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Weekly Round-up, 7th July 2017
Close To The Boom
The number of first-time buyers (FTBs) reached an estimated 162,704 in the first six months of 2017, only 15% below the peak of the last boom in 2006 (190,900), according to the latest Halifax First Time Buyer Review.
Although the growth in FTBs slowed to just 3%, compared to an increase of 10% last year, the number of homeowners getting on to the property ladder for the first time is up from 154,200 in the same period in 2016 and more than double the market low in the first half of 2009 (72,700).
A decade ago, just over a third (36%) of all house purchases financed by a mortgage were made by first-time buyers. In 2017, this proportion is estimated to have risen to almost half (47%), with the share growing from 44% since the launch of the Help to Buy scheme in April 2013. Whilst the homemover (current owner occupier) market has slowed, housing activity has been dependent on buyers taking the first step on the ladder.
In the first half of 2017, the average house price paid by first-time buyers was £207,693 – the highest on record. In the past year the average value of a typical first-time buyer home has grown by 4% from £199,414. And in the past five years, the average price has grown by 50% from £138,663 to £207,693 (an increase of 50% or £69,025), comfortably outperforming price growth across the entire market (42%).
Where Have All The Movers Gone?
Before the recession, there were about 1.6 million home sales a year in the UK, which plummeted to 860,000 in 2009 but has since recovered to around 1.2 million. New research published by the Council of Mortgage Lenders (CML) suggests that the shortfall is largely the result of “missing movers” – mortgaged home-owners not moving up the housing ladder.
The CML commissioned researchers Neal Hudson and Brian Green to explore the phenomenon. They suggest that “missing movers” account for about 320,000 of the annual housing transaction shortfall. They point to a number of reasons for the decline, including the fact that there are now fewer mortgaged owners, and they tend to be older and so naturally less likely to move. However, there are still around 140,000 missing moves that can be attributed to a decline in the rates of moving among mortgaged home-owners.
Three factors determine the moving rate among this groups – their desire to move, sufficient funds, and the availability of a home they want to buy. Of these three factors, the research suggests that the availability of sufficient funds – specifically, sufficient equity – is the dominant factor holding back the mortgaged mover rate. The researchers observe that, in many ways, it is not the present but the past that is extraordinary. For five decades the market underwent changes that provided an enormous boost to the ability of people to buy and to own their homes. But expecting a return to those conditions is unrealistic, they suggest.
With the summer holiday season about to start and Brits making a staggering 70 million overseas trips a year, latest analysis by the Association of British Insurers highlights why travel insurance is essential.
Analysis of claims paid last year by travel insurers reveals that £370 million, equating to £1 million every day, was paid to help 480,000 travellers and their families who needed help abroad, such as emergency medical treatment and lost baggage. This was the highest amount paid since 2010, when disruption caused by the Icelandic Ash Cloud pushed claims costs to an all-time high. The increase in claims costs was mainly due to increasing costs of emergency medical treatment with 154,000 travellers helped by insurers at a cost of £199 million. These included a £100,000 bill for treating an abscess in the USA, £16,000 for the treatment of a fractured leg in a motorcycle accident in Thailand, and £11,000 to remove a brain tumour in Spain. And finally £130 million was paid out on 159,000 claims to cancelled holidays with £17 million paid on 83,000 claims for baggage and money lost while travelling.
The cost of the average annual travel insurance policy is £37, compared to the average medical claim of £1,300, and the average cancellation claim of £816. Single trip policies can be cheaper, often less than what a family may spend on a snack or a couple of glasses of wine at the airport.
Couples face an average bill of £800 each time they attend a wedding, according to a survey on the wider costs associated with tying the knot.
The new Nationwide Current Accounts research, which polled 2,000 adults who have attended a wedding, follows an inaugural survey in 2015. It shows that the average cost per person of attending a wedding – from the stag and hen party, buying gifts and clothes, and attending the ceremony – is just over £400. This represents a modest £23 increase since the 2015 survey.
But with many guests attending multiple ceremonies, saying yes could cost them much more. The significant financial outlay is given as the reason why a quarter of people (25%) have declined a wedding invitation, while around one in six (16%) have become overdrawn or borrowed money to be able to attend.
The survey shows male wedding guests spend £21 more than female wedding guests, £411 compared to £391. However, women are catching up, having increased their overall spend by £38 since Nationwide’s 2015 survey, while men spend only £8 more.
According to the latest statistics released by the Nationwide Building Society, UK house prices rebounded in June, with prices rising by 1.1% during the month, erasing the decline recorded over the previous three months. However, monthly growth rates can be volatile, even after accounting for seasonal effects.
The annual rate of house price growth, which the Lender states gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May. In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.
Nationwide highlighted a shift in regional house price trends. Price growth in the South of England has moderated, converging with the rates prevailing in the rest of the country. In Q2 the gap between the strongest performing region (East Anglia, which saw 5% annual growth) and the weakest (the North, with 1% growth) was the smallest on record, based on data going back to 1974. Nevertheless, when viewed in levels, the price gap between regions remains extremely wide.
London saw a particularly marked slowdown, with annual price growth moderating to just 1.2% – the second slowest pace of the 13 UK regions and the weakest pace of growth in the capital since 2012.
The current framework for delivering guidance and advice to those seeking to borrow money against their property as they approach and enter retirement operates largely in two distinct silos according to research published by the Council of Mortgage Lenders (CML). It is split between lenders and intermediaries who lend and provide information and advice on residential mortgages, and those who lend and provide information and advice on equity release products (mainly lifetime mortgages).
The report suggests the two markets have very different attitudes towards borrowing in later life. Residential mortgage lenders have traditionally viewed borrowing as a means to accumulate equity and a retirement free of debt. The lifetime mortgage lenders see borrowing in later life as a means to help customers extract value from the accumulated equity.
