Monthly Archives: January 2016

Weekly Round-up, 29th January, 2016.

Going Digital.

Lloyds Bank has today unveiled results from its first ever UK Consumer Digital Index. The Index, in association with digital skills charity Go ON UK, Accenture, and Toynbee Hall, is the only report of its kind in the UK that looks at the trends in digital and financial capability and, for the first time, aims to understand them from a UK wide perspective.

The Lloyds Bank Consumer Digital Index combines insights on levels of digital and financial capability of a broad spectrum of people across the UK . Significantly, those people who make the most of being online, such as through increased access to research and comparison sites, offers and discounts, have a real advantage against their non-digital peers. This means that they are typically more financially resilient and also report greater overall wellbeing.

However, the Index also reveals that people can benefit no matter what their financial capability may be – with those on the lowest incomes of under £15,000 per year actually saving an average of £516.

Generation X is reaping the biggest benefits online, but it’s the over 60s who have the most to gain digitally. This age group is financially savvy and adept at saving and using a variety of financial products and services, yet are failing to realize that they could make huge savings online through price comparison sites.

Looking at the spending habits of those with low and high financial capability, digital ‘know-how’ has a huge impact on what a person can save. When it comes to utility bills, the more digitally savvy a person may be, the less they will spend in comparison to their non-digital peers as they shop around for the best online deals.

Water, Water.

For those householders who face a continuing threat of flooding, there is some positive news, with the launch in April of a new flood insurance scheme, Flood Re. Its intention is to ensure that domestic property insurance is widely available and affordable for homes at risk of flooding, without placing excessive costs on other policyholders or taxpayers.

The scheme works by allowing the insurer to cede the flood risk part of a policy covering a home with a history of flooding on to Flood Re, a flood re-insurance vehicle, which will be funded by a levy on all insurers according to their market share. This levy has been set at £180 million per annum for the first five years – equivalent to around £10.50 for every household in the UK with both buildings and contents insurance. The ABI estimates that Flood Re will benefit an estimated 350,000 homes across the UK that are at significant risk of flooding and would otherwise struggle to get affordable insurance. So, many home-owners supported by Flood Re will welcome its introduction. But there are some significant gaps in the cover it provides such as homes registered as businesses, including charities and co-operatives, pubs and post offices, bed and breakfast premises where the owner pays business rates, and farm outbuildings that may be occupied by paying tenants.

New home boost.

The number of new homes earmarked for construction rose by 7% in 2015 to hit an eight-year high.

According to the National House Building Council (NHBC), house builders registered 156,140 new homes in the UK last year – that’s 75% more than during the 2009 housing crash when just 88,993 new homes were built.

Research revealed a rosy picture across most of the UK. The majority of regions saw an uplift in new housing registrations, with Northern Ireland, east and north west England growing by 30%, 23% and 16% respectively. London still topped the table for the highest number of new home registrations in the UK last year. Although this activity in the capital was down 9% on 2014, it was still the third highest number of registrations on record. Meanwhile, Yorkshire and the Humber saw a drop of 13% and Wales fell marginally by 2%.

With the exception of London, where 90% of registrations were flats, there was a move towards family housing. In fact, the construction of detached houses reached its highest level for more than a decade in 2015. And the number of semi-detached house registrations also reached their highest level since 1994.

Payments up 11%.

Global insurer Zurich has announced that it paid out over £212.5m to its UK retail protection customers last year, up 11% from £191m in 2014. These claims benefitted over 2,500 customers and their families with life, critical illness and income protection policies.

During 2015, 92% of critical illness claims were paid worth £65.4m. Cancer accounted for over half of claims (55%) with breast cancer accounting for a third of these (19%). Heart attacks were the second most common cause of claims (13%), followed by strokes (7%) and multiple sclerosis (5%).

Of the 788 critical illnesses claims paid, 23 were for children with payments totalling £421,653. Cancer remains the most common cause for children’s claims. Just 8% of critical illness claims were not accepted; 7% because the definition of an illness was not met and 1% because of non-disclosure of medical information. Examples of this include where a customer has not told us about ongoing medical investigations or pending test results.

The majority of life claims (98.5%) were paid last year with 1,673 families benefitting from payments of over £136.8m. Two per cent were unsuccessful because of non-disclosure of medical information. Customers unable to work through illness, injury or disability received over £10.4m in income protection payments with 582 claims paid monthly. Nearly a third of new claims (29%) were for mental illness including stress and anxiety. This represents a jump of over 10% on the same period last year.

Ten cases were not paid because the policy’s criteria were not met, for example where a customer returned to work or where their illness was not covered by the policy.

