You don’t see much of sterling in the headlines these days. Maybe it’s the lack of outrageous award-ceremony outfits, or perhaps it’s just a bit run down and worn out by all the fiscal misery and bad weather of late.

This was certainly the case last week and it was only the plight of the euro that kept sterling steady on Monday morning, as it waited with baited breath for BoE Governor Mervyn King’s two pennies-worth in Wednesday’s minutes. Whilst a rise in unemployment benefit claims kept sentiment shaky towards the pound, Wednesday’s policy meeting showed a unanimous vote to pause quantitative easing, which kept sterling firm against the euro on Thursday. Friday however, was a day for the dollar.

The greenback took a bank holiday on the Monday, having ended the previous week looking fairly bullish against the majors. Further tightening of Chinese monetary policy was expected to slow the global recovery which led investors towards the safe-haven US currency. As Euro-Zone concerns waned, the dollar slumped slightly on Tuesday but picked up midweek in anticipation of PPI figures, unemployment claims and the Philadelphia Fed Manufacturing Index.

The Federal Reserve then went and surprised everybody, including themselves, by raising a key interest rate which sent the dollar surging against the pound on Friday - which slumped to a nine month low against the greenback. The Federal Reserve statement said it would increase the discount rate it charges banks from 0.50% to 0.75%. This was a signal for further tightening and that the Fed Funds rate may well be next.

So last, and probably least as well, the euro continues to thrash around violently in its sleep, troubled by nightmare’s about Greece, wondering whether or not the EU will sort it all out. Concerns lightened after reports out of Brussels suggested that European finance ministers may start playing hard-ball with Greece, possibly by stripping them of their EU voting powers and sending them to bed with a firm scolding and no supper. Greek unions called off a strike of tax collectors, farmers removed their barricades and a fearful silence filled the air. European finance ministers have given Greece a one-month reprieve (until March 16th) to show its deficit reduction plan was being rolled out effectively.

The week ahead could be an interesting one, with some key data due for the UK including house prices, industrial orders and consumer confidence. If you’d like some valuable tips on what to do with your currency, then just give us a call on +44 (0)207 740 0000 for a free quote and a chance to chat to one of our dedicated currency experts. For more information, visit www.currencysolutions.com.

Have a great week.

Nigel Hodges

Take up of fixed-rate mortgages increased further as the interest rate cycle has now reached its floor, according to new data from the Council of Mortgage Lenders.

In April, 69% of borrowers took out fixed rate mortgages with an average rate of 4.83%, the highest share since June 2008.

The CML reported that its members granted 16 per cent more home loans in April than in March, but this is from a still very low base. There were 35,600 house purchase loans in April, compared to an average of 88,000 loans in April over the last seven years.

The number of loans for remortgage continued to decline as low reversion rates and stricter credit criteria for the best deals make refinancing less attractive.

There were 31,000 remortgage loans in April, 22% down on March and 65% down on April last year. Gross mortgage lending in April was £10.5 billion, down from £11.5 billion in March.

But the biggest rise in loans was for house movers, not the vital first-time buyers sector

22,100 loans to home movers worth £3.1 billion, compared with 30,600 loans worth £5 billion in April last year. Lending criteria continued to toughen with a typical home mover putting down a 33% deposit and borrowing 2.63 times their income, compared with 30% and 2.69 in March.

There were 13,500 loans to first-time buyers worth £1.4 billion, compared with 18,800 loans worth £2.4 billion in April 2008. The average first-time buyer had a 25% deposit (unchanged since February) and borrowed 2.96 times their income (2.99 in March). The slowing rate of decline in these measures and the recent introduction of a number of higher loan-to-value products may indicate an easing in criteria in coming months advances.

The cost of servicing new mortgages fell again in April, with first-time buyers typically committing 15% of income to pay their mortgage interest, the lowest proportion since May 2004. And home movers typically spent 11.3% of income on mortgage interest payments, the lowest proportion since November 2003.

CML Head of Research, Bob Pannell said:

"With the interest rate cycle now at its floor, an increasing proportion of borrowers are taking out fixed rates, including for longer term periods of 5-10 years. With expectations for rates to remain low in the near future, shorter term fixed-rate deals are less appealing than attractively priced variable rate deals.

