Data produced by HM Customs and Excise suggests that the recovery in the UK housing sector has slowed down. Completed home sales dipped by 4,000 over the August figure last month to 78,000. This figure was lower than the comparable value from September 2009 and represents the first year-on-year drop seen in 2010.

The Council of Mortgage Lenders reported (Wednesday) that lending in September had been at its lowest value for a September since 2000 at £12 billion. Lending in September was down by 1% on the August figure, but 7% lower than that seen last year.

The Bank of England has confirmed that lending on mortgages has declined and they expect it to remain subdued for some time to come. Dwindling demand for homes and loans is likely to cause a decline in UK house prices. UK home price inflation has vastly outstripped UK wage inflation for many years.

Pound Sterling – UK Markets

Sterling has continued to decline against the Euro and was a further 0.9% lower at yesterday’s close in Europe with £1 buying €1.1233. The currency recovered slightly against the US Dollar and the Japanese Yen closing at $1.5745 and ¥127.67, respectively.

US Dollar – US Markets

The US Dollar ended yesterday’s trading session down against the Euro with the single European currency buying $1.4016, a fall of 1.1%. In overnight and early European trading, the Dollar has rallied and is currently trading at $1.3941 (at 07:10 GMT).

It was the sub-prime crisis that triggered the global financial crisis and it has been suggested that US mortgage giants Freddie Mac and Fannie Mae must take their share of the blame. The cost to the US tax payer of rescuing these two companies which form the backbone of the US mortgage lending is expected to double and the ultimate bill could surpass $360 billion.

Euro – European Markets

In overnight and early European trading, the Euro weakened against Sterling and the US Dollar again. This may represent a pattern of profit taking since early numbers show that the Euro is again appreciating against them both. The Pound was trading at €1.1280 and the Euro was buying $1.3941 at 07:16 GMT, respectively.

The protests against French plans to raise the national retirement age to 62 are set to continue with two new days of (in)action called for 28th of October and the 6th of November by the unions.

Other Currencies – Highlights

All eyes will be on South Korea this weekend as the G20 finance ministers meet ahead on next month’s summit of G20 heads of state. The question of national tensions within the foreign exchange market is likely to take centre stage. China, the USA, Japan, Europe and South Korea have all voiced concerns (or denials) that nations are deliberately manipulating their currencies to gain advantage in export markets. The IMF has already warned of the disastrous consequences of what it terms as a “currency war” in which nations are taking steps to weaken their own currencies to provide temporary economic relief through better export performance.

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Data just released by the Royal Institute of Chartered Surveyors (RICS) suggests that downward pressure is beginning to be asserted on UK house prices. With a glut of houses on the market, some buyers are looking for (and finding) bargains. 44% of RICS members surveyed reported that prices had fallen over the last three months, but half reported that the value of property had remained stable and 1 in 20 noted a rise.

The message seems to be that if you want to sell your home, you need to be realistic about valuation and aware of the fact that there are fewer buyers in the UK market right now. At the moment, many RICS members are characterising the trend as a “correction” rather than anything more dramatic.

Pound Sterling – UK Markets

Sterling has been regaining some ground against the Euro over the past 24 hours, closing 0.1% higher yesterday at €1.1434. The trend has continued this morning and currently, £1 is worth €1.461 (at 9:06 GMT).

A raft of UK data will be released later today which will reflect the consumer price index; trade balance; retail price index and the house price index amongst other figures. The consequences of government austerity measures should be starting to emerge in these data; indeed, the RICS survey noted that concern over the measures was affecting buyer confidence and suppressing the housing market already.

US Dollar – US Markets

The US Dollar is continuing to fall against the Yen, hitting fresh 15 year lows as it does so. Markets in both Japan and the USA were closed for holidays yesterday. The Dollar has strengthened marginally against both Sterling and the Euro over the past 24 hours.

In the States minutes from the Federal Open Market Committee (FOMC) will be released today. FOMC minutes offer a clear guide to US inflation rate policy.

Euro – European Markets

Germany is the economic powerhouse of Europe, so the fact that German exports had fallen for the second month in a row is unwelcome news. The Federal Statistics Office published data for August which showed that German exports had fallen by 0.4%. The single European currency has strengthened in recent months, following the crash caused by the sovereign debt crisis and the costlier Euro may be having an influence on German exports.