The CML highlight how advising older borrowers can be time-consuming and expensive and those needing the loan who may need to move between the two markets or may wish to weigh up the advantages and disadvantages of each market find there is no single obvious place to go and no joined up framework for addressing their needs. In addition, the report suggests consumers are maybe frustrated at barriers to borrowing, some of which can seem to them unfair. They also perceive that the products available do not fully meet their needs and that products can be difficult to compare and understand.
Almost two fifths (37%) of UK holidaymakers plan to book their holiday accommodation directly with hoteliers this year, more than double on ten years ago when 17% booked direct with special offers for direct bookings and lower prices are luring British holidaymakers finds Barclays Corporate Banking.
The figure demonstrates significant growth when compared to 17% in 2007 and 30% five years ago. This contrasts with international trends where travel agents online and on the high street are the most popular ways for holidaymakers to book their UK breaks (52% and 22% respectively).
The findings are from a Barclays survey of British holiday booking trends and the Barclays Corporate Banking report, Destination UK: driving growth in the UK hospitality and leisure sector, which reveals the 2017 holiday and leisure preferences of almost 10,000 guests from the UK, continental Europe, the US, Middle East, Asia and Australia. Key drivers for booking direct for UK holiday makers include cheaper prices (62%), special benefits offered only to direct bookers (39%) and easier booking experiences (37%).
Basic household bills have increased by an average of 43 per cent in the last decade – more than double the rate of wage growth, new research from Santander shows. Analysis of government data also reveals that bills for Council Tax, TV, phone, broadband, gas, water and electricity have, on average, increased 10 percentage points more than inflation over the past 10 years.
Gas and electricity are the biggest drivers of price increases, rising 73 per cent and 72 per cent respectively in the last decade, while water bills have increased by 41 per cent – all significantly higher than inflation at 32 per cent. Council Tax has risen by 27 per cent and TV, phone and broadband prices have all risen by 24 per cent, albeit slower than inflation but still faster than wage growth (19 per cent). Household bills continue to squeeze incomes as an eighth (13 per cent) of the average UK adult’s salary is spent paying basic domestic bills. Over the course of a lifetime, people will fork out an average £524,464 on bills, with those in London set to spend the most (£601,638), closely followed by people in the South East (£580,566).
However, it’s those living in the South West who will spend the largest proportion of their salary on basic household bills – with almost a sixth (15 per cent) of their earnings going towards them over the course of a lifetime.
The Council of Mortgage Lenders (CML) estimates that gross mortgage lending reached £20.1 billion in May. This is a 12% increase on both April last month and on May last year, in which £17.9 billion was advanced. The CML’s buy-to-let forecast for 2017 and 2018 has been revised down from previous expectations at the end of last year, reflecting tax and prudential burdens in the housing and mortgage markets.
The CML now expects buy-to-let lending of £35 billion in 2017 and £33 billion in 2018, a decrease from £38 billion in each year, forecast in December last year. Commenting on market conditions, CML director general Paul Smee highlighted the fact that remortgage activity and first-time buyers continue to drive lending this year and that he expects to see this trend continue, but not as strongly as in the past as the factors supporting lending are blunted by less favourable economic conditions.
Buy-to-let had a weak start to 2017, and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year. While falling mortgage interest rates have helped support borrowing, tax and prudential measures are exerting pressure on the buy-to-let market. Following the distortion of the stamp duty change on second properties last year, the CML expected a slight recovery in lending levels. However, this has not materialised, and they have therefore lowered their forecast for buy-to-let lending this year and next. The trade body has called for the need to avoid further changes to the tax and regulatory framework until the effect of those changes already in train have been properly assessed.
It’s no secret that first time buyers are experiencing a difficult time in the property market, with rising house prices and a lack of affordable homes contributing to the growing problem. New research from Barclays Mortgages has revealed how 51 per cent of those who bought for the first time in the last five years regret not negotiating prior to purchase. 52 per cent of first time buyers – typically aged 32 – admit they have never negotiated for anything in their lives, with a further 53 per cent carrying a fear of missing out in the “extremely competitive” market if they were to negotiate.
In fact, the market is so competitive that 35 per cent would avoid negotiations given the small pool of affordable housing available, as is clearly shown in recent market data from Countrywide Estate Agents, shared exclusively with Barclays Mortgages. Figures on property purchases made through Countrywide between April 2016 and April 2017 show that one in five (21 per cent) British first time buyers paid over the asking price for their property, forking out on average an additional £7,758 to secure their chosen property. Surprisingly in England and Wales it’s not Londoners but those in Yorkshire and Humber who proved to be the most likely to go over the asking price with almost a third, 29 per cent, paying more than the initial selling price. In Scotland, the figure is even higher at 40 per cent but this reflects the fact that properties are often purchased through the sealed bid system.
Time To Travel
The Financial Conduct Authority (FCA) is seeking views and evidence of the challenges firms face in providing travel insurance for consumers who have, or have had, cancer, and the challenges for these consumers in accessing insurance. The paper is also looking at the reasons for pricing differences in premiums quoted.
This paper looks more broadly at access issues related to insurance but specifically seeks views on how consumers with cancer or those in recovery can access the travel insurance market. This is the FCA’s next step to address issues highlighted in the Occasional Paper on ‘Access to Financial Services in the UK’, published last year. This focused on problems consumers can face when trying to find insurance that meets their needs.
The FCA believe that being able to access financial services is critical for people to fully participate in society and hope that this discussion paper will encourage discussion on access issues to examine the challenges for firms and consumers. The FCA is seeking input on the challenges for firms in providing travel insurance for consumers who have, or have had, cancer and the impact on consumers when they have, or have had, cancer in finding suitable travel insurance. The FCA are keen to understand how consumer outcomes can be improved in this area, including through innovation. The findings should read across to many other pre-existing medical conditions and insurance products.