"There are tentative signs of house purchase lending stabilising, but we need to see considerably higher transaction levels to underpin house prices."

No one said it was going to be a straight road to recovery. A trampoline recovery for the UK property market has never looked especially likely, and it looks even less so following the budget and the uncovering of the huge fiscal mountain the UK has to climb.

In fact, we made our view on this clear at the beginning of the month after an especially big leap in mortgage lending was revealed by the Bank of England and all the talk was of 'green shoots' and other clichés.

We pointed out then: "Now, a jump in lending like February's 19% just isn't going to happen each month over several months. But, if we assume a steady but more modest monthly rise - which again is somewhat unlikely - then the earliest we can imagine prices stabilising will be around the autumn.

"But autumn is, traditionally, a dead season for property, so we're probably looking at early 2010 as the most likely bottom of the market - and perhaps (just perhaps), some very, very modest growth."

And the latest mortgage lending data shows this to be the case.

Mortgage lending, or approvals to lend, actually fell last month - the first fall in total approvals since November last year, announced the British Bankers' Association reported.

This in no way suggests the market will start plunging downwards again. In fact, as we said above, this is precisely the pattern we would expect as we gradually approach a bottom and the market becomes positioned for very slow a U-shaped recovery.

Mortgage approvals in March were down seven per cent to 26,097 from 28,024 in the previous month, after rising from a record low of 17,895 in November, the BBA said.

Approvals are 25 per cent lower than 12 months ago and 67 per cent lower than the borrowing peak in November 2006.

While the dip in mortgage approvals is to be expected, other signs provide evidence that confidence at least is returning. Headlines in the press about the property market, for example, are increasingly positive, even if tentatively so.

Estate agents are reporting growing the number of inquiries from potential buyers to be up and some indices, such as the Hometrack index have shown that asking prices at least are falling less quickly.

Commenting on the mortgage data, Simon Rubinsohn, an economist with the Royal Institute of Chartered Surveyors, told the FT, "Although this is, on the face of it, a disappointing piece of data, RICS is not inclined to believe that the pick-up in activity in the housing market from historically low levels is already running out of steam."

BBA statistics director, David Dooks, said, "Lending to households continues to grow, as banks make funds available for people who meet their lending criteria but consumer confidence is fragile and unlikely to change demand markedly in the near-term. The banks' figures also show it would be unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment."

Source: BBA

The annual growth rate for net mortgage lending continued to decline. Gross mortgage lending, at £8.9bn, was at its lowest since April 2001. March's approval activity, both in volume and value, was marginally lower than in February and remains at a historically subdued level.

This slide in lending really underlines the fact that:

• The recovery will be gradual and definitely uneven
• Despite green shoot talk, this is still very much a buyers' market, at least for now

Investors, who have Polish mortgages in Swiss francs (CHF) in Poland, may have had a few sleepless nights recently.

The weak Polish zloty combined with falling property prices translates into LTVs often exceeding the value of the property, which in the long-term (and mortgages are long-term loans) may not have any significance, but in the present can create quite a headache.

The threat is that the majority of the mortgage contracts have a clause saying that if the value of mortgage collateral or the property's value falls dramatically, the bank has a right to ask for additional collateral or change the currency of the loan.

While there's really nothing a mortgagee can do about it, banks have been at pains to point out that, in reality, so long as repayments are not made on time, they won't execute the clause.

But this week we've seen this unwritten agreement between banks and clients has been broken.

There's evidence that so far three banks (Polbank, Noble Bank/ Metrobank and Santander) have been asking clients paying on time to re-negotiate contracts.

This has taken various forms: from asking for another property to be pledged, a higher margin on a loan by 0.5%, additional insurance of the loan, to immediate re-payment of the amount of money that exceeds the value of the property.

If a client doesn't accept the new requirements, banks threaten to end a contract.

And, while it appears that banks are executing their rights stated in contracts, if we take a closer look, it appears that banks are trying to take advantage of clients and use exchange rates fluctuations as an excuse.

The clause in these contracts was actually designed to relate to a dramatic fall in the value of property, something that hasn't happened. In addition, with off plan units, finish adds significant value, which is always taken into account by property valuers.