Data will be released later today on the German consumer price index and the wholesale goods index.

Other Currencies – Highlights

Poised to become the world’s second largest economy behind the USA, China has shown the best recovery from the global economic crisis with export growth figures which are more than ten times greater than her competitors. However, recently, both the USA and Europe have accused China of keeping the Chinese Yuan undervalued against other major currencies, thereby making Chinese exports artificially cheap. Whilst China acknowledges that it will allow the Yuan to appreciate, it has ruled out a swift revaluation and made it clear that US and European “interference” in the matter is unwelcome.

For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000 or click here to submit an enquiry.

Nigel Hodges www.currencysolutions.com

By Nigel Hodges of Currency Solutions

As most of the UK bakes in the sun, the global economy has remained under a black cloud this week after the release of yet more negative economic data. Recovery in the wider economy seems as far off as ever with market confidence taking a knock this week.

In contrast to last week which was light for economic data, this one has been packed with important announcements, reaching a crescendo on Thursday with the release of US labour market data and the ECB interest rate decision. Yet despite the potential for volatility, currency exchange rates have tended to remain within recent ranges, although subject to risk appetite and risk aversion, which says something about the growing sense of market stability.

In the UK this week, we learned that first quarter GDP contracted by 2.4%. As the largest contraction in 51 years, this was much greater than expected and sent the pound lower against its major currency partners. The ONS attributed the decline to steep contractions in construction and production levels and the government sector remains the only sector growing at present.

Later in the week however, purchasing manager indices for the service and manufacturing sectors came in better than expected, with the pace of recession moderating in June. This sums up the UK economy at present as an increasingly complex picture is emerging between time lag data, such as unemployment and GDP, and forward looking survey data. Sterling exchange rates are subject to this fickle sense of market confidence, although the pound seems to have found a support level at 1.60 on the US dollar and 1.16 on the euro.

In the US, the unemployment rate has risen to 9.5% in June, with non-farm payrolls falling sharply by 467,000. The figures for average hourly earnings are also bearish and this triggered a decline on Wall Street, strengthening the US dollar on the back of risk trading.

The ECB decided to leave interest rates on hold at 1%, a move widely expected by markets as the bank remains in 'wait and see' mode when it comes to the economy. Inflation is falling at record levels in the eurozone due to plummeting energy prices and consumer demand while the unemployment rate is on par with the US at 9.5%.

Elsewhere, China reaffirmed the dollar's reserve status this week and posted its fourth consecutive rise in manufacturing levels sending the commodity based rand and Aussie dollar higher. The Polish zloty surged to a six-week high against the euro following the announcement of a World Bank loan for Poland and a report showing manufacturing levels fell at the slowest pace in nine months. Polish growth rates are currently hovering around 0% for the first quarter of 2009.

So internationally, the economic picture remains glum. While there are positive signs that recession is moderating and we may be approaching a bottom, there is also increasing talk of a 'double dip' or 'W' shaped recession as opposed to the more traditional 'V' which would mean we are not out of the woods yet. Only time will tell. However if you need to transfer currency now, your best bet for getting excellent exchange rates is to use a specialist foreign exchange provider. Their specialist currency brokers monitor the currency markets on your behalf ensuring you trade currency at the optimum time. To register with Currency Solutions, give them a call today. Registration is free and there is no obligation to trade.

Have a good weekend.

The number of mortgages approved in May hit a 13-month high, figures as buyers return to the market, figures from the British Bankers' Association reveal.

The figure was also up 16 per cent on the same month last year, which is the first time a year-on-year comparison has shown an increase since November 2006.

Even so, the ongoing weakness in the remortgage market dragged down the overall lending figures, with total advances of £7.7 billion the lowest since February 2001.

Net mortgage lending, which excludes repayments and redemptions, fell for the third month in a row and was at £2.3bn - the weakest monthly rise since early 2001.

Despite being down for the fifth month in a row, the BBA said loans for remortgaging and other purposes like equity release or buy-to-let, seemed to be stabilising at their current low level.

BBA statistics director David Dooks said: 'Steady monthly increases since last November have seen the number of loans approved for house purchase recover to levels seen in early 2008, although gross and net mortgage lending show a subdued wider mortgage picture.