For Sale Or Rent
Property sales in 2016 were 7% lower than in 2015, according to the latest research from Lloyds Bank. There were 848,857 home sales in England & Wales in 2016, compared to 915,096 in the previous year.
All regions saw a decrease in sales in 2016 compared to 2015, with the largest falls in Greater London (-20,660 sales, -18%) and the South East (-23,422 sales, -10%). Both East and West Midlands fared the best with just a one percent decline, followed by North West (-2%). Despite the recent dip in home sales, there has been an improvement compared to five years ago when the market started to recover from the financial crisis. The number of sales in England & Wales as a whole increased by 29% (188,386 sales) from 2011-2016 with the majority of regions seeing increases of between 23% (South East) and 46% (North West).
The exception – and the worst performer by some distance – was Greater London with a rise of just 2% in the past five years. The majority (82%) of towns in this survey saw a decrease in sales between 2015 and 2016. In Greater London all boroughs experienced a fall in sales.
Average house prices in the UK have increased by 5.6% in the year to April 2017 (up from 4.5% in the year to March 2017) according to the Office for National Statistics. While up against March 2017, there has been a general slowdown in the annual growth rate since mid-2016. The average UK house price was £220,000 in April 2017. This is £12,000 higher than in April 2016 and £3,000 higher than last month.
The main contribution to the increase in UK house prices came from England, where house prices increased by 5.7% over the year to April 2017, with the average price in England now £237,000. Wales saw house prices increase by 4.2% over the last 12 months to stand at £148,000. In Scotland, the average price increased by 6.8% over the year to stand at £146,000. The average price in Northern Ireland currently stands at £124,000, an increase of 4.3% over the year to Quarter 1 (Jan to Mar) 2017.
On a regional basis, London continues to be the region with the highest average house price at £483,000, followed by the South East and the East of England, which stand at £315,000 and £281,000 respectively. The lowest average price continues to be in the North East at £123,000. The East of England showed the highest annual growth, with prices increasing by 8.1% in the year to April 2017. This was followed by the South West at 6.8%. The lowest annual growth was in the North East, where prices increased by 0.6% over the year, followed by the North West at 4.1%
Fraud involving criminals taking hold of a bank account, credit card or email account and using them to steal money has soared over the past year, fraud prevention body Cifas has warned.
Dubbed ‘facility takeover’ fraud, it involves criminals ‘posing as a genuine customer to gain control of an existing account and using it for their own ends’, Cifas said, including spending or withdrawing money, ordering or upgrading products such as expensive smartphones. This type of identity fraud rose by 45% in 2016, with more than 22,000 – 6.7% of the 325,000 fraud cases reported – falling victim to it. Figures from Financial Fraud Action suggest that consumers lost £24m to takeover fraud last year. Cifas has also revealed the nation’s ID fraud hotspots and while a third of all fraud was recorded in London, the highest proportion of ID fraud was recorded in the south east of England.
Half of takeover fraud takes place over the phone, whereas 88% of ID fraud takes place online. This means that criminals are increasingly targeting people directly to trick them into handing over their personal details. 50% of fraud was carried out over the phone with 61% of victims being men and 39% women The highest number of victims were aged between 40 and 50 Takeover fraud on bank accounts has risen by 12.7%.
Happy Father’s Day?
As the nation celebrates Father’s Day this Sunday with handmade cards, breakfast in bed and pub lunches, the importance of financial security is likely to be the furthest thing from people’s minds. But research from Scottish Widows reveals that more than half (53%) of men in the UK with dependent children have no life cover, meaning that 3.9 million dads are potentially putting their family’s financial security at risk if the unexpected were to happen.
The research also shows that only 16% of dads have a critical illness policy, leaving many more millions at financial risk if they were to become seriously ill. Fathers are, in fact, more likely to insure their mobile phones (21%) than to insure themselves against serious illness.
More than a fifth (22%) of dads admit their household would be placed at financial risk if they lost their income due to unforeseen circumstances, and 28% say they could only pay their household bills for a minimum of three months. Two-fifths (40%) say they’d have to dip into their savings to manage financially, but 42% say that their savings would last for a maximum of just three months.
Base rate ready for a rise?
At its meeting ending on 14 June 2017, the Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-3 to maintain Bank Rate at 0.25%. The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.
The MPC set out its most recent assessment of the outlook for inflation and activity in the May Inflation Report. That assessment depended importantly on three main judgements: that the lower level of sterling continues to boost consumer prices broadly as projected, and without adverse consequences for inflation expectations further ahead; that regular pay growth remains modest in the near term but picks up significantly over the forecast period; and that more subdued household spending growth is largely balanced by a pickup in other components of demand.
CPI inflation has been pushed above the 2% target by the impact of last year’s sterling depreciation. It reached 2.9% in May, above the MPC’s expectation. Inflation could rise above 3% by the autumn, and is likely to remain above the target for an extended period as sterling’s depreciation continues to feed through into the prices of consumer goods and services. The 2½% fall in the exchange rate since the May Inflation Report, if sustained, will add to that imported inflationary impetus. In contrast, pay growth has moderated further from already subdued rates, even as the unemployment rate has fallen to 4.6%, its lowest in over 40 years.
GDP growth declined markedly in the first quarter, in part reflecting weaker household spending. It remains to be seen how large and persistent this slowdown in consumption will prove. In recent months, there have been further signs of a slowing housing market and new car registrations have fallen sharply. Consumer confidence has remained relatively resilient, however, and employment has continued to rise. Outside the household sector, export indicators have strengthened, probably reflecting both the depreciation of sterling and increasingly robust global demand. Most surveys of investment intentions have remained above their historic averages. Surveys of general business activity suggest a modest recovery in GDP growth in the second quarter.
