Weekly Round-up, 30th June 2017
House Price “Re-bound”
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.
Weekly Round-up, 23rd June 2017
Leave The Landlord Alone
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.
Weekly Round-up, 16th June 2017
ONS House Price
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.
Weekly Round-up: 9th June 2017
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.
Weekly Round-up, 2nd June 2017
Smash and Grab
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”