"However, unlike much of the mortgage market, the high street banks are still seeing lending growth and improved mortgage availability is reflected in higher average loan approval values.

"Consumers' borrowing appetite remains weak, reflecting uncertainty over household circumstances, so credit growth is negligible and spending activity on credit cards is down on this time last year. Lending to non-financial companies was little changed overall in May."

The jump in the number of mortgages approved does suggest that buyers are returning, attracted by low interest rates and what are seen as drastically reduced property prices.

As a result of this, and a remaining dearth of good quality properties, prices are generally reported to have risen last month.

However, while the appetite is clearly there among buyers, the most likely brake on a recovery is still likely to be the availability of affordable mortgages.

The pick up in lending is, we believe, likely to remain extremely fragile for several months to come and in fact credit could actually tighten further.

In fact, this trend is already evident in fixed rate mortgages being offered. Barclays, which offers its products through the Woolwich, is just the latest to raise it's fixed rates.

Nationwide, Northern Rock, Abbey, Halifax and Lloyds TSB have all raised selected fixed rates.

With rates at historic lows, trackers remain tempting, but the trend in interest rates can only really be up, so a fixed rate of 5 per cent or under is probably going to look attractive in the months ahead.

The BBA figures also show that consumers continued to focus on paying off debt in May and delivering continues apace.

A total of £6 billion was spent through credit cards in May, which was down 11 per cent on the same month a year ago. Most significantly, £6.4 billion was repaid. This means that outstanding credit card debt rose by a mere £157 million in May, when interest and other charges are added in.

£249 million more was repaid on overdrafts and loans in May than was borrowed. This is the 10th consecutive month in which repayments have exceeded borrowings.

It seems that the ultra-low interest rates on offer from banks are making the choice to pay off debt rather than save an easy one. Personal deposits were up by a mere £476 million in May, compared to the £2.23 billion placed on deposit in May last year.

Meanwhile, the number of mortgages slipping into arrears in the first three months of the year was down 12 per cent on the same quarter last year to just under 60,000, the Financial Services Authority said.

Most of the fall was for non-regulated mortgages - generally buy-to-let and interest-only loans; but regulated mortgages going into arrears were also down slightly.

Repossessions were up by 13 per cent to more than 14,800 in Q1, 2009 - up from 13,100 the previous quarter in 2008. This increase is markedly slower than the 20 per cent plus in Q2 and Q3 last year.

The Council of Mortgage Lenders yesterday reduced its forecast for expected repossessions in 2009 to 65,000, that's down from an earlier forecast of 75,000.

Nationwide figures provide yet another glimmer of evidence that we've reached the bottom of the market. Or do they?

Data for May show prices (asking prices, that is, not sale prices achieved), rose by a healthy 1.2 per cent in May.

That takes the annualised rate of fall from -15 per cent to -11.3 per cent.

But, this may well turn out to be something of a false dawn, simply because there is strong evidence that many would-be sellers are holding off going to market as long as possible because they fear being unable to achieve the price they need to move.

And this includes those who have taken the view that it's better to rent out their home and move than to sell it.

This has severely restricted supply relative to willing buyers in many areas and this in itself is driving up asking prices. It is unlikely to last as, over time, more sellers will be driven to market as they lose jobs or are unable to refinance - and, of course, as supply rises, so we'll see downward pressure on prices once again. Unless the supply of mortgages with higher LTVs begins to pick up; but there's little real evidence of that happening just yet.

Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said: "The price of a typical house rose by 1.2% in May, providing further evidence of some improvement in housing market conditions over the last few months. At £154,016, the average house price is still 11.3% lower than a year ago, although this marks a significant improvement from the annual decline of 15.0% recorded in April. The 3 month on 3 month rate of change - a smoother indicator of short-term price trends - rose from -3.0% in April to -0.5% in May and now stands at its highest level since January 2008.

"Although the short-term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively. During the downturn of the early 1990s, there were many months during which prices rose, only to fall back down again in subsequent periods. In the current downturn, the combination of rapidly rising unemployment and tight access to credit implies that the last of the price declines has probably not been seen yet.