New research from Lloyds Bank has found that homes within easy reach of a local supermarket are, on average, £21,512 higher than in nearby areas. Properties in areas with a Waitrose, Marks and Spencer, Sainsbury’s or Iceland are most likely to command a higher house price premium when compared to the wider town average. And prices near upmarket supermarket brands can be particularly high. For example, the average price for properties within easy reach of a Waitrose is typically £36,480 higher than the wider town average (£429,118 versus £392,939).
Those living close to a Marks and Spencer have the second highest premium, with properties worth an average of £29,992 more than homes further away, followed by Sainsbury’s (£26,081) and even discount chains like Iceland (£22,767) command a strong premium. Homes within easy reach of all four supermarket chains are trading at an average premium of 9%.
House prices close to an Aldi, Lidl, Morrisons or Asda have grown by an average of 11%, or £21,400, since 2014. This is a faster increase than for all supermarkets (9%) and marginally higher than for all areas in England and Wales (10%). In postal districts with an Aldi, the average house price has grown from £178,809 in 2014 to £198,810 in 2017 – an increase of £20,000. In addition, areas with a Lidl have seen average price grow of £23,722 (from £216,258 to £239,981). However, in cash terms the largest price increases remain in postal districts with a Waitrose – £33,015 (from £396,104 to £429,118) or 8%. The average house price in an area with a Waitrose store is £429,118 – the most expensive of all the chains – and more than double compared to areas with an Aldi store (£198,810), which is the least expensive. The next most expensive are areas with a Marks and Spencer (£350,263) and Sainsbury’s (£314,154).
The latest House Price Index from the Halifax suggests that after reaching a recent peak of 10% in March 2016, the annual house price growth has since fallen to 3.3% in May. House prices have again fallen over the past three months with overall prices in the three months to May 0.2% lower than in the preceding three months; the same rate as in April. The lender highlights the fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, is still likely to support house price levels over the coming months.
Looking year on year, prices in the three months to May were 3.3% higher than in the same three months in 2016. This was lower than April and is the lowest annual rate since May 2013 (2.6%). The annual rate is around a third of the 10.0% peak reached in March 2016. There has been virtually no change in prices over the past three months and nationally, house prices in May 2017 were 11% above their August 2007 peak. The average house price of £220,706 is £66,043 (43%) higher than its low point of £154,663 in April 2009.
Four Weeks No More
Britain’s employees could maintain their current lifestyle for only a month if they lost their source of income and had to rely on savings, new research from insurer Legal & General shows today.
The survey of 2,000 full and part-time employees found that the average employee’s ‘deadline to the breadline’ was just 32 days. However, more than a quarter (26%) said that their current savings would last just one week or less, highlighting that families across the UK are at threat should the main breadwinner die or become critically ill.
The research found that whilst the deadline rose to 36 days if respondents reined in their spending, one-fifth (21%) would still be able to live off their savings for up to one week. Furthermore, whilst the average employee had just over £6,500 in savings, they believed they would need a further £9,830 to feel financially secure. Nearly one-quarter (23%) even said they did not save any of their income each month.
The statistics also showed a variation in the deadline across the UK. Northern Ireland had the longest deadline, with individuals saying that their savings would last 36 days on average. In contrast, Wales had the shortest deadline to the breadline, with those surveyed saying that with they could sustain their current level of spending for on average just 26 days after losing their primary source of income.
Follow The Instructions
Enquiries from new buyers, new instructions from those wanting to sell, and agreed sales in the housing market, have once more declined in May, according to the latest RICS UK Residential Market Survey. In addition, price growth also lost momentum and is predicted to slow further over the next three months.
Although a fall in property coming on to the market is a recurring theme over the past two years, anecdotal evidence from respondents to the survey in May suggests this month’s drop may have been exacerbated by the General Election, as some adopt a “wait and see” approach. In May, 25% more respondents cited a decline in fresh listings (compared to those reporting a rise), producing the most negative reading since July 2016. Alongside this, new buyer enquiries fell at the national level, having remained stagnant over much of the past six months. As with new sellers, a large portion of contributors suspect the General Election is having an adverse impact on demand.
In the lettings market, tenant demand rose only marginally (on a non-seasonally-adjusted basis), while new landlord instructions were again broadly flat. 17% more respondents nationally expect rents to rise (rather than fall) over the coming three months and, in terms of twelve month expectations, contributors are penciling in around 2% headline rental growth over the year ahead.
Parents are plundering children’s ‘piggy banks’ to the tune of nearly £50 a year, according to an annual poll that shows a significant rise in the amount borrowed by mum and dad. The Nationwide Financial Planning survey into ‘piggy bank raiding’ quizzed 2,000 parents of children between four and 16. It shows three in five (60%) admit taking money from their offspring – a 14 per cent increase on last year’s study.
According to the Society’s poll, the average amount taken by parents over a 12 month period is £46.20 – a sharp rise of 115 per cent on the £21.41 indicated last year – while one in five (20%) admit to pilfering £60 or more annually. Just over a fifth (21%) admit to raiding the piggy bank twice or more times a month. And when it comes to the parental divide, dads (£51.12 per annum) take more than mums (£44.52). Paying the school lunch money (32%), needing loose change for parking (29%) and covering school trips (24%) are the primary reasons parents need to dip into the ‘Bank of Child’. Other reasons include donating to school charity days (21%) and paying for clubs and societies (20%).
In terms of mum and dad, it’s women who need the cash for school charity days (23% v 16% for men), school lunch money (33% v 30% for men) and school trips (24% v 20% for men). Men, on the other hand, will take money to pay a bill (16% v 12% for women), buy Christmas presents (14% v 10% for women) and to cover any doorstep charity requests (10% v 7% for women). However, both mum and dad are prone to raiding their children’s piggy banks to get a takeaway (12% of men and 10% of women).
As a direct result of not returning cash owed, the poll highlights how levels of outstanding debt build up. A quarter (25%) owe their children £25 or more, while one in 20 (5%) admit to being in debt to their offspring to the amount of £100 or more.
