Weekly Round-up: 25th August 2017
Are You The 1 In 3?
Almost a third (31%) of UK adults have experienced temporary or permanent leave from work due to ill health, a cancer diagnosis or even a death within the family, research from Aviva shows. More than three quarters (77%) of these have seen their finances suffer, equivalent to 12.3 million people.
Aviva’s Protecting Our Families report shows the reality of the financial fall-out caused by unexpected illness, with a particularly damaging effect on families with young children. The research shows more than a quarter (27%) of parents with dependent children have suffered a health crisis, with nearly all (91%) of these saying their finances were negatively affected.
UK adults who have suffered unexpected health events have noticeably poorer finances. Aviva’s data shows the average monthly income of someone who has experienced this is 24% lower than those who have not (£1,909 vs. £2,518). They also typically have 40% less in savings and investments (£2,991 vs. £5,011). In addition, they have 47% more in average debt (£9,692 vs. £6,573), possibly suggesting many who experience a health crisis are forced to turn to borrowing to cope.
UK adults who have experienced unexpected health events or a death in the family have had to resort to a number of measures to get by. Almost two in five (38%) had to apply for benefits or other support from the Government, while over one in five (22%) had to dip into their savings. In addition, 13% cited that they stopped saving for their retirement. One in six (16%) also had to sell their personal possessions.
Worryingly, 15% had to either downsize, move back in with family, start renting or even became homeless – demonstrating the life changing impact an unexpected loss of income due to ill health can cause.
The number of homemovers – current homeowners moving house – fell by 2% in the first six months of 2017 compared with the same period in 2016, according to the latest Lloyds Bank Homemover Review.
There were 171,300 homemovers in the first half of 2017 compared with 174,300 in the same period last year. The first half of 2016 saw 18,000 more homemovers (an increase of 11% compared to the first half of 2015). This increase may have been due to owners making home purchases before the introduction of the new stamp duty charges for second and additional homes.
Since hitting a market low of 117,900 in the first half of 2009, the number of homemovers has grown by 45% (or 53,000). However, the current numbers still remain at just under half (48%) of what it was before the financial crash in the first half of 2007 (327,600). A decade ago, just under two-thirds (64%) of all house purchases financed by a mortgage were made by homemovers. In 2017, this proportion has dropped to almost half (51%). Over the past five years, the average price paid by homemovers has grown by 41% (£84,869) from £206,122 in 2012, to £290,991 in June 2017, equivalent to a monthly rise of £1,414.
The average deposit put down by a homemover has increased by 40% in the past five years, from £68,663 in 2012 to £96,109 in 2017. Not surprisingly Londoners put down the largest deposit towards the purchase of their next home; £188,916 – four times higher than the average homemover deposit of £48,080 in Northern Ireland, the lowest.
Proceed With Caution
According to figures from HMRC for properties bought at prices above £40k, the provisional seasonally adjusted UK property transaction count for July 2017 was 104,760 residential and 11,750 non-residential transactions. The seasonally adjusted estimate of the number of residential property transactions increased by 1.3% between June 2017 and July 2017.
This month’s seasonally adjusted figure is 8.3% higher compared with the same month last year, but around the same level as in July 2015. HMRC do suggest caution when making comparisons of transactions between July 2017 and July 2016 as some taxpayers may have changed their behaviour as they considered the result of the June 2017 General Election, and the EU referendum in June 2016.
For July 2017 the number of non-adjusted residential transactions was about 10.3% lower compared with June 2017. The number of non-adjusted residential transactions was 1.4% higher than in July 2016 but these figures for the three most recent months are provisional and therefore subject to revision.
HMRC’s estimate on the number of transactions in June 2017 has increased since they last went to publication and they highlight some uncertainty around their estimates for the most recent month, due to the fact that purchasers have 30 days from the date of completion to inform HMRC. For Buy to Let, the seasonally adjusted estimate of the number of transactions increased by 12.1% between June 2017 and July 2017. This month’s figure is 15.8% higher compared with the same month last year.
Insured To Drive A Golf Buggy?
Owners of vehicles used on private land, such as quad bikes, golf buggies, mobility scooters and motorised lawnmowers, together with participants in motor sports, could all be forced to take out third party insurance unless the European Commission takes urgent action insurance organisations warned this week.