Keep it Quiet.

Secrets have a way of escaping that makes it impossible to keep a major conspiracy under wraps for long, a study has found. British physicist Dr David Grimes worked out a mathematical way to calculate the chances of a plot being deliberately leaked by a whistle-blower or accidentally uncovered. He was able to show that the more people share in a conspiracy, the shorter its lifespan is likely to be.

For a plot to last five years, the maximum number of plotters turned out to be 2,521. To keep a scheme operating undetected for more than a decade, fewer than 1,000 people could be involved, while a century-long deception had to include fewer than 125 collaborators.

Applying the technique to four real-life scenarios showed that had the moon landings been a hoax – involving an estimated 411,000 people – it would have been found out in three years and eight months. A climate change conspiracy with 405,000 conspirators would have lasted just three years and nine months, an unsafe vaccination plot (22,000 or 736,000 conspirators, depending on whether pharmaceutical companies were involved in the cover-up) three years and two months, and a secretly suppressed cancer cure (714,000 conspirators) three years and three months.

He said he was inspired to carry out the research by the numerous communications he receives from people who believe in science-related conspiracies. Dr Grimes developed an equation to express the probability of a conspiracy being either deliberately uncovered by a whistle-blower or inadvertently revealed. It factored in conspirator numbers, length of time, and even the effects of conspirators dying, whether of old age or non-natural causes.


Tick, tick, tick.

Landlords must feel like the countdown clock has started ticking towards the end of the tax year, with a sustained attack on both activity and profitability. The rise in stamp duty on second homes and investment property purchases will see those looking to buy want to complete before April, just at the time when many lenders are implementing new systems to meet the consumer buy-to-let legislation coming in in March.

Of course, before that we see the landlord becoming an immigration officer implementing right to reside checks against any tenants in their properties – for most this will either be a new cost to be absorbed or a decision to move the property to a lettings agent who has the systems and controls in place to perform the task on the landlords behalf. And then, finally, we have the impact of Basel III. One of the main problems, as the Council of Mortgage Lenders has highlighted, is the authorities do not acknowledge the ‘special characteristics’ of buy-to-let lending when setting risk and capital requirements. Buy-to-let loans are potentially captured under a broader heading of ‘specialist lending’, which could mean that the risk weighting on buy-to-let lending rises from its current level of 35% to 120%.

Discussions are on-going at the moment, but landlords do face the risk of higher product prices and lower loan to value lending – a possible end to the remortgage for portfolio growth. And, of course, I haven’t covered off the tax changes which results in the landlord questioning their investment – asset price growth or income? Accountants must be looking forward to more business as the tax complications of maintaining a portfolio of buy-to-let properties become reality.

So as a landlord you must feel like this first quarter is the calm before the storm, as a tenant you must be worried that all these costs get passed on in terms of higher rent payments. All in all it’s going to be an interesting first three months of 2016 for buy-to-let, and then probably a period of reflection in April and May. The future for buy-to-let? Positive for the Government if the market continues at its current pace with a 3% windfall; uncertain if tax, stamp duty, immigration, Basell and a rejection by tenants to higher rents come together to create the perfect storm.

Neil Hoare, Commercial Director, HLPartnership.

Weekly Round-up, 22nd January, 2016.

Slow she goes.

The Governor of the Bank of England (BoE) has been giving his views on interest rates this week. In the Bank’s opinion, they need to have reasonable confidence that inflation is on track to return to the target before a modest tightening in monetary policy. This means core inflation measures moving notably towards the target of 2%.

Mark Carney highlighted that the world is weaker and UK growth has slowed, and due to the oil price collapse, inflation has fallen further and will likely remain very low for longer. This suggests that the firming in inflationary pressure they had expected will take longer to materialise.

Risks to the outlook and uncertainties about the economy are occupational hazards of monetary policy making. The MPC’s job is to assess them constantly and set policy accordingly and there will apparently be no pre-commitments beyond an unwavering focus on conducting policy in a manner consistent with their remit. The expectation therefore is that the path for the real interest rate that balances demand and supply, will recover only gradually and to a limited extent compared to the pre-crisis era. The journey to monetary policy normalisation is still young.

Lending up.

The Council of Mortgage Lenders estimates that gross mortgage lending reached £19.9 billion in December. This is 3% lower than November (£20.5 billion), but 23% higher than December 2014 (£16.2 billion). This brings the estimated total for the year to £220.3 billion, an 8% increase on 2014’s £203.3 billion and the highest annual gross lending figure since 2008.