So, these clauses are now being invoked in relation to a fall in the value of the PLN in relation to CHF, rather than anything to do with the declining value of property.

The Financial Controlling Commission (KNF), regulatory and supervisory body, clearly states that a decline of mortgage collateral doesn't mean that a client's creditworthiness has dropped.

The body is defending CHF mortgagees and has said that banks should not be using CHF exchange rates to increase the cost of mortgages. KNF warns banks that such requirements could be seen as bad risk management and force the KNF to take action against banks.

The view expressed by KNF is shared by the Office of Competition and Consumer Protection (UOKiK), which is taking BRE Bank to court. UOKiK questions some clauses in mortgage contracts that state that the bank can change some terms and conditions and require clients to inform banks about any changes in their financial situation.

UOKiK says that it will take more banks to court before Easter, but doesn't say which banks are on its list.

The fast and prompt response from controlling bodies is good news for those people who were or will be asked to re-negotiate mortgage contracts. It seems that at the moment, the reaction from KNF and UOKiK is the best card that could be played in talks with banks.

But what should an investor do if they find a bank is making such a request?

Firstly, check contracts to see on what basis a bank is demanding changes. Secondly, a client should demand a new property valuation from the bank or hire a valuer on their own. Anyone who bought off-plan should produce the bills they paid for finishing an apartment.

It doesn't appear that this saga is about to be concluded, so we'll keep you posted as the situation develops.

The number one problem facing property investors the world over right now is the availability of finance - or rather, the lack of it.

Whether in the UK or overseas, many investors will be struggling to raise the finance for existing investments or finding it very difficult to find funds for new investments.

In the discussions we've had with our clients, especially those looking to take advantage of the Property Sourcing service offered by i-PropertyAssets, the lack of available mortgage products is proving to be a real frustration in markets where prices have fallen to levels that make further investment a very attractive prospect.

So what actually is available around the world for the investor?

We've undertaken comprehensive research into a huge number of property markets to provide you with a definitive list of what is and isn't available in Europe, the Americas, Asia, Africa and the Middle East.

View the data here.

PLEASE NOTE: This data is only available to Property Secrets PRO members. To upgrade your membership now, please start here.

Czech Republic started to feel the impact of the global economic crisis only as recently as the second half of 2008. Consumption, including spending on property, has now slowed down fairly drastically. Falling housing demand has been mirrored by slower growth in the mortgage lending.

During 2008, banks in Czech reported an increase in mortgage sales, but it was widely believed this was at a lower rate than the year before.

Now we have confirmation. The latest data from the Ministry of Regional Development reveals that mortgage lending in 2008 plunged by some 20%.

The number of mortgages granted to individual clients dropped 23% from 83,444 in 2007 to 64,497 in 2008. Companies obtained 1,930 mortgages in 2008, a 19% over 2,383 loans in 2007.

In terms of mortgage volume, lending to individuals was down by 25%. In 2008, banks lent individuals mortgages worth CZK113,927 million, compared to CZK142,288 million in 2007.

Companies, on the other hand borrowed 55% more in 2008 - CZK64,222 million worth of mortgages, compared to CZK41,485 in 2007.

Jan Sadil, CEO of leading mortgage bank Hypotecni banka says, "There were many reasons for the fall in the volume of mortgage loans provided in the year 2008, including a record comparative base in the previous period, the macroeconomic development and the financial crisis. The result is quite good in this situation".

Hypotecni banka granted more than 21,000 mortgages in 2008 worth CZK39.6bn, a slight drop from CZK40.4bn a year earlier.

Overall, banks in Czech Republic granted 403,486 mortgages between 2000 and 2008. The mortgage debt grew on a yearly basis by 24% and at the end of 2008 the market amounted to CZK583,520, which is around 16% of Czech GDP.

Mortgage markets experts think that it would be success if banks can provide in 2009 mortgages worth CZK100,000 million.

This is strictly linked to the worsening situation on labour market. In general, the Czech property market isn't over-supplied but prices are fairly static.

The Czech Statistical Office reported on 2nd February that apartment prices in the country increased by just 0.2% in Q4 2008.