If the Commission fails to act then the UK government will need to change domestic law and extend the scope of compulsory motor insurance for the time the UK remains in the EU and during any exit transition period. This would lead to significant disruption and additional costs. The European Court of Justice (ECJ) in 2014 ruled that compensation for injuries suffered by a Slovenian farm worker, Damijan Vnuk, by a tractor while on private land should have been covered by compulsory motor insurance. In the UK motor insurance is compulsory for vehicles used on public roads, but not on private land.
The ABI, together with the British Insurance Brokers Association, Motor Insurers’ Bureau, International Underwriting Association, Lloyds Market Association and Lloyd’s, are urging the EU Commission to resolve this by implementing its proposal to clarify that compulsory motor insurance only applies to vehicles when in traffic and not those used on private land.
Compliance Update: 21st August 2017
A great honour has been bestowed upon me – Gavin has asked me to take over the Compliance Blogs and to share my thoughts on the topical compliance subjects of the day. Hopefully I can do the job justice.
When thinking about writing the blog, my first thought was how tricky it is to know what to talk about; not through a lack of material but an over-abundance. The regulatory landscape is littered with hot-topics including such juicy subjects as the Senior Managers regime and GDPR but I think we’ll leave those for another time. Instead, I shall break myself in gently with a familiar topic, and something I haven’t published anything about for some months – Debt Consolidation.
Why? Well, it’s back in the news again again, thanks to some enforcement action taken by the regulator against a firm who failed to treat debt consolidation customers fairly.
As a network, we do our best to keep all our members safe but, inevitably, there will be some who may think we are too prescriptive or say things that don’t need to be said. This was certainly true of the Debt Consolidation work we did last year as a lot of people felt they understood the subject well and didn’t need the network to provide guidance on best practice. And that may well have been true for many advisers but there were equally a lot of people who felt that the guidance was useful and certainly appreciated the debt consolidation calculator tool we developed.
Well last week, then regulator took action against a directly authorised firm in Cheshire, instructing them to calculate and offer redress to customers who did not receive suitable debt consolidation advice. Unsurprisingly, I like rulings such as this. It validates the work we do and helps demonstrate the value of a network putting those protections in place.
The company in question was deemed by the FCA to have not adequately considered the costs and implications of adding debts to their mortgages. The firm also admitted it hadn’t considered alternatives to debt consolidation, not explained the implications of securing unsecured debts, and had not calculated the costs associated with extending the term of the consolidated debts.
The action required involves writing to all customers who had consolidated their existing debts over a 7-year period up to 2014. A third-party firm will then be appointed to assess the advice on each case, establish any customer detriment, and calculate suitable redress. The whole process and methodology will be overseen by the FCA so it’s quite an undertaking and not one that the firm in question will relish. It is likely to be a very costly exercise and cause significant damage to the firm’s reputation.
This case is the first direct result of the FCA’s thematic work on Debt Consolidation that they did last year. I don’t expect it to be the last by any means so it’s more important than ever to ensure any debt consolidation cases show the calculations and the risks are explained to the customer.
Would this firm have been in that position had they been in a network? Possibly – they would have at least had the support and guidance needed, and probably had any issues identified long before it became a systemic issue. A lower risk perhaps but ultimately it still comes down to the adviser doing the job properly – were these issues a result of mis-understanding or lack of knowledge? Perhaps the issue lies with the governance and oversight within the business. Or it could simply be an issue with the moral and ethical compass of the adviser. We may never know but whatever the background, this will be a hard-learned lesson for the firm and its advisers.
Weekly Round-up, 18th August 2017
With the 26th Premier League season well and truly underway, research by the Halifax reveals Tottenham Hotspur as early champions when it comes to house price growth in the areas surrounding White Hart Lane.
The house prices of properties near the grounds of all 49 football clubs that have played in the Premier League since 1992 were looked at over the past 20 years to see which area had hit the back of the net for football fans or potentially scored an own goal.
Halifax’s research found that, since 1997, the average home value in the postal district surrounding Tottenham Hotspur’s stadium has risen over seven and a half times (655%), from £59,638 in 1997 to £450,104 in 2017.
The average house price for all 49 past and present Premier League football clubs has risen by an average of £243,591 (equivalent to 326%) from £74,733 in 1997 to £318,324 in 2017. Current Premier League sides have performed better than those relegated with a rise of £234,226 (336%) compared to £249,709 (320%), although both outpace the average growth of £207,230 (283%) for England & Wales as a whole.