Gross mortgage lending for the fourth quarter of 2015 was therefore an estimated £62.3 billion. This is a 1% increase on the third quarter and a 23% increase on the fourth quarter of 2014.

Lending ended the year stronger than it started, with the trade body’s estimate of nearly £20 billion lent in December. This brings total lending to just over £220 billion for 2015 as a whole, and slightly higher than they had anticipated. The low inflation environment, along with real wage growth, an improving labour market and competitive mortgage deals have all helped to underpin demand.


More than four in every five people in the UK are looking to get away this winter and leave behind the wettest December on record, according to a new study by credit card company MBNA. With December 2015 being hailed as Britain’s wettest month in more than a century 83 per cent of people surveyed by MBNA said they have booked, or are planning to book, a winter getaway.

Of 2,050 people surveyed, 39 per cent said they would look to chase the winter sun with a beach holiday abroad. Overseas city breaks came second in the MBNA poll (35 per cent of those surveyed) closely followed by UK ‘staycations’ in third (34 per cent).

The study shows the average costs of travel and accommodation for winter holidays is £1,215 this year with most opting to fund the cost through savings, income and/or credit cards. Spending on essentials in advance of winter holidays (e.g. clothes, parking, tours/trips) averages at around £286.

Protecting income.

British Friendly has become the first insurer to publish a decade of claims statistics as it highlighted that it has paid 96.7% of all income protection claims since 2006. The most common reason for claims is orthopaedic/musculoskeletal conditions (30%) followed by viral illness/respiratory (20%) and psychiatric/mental health conditions (10%) that, together, have made up 60% of claims over the decade.

The figures also show details of the age and gender profiles of claimants. Overall, men account for 56.8% of all claims. The most common age range for a claim is 50-59 years for both males and females.

Just pick up the phone.

A woman phoned the police to report that there was a large poisonous spider in her home preventing her from leaving. She had just had some furniture delivered and believed the eight legged creature might have travelled in a crate from overseas and ended up in her home in Wiltshire.

An officer went out to her house – but upon investigating, the large poisonous spider turned out in fact to be a piece of fluff under the kitchen door.

Details of the call were released by Wiltshire Police as part of a week-long campaign to highlight the inappropriate use of the 999 and 101 numbers.

One telephone operator took a call from a man who was lost in some woods. On his way home from a night out and was scared that a badger was going to attack him. He was reassured that the instances of badger assaults were very rare and perhaps he shouldn’t have had that extra drink. Then there was the person out on their rollerblades who had come across a steep hill that they couldn’t get up and wanted an officer to come and pick them up.

Other calls included a homeless man who rang police after he had been given a sandwich and was worried someone was trying to poison him because the packet had been slightly opened, so wanted an officer to test it. And a woman rang the force worried that she could not turn her broken tap off and was overflowing. She was advised to take the plug out and call a plumber.

Weekly Round-up, 15th January, 2016.

No Change.

At this week’s meeting, the Bank of England’s Monetary Policy Committee voted by a majority of 8-1 to maintain Bank Rate at 0.5%. The minutes of the meeting suggest that Twelve-month Consumer Price inflation rose to 0.1% in November and is likely to rise modestly further in the coming months as some of the large falls in energy and food prices a year earlier drop out of the annual comparison. But the 40% decline in dollar oil prices means that the increase in inflation is now expected to be slightly more gradual in the short term than forecast in the Committee’s November Inflation Report projections.

As in previous months, there is a range of views among MPC members about the balance of risks to inflation relative to the target in the medium term. At the meeting eight members judged it appropriate to leave the stance of monetary policy unchanged at present. Ian McCafferty preferred to increase Bank Rate by 25 basis points, given his view that the path of domestic costs was more likely to lead to inflation exceeding the target in the medium term than was embodied in the Committee’s collective November projections.

All members agreed that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so only gradually and to a level lower than in recent cycles. This guidance is an expectation, not a promise by the Bank of England. The actual path that Bank Rate will follow over the next few years will depend on the economic circumstances.

It’s a first!

The number of first-time buyers is estimated to have totalled 310,000 in 2015, according to the annual Halifax First-Time Buyer Review. Although this represents a marginal decline (-0.5%) from 311,700 in 2014 – the first annual decline in the number of first-time buyers since 2011 – the number has grown by almost two-thirds (60%) since 2011, from 193,700 to 310,000. The marginal decline in first-time buyers is in line with general residential house purchases, and is partly due to lack of supply.

The average price paid by first-time buyers increased by 10% in 2015, from £172,563 to £190,180; taking the price above the previous peak in 2007 (£174,994) for the first time.

