Weekly Round-up: 26th January 2018
According to the latest figures from UK Finance, mortgage activity has been building through the year, helped by increasing numbers of first-time buyers. Gross mortgage lending in the month is estimated to have been £20.2 billion, 1.2 per cent more than a year earlier. Credit card spending decreased slightly in the month, with annual growth in outstanding credit at 5.3 per cent.
Business borrowing has continued to moderate through the year, with the manufacturing sector showing only modest annual growth, while construction and property-related sectors have contracted their bank borrowing over the year.
The trade body highlights that December is traditionally a quieter month for mortgages, although the underlying trend of increased numbers of first time buyers, supported by government initiatives such as Help to Buy, continues. Mortgage rates remain low, driven by a competitive market, so they are suggesting customers should shop around for the best deals.
Business lending is up year-on-year, even though December saw the usual seasonal net repayment across all industries and sizes of borrower. However, healthy export levels and an uptick in overall business confidence suggest that in this New Year, there may be an appetite to capitalise on opportunities for growth supported by continued favourable borrowing conditions.
Pension or holiday?
Short term saving is dominating the UK’s savings habits, with two in five (35%) prioritising saving for a rainy day fund over any other financial milestone, according to the latest sentiment research from Foresters Friendly Society.
The findings reveal that less than a third of consumers (29%) view saving to provide a retirement income as a priority, while around a quarter are prioritising saving for a holiday (26%). This long term saving gap is particularly significant amongst millennials (those aged between 18-34) who stand most to gain when thinking longer-term, where saving for retirement ranked even lower on their list of priorities with just 16% building up ‘nest eggs’ for their future.
This short-termism is reflected in their savings choices, highlighting a significant lack of understanding when it comes to deciding how best to achieve these financial goals. More than a third (34%) of UK adults use a standard savings account as their preferred way to save while 27% opt for cash ISAs and 15% just use their current accounts. In the current low interest environment, none of these vehicles is likely to deliver significant returns but shares based options, best suited to early saving, offering the potential for superior returns are not being embraced in significant numbers, with take-up of the Lifetime ISA at 9% and Stocks and shares at just 10%.
This attitude calls for improved education, amongst younger savers particularly, on the importance and benefits of saving early in order to avoid them hampering their future saving progress. Fewer than one in ten (9%), for example, are taking advantage of the benefits from the Lifetime ISA (LISA) which was developed specifically to help those under 40 years old achieve their long-term savings goals.
Driving us crazy
The relentless rise in the cost of motor insurance continues with the ABI’s latest Motor Insurance Premium Tracker out this week showing that the costs of motor insurance have reached record levels.
The ABI’s Premium Tracker – the only market survey which measures prices consumers actually pay for their motor cover, rather than quotes – shows that in the fourth quarter of 2017: The average price paid for private comprehensive motor insurance was £493. This was the highest quarterly figure since ABI started collecting the data in 2012, up 6% on the same quarter 2016. The average premium paid over the whole of 2017 at £481 was 9% higher than the previous year, and the highest since ABI started collecting this data back in 2012. This added an extra £40 to the average premium.
The average cost of motor cover has leapt by 29% since 2014 and as a consequence the ABI is urging the Government to help reduce the cost of motor insurance by introducing as quickly as possible its reforms to how compensation for large personal injury compensation awards is adjusted (known as the Discount Rate) to ensure a fairer system for claimants and insurance customers, and push ahead with reforms to how lower value whiplash-style claims are handled. Since 2013 there has been a rise in these claims reported to the Government’s Compensation Recovery Unit.
Funeral Costs rising
New data obtained by Royal London reveals the number of public health funerals and the average cost of a public health funeral for local councils has risen in the last five years. The data is based on Freedom of Information (FoI) requests submitted to 390 local authorities in the UK. A public health funeral, also known as a pauper’s funeral, is held by a local authority if the deceased has no family or the family are unable to cover the cost of the funeral.
Royal London’s National Funeral Cost Index has found growing levels of funeral poverty as families struggle to meet rising costs. With the average cost for a basic funeral running at £3,784, many families go into debt, with one in six (16%) taking on an average debt of £1,680. Others are simply unable to contribute at all, leaving the local authority to take on the cost of the funeral. The data from 260 local authorities shows there were 3,784 public health funerals across the UK in the financial year 2015/16. The total cost of these funerals amounted to £4 million.