Last year’s Premier League champions Chelsea take the title for the most expensive area to live, with an average house price of £1,108,649 for homes around Stamford Bridge. North London rivals Arsenal (£763,401) and Tottenham Hotspur (£450,104) are in second and third place respectively. At the opposite end of the table, homes in the area close to the grounds of Liverpool and Everton have an average price of £76,072 – 14 times less than top of the table Chelsea.
According to the Office of National Statistics, average house prices in the UK have increased by 4.9% in the year to June 2017 (down from 5.0% in the year to May 2017). The annual growth rate has slowed since mid-2016 but has remained broadly around 5% during 2017.
The analysis suggests that the average UK house price was £223,000 in June 2017. This is £10,000 higher than in June 2016 and £2,000 higher than last month. The main contribution to the increase in UK house prices came from England, where house prices increased by 5.2% over the year to June 2017, with the average price in England now £240,000. Wales saw house prices increase by 3.6% over the last 12 months to stand at £152,000. In Scotland, the average price increased by 2.9% over the year to stand at £144,000. The average price in Northern Ireland currently stands at £129,000, an increase of 4.4% over the year to Quarter 2 (Apr to June) 2017.
On a regional basis, London continues to be the region with the highest average house price at £482,000, followed by the South East and the East of England, which stand at £320,000 and £287,000 respectively. The lowest average price continues to be in the North East at £130,000. The East of England showed the highest annual growth, with prices increasing by 7.2% in the year to June 2017. This was followed by the East Midlands at 7.1%. The lowest annual growth was in the North East, where prices increased by 2.5% over the year, followed by London at 2.9%.
Lending On The Rise
On a non-seasonally adjusted basis, UK Finance data shows that mortgage lending in June rose with first-time buyers borrowing £5.9bn, up 26% on the previous month and 9% on June 2016. This was roughly 36,000 loans, up 22% month-on-month and 6% year-on-year.
Home movers borrowed £7.8bn, up 26% on May and 15% year-on-year. This equated to 36,500 loans, up 24% month-on-month and 9% compared to a year ago, and remortgage activity totalled £6bn, up 5% by value on May and 7% on a year ago. The number of remortgage loans totalled 34,300, up 5% month-on-month and 6% on a year ago.
Gross buy-to-let lending was also up totalling £3.0bn, up 3% on May and up 3% compared to June 2016. These equated to 19,700 loans, up 3% month-on-month and 6% year-on-year.
The proportion of household income used to service capital and interest rates continued to be near historic lows in June for both first-time buyers and home movers at 17.3% and 17.5% respectively with affordability metrics for first-time buyers indicating the typical loan size has increased from £137,000 in May to £139,000 in June. The average household income increased to £41,000 from £40,500 meaning the income multiple went up from 3.58 to 3.59.
The average amount borrowed by home movers in the UK increased to £180,000 from £177,000 the previous month, while the average home mover household income increased month-on-month from £54,900 to £55,200. The income multiple for the average home mover went up to 3.39 from 3.37.
The Deadline Is Approaching
The Financial Conduct Authority will soon be launching a campaign to inform people about the 29 August 2019 deadline to complain about payment protection insurance. This campaign will complement the regulatory and supervisory work the FCA has done – and will continue to do – around PPI.
The consumer campaign is being funded by 18 firms that together receive more than 90% of complaints about the sale of PPI. These firms include banks and other providers. The FCA have asked these firms to make a range of improvements to the way people can complain to them about PPI, ahead of the launch of the campaign on 29 August 2017. The improvements should make it quicker and easier for people to complain about PPI or check if they’ve had it.
They include redeveloping parts of their websites and online tools, to make it easier for people to check online if they had PPI, complain online about PPI using a simple, straightforward form and find more information about PPI on the FCA and Financial Ombudsman Service websites.
The FCA has also worked to ensure that firms are offering accurate, timely and free PPI checking services, which are clearly signposted with information in a format that is easy to understand. In addition, these firms will now offer a simplified process for people who have previously had complaints rejected but now want to make a new complaint about high levels of commission earned from the sale of PPI. This means customers don’t have to provide lots of information a second time.