The latest survey from My Home Move reveals that would-be first time buyers are nostalgic for stereo players, teasmades and VHS recorders, wishing these items, once found in every home across Britain, would make a comeback. The results, formed part of a survey regarding aspiring first-time buyers and their attitudes towards technology, conducted by the UK mover conveyancing service provider.
It found that despite 70% of respondents saying they were unable to live without their smartphone, 33% want to see the stereo player, complete with mini disc, cassette and record decks, make a return to living rooms and bedrooms alike. Alongside this, 89% stated they want their first home to have a garden.
57% of aspiring first-time buyers said super-fast broadband is their ‘must have’ piece of technology for their first home; and when asked the same question when budget is no issue, a home with full-connectivity to control heating, lights and appliances (31%) ranked highest among the respondents.
Experian has revealed that one in two households, with occupants aged 35 or under, could not afford an ad hoc bill or expense of just £250, without reverting to credit or financial help from their family. The new report, compiled over five years reveals the widening financial gap between generations. It identifies an emerging group of people, defined by four key characteristics: they’re young, they earn relatively good money, they rent rather than own their homes and they have virtually no savings (YERNS).
Representing nearly a third of all UK households (29.3%) – or 7.3 million Britons – the ‘YERNS’ are far more likely to use credit cards, take unsecured personal loans, and fall behind when paying bills. Four in every five (79%) of these YERNS households have outstanding debt, and around two million households within this group have no savings whatsoever.
With an average age of 35, the YERNS group contrasts directly with the older ‘MORS’ generation (Mature, Owning, Risk-averse, Savers). This cautious, more content generation has an average age of 69 and is far more likely to have substantial savings, with almost half of this group (46%) with £20,000 or more ‘in the bank’. MORS are also far less likely to owe money, with two thirds (64.5%) being completely free from debt of any sort. Whereas more than a third of YERNS (35.2%) have credit cards, and nearly one in ten (6.2%) have had to take a loan from friends or family members. This includes expenses for rent, car costs and holidays.
When looking at average household income across the country, YERNS households bring in more than MORS (£37,081 vs £29,051 respectively). However, the discrepancy between income and outgoings makes it far harder for the younger generation to build up savings.
Royal London published its 2016 claims statistics this week which showed 97.3% of claims were paid totaling over £331m. Nearly £1m was paid in free cover claims – free cover is provided for up to 90 days while an application is being processed and will pay out on receipt of a valid claim before any premium has been collected from the customer. This can be useful if a customer is waiting for a mortgage to complete. In addition over 60% of all claims paid were fast-tracked and paid within three days.
Critical illness (CI) claims accounted for over £156m of payments last year with an average payout of nearly £83,000. Once again the most common reason for claims was cancer (63%), followed by heart attack (10%), stroke (6%), multiple sclerosis (4%) and children’s critical illness (3%). 92.2% of CI claims were paid. 1.1% of claims were declined due to misrepresentation and 6.7% did not meet the policy definition. The average age of a CI claimant was 48 years old and the average policy had been in force for 10 years and 5 months. Almost £2.3m was paid in children’s CI claims. 96.8% of term life insurance claims were paid totaling nearly £108m and 90.9% of terminal illness claims were paid amounting to nearly £26m. Over £33m was paid in whole of life claims and 100% of claims received were paid.
Royal London paid 95.6% of income protection (IP) claims totaling £3.6m based on new claims and those already in payment. Of the 4.4% of claims that weren’t paid, 2% were declined due to non-disclosure and 2.4% for claim definition not being met. As a member of the Association of British Insurers this is the first year Royal London are also declaring claims based on the amount of new claims only, excluding claims in payment before 2016 that continued to be paid in 2016. On this basis, the value of claims paid in 2016 was nearly £1m and 83.8% of claims were paid. The top three reasons for IP claims were for cancer (29%) mental health conditions (26%) and musculoskeletal conditions (26%).
Are Ewe Happy Now?
Researchers have devised an artificial intelligence (AI) computer system that can tell whether a sheep is happy or sad from its face. While it may seem like a strange idea, the device has a practical application: by being able to detect pain, it could allow farmers to detect a range of diseases.
When a sheep is in pain, five things happen to their faces, their eyes narrow, their cheeks tighten, their ears fold forwards, their lips pull down and back, and their nostrils change from a U shape to a V shape.
Professor Peter Robinson, of Cambridge’s Computer Laboratory said: ‘There’s been much more study over the years with people. But a lot of the earlier work on the faces of animals was actually done by Darwin, who argued that all humans and many animals show emotion through remarkably similar behaviours, so we thought there would likely be crossover between animals and our work in human faces.’
His co-author Dr Marwa Mahmoud added: ‘The interesting part is that you can see a clear analogy between these actions in the sheep’s faces and similar facial actions in humans when they are in pain – there is a similarity in terms of the muscles in their faces and in our faces”
The Council of Mortgage Lenders (CML) estimates that gross mortgage lending reached £18.4 billion in April. This is 11% lower than March’s lending total of £20.7 billion, but 4% higher than the £17.7 billion lent in April last year.
In the CML’s commentary they suggest that first-time buyers and remortgage customers appear to be buoying the market, as low mortgage rates are encouraging borrowers to remortgage and attractive government schemes are helping first-time buyers. The CML expects this trend to continue over the coming months.
According to the CML home movers are having less luck. Activity in this sector has been subdued for some time now and the low number of movers means fewer properties for sale. It is suggested that this supply and demand imbalance will continue to underpin house price values, even as the rate of price rises slows.
New start in life
In its latest analysis of the housing market the Department of Communities and Local Government (DCLG) reported that, on a quarterly basis, new build dwelling starts in England were estimated at 43,170 (seasonally adjusted) in the latest quarter. This represents a 3 per cent increase compared to the previous 3 months and 21 per cent increase on a year earlier. Completions were estimated at 39,520 (seasonally adjusted), 9 per cent higher than the previous quarter and 21 per cent higher than a year ago.