211 councils provided data on public health funerals both for the financial years 2011/12 and 2015/16. This reveals the number of public health funerals has increased by 12% over the last five years. Councils in the East of England saw the biggest percentage increase in public health funerals in the last five years, at 36%. The total cost of public health funerals to councils across the UK increased by 36% in the last five years. The data also shows the cost of public health funerals varied regionally across the UK. West Midlands had the highest cost, with more than £900,000 being spent on funerals in 2015/16. London local authorities saw a 51% increase in the average cost of a funeral, with a public health funeral costing local authorities an average of £1,004 in 2015/16 compared to £666 in 2011/12.
Weekly Round-Up: 19th January 2018
UK Finance’s mortgage trends updated for November 2017, released this week, revealed steady increases in mortgage lending for first-time buyers and home movers compared to the previous month and the equivalent period in 2016.
The data shows housing market activity remains buoyant, despite November’s rise in the base rate. According to the trade body that represents major lenders in the UK highlight that increases in lending for house purchases together with increases in homeowner remortgages reflect a keenness among consumers to benefit from still historically low interest rates, and a highly competitive marketplace.
In contrast, the update indicates declines in buy-to-let lending reflecting the changing regulatory and fiscal environment for landlord businesses, which might result in some landlords being inclined to reappraise the viability of their portfolios.
Keep on Moving
The number of people moving home is at its highest level since 2007. The number of homemovers – current homeowners moving house – across the UK increased by 2% to an estimated 370,300 in the past year, according to the latest Lloyds Bank Homemover Review.
The slight increase in homemovers could be a result of continued low mortgage rates and high demand for homes, which have made it easier for homemovers to take the next step on the housing ladder. The increase in 2017 follows a decline in the number of homemovers reported in 2016, which fell for the first in five years. Since hitting a market low of 315,000 in 2009, the number of homemovers has grown by 18% (or 55,300). However, the current number is still 43% below the level of 653,700 seen in 2007.
High house prices in London have adversely impacted the homemover market in the capital, with numbers of homemovers falling by 6% to 22,600 in the past year – the only region to have a decline in numbers. The South East region has the highest number of homemovers at 65,400 – more than double the next highest region, South West with 27,500. Northern Ireland has the lowest number at 4,400. Over the past five years, the average price paid by homemovers has grown by 44% (£90,879) from £205,852 in 2012, to £296,731 in 2017.
In London, the average price a homemover pays has grown by 59% since 2012 to £568,816, the highest in the UK. The average homemover price in the capital is 40%, or £161,429, higher than the South East (£407,386) which is the second most expensive. Northern Ireland has lowest average price of £164,878. The average deposit put down by a homemover has also increased by 45% in the past five years, from £69,089 in 2012 to £100,387 in 2017. Londoners require the largest deposit of £196,535 towards the purchase of their next home, which is four times the average homemover deposit of £46,032 in Northern Ireland. However, whilst Londoners pay the highest deposit in monetary terms, homemovers in East Anglia pay the largest deposit as a proportion of average house price – 37% (£110,321), followed by both South East and South West (36%).
Take the month off
Research from the 2017 Britain’s Healthiest Workplace survey (BHW), a study of almost 32,000 workers across all UK industries, has revealed that employees lose, on average, the equivalent of 30.4 days of productive time each year as they take time off sick and underperform in the office as a result of ill-health (otherwise known as presenteeism). This is equivalent to each worker losing six working weeks of productive time annually. Importantly, while some sectors performed better than others, the results demonstrated high levels of productivity loss across all sectors and organisational sizes.
When translated into monetary terms, the combined economic impact of this ill-health related absence and presenteeism is £77.5 billion a year for the UK economy. Worryingly, employee work impairment and the associated productivity loss appears to be on a worsening trend, up from 27.5 days and £73 billion respectively in 2016.
Britain’s Healthiest Workplace, which was developed by VitalityHealth and is delivered in partnership with the University of Cambridge, RAND Europe and Mercer, also points to a growing presenteeism problem, with time missed by the average employee through absence reducing since 2016 (3.3 days to 2.7 days), while increases in presenteeism (24.2 days to 27.7 days) have more than offset the observed reduction in absence. This increase in presenteeism demonstrates the importance of having a holistic understanding of employees’ physical and mental health, both in and out of the workplace.