Weekly Round-up, 11th August 2017
According to UK Finance, the number of mortgages in arrears of 2.5% or more of the outstanding balance declined to 88,200 in the second quarter of this year, the lowest level since at least 1994 when this run of data began. The total was 5% lower than in the first quarter (92,600) and amounted to 0.8% of the more than 11 million mortgages outstanding in the UK.
The second quarter also saw a fall in the number of mortgages across all arrears bands, including those with the highest levels of arrears. In the same period, the number of mortgages with arrears of 10% or more of the outstanding balance totalled 25,200, down 5% from 26,500 in the preceding quarter. This brought a welcome end to a period of five successive quarters in which this figure had edged upwards from 23,400 in the first quarter of 2016.
The number of properties taken into possession also declined in the second quarter from 1,900 to 1,800 (accounting for 0.02% of all mortgages). The total was the same as in the final quarter of last year, and is the lowest figure since quarterly data was first published in 2008. In line with a trend that has become established in recent data, the rate of buy-to-let arrears was lower than arrears in the owner-occupied sector, although the buy-to-let possession rate was higher. This is because lenders extend a high level of forbearance to owner-occupiers to help them overcome any period of financial difficulty and stay in their homes wherever possible.
Fourth On The Fall
In the latest analysis from the Halifax, house prices in the last three months (May-July) were 0.2% lower than in the previous three months (February-April). This was the fourth successive quarterly fall; the first time this has happened since November 2012. Prices in the three months to July were 2.1% higher than in the same three months a year earlier. This was lower than in June (2.6%) and is the lowest annual rate since April 2013 (2.0%). The annual rate has fallen from a peak of 10.0% in March 2016.
House prices rose by 0.4% between June and July, partially offsetting the 0.9% decline recorded between May and June. Nationally, the lender suggests that house prices in July 2017 were 10% above their August 2007 peak with the average now £219,266 being £64,603 (42%) higher than its low point of £154,663 in April 2009.
New instruction for home sales fell for the 16th consecutive month in June. Whilst the average stock levels on estate agents’ books are down marginally to an all-time low. After exceeding 100,000 for five successive months, home sales fell by 3% between May and June, to 96,910. This is the lowest level since 96,740 in October 2016.
Choice Is Everything
The number of mortgage products available has increased for yet another month to stand at a whopping 4,657. The data, taken from Moneyfacts’ monthly Mortgage Treasury Report, shows that the number of live deals has risen by 53 on July and by 843 on last August, when there were 3,814 deals available.
Choice has been increasing for longer than that, though, with this month’s increase marking the 15th month in a row that product numbers have improved according to Moneyfacts.
Indeed, the residential mortgage market has grown substantially since product numbers hit an all-time low of 1,209 in April 2009. Even compared to five years ago, when the number of products stood at 2,888, there has been an increase of 61%. The research highlights the most recent increase in product numbers is largely due to lenders entering the three-year fixed rate market.
The Holiday Risk
The jaw-dropping potential costs of emergency medical treatment faced by UK travellers abroad this year is highlighted by the Association of British Insurers. Six-figure medical bills are now not uncommon. The ABI has launched a new guide to travel insurance to help travellers ensure they have the right travel insurance to cover any sky high overseas medical bills and emergency repatriation to get back home.
The USA, which attracts 3.8 million UK visitors a year, has some of the highest medical costs for example £768,000 has been paid to cover the medical costs of treating a traveller who suffered a stroke. This includes £60,000 for an air ambulance back to the UK, and £252,000 to treat a brain haemorrhage and broken shoulder suffered by a traveller when he fell off a cycle.
Elsewhere in the world, examples of emergency medical bills faced by British travellers that travel insurers have paid include £136,000 for treating complications following an insect bite in Chile. This included paying for a nurse to escort the traveller home, £125,000 to pay for surgery following a jet-ski accident while holidaying in Turkey and £81,000 to cover ongoing costs of treating a holidaymaker who contracted pancreatitis in Greece.
Weekly Round-up, 4th August 2017
Steady As She Goes
UK Finance estimates that gross mortgage lending reached £22.1 billion in June. This is 9% higher than May’s lending total of £20.3 billion, and 3% higher than the £21.5 billion lent in June last year.
Gross mortgage lending for the second quarter of 2017 was therefore an estimated £60.3 billion. This is a 3% increase on the first quarter of this year and a 6% increase on the £57.1 billion lent in the second quarter of 2016.
