Weekly Round-up: 29th September 2017
I don’t think so
Financial fraud losses of £366.4 million in the first half of 2017 were 8 per cent lower year-on-year, figures from UK Finance show. The data, which covers payment cards, remote banking and cheques, also shows that the industry prevented over £750 million of fraud during the same period, or 67 per cent of attempted fraud. This compares with £400.4 million of losses and £678.7 million of prevented fraud in the first half of 2016.
The new data comes as the banking industry and government join forces to launch the next phase of Take Five to Stop Fraud – the national campaign that offers advice to help customers protect themselves from fraud. Launching on Monday 2 October 2017, the campaign is focused on helping customers to recognise scams and confidently challenge any requests for their personal or financial details by remembering the phrase ‘My money? My info? I don’t think so’.
Data for January to June 2017 shows that the industry helped prevent over £500 million in attempted card fraud. Actual fraud losses on cards were down 11 per cent on the same period the year before – to £287.3 million despite card spending rising by 8.4 per cent year-on-year across the six-month period. Card fraud as a proportion of spending equates to 7.5p for every £100 spent, down from 8.7p in the first half of 2016. It peaked in February 2002 when it was 18.9p per £100.
Overall there were 937,518 cases of financial fraud, a figure that has remained stable compared with the same period the year before.
Take time to study
In the same time it takes to undertake the average degree course, university towns across the UK recorded an increase in average house price of 22.5% (£38,666), according to new research from Halifax.
Across 65 university towns, the average house price has grown from £172,179 to £210,845 in three years – an increase of £38,666, equivalent to a rise of £1,074 per month or 22.5% since 2014. The top 10 university towns with the largest price growth are all located in southern England. The largest price growth was in Guildford, home to the University of Surrey, which increased in value by £105,362 and also doubles up as the most expensive university town, with an average house price of £511,673.
This is nearly two and a half times higher than the average for all universities. The next most expensive is Winchester with an average house price of £458,228, followed up by Uxbridge where Brunel University is located, (£441,273), Oxford (£424,258) and Cambridge (£397,170). The greatest percentage increase was in Bedfordshire, where house prices increased by 42% from £200,086 to £284,707 in the last three years. This is followed by Coventry, where the average price has grown from £154,573 to £207,974 – an increase of 35%.
The least expensive student town is Paisley which has the University of the West of Scotland with an average price of £122,681 – about quarter of average price in Guildford. Others include Bradford (£127,643), Hull (£134,938), Sunderland (£138,548) and Middlesborough (£142,412).
Work to party
As Fresher’s Week rolls out across the UK, universities research reveals how four in ten students will soon be juggling both the world of work and study due to money worries – with many clocking up big timesheets. Research from Nationwide highlights that some four in ten (43%) students work during term time, putting in an average of just under 13 hours per week (13%). However, around a fifth (18%) of students work in excess of 18 hours a week with three per cent working more than 30 hours on top of their studies. More than one in ten (13%) hold down more than one job, while two thirds (63%) take on evening shifts due to study commitments.
The top reason cited by students for working during university is to finance their social life (64%). However, for four in ten (40%), they work simply to lower post-university debt, which according to the survey of more than 1,000 UK students is £41,348 on average. The poll also shows three quarters (74%) are concerned about how much debt they’ll be in when they finish university, with more than half (53%) thinking they will never pay off their loan. Therefore, earning while learning could be seen as a practical solution to keeping debt at bay.
The research shows that around one in six (16%) students would consider getting an additional job if they were struggling for money at university, while 15 per cent would put in more hours at their existing job. However, parental support still tops the list, with four in ten (40%) claiming they would turn to mum and dad for help. And while nearly one in five (18%) would use their overdraft – a common fall-back for students – just one per cent would resort to using a payday loan.