Time to Retire
People planning to retire this year are expecting to live on an average annual income of £19,900, according to the latest research by Prudential1. The figure now stands at its highest level since the survey began in 2008 and after five consecutive years of rising incomes.
Each year Prudential conducts its unique research into the financial plans and aspirations of people planning to retire in the year ahead. This year’s retirees – the Class of 2018 – expect an income 10 per cent higher than those who gave up work in 2017, whose average expected annual retirement income was £18,100. Expected retirement incomes have now risen consistently since 2013 when they hit a low of £15,300. Prudential’s annual study, now in its eleventh year, shows that expected incomes have now passed their pre-financial crisis levels and are £1,200 higher than the £18,700 expected in 2008.
The Class of…research has tracked retirement trends over a period that has seen some of the biggest changes to pensions in generations as well as major political and economic upheavals and there are signs uncertainty may be hitting confidence despite rising incomes. Despite the record increase, this year’s findings revealed that nearly half (46 per cent) of people planning to retire this year feel they are either not financially well prepared for retirement or are unsure about their preparations.
Meanwhile, just half (50 per cent) believe their expected income will enable them to have comfortable retirement while 27 per cent believe they do not have enough money for retirement.
Weekly Round-up: 12th January 2018
Off to the races
The Gloucestershire town of Cheltenham saw the highest percentage rise in house prices of any major UK town or city in 2017, according to new research by Halifax. The average house price in the town that’s located on the edge of the Cotswolds and is famous for its horse racing and cultural festivals, was 13% higher than in the previous year, increasing from £277,118 to £313,150 in 2017; nearly five times the 2.7% increase in the UK as a whole.
The seaside town of Bournemouth on the south coast experienced the second biggest rise, with an increase of 11.7%, while Brighton, on the south east coast completed the top three with an 11.4% rise in the past year.
Fifteen of the 20 top house price performers are in London and southern England – these include Crawley (10.4%), Newham (10.2%), Peterborough (10.1%), Gloucester (9.5%) and Exeter (9.1%).
Huddersfield (9.3%) in Yorkshire and the Humber, Nottingham (8.9%) and Lincoln (8.4%) in the East Midlands along with Stockport in the North West (8.2%) and Swansea in Wales (7.7%) are the top performers outside London and the South, making the top 20 this year. There were marginal price decreases in a number of other towns: three in Scotland – Paisley (-3.6%), Dunfermline (-2.2%) and Aberdeen (-1.1%); five in Yorkshire and the Humber – Wakefield (-2.9%), Rotherham (-2.2%), Barnsley (-1.6%), Bradford (-0.4%) and Leeds (-0.4%); one in the West Midlands – Stoke on Trent (-4.0%); Bromley in the South East (-0.6%); Hounslow in Greater London (-0.2%); and Sunderland in the North (-0.2%).
New research from Barclays finds that the average British parent will spend £4,886.28 on birthdays in the seven years their children attend primary school (ages 4-11). And with parents expected to have to fork out an average of £60,000 on the expenses children’s school years bring, from school uniforms, to trips, to extra-curricular activities, the strain on savings is only going to deepen in later life.
The survey of 1,000 British parents with children aged eight years old or below found that parents will typically spend £433.39 on their children’s birthday parties, and £164.65 on presents – with some more extravagant parents buying as many as 50 gifts per birthday. Catering, the entertainment, the activities, party bags and cake are the top 5 most expensive elements of a birthday, parents claim. Birthday spending reaches even more astronomical heights when it comes to the costs parents have to fork out on other people’s children. The research revealed that parents spend an average of £223.05 on party bags alone (£14.87 per bag), with birthdays attended by an average of 15 children.
Perhaps due to peer pressure from parents and children alike, almost half of respondents (49%) said they feel obliged to invite the whole class, raising attendance numbers to a minimum of 27, according to average class sizes in UK Primary Schools. And although some dutiful parents revealed they attend as many as 30 children’s parties every year, the typical parent in the UK will have to take their child to six occasions a year, spending an average of £16 for a gift.