In Prague, on the other hand, the average flat price declined by 1.7% (quarter-on-quarter) in Q4 2008. Here, the fall in the number of mortgages granted in 2008 was also the highest - 27%.

All the figures above indicate a slowing property market, which, taking into account the global crisis and the sharp slow down of the Czech economy, will inevitably continue through 2009.

Many experts believe the Czech economy is already in recession, although this hasn't been confirmed yet by official data. In 2008, GDP grew by 5.4% in Q1, 4.5% in Q2 and 4.2% in Q3 and for the whole year it is estimated growth was around 4%, down from 6.5% in 2007.

The slow down is mainly a result of a decline in exports as the vast majority of these (85%) go to the EU, with Germany itself accounting for one third of Czech's exports. Another key factor driving down economic growth is sharply decreasing domestic demand, which, according to estimates, grew only 1.2% in 2008 compared to 5.2% in 2007.

These trends will be even more pronounced this year, as most of Czech's trade partners are already in or are heading for recession. Consumption in Czech is almost certain to slow even further as unemployment - and the fear of unemployment - increases.
The latest forecast from the Czech Ministry of Finance assumes 1.4% economic growth in 2009, a slow pick up in 2010 (2.1% GDP growth) and recovery in 2011 (3.8%).

The figures above, even though indicating a sharp decline in economic growth in Czech, are still far better than forecasts for many other EU countries. The Czech government also has room for some important fiscal measures, such as cutting taxes. And we are likely to see further falls in interest rates.

Our view is that, while Czech will clearly not escape the big economic chill, it is highly likely to be one of the first CEE economies to emerge from it and will return rapidly to steady economic growth, probably as early as 2010/2011. However, much will depend on the timing of a recovery on the revival of its key export markets, most importantly Germany.

The mortgage market in Bulgaria is still relatively undeveloped - but considerably more mature than the stage of the development of key investment markets would suggest.

For foreign investors, it offers some excellent deals - including self certs, refinancing products and interest only (in the case of one bank).

By key investment markets, we mean NOT coastal property; NOT ski property, but property investment within cities - most obviously, Sofia, the capital.

The key measure of mortgage penetration, the mortgage debt to GDP ratio was only 7% in 2006.

This rate is still very low by European standards, even by CEE standards - Bulgaria ranks third after Romania (2.3%) and Slovenia (6.6%). If compared to the EU-12 average of 53% in 2006 - Bulgarian indicator is a measure of great potential for further development.

The mortgage market in Bulgaria is small but is growing rapidly on a yearly basis - clear evidence of a growing demand for mortgages - and it is mortgage credit that, ultimately, drives any market.

The growth is caused by local and foreign buyers. But, here it is worth making a clear distinction - the holiday home market in Bulgaria is dominated and driven by overseas investors, while main city markets are driven by domestic buyers.

In 2005, the mortgage market growth was 97% - on a par with Latvia - while in 2006 it was 73.5% - the second highest, after Latvia, in the EU.

In 2007 the growth rate slowed to 67% - the slowdown largely accounted for by the credit crunch that occurred in the second half of the year.

Most, if not all of that slowdown occurred in the holiday market - as has been reported in the Financial Times - Brits, especially, have simply stopped buying holiday homes on the coast.

Some banks have now started refusing to lend to buy properties located in the resorts.

The situation, however, is very different in the booming capital.

Interest rate rises in 2008 probably can't be avoided as inflation increased to 12% (from 4% a year ago).

Mortgage lending in Bulgaria is dominated by UniCredit Bank (Bulbank), DSK Bank, Raiffeisen, United Bulgarian Bank (UBB), First Investment Bank (FIBank) and Economic and Investment Bank (EIB). All these banks offer mortgages for locals and foreigners.

Mortgage Products for Locals

Typical LTVs range from 70% to 80%. In the case of off-plan properties, the LTV also depends on the construction stage of the building - closer to completion, the higher the LTV that can be achieved.

The location of the property can also be a deciding factor - if buying property located in one of the main cities, it is much easier to get a higher LTV. This also applies to foreign applicants.

Some banks even offer 100% for domestic borrowers (120% in FIBank) - however the offer is available only to very high-income Bulgarian resident clients.