"The movement of house prices ultimately depends on the balance of demand and supply of houses on the market. One timely indicator of the supply-demand balance is the ratio of sales to unsold stock, published monthly by the Royal Institution of Chartered Surveyors. For most of 2008, this measure was on a steady declining trend, consistent with the acceleration of house price falls as the year progressed.

'Although it remains at a very low level by historical standards and continues to point to further house price declines, the ratio has recently stabilised somewhat and this probably explains some of the improvement in price trends over the last few months.

"It is not yet certain, however, whether the sales-to-stock ratio will rise on a more sustained basis over the coming months. House sales still remain close to record lows, so that the improvement in the supply-demand balance is so far mostly attributable to a decline in the stock of property on estate agents' books. There are several possible reasons why stock levels are falling. First, the rate at which additional property is coming onto the market could be lower than the rate of sales.

"While supply dynamics in the market have all been exerting downward pressure on stock levels, there are reasons to believe that this trend is unlikely to continue in the long run. Potential sellers of existing homes who had previously delayed the listing of their property may not be able to wait indefinitely, particularly if they have seen a loss of income due to the deteriorating labour market situation.

"The recent widely reported increases in new buyer enquires may also encourage more of these reluctant sellers to test the market in the coming months.

"If the supply of homes onto the market does increase, the recent moderation in the pace of house price falls may not be sustained. However, the ultimate outcome for prices depends as much on the development of demand as it does on supply dynamics. Survey evidence suggests that buyer interest has picked up strongly in response to lower prices and lower interest rates. If this buyer interest translates into actual sales and outweighs any potential increases in supply, then the recent moderation in price falls may continue. For the moment, however, it is unclear how the balance between supply and demand will ultimately work through in the coming months."

Whether that increased demand - flushed out, as said above - by much lower property prices actually does translate into increased sales will depend entirely, not on that increased willingness to buy, but on the willingness of the banks to lend at affordable rates and higher LTVs.

We're not bouncing along the bottom yet! It's going to be a buyer's market for some time to come.

Council of Mortgage Lenders data reveal just how much of a pounding the Scottish mortgage market has taken. Lending fell in Q1 of 2009 by 31 per cent against the previous quarter and by 52 per cent against the same period a year earlier.

There were 7,600 mortgages advanced in Scotland in Q1, down from 11,600 in the previous quarter.

Across the UK, mortgage lending in the first quarter was down 25% from the previous quarter and 44% from Q1, 2008.

The CML points out that the Scottish housing market appears to be lagging behind the rest of the UK. In coming quarters it expects activity in Scotland to stabilise at low levels as seen across the UK as a whole.

Scotland accounted for around 10% of the total number of UK house purchase loans, still a little above the long term average (9%).

The fall in lending was fairly evenly distributed across borrower types. Loans to Scottish first-time buyers fell by 33% from the previous quarter and home movers fell by 36%.

Lenders have tightened lending criteria further across the UK in response to the worsening economic outlook and funding constraints.

Scottish first-time buyers typically needed a deposit of 25% in the first quarter - equal to around £26,000. A year earlier, first-time buyers typically required a 12% deposit - equal to around £14,000. This significant up-front requirement means that only the most affluent borrowers, or those with help from family, are able to enter the market.

The tightening in loan-to-value criteria also affected home movers, but to a lesser extent. Scottish home movers typically had a 29% deposit, compared with 26% in the same quarter a year ago.

Income multiples have also tightened, first-time buyers typically borrowed 2.74 times their income, compared with 2.8 in the previous quarter. Home movers typically borrowed 2.51 times their income, compared with 2.63 in the previous quarter.

For those who can obtain credit, however, affordability is becoming significantly better. Big cuts in interest rates mean that mortgage payments now consume 14.6% of a typical first-time buyer's income, down from 16.9% in the previous quarter and 18% a year ago.

Home movers, typically spent 11.6% of their income on interest payments, compared to 14.7% in the previous quarter.

There were 12,000 remortgage loans advanced in Scotland in the first quarter, a 24% decline from the previous quarter.

This is now the ninth consecutive quarter of zero or negative growth, and the pattern and extent of the decline broadly echoes the wider UK picture as borrowers have less of an imperative to refinance in a low interest rate environment.