On a rolling annual basis new build dwelling starts totalled 162,880 in the year to March 2017, up by 15 per cent compared with the year to March 2016. During the same period, completions totalled 147,960, an increase of 6 per cent compared with last year. Private enterprise new build dwelling starts (seasonally adjusted) were 4 per cent higher in the March quarter 2017 than the previous quarter, and completions were 12 per cent higher. Starts by housing associations were 2 per cent higher compared to the last quarter and completions 5 per cent lower.
All starts are now 152 per cent above the trough in the March quarter 2009 and 12 per cent below the March quarter 2007 peak. All completions are 57 per cent above the trough in the March quarter 2013 and 18 per cent below their March quarter 2007 peak.
New research released by Barclays Bank, the Barclays UK Property Predictor, provides a three-to-five year forecast of investment hotspots on the residential property market, revealing the areas across the UK where house prices and rental incomes are expected to rise. The research uses factors including rental trends, employment levels and commuter behaviour as well as current house prices to create an index of property hotspots. The research also surveyed high net worth investors from across the UK, to reveal where and why they plan to purchase property in the future.
According to the research, and despite an uncertain economic and political climate, the UK property market remains buoyant with prices in areas across the UK set to rise by an average of 6.1% by 2021, bringing the average value of a UK property to almost £300,000.
The research reveals that younger High Net Worth Individuals will be a key driver in the growth of the UK property market over the next three-to-five years. The millennial investors surveyed have 41% of their investment portfolio tied up in property, compared to 23% amongst those aged over 55. They are also more bullish in their approach to investing in bricks and mortar with 75% intending to increase the percentage of their portfolio in property over the next three-to-five years, compared to just 10% of over 55s.
Investors are leaning on buy-to-let to fuel their property portfolios, despite the recent changes to buy-to-let tax. Higher value investors are seeking to maximise returns through property purchases, with nearly two-thirds (65%) of those looking to buy doing so for rental income. Sixty-two per cent of those with rental properties expect the proportion of the income they receive from rent to increase over the next three-to-five years, with half predicting it will rise by up to 20%.
Home Insurance on the rise
Government tax rises are driving home insurance prices higher despite the mild winter keeping claim costs down, new analysis from insurance market research experts Consumer Intelligence shows. Average home insurance costs rose 2% – below the 2.3% rate of inflation for the economy as a whole – in the year to April to £121 and were virtually unchanged in the past three months.
Prices are rising fastest for over-50s householders who are seeing above inflation increases of 3.6% to £117 compared with just 1% for under-50s to £124. The relatively mild winter with low claims for storm damage would have limited price rises but an Insurance Premium Tax rise in October and another due in June taking the rate to 12% will keep costs rising, Consumer Intelligence warns.
Consumer Intelligence – whose data is used by the Government’s Office for National Statistics to calculate official inflation statistics – says prices rose by just 0.2% in the three months to April and even fell for the under-50s.
Home insurance customers in the North East are experiencing the highest increases in premiums with average rises of 3.3% in the past year while prices rose 3.2% in Yorkshire & Humberside. Londoners pay the highest premiums at £144 while householders in the North West have seen prices rise by just 0.9% in the past year. But there’s good news as home insurance costs are still 7.7% lower than in February 2014 when Consumer Intelligence first analysed data.
Is this the best pipeline in the world?
Engineers are building a 7-km long, underground pipeline to send 400,000 litres of beer to a festival in northern Germany. Its an initiative put in place for Wacken Open Air Festival, the world’s biggest metal music festival.
Organisers found out that the 75,000 metal fans who attend the event each year consume an average of 5.1 litres per person over the three day festival, according to statistics portal Statista.
The pipeline, buried 80cm beneath the ground to keep the beer cold, will solve logistics problems of tracks going back and forth, ruining the festival ground.
“In this way, we will no longer have to distribute truckloads of beer kegs across the premises each day,” festival spokeswoman Frederike Arns told Deutsche Press Agentur. The new pipeline will have enough pressure to pour six beers in six seconds.
According to the Council of Mortgage Lenders home buyers borrowed £28.6bn, down 13% on the fourth quarter 2016 and 7% on the first quarter 2016. This came to 156,000 loans, down 13% on the previous quarter and 5% on the same quarter last year.
First-time buyers borrowed £12.3bn for home-owner house purchase which was down 13% on the fourth quarter 2016 but up 10% on the first quarter 2016. They took out 78,300 loans, down 13% quarter-on-quarter but up 10% year-on-year. In comparison home movers borrowed £16.2bn, down 12% on the previous quarter and 18% on the same quarter last year. This equated to 77,600 loans, down 14% quarter-on-quarter and 16% compared to the first quarter 2016.
In contrast home-owner remortgage activity was up 12% by value and 11% by volume on the previous quarter. Compared to the first quarter 2016, remortgage lending was up 18% by value and by volume. Gross buy-to-let saw quarter-on-quarter decreases, down 2% by value and 1% by volume. Compared to the first quarter 2016, the number of loans decreased 39% and the amount borrowed decreased by 40%.
Looking on a seasonally adjusted basis, first-time buyer, home mover, buy-to-let and remortgage activity remained relatively unchanged by volume and by value month-on-month. Compared to March 2016, all loan types had similar changes to the non-seasonally adjusted figures. Full seasonally and non-seasonally adjusted data can be downloaded at the bottom of the page.
This week saw Lloyds Banking Group return to full private ownership, and announce its continued commitment to Help Britain Prosper. Successful delivery of strategy has enabled the Group to return more than £21.2 billion to the British taxpayer, repaying £894 million more than the original investment.