Follow the rules
The Competition and Markets Authority (CMA) has published its final report following a market study into the use of price comparison sites and other apps. The year-long examination found that these sites offer a range of benefits, including helping people shop around by making it easier to compare prices and forcing businesses to up their game. But where sites are not working in people’s best interests, the CMA is taking action. As part of this, it is opening a competition law investigation into how one site has set up its contracts with insurers, because it suspects this may result in higher home insurance prices.
The CMA has also laid down clear ground rules for all sites on issues such as communicating how they plan to use people’s personal data and clearly displaying important information like price and product descriptions. They have set out ground rules for how sites should behave, as well as being clear on how regulators can ensure people have a better experience online.
The main recommendations from CMA’s final report included a statement that all sites should follow their ground rules. They should be Clear, Accurate, Responsible and Easy to use (CARE). All sites should be clear about how they make money; how many deals they’re displaying and how they are ordering the results. Sites should be clear on how they protect personal information and how people can control its use and it should be made as easy as possible for people to make effective comparisons or use different sites, for example through better information about products.
The report also reveals that nearly two-thirds of people using a price comparison site visited more than one when shopping around. This is something the CMA is advising everyone to do, along with other top tips, if they want to get the best deal.
Weekly Round-up: 22nd September 2017
Badge of honour
Under a new voluntary agreement, starting this week, UK Finance, the Building Societies Association and the FSCS have agreed a package of measures for retail customers’ savings and current accounts, including publishing the FSCS badge on relevant website pages, i.e. product homepage and login page where customers go to view their cash account, incorporating the badge at least once in a prominent place in the customer journey on mobile banking apps and adding the badge as standard to the standard FSCS information sheet presented to customers at account opening.
The agreement will underpin consistent use of the FSCS badge by banks and building societies across the most effective points in customer journeys to promote FSCS protection with firms having up to 18 months to implement the agreement in full and will be subject to FSCS mystery shopping.
Data shows that 82% of consumers said they felt reassured knowing FSCS exists, while 62% said they trust banks and building societies knowing that FSCS would protect them if they fail. But there’s always more to do to ensure that customers are aware of how industry and the FSCS work together, and what protections are available to them under the new agreement.
In their 9th report for the Intergenerational Commission, the think tank Resolution Foundation has taken on the hugely important topic of housing. They have explored how the housing experience of each generation has been determined by demographics, policy and the market alike, and what we might expect the future to hold and have found that today’s families headed by 30 year olds are only half as likely to own their home as the baby boomer generation was at the same age, and home ownership has declined across all regions and income groups.
With falling home ownership and a shrinking social rented sector, four out of every ten 30 year olds now live in private rented accommodation – in contrast to one in ten 50 years ago, and millennials have also been more likely to be living with their parents in their mid-20s than previous cohorts.
While the average family spent just 6 per cent of their income on housing costs in the early 1960s, this has trebled to 18 per cent. Housing costs have taken up a growing proportion of disposable income from each generation to the next. This is true of private and social renters, but mortgage interest costs have come down for recent generations. However, the proportion of income being spent on capital repayments has risen relentlessly from generation to generation thanks to house price growth.
The quality of housing has in many respects improved hugely. But millennial-headed households are more likely than previous generations to live in overcrowded conditions, and when you look at the distribution of square meterage its clear that today’s under-45s have been net losers in the space stakes compared to previous cohorts, while over-45s are net gainers. More recent generations have also had longer commutes on average than previous cohorts, despite spending more on housing.
They conclude that if similar trends to the 2002-2012 were to return, less than half of millennials will buy a home before the age of 45 compared to over 70 per cent of baby boomers who had done so by that age.
New research shows that landlords are struggling to keep up with the financial impact of multiple tax and regulatory changes. This could lead to increased rents, reduced maintenance spending and even landlords being forced to sell properties to make ends meet.
