mansion block. There are more Victorian terraces in Colville Square. Westbourne Park Road is mainly shops, but with flats above. Here is also the Convent Gardens council estate. This part of Notting Hill contains various mews with small houses, such as Colville Mews, Lonsdale Mews and St Luke’s Mews, and Dunworth Mews. Lancaster Road contains Victorian terraces and semi-detached houses.

The area of Notting Hill to the west of Clarendon Road is known as Notting Dale or Avondale. There are council blocks mixed with Victorian Terrace, and new small developments around squares or in mews. This is generally in Lancaster Road and the area of Silchester Road. Ladbroke Grove is the local tube station. It is a jumble of streets. Ladbroke Crescent contains flats in former Victorian terraces. Hippodrome Mews contains small town houses, as does Wilsham Street, where the houses are painted various pastel shades. Further south, there are streets of small artisan cottages and terraced houses around Avondale Park. Then there is a large council estate on Angus Road.