The sale marks the successful delivery of the Group’s strategy to transform itself into a simple, low risk, UK focused retail and commercial bank. Since the Government first acquired shares in 2009, the Group has repaired its balance sheet, reduced its cost base, cut complexity and international exposure, built and sold TSB, and addressed legacy issues. The Group returned to profitability in 2013 and resumed paying dividends in 2014.
In a statement the Group confirmed its commitment to being a strong, safe Bank, focused on meeting the rapidly changing needs of its customers. This year the LBG has confirmed new, ambitious targets as part of its 2017 Helping Britain Prosper Plan to help address pressing issues such as the housing shortage, lending to SMEs and apprenticeships and skills. positioned to help Britain prosper while creating sustainable value for its 2.5 million shareholders.
Britain’s savers say increases in the cost of living are making saving harder than ever, according to research by specialist financial mutual, Wesleyan.
A Nation of Savers?
More than one in four (28 per cent) say they are saving less than this time last year, compared with only one in five (20 per cent) who are saving more. The sharpest fall was among millennials, with a third (33 per cent) of those aged 25-34 saying they are now saving less than a year ago.
Wider economic and political events, including Brexit, over the past year are also having a bearing on savers’ confidence. A fifth (21 per cent) admit Brexit has made them more cautious and changed their attitude towards risk. Elsewhere, savers are prioritising short-term purchases over long-term saving – 23 per cent are saving towards a holiday and 16 per cent are saving for a new car, compared with just 15 per cent saving towards retirement.
The findings from the study also revealed that despite ISAs being the previous go-to option for savers, just a third (33 per cent) of people are using ISAs for long-term savings. Interestingly, one in five (22 per cent) are using their current account to hold their long-term savings, further evidence that people want access to their money quickly and easily, rather than locking it away.
How much – I don’t?
While many focus of a wedding might be on the bride and groom, few think about the cost to the guests. Given that many people could have several weddings to attend over the course of a season, those costs could quickly escalate, as research from American Express shows.
The survey found that some 31% of Brits will attend at least one wedding this year, and they’ll spend an average of £432 in the process. This means that, with typical respondents set to celebrate an average of four nuptials over the season, the cost of being a wedding guest could escalate to a whopping £1,728.
This is more than the average bride spends on her dress – which according to Brides magazine clocks in at an impressive £1,378 – and means that the total guest bill for 2017 adds up to £27.5bn. The average per-wedding expenditure may have nudged down from last year, when guests spent an average of £479 attending each wedding, but it’s still a significant sum.
The largest expense for guests will be the wedding gift, where there’ll spend an average of £85 (down from £102 last year), followed by hotel accommodation (£74, unchanged from a year ago), the all-important outfit (£71, down from £75) and travel to the big day (£64 instead of £94).
The number of mortgages in arrears fell slightly in the first quarter of 2017, and is down on both the previous quarter and a year ago, according to the Council of Mortgage Lenders. There were 92,600 mortgages in arrears, representing 0.84% of all mortgages, the lowest quarterly rate on record.
Within the total stock of arrears cases, all arrears bands except the most serious showed a fall. However, the stock of cases with arrears of over 10% of the mortgage balance rose to 26,500. Although this is a small number within the total mortgage market, it does suggest that there is a minority cohort of borrowers for whom arrears are worsening.
The number of properties taken into possession was also 10% down on a year ago (though up on the fourth quarter, reflecting a usual seasonal pattern). In total, 1,900 properties were taken into possession – the eighth successive quarter of a repossession rate of 0.02%.
In line with the normal trend of recent times, the buy-to-let arrears rate was lower than the owner-occupier arrears rate, but the repossession rate was higher. This is because of the high level of forbearance that lenders typically seek to extend to home-owners to try to enable them to resolve their difficulties and keep their homes wherever possible.
The Lady Godiva
As the paper £5 is withdrawn from circulation, Lloyds Private Banking looks at how the value of money has changed since the modern blue £5 note was first introduced in 1957.
The value of money has fallen by 96% over the last 60 years, according to new research from Lloyds Private Banking. The research shows that a twenty-three fold increase in retail prices means that someone today would need £113 to have the equivalent purchasing power of £5 in 1957.
The purchasing power of money has eroded at an average rate of 5.3% a year over the past 60 years. By decade, retail prices grew the most rapidly between 1967 and 1977 at an annual average rate of 11.3%. The lowest increase in inflation came over the most recent period 2007 to 2017 with an annual increase of 2.7%. At the same time, the average weekly wage has increased 4,142%, from £12 in 1957 to £509 today.
Looking to the future, if retail prices were to rise by the current rate of retail price inflation, 2.8% annually, the value of money would decline by a further 80% over the next 60 years. In this event, someone would need £26.22 in 2077 to have the same spending power as an individual with £5 today.
Momentum is continuing to ebb in the UK housing market as sales dip slightly and buyer interest remains flat in April according to the latest research from the Royal Institute of Chartered Surveyors.
The results show that new instructions continue to drop. Anecdotal evidence cites a lack of choice, uncertainty due to the calling of an early election and the ramifications of stamp duty changes as factors hampering activity.
The lack of choice for would-be buyers across the UK is still a key issue and in April new instructions remained negative for a fourteenth month in a row at the national level, leaving average properties on estate agents books hovering close to record lows. 15% more respondents saw new instructions drop in April, and perhaps consequently, new buyer enquiries were unchanged nationally having failed to see any meaningful growth since November 2016. During April, a net balance of 4% of respondents saw a fall in new buyer enquiries.
Alongside stagnant buyer demand, respondents reported agreed sales were beginning to slip slightly following a number of months of flat transactions. Overall 9% more respondents saw a drop in sales over the month (from -3%), which is the weakest reading since the aftermath of the referendum.
Looking ahead, the flat picture for sales at the national level is expected to continue over the next three months as 3% more respondents expect to see a rise in sales over the time period. Expectations have moderated in virtually all areas of the UK when compared to the March survey. However, the twelve-month outlook is more optimistic with 31% more respondents anticipating a pick-up in sales over the year ahead at the national level.