The average first-time buyer deposit in 2015 was £32,927; 13% higher than in 2014 (£29,094) and 88% higher than the average deposit in 2007 (£17,499). Higher house prices paid by first-time buyers during the year has resulted in an increase in the average deposit paid. In the South East the average deposit paid rose by 24% in the past year, from £35,582 to £44,024.

Whilst a mortgage term of 25 years has been the norm for some time, many first-time buyers are increasingly taking out mortgages where payments are spread over a longer period. In 2007 the proportion of first-time buyers taking up a 35-year mortgage stood at 16%. By 2015 this figure had grown to over one-in-four (26%). Over the same period, the share of mortgages with a 20 to 25 year term dropped from 48% to 30%.

Up, up, up.

According to the Council of Mortgage Lenders, home-owner house purchase lending totalled £10.7bn in November, down 9% on October but up 18% on November 2014. First-time buyers borrowed £4.2bn for home-owner house purchase, down 9% on October but up 14% on November last year. This totalled 27,900 loans, down 8% month-on-month but up 10% year-on-year.

Home movers took out 32,300 loans, down 10% month-on-month and up 9% compared to November 2014. In total, this was £6.5bn borrowed, down 10% on October but up 20% year-on-year. Home-owner remortgage activity was down 9% by volume and 14% by value compared to October. Compared to November 2014, remortgage lending was up 24% by volume and up 36% by value. Gross buy-to-let saw month-on-month decreases, down 6% by volume and 8% by value, but the substantial growth year-on-year continued.

Desmond, Eva and Frank.

Following the devastating floods caused by storms Desmond, Eva and Frank during December and over the New Year, insurers this week released new figures to demonstrate the scale of the response by the sector.

Statistics collected by the Association of British Insurers (ABI) show more than 3,000 families are now in alternative accommodation while repairs are made to their homes. The average expected pay out for each domestic flood claim is £50,000 – compared with an average from the 2013/14 winter storms of £31,000.

£24 million of emergency payments have been made to both families and businesses to spend on immediate needs, for example food, clothing and staff salaries. Costs for alternative home or business accommodation are paid directly by insurers.

The latest estimates suggest the final amount ABI members will spend on customers affected by flood damage is likely to be around £1.3 billion.

Mind the sun.

Rail passengers have expressed their anger after being told trains were delayed due to “strong sunlight”. Services at Lewisham, south-east London were disrupted because of the angle of the sun, train operator Southeastern said.

The rail firm posted on Twitter: “We had severe congestion through Lewisham due to dispatching issues as a result of strong sunlight.” It added: “The low winter sun has been hitting the dispatch monitor which prevents the driver from being able to see.”

But some travellers were unimpressed by the explanation. Julie Clarke asked Southeastern: “How do they go on in hot countries where they have sunshine all the time?” Paul Malyon described it as “the weakest excuse ever” while Brian Barnett wrote: “Leaves on the line. Wrong snow. Now sunshine! Let’s think of next excuse?”

A spokesman for Southeastern said: “We know that sometimes it seems that if it is not leaves on the line or snow on the track then it is some other weather issue. But actually glare this morning made it impossible for some drivers to see the full length of their train in their mirrors before leaving stations. When this happens they have to get out and check to ensure everybody has got on or off the train safely before they can move. This can take a little more time but thankfully for all it doesn’t happen very often.”

Passengers were advised to wear sunglasses.

Welcome to 2016.

The first week of 2016 is over, a week when many of us were thinking back to London 2012 as the Olympic torch continues around Brazil in advance of its final destination of Rio. As our own Olympic success fades into the dark recesses of our memory, and, as the chancellor would like us to do, we forget the old culture of the banking industry, it’s probably worth just thinking about how things in our own industry have changed in just 4 years. In 2012 gross lending hit £146bn, estimates for 2016 suggest £220bn, a 50% rise. Four years ago an equal number of customers went to the retail outlets of lenders and Intermediaries, today the channel of choice for advice on a mortgage is broker. And, of course, we didn’t have the Mortgage Market Review with the Regulator and the Government having a constant involvement in the housing market.

2016 will be another interesting year with new rules and tax changes for what we used to call a landlord but should now label as a second line immigration officer. The Mortgage Credit Directive introduces Europe into our market as we approach the hokey cokey in out referendum. What we know is that the ESIS is in, and sales linked remunerate on is out, which will shake us all about. And there will be the pundits voting on when the base rate will rise, the US went before Christmas with a twenty five basis point increase, and as a result speculation will be constant on when Mark Carney decides it’s time to move the rate. The Government has stated they will be directly commissioning house building, the Help to Buy ISA has been introduced, schemes extended and Right to Buy introduced to housing associations.