A YouGov survey of 1,000 landlords, commissioned by The Mortgage Works, Nationwide’s Buy to Let arm, found that many landlords have shielded their tenants from the financial impact of the changes, with almost a third (29%) having never increased their rent. However, the survey shows that more than two in five (44%) are now considering increasing rents, one in ten (10%) will reduce the amount they spend on property maintenance, one in seven (14%) intend to start managing the property themselves, rather than using an agent and a fifth (22%) are considering selling their rental property.
Among landlords considering increasing rent, almost three quarters (74%) intend average increases of £100 or less per month, with a similar proportion (72%) feeling it’s important their tenant is aware that the increase is just to cover additional costs. This is perhaps why almost half (45%) would prefer to inform their tenant of a rent increase personally, even though two in five (39%) worry their tenant might leave as a result.
For two in five landlords (38%), the rising costs have made them consider getting out of renting property altogether.
Aviva has enhanced its Life Insurance+ and Critical Illness+ products by making changes to four definitions which centre on the most common payment areas of heart conditions, strokes and cancers. The changes have been made to improve clarity and consistency across similar conditions which they expect would lead to a greater likelihood of having a successful claim. These three conditions are cardiomyopathy, spinal stroke and benign spinal cord tumour.
As part of the changes, the spinal stroke definition has also been aligned with the stroke definition and the definition for benign spinal cord tumours has been aligned to benign brain tumours, to improve consistency. These changes mean that for conditions such as spinal strokes, Aviva will be able to make payment at an earlier point following diagnosis and for benign spinal cord tumour claims there is no longer a need to wait for permanent symptoms. For cardiomyopathy the definition has now been broadened to include three measures of severity, including the insertion of a defibrillator.
In recognition that cancer is the most common cause of claim for children and understanding the financial impact on a family when a child is diagnosed with cancer, Aviva has doubled the maximum benefit payable where upgraded children’s benefit has been selected. Customers with a child diagnosed with cancer will now be able to claim up to £50,000 to help them during their difficult time.
Compliance Update: 22nd September 2017
The thing I like about working in compliance is that there is always a lot going on. I know some people think I spend my day with my feet up, enjoying another one of Bev’s excellent cups of tea but the reality is that there is vast amount to do. Particularly at the moment, there are some big topics on the horizon so I thought it might be good to give you an insight into two of the major ones.
General Data Protection Regulation (GDPR)
We’ll start with the GDPR; mainly because it’s fresh in my mind having just given a report to the board on this brute of a subject. If you’re not yet up to speed about GDPR, this is a new European standard for Data Protection and is a significant piece of work. Even though we’ll be leaving the EU, the UK government have effectively copy and pasted the European rules in the UK law so that we’ll be operating on a level playing field with the rest of Europe.
It’s also a slightly odd one because technically we are not responsible for our Member’s Data Protection being that AR firms are individually licenced by the Information Commissioners Office. For that reason, individual firms will have to ensure they meet the required standards however we will be providing the tools and guidance necessary to ensure all firms remain compliant with the new rules.
Some of the work we’ve been doing includes identifying all the customer data that we capture and documenting the legal reason we capture it, how long we keep it for, how it’s stored, secured, backed up etc. It’s quite a task as you can imagine. And there is the possibility that individual firms have their own forms and questionnaires they use with customers that may capture additional data so there will be a need for firms to review their own processes and assess what information they get.
The other interesting aspect is some of the new rights that individuals will have over their data. Notably, the right to have their data erased which raises some interesting compliance issues. The good news is that there is absolute right here where the data is required for legitimate purposes such as the ability to defend potential legal claims later on. That said, there must be clear processes and policies in place to manage this so this something we’re working on.
There is also the issue of information security and of particular note is ensuring those who have access to the data are only using it for the purposes stated. The issue this raises surrounds administrators and support staff so we will be introducing a process to improve the information we have surrounding the support staff within AR firms.
In the next couple of months, we’ll be publishing some guidance on the individual topics and providing a ‘Data Protection Self-Audit’ to AR firms. This document will help you understand your own data protection processes and identify what you may need to do to meet the new standards. It will also help us understand your processes and ensure we can help you become and stay compliant. Once the audit is done, we’ll then provide policies and further guidance in the new year to make sure everything is ready for 25th May 2017.