CML Policy consultant, Kennedy Foster said: "Scotland has lagged behind the UK throughout the decline and as a result may continue to do so when the recovery begins. We expect the pace of decline in lending volumes to slow in coming months and flatten out as we have seen elsewhere in the UK."

We've seen some big rises in the levels of mortgage lending recently and this is probably the most significant sign that the property market is bottoming out.

Mortgages jumped by 29 per cent in March, according to the Council of Mortgage Lenders. 31,000 mortgages were advanced during the month for people buying a property (rather than re-mortgaging) - up from 24,000 in February. This was still 33 per cent lower than March 2008, however.

Even so, it was a big and significant rise. We warned at the time that the chances of loans growing consistently at such a pace were remote. And the latest data released today by the CML shows that to be the case.

Gross mortgage lending plummeted to an estimated £10.4 billion in April - that's a decline of 9 per cent from £11.4 billion in March and 60 per cent from £26.1 billion in April 2008,

There is a slight fall for seasonal reasons as Easter fell in April this year (Easter was in March in 2008). Taken together, lending for March and April is down 57 per cent on a year earlier.

CML director general Michael Coogan said: "It's still too early to spot a clear pattern of recovery in the housing market as some commentators have suggested. Activity remains weak, and we have said we will see volatility in monthly lending figures as we bounce along at the bottom of the market. Our forecast for gross lending of £145 billion in 2009 remains unchanged."

Interestingly, though - and significantly - the number of first-time buyers entering the market and getting access to finance does seem to be climbing.

In March 12,500 FTBs took out a mortgage representing 40% of all loans, which was the highest proportion since April 2005. The absolute number of first-time buyers is still very low though - 12,500, up from 9,200 in February, but well below the 17,800 recorded in March 2008.

Mortgage broker John Charcol finds a similar pattern and says that 20 per cent of mortage deals are for first-time buyers; that's compared to one in 20 in December last year. Banks do seem to be tentatively raising the amount first-timers can borrow, the average deposit is still 25 per cent.

"A surprising number of first-time buyers have managed to find deposits of at least 25 per cent in order to access a wider choice of mortgages and get a cheaper deal," said Ray Boulger of John Charcol.

"Many branches of The Bank of Mum and Dad have proved more robust than many of our High Street banks, haven't needed a government bail-out and recognise that providing their son or daughter with a sizeable deposit is often a good way of utilising their savings."

Yesterday, the annoucement by government-backed Lloyds that it was reintroducing the 95 per cent mortgage for first-time buyers made a few headlines, but the details of the product mean that in essence it still involves the equivalent of a 25 per cent deposit, supplied by parents and locked into a savings account.

As seems rational, the vast majority of borrowers are now opting to fix their borrowing rates -as trackers seem only to have the potential to rise. John Charcol saw 82 per cent of mortgage and remortgage deals being fixed-rate deals. In January some 47.8 per cent of mortgages were fixed rates.

So, more mixed signals - but, taken together, we are certainly seeing a property market that is increasingly stabilising, which is no bad thing. Is this, though, the long-bottom so often talked about?

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

The number of house purchase loans ticked up in February, according to new data from the Council of Mortgage Lenders. There were 24,300 house purchase loans worth £3.1 billion, compared with 23,400 loans worth £3.1 billion in January - a 4% increase.

But historically activity remains very weak, running at around one-third of the average February total of 76,000 loans for house purchase between 2002 and 2007.

Remortgaging declined steeply with 35,000 remortgage loans, down from 44,000 in January- a 20% decline. We expect demand for remortgaging to remain muted as lenders' standard variable rates are attractive compared to new mortgage pricing, and house price falls continue to erode equity levels which will exclude some borrowers from the best remortgaging deals available to those with large deposits.

There were 9,400 loans to first-time buyers - a 7% monthly increase -but significantly less than the 17,400 in February 2008.

The tight lending criteria remain a barrier to most first-time buyers. First-time buyers typically had a deposit of 25% in February, a new record. Such amounts remain out of reach for all but the most affluent buyers, for example people returning to home ownership after a period of renting, divorcees, or those who get financial assistance from their family.

First-time buyers typically borrowed 2.95 times their income, down from three times in January. The average first-time buyer loan was £95,000, down from £97,000 in January and £114,000 in February last year. This decline reflects the change in house prices over the same period and the growth in the size of first-time buyer deposits.