Typical interest rates are currently around 4-5% for CHF, from 6.5% for Euro and 7-8% in BGN and US$ with maximum terms of around 30 years available.

Most of the mortgages in Bulgaria are taken out in Euro over 25 year period.
Banks in Bulgaria usually charge between 1% and 2% for granting a loan and most of them apply age limit of 21-70 years. As a rule monthly mortgage repayment should not exceed 50-70% of net monthly income, subject to the bank.

Mortgage Products for Foreigners

What you need to know before you apply:

The choice of mortgage products for foreigners in Bulgaria is good - and, along with repayment and self-certification mortgages, re-mortgaging is also available.

Interest-only mortgage is currently offered only by Piraeus Bank for up to 10 years. The LTV is a max of 75%, and the current rate is 7.25% for Euro loans only.

With FIBank you can apply for a three year interest-only period, while with DSK Bank the period is one year.

The mortgage processing time usually takes 12 weeks on average, once all the required documentation is received by a bank, but may vary from six weeks to six months.

The necessary documents, when applying for mortgage are:

1. For all applicants

- ID/ passport
- Marriage certificate (if applicable) - with some banks married couples must apply together
- Preliminary purchase contract
- Credit report from Equifax or Experian

2. For those employed

- P60 and payslips for the last 3-6 months (or bank statements)
- Letter from employer confirming the role, income, start date

3. For self-employed

- 3-6 months bank statements
- Tax returns for the last 2-3 years
Some banks require that the documents are translated and/ or certified by the issuer.

Affordability is based on the fact that monthly repayments can't exceed 50-60% of net income.

A bank's fee for granting a loan is typically 1-1.5% and a mortgage broker commission on completion is around 0.5% (minimum £200), plus the application fee of around £600.

Early repayment penalties vary from 3% to 2%.

What's available

The current products for foreigners described below are based on Bulgarian Home Loans offers.

LTVs for foreigners are typically of 60-80%, subject to the bank, location of the property and in the case of off-plan - the stage of construction.

For example, Raiffeisen's rule is clear: up to 80% is available for completed apartments, up to 70% for roof level stage and 60% for regulated land stage.

As a rule, LTV is calculated on the purchase contract price, however when applying for a repayment mortgage with Raiffeisen, the LTV is based on the bank's valuation, not the purchase price.

The mortgage is disbursed usually in one payment. In the case of off-plan properties with stage payments, most of banks will agree to make them only when the building is at the roof-level stage of construction.

The repayment period is typically 20-25 years. Mortgages can be issued in Euro, BGN and US$ and interest rates are typically around 7% for Euro and 7-8% for BGN and UDS$.

Raiffeisen offer self-certification mortgages only for properties located in major Bulgarian cities (or as part of golf course developments). Tellingly, properties in holiday resorts do not qualify for self-cert mortgages.

Apart from Raiffeisen, Invest Bank and FIBank also offer self-cert mortgages for foreigners. LTVs vary from 60% to 80% over a max of 20 years, but the interest rates will be higher than normal.

Re-mortgaging products to foreigners are offered by three banks: Piraeus, DSK Bank and EIB. LTV is no more than 60-75% over 5-15 years. This product is available in Euro only and interest rates start from 7.5%.

Conclusion

Mortgage lending in Bulgaria is still a small sector with huge for potential to grow in the future. On a yearly basis, the market is already growing extremely rapidly.

There is a relative lack of competition among lenders and mortgage brokers, which is mirrored by the fact that brokers' fees and commissions are quite high.

The greatest choice of products is for repayment mortgages, while several banks also offer refinancing and self-cert options.

Interest-only mortgages are possible to obtain - but as yet only one bank offers such a product.

Buy-to-let mortgages are not available.

Banks in Bulgaria are still relatively conservative in their lending and LTVs don't exceed 80%, while the repayment period is usually no longer than 20-25 years.

In calculating LTVs bank are also cautious.

The application process is lengthy and fairly bureaucratic if compared to UK standards, but not especially so relative to other CEE markets.

It is very likely that in the next year Bulgarian banks will liberalise application procedures and improve lending terms and conditions considerably, as the market rapidly develops...... AND, as far as foreigners are concerned, the focus moves away from the high risk coastal developments to the greatest potential investment returns - in Sofia.