Training & Competence (T&C) Scheme
The other big topic we’ve been working on recently is an update to our Training & Competence scheme which we will publish towards the end of the year and begin using in 2018. A good T&C scheme is one of the cornerstone processes for any financial services business and is crucial for enhancing the integrity of the UK Financial System. The scheme itself sets the methodology by which supervision is carried out between the network and the AR firm, as well as with individual advisers. Gavin spoke briefly at the last conference about our plans to introduce a fresh scheme, to be effective from the new year, and over the coming weeks, I will talk more about some of the individual elements such as the key performance measures, adviser risk ratings and annual fitness and propriety checks.
The new T&C Scheme will not be a strict, ‘rule-based’ scheme but instead one that utilises evidence and risk management principles to ensure that Advisers meet the company and regulatory standards. Naturally there will be certain prescriptive areas, but it is recognised that individuals have different abilities and experience and therefore a degree of flexibility may be applied.
The key areas of activity for the scheme focus on recruitment, induction and attaining competence, and maintaining competence. The HLPartnership team of Regional Compliance Managers – Stuart, Andy, Dean, Jeanette and Richard – will oversee the T&C Scheme. I’ll provide more details on the T&C scheme in my next update.
The T&C Scheme document itself, which will be published in the coming months, summarises the minimum required activities and performance levels required for an adviser to achieve and maintain competency and provides guidance to assist the Regional Compliance Managers and Firm Supervisors with their responsibilities.
More information will be given on the GDPR and the new T&C scheme at the forthcoming conferences which are filling up fast so make sure you book your place using the links below. In particular, anyone who has not come to our conferences before or who has joined the network this year really needs to get along to one of the events. Everyone will get a lot of the day so I hope to see as many of you there as possible.
Manchester – 11th October 2017 br>
Bristol – 12th October 2017 br>
Milton Keynes – 18th October 2017 br>
Crawley – 19th October 2017
Weekly Round-up: 15th September
No change, no change
At its meeting ending on 13th September 2017, the Monetary Policy Committee (MPC) voted by a majority of 7-2 to maintain Bank Rate at 0.25%. The MPC set out its most recent assessment of the outlook for inflation and activity in the August Inflation Report.
That assessment depended importantly on three main judgments: 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 over the forecast period; and that subdued household spending growth is largely balanced by a pickup in other components of demand.
Since the August Report, the relatively limited news on activity points, if anything, to a slightly stronger picture than anticipated. GDP rose by 0.3% in the second quarter, as expected in the MPC’s August projections, although initial estimates of private final demand were softer than anticipated. The unemployment rate has continued to decline, to 4.3%, its lowest in over 40 years and a little lower than forecast in August. Headline and core Consumer Price Inflation in August were slightly higher than anticipated. Twelve-month CPI inflation rose to 2.9% and is now expected to rise to above 3% in October.
All MPC members continue to judge that, if the economy follows a path broadly consistent with the August Inflation Report central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than current market expectations. A majority of MPC members judge that, if the economy continues to follow its current path then some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target. All members agreed that any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.
At this month’s meeting, seven members thought that the current policy stance remained appropriate to balance the demands of the MPC’s remit. Two members considered it appropriate to increase Bank Rate by 25 basis points. The Committee will undertake a full assessment of recent developments in the context of its November Inflation Report and accompanying economic projections.
Time for a remortgage
According to the latest statistics from UK Finance, remortgaging strengthened in July and reached its highest level since January, with customers attracted by borrowing rates that are at or close to their historic low point. The increase in activity in July means that, over the last year, the number of people remortgaging has been at its highest since 2009. Lending for house purchase was lower in July than in the preceding month, with the market expecting to continue to soften a little in the coming months. There was a smaller increase in both the value and volume of buy-to-let lending.