To coincide with Stroke Awareness Month in May, Scottish Widows is highlighting the nation’s lack of a financial back-up plan should a serious condition like this be diagnosed.
Stroke occurs approximately 152,000 times a year in the UK, which is one every three minutes and 27 seconds, and there are more than 1.2 million stroke survivors. It’s the fourth single largest cause of death in the UK and second in the world, and by the age of 75, 1 in 5 women and 1 in 6 men will have a stroke.
Men have a 25% higher risk of having a stroke and at a younger age compared with women, but as women live longer, they have a higher incidence rate. Every two seconds, someone in the world will have a stroke for the first time.
Stroke was, in fact, the third largest cause of critical illness claims at Scottish Widows in 2015, and the sixth largest cause of life cover claims. The company paid out more than £10.8 million for these claims – the equivalent of more than £41,500 every working day that year. The average age of people who made stroke-related critical illness claims was 50.
Research from Scottish Widows reveals, however, that only a third (32%) of people have life insurance, and just one in ten (9%) have taken out critical illness cover. Instead, more than a third (36%) admit they would resort to dipping into their savings if they found themselves in a position where they or their partner were unable to work. Moreover, a quarter (25%) of Brits could only afford to pay household bills for a maximum of three months if they or their partner were unable to work due to long-term illness, and just over a quarter (26%) could only make a maximum of three monthly mortgage payments.
Internet spending has jumped by more than a quarter in the last two years, a new report analysing how the UK uses payment cards online has revealed. Card spending on the internet totalled £154 billion in the UK in 2016, averaging £422 million a day, figures from The UK Cards Association show. This is a rise of 28 per cent since 2014, when online spending amounted to £120 billion.
Analysis found that one in four card purchases online is on entertainment, with consumers buying cinema and concert tickets, takeaway orders and digital content. The UK now spends online more per household than any other country, at US$5,900 in 2015. This is higher than Norway (US$5,400), the USA (US$4,500) and Australia (US$4,000).
The report also looked at internet spending patterns on debit and credit cards in the UK and found that a quarter (26 per cent) of all card spending was online last year, up from 22 per cent in 2014 with 1.8 billion purchases in 2016, an average of 150 million a month. This is an increase of 38 per cent from 1.3 billion in 2014. Entertainment sales make up the highest proportion of all online purchases (26 per cent); although these only account for 7 per cent of the total value, reflecting the relatively low cost of digital entertainment such as apps and music downloads while 41 per cent of in-store card purchases are on food and drink, the sector only makes up 7 per cent of online transactions. More than a quarter (27 per cent) of all online spending by value is on financial services, the highest share of any sector.
It’s a Sale
According to the latest figures from HM Revenue and Customs for properties whose value is over £40,000, the provisional seasonally adjusted UK property transaction count for March 2017 was 102,810 residential and 10,390 non-residential transactions.
The seasonally adjusted estimate of the number of residential property transactions increased by 0.5% between February 2017 and March 2017 with this month’s seasonally adjusted figure is 40.9% lower compared with the same month last year.
The large year-on-year drop is due to the unusually high transaction count in March 2016 followed by the substantial reduction in April associated with the introduction of the higher rates on additional properties in April 2016. Non-tax factors may have caused changes in the property market as well, for example the Bank of England’s plans to curb Buy-to-Let mortgages could have resulted in a rush to purchase before April 2016, and the EU Referendum affecting transactions in the following months.
For March 2017 the number of non-adjusted residential transactions was about 20.9% higher compared with February 2017. No direct comparison should be made between March 2016 and March 2017 due to the large peak in March 2016. However, 9% of the annual transactions for 2016-17 were received in March 2017 which is in line with years prior to 2015-16.
In The Know
Every year protection providers publish claims data to explain the number of claims they have paid out to customers. However, a view from Aegon’s customer and consumer panel has revealed that four out of five (83%) people who purchased protection policies were unaware that providers publish this information.
In addition to this, 81% of people believed that the UK protection industry pays out less than 90% of life protection claims each year. In fact, 52% of people thought this figure was less than 70%. While 92% of consumers thought the industry pays out less than 90% of critical illness protection claims each year, with the majority (58%) of people believing this figure was less than 70%. More than half (52%) of respondents were surprised to find that protection providers in the UK paid 97% of all protection claims in 2015.
Respondents had a good grasp of the most common reasons claims aren’t paid, with not meeting the illness definition, providing inaccurate information on applications and claiming for something that’s not included in the policy listed in the top three.
According to the latest analysis by Nationwide Building Society, house prices recorded their second consecutive monthly fall in April, while the annual rate of growth slowed to 2.6%, the weakest since June 2013. The Lender expressed surprise that there is a softening in house price growth with key metrics such as the unemployment rate being near to a 40- year low, confidence is still relatively high and mortgage rates have fallen to new all-time lows in recent months.
Nationwide observed that while monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country. Various data suggest that the latest slowdown in house prices may be part of a broader trend with retail sales growth slowing markedly in recent months, from a 14-year high of 7.3% in October, to 3.7% in February and 1.7% in March.
The Lender suggested that household budgets may be coming under pressure, as wage growth has moderated and inflation has accelerated. The household saving ratio, which measures how much income goes unspent each quarter, fell to an all-time low of 3.3% in Q4 on data extending back to 1963. The data also suggests there may also be more fundamental reasons for the slowdown. House price growth has been outstripping earnings growth for a sustained period of time, steadily eroding affordability on a number of metrics. For example, according to Nationwide, the typical house price is currently 6.1 times average earnings, well above the long run average of 4.3 times earnings, and close to the all-time high of 6.4 times recorded in 2007. Moreover, even though mortgage interest rates have touched new lows in recent months, the cost of servicing a typical mortgage is only just in line with long run average, and above long run averages in London and parts of the South of England.