One PS investor who secured a 100% LTV Slovakia is Ravi Sawhney who recently invested in Bratislava in Slovakia.

Ravi purchased an apartment in Nove Mesto (new town) in Bratislava. The price was about SK56,000 psm and the property was an apartment on the secondary market.

His mortgage terms make his investment cashflow neutral - the rent covers the loan.

This is his first investment in central and Eastern Europe. He actually looked into buying in Slovakia about two years ago but at the time he ended up buying in London.

This tied up his capital, but he kept a close eye on the markets of Bratislava and other secondary cities such as Trnava.

His reasons for sticking with the Slovak market are that he believes the country and Bratislava in particular offers one of the best risk/reward profiles in Europe for property investment.

He believes the market offers great potential for growth yet a stable economy.

Great finance and rental potentials lessen the risks involved in investing in the market.

Ravi's girlfriend is from the Slovak Republic, so he is familiar with the market having visited the country over a dozen times in the last four years, each time becoming more familiar with the people, economy and areas of the country.

Having settled on the Slovak Republic as his investment location, he decided on his investment strategy.

Ravi's view is that there is value to be had in buying properties on the secondary market and refurbishing them.

The problem he encountered was finding the right property and being able to move quickly on it. He admits it took some time and effort before he eventually found something in Nove Mesto, very close to the transport links and the Old Town.

He completed the property purchase last October 2007 and began applying for a mortgage in November.

He started off by approaching a few brokers and intermediaries but soon found out that some of them were charging unreasonable fees.

One broker was charging him a 3% bank arrangement, fee but he believes you should walk away from anything more than a 0.5% fee, which is typically capped at €500.

In the end he went direct to the bank and avoided the fee all together. This was possible because he had his girlfriend on-site to manage the relationship with the bank manager.

The bank he went with in the end was OTP bank and he arranged a mortgage with 100% LTV, and valued Ravi's unit at 3% below market value, which he says in normal in Slovakia. Total charges, including translations and notary stamps, were around £1,500.

The interest rate is fixed for five years is 4.9%. Slovakia is expected to join the euro next year, there is an argument that rates might fall as a result. But he is bullish on the eurozone over a five year period and values predictability over the five year period more than the any potential small drop in lending rates.

He believes the expected rentals will also cover the repayments.

Would he recommend fellow investors to go down the road he did?

Buying on the secondary market was very complicated and he came across a number of obstacles when dealing with the purchase on his own.

He ended up paying for the seller's estate agent to handle a lot of the paper work but this worked out well for him as he felt they could be trusted.

Naturally it was a huge advantage that his girlfriend is from the Slovak Republic and in a position to negotiate with agents and banks in their native language.

A way around this would be to hire a translator however this adds to the purchase cost.

What advice would Ravi give to people setting out to apply for a mortgage in the Slovak Republic?

Do not pay more than 0.5% of the loan amount to any broker.

Ravi recommends you try going direct to the banks if you have the time but having a Slovak speaker definitely helped a lot in doing this.

Be prepared for things to move slowly.

Having a regular income also seems to be banks' number one concern. "It was the first question they asked when you walk through the door, " said Ravi.

Ravi admits he was applying for the mortgage over the Christmas period which didn't help however he advises not to be afraid to keep applying pressure on the bank manager and if you have a good relationship with the seller's agent, ask them for help also.

Another point to keep in mind is that because the markets are moving so fast, the valuation of your property may be less than the sale price by more than you would expect. In Ravi's case it was just 3%.

This, he explains, is down to the fact that the government body updates average valuations once a year in March.

The whole application process took two months, which was a little excessive as it was over the Christmas period. But Ravi describes the paperwork as 'Simple and straightforward' because the seller's agent did a lot of the work. "Otherwise it would have been a complete headache, especially on a re-sale since all the documents are in Slovak."

So, plan for the fact that you will need to get some translation work done and for this you will need a state recognised translator. Prices can also vary for this so it's a good idea to seek several quotes.

Ravi's final piece of advice is tread carefully and always do your homework!
Judging by the success Ravi had in securing a 100% LTV mortgage at interest rates where his rentals will cover the mortgage, it certainly seems that Ravi has done well in this Slovak Investment.