The proportion of household income taken up by monthly mortgage payments nudged upwards in July for both first-time buyers (17.4%) and movers (17.6%). But it remained low by historical standards. The average amount borrowed by a first-time buyer edged up from £138,750 in June to £139,000 in July. The average first-time buyer household income declined marginally, which means that their average income multiple nudged up from 3.59 to 3.60. The average amount borrowed by movers was unchanged at £180,000, as was their average income multiple of 3.39.
Remortgaging accounted for more than 70% of all buy-to-let lending in July. Buy-to-let remortgaging was 10% higher than in June, but overall the sector continued to reflect the more subdued levels of activity seen since the introduction of higher stamp duty in the spring of 2016.
East Midlands leads the way
In its latest analysis, the Office for National Statistics has said that average house prices in the UK have increased by 5.1% in the year to July 2017 (unchanged from June 2017). The annual growth rate has slowed since mid-2016 but has remained broadly around 5% during 2017. The average UK house price was £226,000 in July 2017. This is £11,000 higher than in July 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 5.4% over the year to July 2017, with the average price in England now £243,000. Wales saw house prices increase by 3.1% over the last 12 months to stand at £151,000. In Scotland, the average price increased by 4.8% over the year to stand at £149,000. The average price in Northern Ireland currently stands at £129,000, an increase of 4.4% over the year to Quarter 2 (Apr to Jun) 2017.
The East Midlands showed the highest annual growth, with prices increasing by 7.5% in the year to July 2017. This was followed by the East of England at 7.1%. The lowest annual growth was in London, where prices increased by 2.8% over the year, followed by the South East at 3.8%.
In July 2017, the most expensive borough to live in was Kensington and Chelsea, where the cost of an average house was £1.4 million. In contrast, the cheapest area to purchase a property was Blaenau Gwent, where an average house cost £81,000.
In recognition of childhood cancer awareness month, Aegon is reminding parents to check their critical illness (CI) policies and has shared information for child CI claims since 2007. Of all the CI claims for children received by Aegon in the last 10 years, 67% were for cancer.
Since 2007, 30% of childhood cancer claims were for brain tumours, 25% were for Leukaemia and the remainder were for other forms of cancer. In 2016, cancer accounted for 83% of CI claims for children.
In the last 10 years the Insurer has paid a total of 84 claims for Child CI. These claims have included all ages from children under one to teenagers of 17. Cancer diagnosis and treatment for a child can come with a hefty and unexpected financial burden. Aegon highlights that people often forget to consider the length of treatment, the need to take regular time off work, expensive parking at hospitals, travel costs and buying snacks and food in hospital.
Many people might be unaware that their cover includes their children so Aegon are urging anyone with a family to check their policy or speak to their adviser to make sure their children are covered too.
Compliance Update, 8th September 2017
As a network, we have forged some great relationships with providers and as a result, are provided with lots of interesting data and statistics. These are normally numbers in boxes and the particular box I want to highlight today is one entitled ‘Credit Abuse’. OK, so I appreciate what is interesting to me might not be to you, but bear with me as this is quite important to helping you stay safe.
We all know that a customer’s credit history is one of the most important criterion lenders look at when deciding whether or not to offer an advance, and in a world where information is so readily available, I would hope that the credit abuse box remains empty but sadly, that’s not always the case.
The term ‘Credit Abuse’ covers a multiple of sins and is normally applied to some form of non-disclosure relating to credit. That could be failing to disclose active credit such as loans or credit cards, using false addresses or a false address history to hide credit, or where a customer fails to disclose adverse credit. It is this last area which I want to focus on as it is the most common form of credit abuse we see.
Maybe it’s because there is a stigma attached to adverse credit and customers feel embarrassed about admitting it; maybe it’s because they think they won’t get found out. Whatever the reason, the customer often seems surprised to find their mortgage has been declined because of undisclosed information.