Lower income multiples and mortgage rates have made affordability considerably easier for those able to get a mortgage. Interest payments consumed 15.4% of the average first-time buyer's income in February, down from 20.1% in February 2008 and the lowest proportion since June 2004.

There was a shift away from tracker products towards fixed rates, with 56% of new loans at fixed-rate, up from 49% in January, while 31% were tracker products, down from 38% in January.

An increased proportion of homebuyers are not paying stamp duty as a result of falling house prices and the temporary raising of the nil-rate threshold. In February 57% of all house purchase loans did not incur stamp duty, compared with 48% a year earlier.

Michael Coogan, CML director general, said: "These figures represent February mortgage completions. Recent mortgage approvals figures published by the Bank of England show some signs of improvement at the beginning of the borrowing process, although activity is at a very low level historically. We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year.

"Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own. We need further market measures to be introduced by the government around the Budget to encourage a mortgage market where all types of lenders - banks, building societies and specialist lenders, and large and small businesses - are encouraged, and enabled, to commit more funds to the mortgage market if we are to enhance lending activity significantly."

Almost one year on from its introduction, 40 per cent of UK landlords are still unaware of the Tenancy Deposit Scheme (TDS) leaving them at risk of committing a civil offence and being forced to pay tenants three times the deposit amount, says leading buy to let mortgage broker The Money Centre.

The Tenancy Deposit Scheme was introduced by the Government on April 6th 2007 to protect tenancy deposits and provide a fairer system for settling disputes about the return of a deposit at the end of a tenancy.

But nearly a year on, independent research commissioned by The Money Centre has found that 40 per cent of landlords questioned are still unaware of the scheme. A further 22 per cent of respondents said they were aware but did not fully understand it, leaving only 38 per cent confirming they were aware of the scheme and understood it.

The results show that awareness levels have plateaued since The Money Centre last reported findings on the TDS scheme in October 2007, leaving a large proportion of landlords still in the dark about the legislation. Awareness of the scheme has actually dipped slightly since October, with a six per cent drop in the number of respondents who said they were aware of the scheme and fully understood it.

Lynsey Sweales, marketing and PR director of The Money Centre commented: "The results of this research are extremely worrying. The scheme has now been in place for nearly a year, yet many landlords are still unaware of the legislation and its implications. The good news is more than half of those surveyed did believe the scheme would benefit both landlords and tenants, as it was designed to do. But until awareness, understanding and participation can be improved the scheme won't be fully effective."

The Tenancy Deposit Scheme was introduced to ensure:

• tenants get all or part of their deposit back, when they are entitled to it,
• any disputes between tenants and landlords are easier to resolve, and
• tenants are encouraged to look after the property they are renting.

Deposits are a big issue for many landlords with half of those surveyed confirming they had withheld all, or part of, a tenant's deposit to cover property damage and other costs (such as cleaning costs and unpaid utility bills) at some stage. Therefore, it may not be long before problems arise due to a lack of participation in the scheme, and if a landlord or agent does not protect a tenant's deposit, they can be ordered by the local county court to pay the tenant three times the amount of the deposit.

While the TDS only covers tenancy agreements made on or after 6th April 2007, as time goes on and tenancy agreements are renewed and changed, all landlords will eventually become affected. It is therefore vital that landlords take the time to understand the TDS now and avoid becoming ignorant of the law.

Lynsey Sweales concluded: "Once again we are urging landlords who are not up to speed with the TDS to do their research immediately and advise them to join their local landlords' association. These organisations provide advice to their members on changes in legislation and can act as a forum to share best practice."

Sources of further information for landlords include:

• The Department for Communities and Local Government: www.direct.gov.uk/tenancydeposit or 0845 609 0696
• Landlords' associations: National Federation of Residential Landlords - www.nfrl.co.uk; National Landlords Association - www.landlords.org.uk; Residential Landlords Association - www.rla.org.uk

The research was undertaken by independent research agency BDRC on behalf of a syndicate of buy-to-let mortgage lenders and brokers. Online interviews among 493 residential property investors were conducted in December 2007.

This blog was supplied by The Money Centre.