UK Finance, the body that represents nearly 300 of the leading firms providing finance, banking, markets and payments-related services in or from the UK highlights that a period of belt-tightening now seems to be underway as inflation begins to erode consumer spending power, and consumer confidence weakens. Given that the economy and housing market are closely linked, this has contributed to the activity plateau since the start of the year.
Looking ahead, UK Finance suggests housing market activity is likely to reflect economic conditions – a deterioration would likely dampen first-time buyer numbers and homeowners remortgaging – the factors that have supported lending recently.
Nothing As Certain
Homeowners spend an average £12,693 in total on stamp duty as they move up the housing ladder, according to the latest research from Lloyds Bank. A typical first time buyer would have paid an average stamp duty of £758 in March 2001, £1,989 for their second home in March 2009 and £9,946 for their final step in March 2017. Homebuyers in England and Wales paid £8.3 billion in stamp duty in 2016 – £1.2 billion more than in 2015. This rise reversed the £571 million decline between 2014 and 2015, which resulted from the stamp duty reforms that came into place in December 2014.
The highest overall stamp duty bills are faced by buyers in London and the South East. In London, homebuyers pay a total of £40,576, 320% more than the average for England and Wales. In the South East, the overall bill is £20,133. The lowest bills are in the North (£4,212) and Wales (£4,489).
Other research findings show that the proportion of first time buyers paying stamp duty has risen in the past 16 years from 47% in 2001 to 78% in 2017. In Greater London, 100% of first time buyers face paying stamp duty with 98% of first time buyers paying the tax in the South East. The only region where fewer than half of first time buyers pay stamp duty is the North 41%. In the southern regions, nearly all home movers now face paying stamp duty – London (100%), South East (99%), South West (97%) and East Anglia (97%). By comparison, 72% of homemovers in the North and 78% in Wales pay stamp duty.
According to a new study from insurer LV=, renters among the late-Millennial generation (25-34 years old) are one of the least financially resilient groups in the UK. Based on research conducted with over 9,000 people, the first instalment of LV=’s ‘Income Roulette’ research found that more than half (55%) of 25-34 year olds fall short of the Money Advice Service (MAS) recommended amount of savings to be financially resilient. Resilience can be defined as someone who has 90 days’ worth of outgoings in savings, however the research found that a third (34%) of late-Millennials could only survive for one month or less if they lost their income. These figures are even more pronounced for renters of this age, who make up almost half (45%) of the group.
Two-thirds (65%) of 25-34 year olds who rent don’t have the level of savings specified by MAS – almost double the national average (37%) – and 45% could only cope for one month or less without their income. In addition, more than two in five (44%) aren’t confident in their ability to handle a personal financial crisis, again far higher than the UK average (33%).
This group of renters among late-Millennials are particularly struggling with debt, leading to LV= dubbing them ‘Generation Debt’. 43% say they can’t save any money at all with student debt being this group’s biggest obstacle to saving (40%), followed by credit card bills (32%). Half (51%) have some form of unsecured debt and one in five (20%) owe more than £5,000. Further to this, double the national average are in their authorised overdraft (21% vs 11%) and this group are three times more likely to have a loan from friends or family (12% vs 4%). If they were to lose their main source of income, fewer than one in ten (7%) renting 25-34 year olds have a form of income protection insurance to fall back on, despite the fact cover of £1,000 a month can cost less than £10 a month. In fact, almost one in four (22%) would plunge themselves into further debt by putting even more on their credit cards and 3% even admitted they would turn to a pay day lender.
Rent Costs On The Increase
According to the ARLA UK Private Rented Sector Report for June, the number of letting agents who saw landlords increasing rent costs for tenants rose to 31 per cent in June, up from just 27 per cent in May. This is the highest level since April 2016, when 31 per cent of agents reported rent hikes too.
Feedback from letting agents suggests they would like the Government to scrap the impending ban on letting agent fees (83 per cent) – however three quarters (73 per cent) would also like the Government to focus on improving enforcement for rogue agents. More than three in five (62 per cent) want the new Government to regulate the sector, while a quarter (26 per cent) think they should provide tax breaks to encourage longer term tenancies
The number of properties managed per member branch increased marginally in June, to 190 – up from 189 in May. Year on year, this figure has increased by eight per cent. In June last year, letting agents managed just 176 properties on average
In June, demand from tenants dropped slightly, with 61 new tenants registered per branch. In April and May, agents registered 65 on average.