But there may be a further surprise. It is often underappreciated quite how connected customers and brokers are once an application has been submitted. If a customer fails to disclose information such as adverse credit, the lender is likely to assume the broker who submitted the case is either in on the deception or has been lazy in terms of getting to the heart of the problem. Either way it doesn’t look good for the broker. They will ask themselves:
- Has the broker asked the right questions?
- Have they taken steps to try and establish the customer’s credit history?
- Has the broker taken all reasonable steps to ensure the customer provided full disclosure?
It is for this reason you should know more about the issue of credit abuse.
There are several easy ways to keep yourself safe and it is good to see a growing trend amongst brokers to get the customer’s credit report before making an application. Anyone who doesn’t do this routinely is potentially exposing themselves to a risk and it’s so easy for customers to get credit reports now that it is fast becoming standard practice in the industry.
When customers do provide a credit report, this can provide all sorts of gems of information, not just whether they’ve got adverse credit. The report will help confirm the customer’s personal details, whether or not they are on the electoral role, the amount of used credit, the amount of available credit, any linked addresses etc. It also shows who else has looked at the credit report which may be telling in itself.
Of course, the credit report has its limitations and there can be a delay of a few weeks for the latest data to appear on the report so this needs to be combined with asking the right questions in order to try and weed out any potential problems before they arise. For example:
- Has the customer approached anyone else for a mortgage such as another broker, their bank, or an online portal? If so, what happened?
- Has the customer ever been turned down for credit? If so, why?
It is also important to be clear about the importance of full disclosure. The customer needs to understand that if they are not open about their personal circumstances, it could lead to the wrong advice and is likely to mean the case will be declined.
I know what you’re thinking and yes, there will occasionally be customers who may not know about any adverse credit they have or may have genuinely forgotten such information. For me, that makes it all the more important to get the customer to double check what they’ve told you and for them to obtain their credit report, even if that only serves to confirm that everything is as it should be.
Mortgage lenders will continue to gather their statistics and there will continue to occasionally be numbers in the credit abuse box. But this information is far more than just statistical data – it certainly says a lot about the customer; the question is then what it says about the broker. Something as simple as getting a credit report may make all the difference.
Finally, a quick reminder about our October conferences. There are some big compliance topics on the horizon, notably the GDPR and the Senior Managers & Certification Regime so Gavin will be there to explain more about these and other important compliance information. These topics will be of particularly interest to business principles as well as advisers so do make sure you book to come along and I look forward to seeing as many of you as possible at the events.
Manchester – 11th October 2017
Bristol – 12th October 2017
Milton Keynes – 18th October 2017
Crawley – 19th October 2017
Weekly Round-up: 8th September 2017
House Price Increase
According to the latest house price survey by the Halifax, the annual rate of growth increased from 2.1% in July to 2.6% in August with the average house price now £222,293, which is just above the previous high of December 2016 (£222,190).
The Lender highlights that recent figures for mortgage approvals suggest some buoyancy may be returning, possibly on the back of strong recent employment growth, with the unemployment rate falling to a 42 year low. However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.
House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale over the coming months. Sales of UK houses have now exceeded 100,000 for the seventh month in succession, and in the three months to July activity was 10% higher than in the same period last year. (Source: HMRC, seasonally-adjusted figures)
Mortgage approvals for house purchases – a leading indicator of completed house sales – also grew sharply, by 5.2% between June and July, to 68,700; the same level as in January. The increase in mortgage approvals nearly reversed all the falls seen so far this year, though they have remained in a narrow range between 65,100 and 68,700 per month over the past ten months. (Source: Bank of England, seasonally-adjusted figures)
No Time To Save
An estimated two million self-employed people in the UK are unable to save any money each month leaving them vulnerable to financial shocks, according to new research by insurer, LV=.
