Weekly Round-up, 26th May 2017
First time buoyed
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.
Weekly Round-up, 19th May 2017
The Remortgage Quarter
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).
Weekly Round-up, 12th May 2017
Take It Back
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.