We all know that buying a house generates more income to the UK than simply a housing transaction – carpets are bought, white goods are fitted, new televisions are watched and jobs are created. It’s no surprise that the Government’s priority is encouraging first time buyers rather than increasing the size of the private rented sector, where the investment in a property’s contents is significantly less. And, finally, I’m sure there will be significant debate around where property is built with the recent flooding. There are many families who will be appreciating the quality of home insurance cover they bought when they most likely never thought they’d need to claim, and there will be others that thought saving £5 a month was a great deal. Flooding will continue to be a real risk for us all in the UK as our weather patterns change and we should all be reviewing our cover to ensure it gives us the peace of mind we need.

So will 2016 be full of gold medals? Well we can’t predict the results of the Rio Olympics, but we can make sure we are quick off the blocks, put on a sprint, jump over any hurdles that the market presents, and perform to the highest standards of the MMR to put the customer on the top of the podium, then we will all be winners.

Neil Hoare, Commercial Director, HLPartnership

Weekly Round-up, 8th January, 2016.

House price growth.

According to the latest research from the Halifax, house prices in the last three months of 2015 (October-December) were 1.6% higher than in the preceding three months (July-September). The quarterly rate of change remained below 2.0% for the second successive month; its lowest values during 2015. Prices in the three months to December were 9.5% higher than in the same three months a year earlier. This was a little higher than November’s 9.0%, keeping the annual rate in the 8-10% range where it was for nearly all of 2015.

House prices increased by 1.7% between November and December. This maintained the fluctuating monthly house price pattern seen during the second half of 2015. The quarter on quarter change is a more reliable indicator of the underlying trend.

London Rent.

Around 430,000 households across London – containing 990,000 people – spend more than half of their income on housing costs, according to new analysis published this week by the Resolution Foundation. The analysis shows that the proportion of ‘housing pinched’ households in London (those spending more than half of their net income on the ongoing cost of housing) increased sharply in the years running up to the financial crisis – peaking at around one in seven households in 2008.

The analysis shows that people living in London are significantly more likely to be housing pinched than the rest of the UK, and the gap has grown in recent years. Almost three quarters of London’s housing pinched population (71 per cent) are in working households – far more than the UK average – and the majority (54 per cent) are renters, rather than homeowners. The analysis shows that almost one in four (24 per cent) private renters in the capital spend more than half of their income on housing costs, compared to 12 per cent of mortgagors and 8 per cent of social renters.

Don’t wait for Cancer to strike.

Almost 700,000 new cases of cancer linked to being overweight or obese could be diagnosed in the UK during the next 20 years, according to a new report from Cancer Research UK and the UK Health Forum.

The report also predicts for the first time the alarming impact obesity will have on cancer in the UK based on current trends. If they continue almost three in four adults will be overweight or obese by 2035. Even more concerning is the prediction that more people will be obese than overweight by 2030.

The report estimates that rising rates of obesity and being overweight in the UK could lead not only to 700,000 new cancer cases, but also millions of new cases of type 2 diabetes, coronary heart disease and stroke. This would cost the NHS an additional £2.5 billion a year by 2035 over and above what is already spent on obesity related disease.

Flood Resilient.

People whose homes or businesses have been damaged by flooding in the wake of the December storms are being reminded about the availability of Government grants to fund flood resilience and resistance measures as their properties are repaired.

The Association of British Insurers (ABI) is highlighting the wide range of techniques and products available which can help keep water out of buildings, reduce damage and make future repairs quicker and easier. Defra is soon due to set out more details of Government funding which is being made available for this work via local authorities.

The most appropriate resistance and resilience measures to use will depend on the type of flooding a home or business owner are most at risk from and the nature or construction of the property. A professional survey can help determine what the most appropriate measures might be and can identify the best options for having any work carried out by a suitably qualified professional.

Left luggage.

An American violinist who left her $2.6 million 1727 Stradivarius in the luggage rack on a regional train in western Germany was “more than relieved”, police said, when officers retrieved it one minute before it left the station.

The woman, who police described as being in her 20s, left the ‘General Dupont Grumiaux’ edition of the famous violin brand on a train traveling from Mannheim to Saarbruecken in western Germany, where she alighted.

Realizing her error after leaving the train, she alerted the police. One minute before the train heading back to Mannheim departed, police found the violin in the last section of the carriage concerned and returned it to the woman.