With the number of self-employed workers now close to five million, the second instalment of LV=’s ‘Income Roulette’ report – a study of debt, savings and protection among 9,000 people – explores how the self-employed would cope with an unexpected financial shock. The results show that four in ten (41%) self-employed people can’t afford to save any money each month and a further one in ten (11%) save less than £50. Furthermore, a third (33%) couldn’t survive for more than three months if they lost their income – meaning they fall short of the Money Advice Service’s recommended amount of savings that would allow them to be financially resilient.
When looking at barriers to saving, the figures show that monthly bills eat up the wages of nearly two thirds (62%) of self-employed people, compared to a national average of 56%, with this group also more likely to be hampered by debt (38% vs 32% national average). In addition to this, sole traders are more likely to be hit by unexpected costs such as home maintenance or car repairs (33% vs 28%).
As self-employed people don’t have the safety net of employers’ benefits, such as sick pay, they are often recommended to consider taking out some form of income protection to avoid having to rely on state support if they couldn’t work because of accident, sickness or disability. However, only 4% of self-employed people in LV=’s research have income protection, compared to a national average of 11%, with more than two fifths (42%) mistakenly believing that they’re not eligible for it.
Despite the lack of saving and insurance, the research shows this group is aware of the risks of self-employment – three in ten (28%) are worried about having an accident and not being able to work (vs the national average of 21%) and a similar proportion (29%) are worried about falling sick (vs 24%).
Increases in payouts to victims of car crashes and operations are to be scaled back after discussions with insurance industry by the Ministry of Justice. In a U-turn by ministers, changes to the so-called “Ogden rate” used to calculate compensation payouts are to be revised, after insurers said they may inflate car insurance premiums by hundreds of pounds to compensate for the potential increase in claim costs.
When the government cut the rate from 2.5% to -0.75% in February there was an outcry from insurers. After a consultation, the Ministry of Justice has proposed a rate of between 0% and 1% in draft legislation. The change appears small, but the mathematical implications for payouts can be very significant. When the new Ogden rate was imposed in February, insurers said the compensation figure for a brain injury on a 25-year-old could soar from £3m to £8m, and that the NHS and other parts of the public sector could face an extra £6bn bill.
Responding to the news, Huw Evans, Director General of the ABI said “This is a welcome reform proposal to deliver a personal injury discount rate that is fairer for claimants, customers and taxpayers alike. The reforms would see the discount rate better reflect how claimants actually invest their compensation in reality and will provide a sound basis for setting the rate in the future. If implemented it will help relieve some of the cost pressures on motor and liability insurance in a way that can only benefit customers.”
One in seven older home owners planning to downsize in later life believe they will be unable to retire unless they move to a cheaper property, a survey has found. Nearly half (47 per cent) of over-55s who own their home are planning to sell up and move to a less expensive property in their later years, according to Prudential.
And while convenience was found to be the main reason for moving, a significant proportion of people are relying on downsizing as a key part of their retirement plans. One in seven (13 per cent) of those expecting to downsize said they could not afford to retire otherwise.
Prudential’s survey of more than 1,000 people suggests that home owners in Northern Ireland and the East of England are particularly likely to expect to downsize their property, while those living in London, Scotland and the West Midlands are the least likely to sell up and move somewhere smaller.
Those planning to move to a cheaper property expect to free up around £112,000 in equity on average by downsizing. One in nine (11 per cent) believe they will make more than £200,000 by downsizing. Of those who expect to raise money from downsizing, 60 per cent will use it to boost their retirement funds and improve their standard of living. Nearly half (47 per cent) will use the cash for travelling more, while (13 per cent) want to release equity to help their children buy a house and 14 per cent plan to simply give the cash to their children.
Weekly Round-up: 1st September 2017
UK Finance data shows that consumer borrowing from High Street banks remained stable at 2% in July, compared with 1.9% in the previous month. UK Finance also estimates that overall gross mortgage lending in July was £23.0 billion. Accounting for seasonal factors, this figure is above the average lending figures seen over the past year.
First-time buyers and remortgage activity on the part of homeowners has supported lending for some time, but UK Finance anticipate the pace of growth to slow slightly, dampened by a potentially more challenging economic outlook.
UK Finance suggest that consumer borrowing from high street banks remained stable in July, as continued pressure on household budgets reduced spending and saving. It appears business as usual for business lending as companies continue to borrow less and build their reserves, increasing deposits at an annual rate of 7.5%, while larger corporates are using the capital markets for funding. Steady levels of mortgage activity seen through the first half of the year continued into July. First-time buyer numbers continue to be strong, helped in part by government schemes. But that has been offset by home movers, where a shortage of homes on the market is limiting their activity.
Bank of Best Friends
Almost half of 18-35 year-olds plan to cash in on the ‘Bank of BAE’ to help get onto the property ladder, according to the latest Halifax Generation Rent research. Halifax found that 45% of 18 to 35 year-olds want to buy their first home with their ‘BAE’ (partner or loved one). The study also revealed that twice as many men (one in five) than women admitted waiting for their ‘BAE’ to try and get on to the property ladder.
Almost one in six (15%) plan to stay with their parents until they can afford to buy, so parents may be forced to sit tight in the meantime, as a third (32%) of young people aged 18 to 35 see themselves buying their first home within the next five years. The bad news for parents of under 25s is that one in 10 don’t see themselves becoming a homeowner for closer to 10 years. They are, however, still expecting a donation from the Bank of Mum and Dad, with fewer than one in five saying that inheritance isn’t an option for them.
Home truths One in 20 of those under 35 have already given up the idea of owning their own home, with the same number admitting that they’re not sure if buying a house is the right choice for them.
The research has highlighted for the first time a difference in mind-set between men and women about buying a home, with women less confident about getting on to the property ladder – 42% claimed buying a house wasn’t realistic, compared to 35% of men. Lack of income was unsurprisingly the biggest barrier for young people getting on to the ladder, with 55% of men blaming their salaries, compared to an overwhelming 70% of women.
Check The Plan
The Financial Services Compensation Scheme (FSCS) has confirmed that it does not provide protection for individuals who have a funeral plan with a provider that fails. This applies whether the plan was purchased by paying a lump sum or by paying a monthly amount to the (funeral plan) provider.
Whilst funeral plan providers can be regulated by the Financial Conduct Authority (FCA) the vast majority choose to use exemptions available to them which means they are not. Even if a regulated funeral plan provider were to sell a funeral plan to an individual, this would not be covered by the FSCS because these products are not categorised as a ‘designated investment’ under FSCS’s compensation rules.
Funeral plan providers rely on insurance companies and investment trusts to meet their obligations to customers. In some limited circumstances where the provider of a Whole of Life insurance policy or provider of a product held within a trust goes bust, FSCS may be able to pay compensation to the provider of the funeral plan or the trustees. It would then be for the funeral plan provider or the trustees of the investment fund to decide what to do with any monies that are paid out as a result. Having paid compensation, FSCS is not responsible for the decisions that funeral plan providers or investment fund trustees may make. It is unlikely that FSCS would be able to pay compensation directly to individuals.
Slowly But Surely
According to the Nationwide Building Society, the annual pace of house price growth moderated to 2.1% in August, from 2.9% in July. The slowdown in house price growth to the 2-3% range in recent months from the 4-5% prevailing in 2016 is consistent, the lender observes, with signs of cooling in the housing market and the wider economy.
The economy grew by c.0.3% per quarter in the first half of 2017, around half the pace recorded in 2016. The number of mortgages approved for house purchase moderated to a nine-month low of c.65,000 in June and surveyors have reported softening in the number of new buyer enquiries. Nevertheless, in some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market. The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4% – the lowest rate for over forty years. In addition, mortgage rates have remained close to all-time lows.
The Nationwide highlight that it may be that mounting pressure on household finances is exerting a drag. Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened. While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions – especially London and the South of England.