The latest industry figures show the lowest level of sickness absence since records began almost a quarter of a century ago. However Bupa research highlights that millions head into work despite being unwell, with figures revealing that two-thirds (64%) of UK employees have done so in the last twelve months. The findings come at a time when increasing productivity is a strategic goal for most business leaders in 2018. But high levels of ‘presenteeism’ are in fact associated with loss of productivity and reduced performance – as employees who push themselves into work when unwell, risk delaying their own recovery.
Bupa’s research shows that more than one in four (27%) employees ignore their doctor’s orders to stay at home and ‘soldier on’. A third of employees would go to work despite back pain or issues related to their joints and, disturbingly, a similar number (29%) head to work when suffering from mental health issues such as depression. As two of the most common reasons to be signed off work, Bupa’s experts fear these employees risk worsening their health, increasing the likelihood that they’ll need a prolonged period of time off work further down the line.
Although businesses across the UK are starting to recognise that a healthy workforce is more productive, workload pressure is one of the reasons many people head to work regardless of the state of their health. Many felt their to-do list was too long for them to be able to take time off. A quarter (26%) of people selflessly head into work when they are seriously ill because they worry that their absence will be a burden on their team, unaware that this is counterintuitive.
However, others come into work despite being ill because of a lack of trust and they worry that their colleagues would think they were not genuinely unwell and others worry that being off may impact their job security.
The Full Year 2017 report from Key Retirement reveals the highest recorded year both for equity release new plan numbers and total lending. Every quarter of 2017 has witnessed consistent year on year record growth. Sales of plans were 38,995 from 27,666 for 2016, an increase of 41%, whilst Lending increased to £3.01 billion, from £2.15 billion in 2016, an increase of 40%.
The average loan amount has fallen slightly over the period from £77,877 to £77,380 with Drawdown remaining the most popular type of plan accounting for 62% of all new plans (Drawdown and Enhanced Drawdown). Drawdown, which retains accessible further funds, provides potential further borrowing of £910 million in addition to the £3.01 billion in initial advances; giving a total market for the year of £3.92 billion, compared to the total of £2.87 billion for 2016. Lump sum releases have remained steady accounting for 38% of new business the same as for 2016. The average age for those releasing equity was 72 remaining unchanged against 2016.
Away from the consistently top reason for releasing equity of Home/Garden Improvement, featuring high up the list is debt repayment both secured and unsecured. Over 1 in 5 are utilising the funds to repay outstanding mortgages. The average mortgage debt for those releasing equity is £84,000 carrying an average monthly payment of £674. Equity release has become established as a prime option for those looking to clear maturing interest only mortgages, with 2017 witnessing the beginning of the first major wave of maturities.
Whilst many lenders are working hard to lend to older borrowers, reduced incomes in retirement, and tightened mainstream mortgage criteria, still means that many are faced with the only option of selling their home to clear the debt. Increasingly though equity release is providing a robust alternative to meeting this need. 31% of those releasing equity were repaying unsecured debts with the money released. With average credit card balances nearing £11,000 and average monthly payments of £292 to service this debt, the impact of releasing equity to eradicate the burden has a huge impact for many on their retirement income.
Weekly Round-up: 5th January 2018
Don’t give up
TSB have been looking at our New Year’s resolutions and reveal that Brits spend an average of £187 on those that they later give up. The findings show that last New Year nearly one in three people (31%) had given up at least half of their resolutions by the end of January. By the end of March, more than four in ten (46%) had given up their resolutions.
These included activities such as joining a gym or a slimming club, buying new workout clothes, buying fitness DVDs, and buying a bike. There were plans to change diets which meant buying a blender or a juicer, purchasing the latest health food craze, and buying protein shakes. For others it was learning a new skill or hobby.
A quarter (25%) said their resolutions at the start of 2017 cost them more than they had anticipated. The high costs associated with these resolutions mean that nearly a fifth (18%) of Brits think they may end up relying on credit to fund their ‘new year, new you’ ambitions for this year.
Yet, over a third of people (31%) say they want to make a finance-related New Year’s resolution and more than half (58%) said they want to start managing their money better in 2018.
According to the latest figures from the Nationwide Building Society, annual house price growth ended the year at 2.6%, within the 2-4% range that prevailed throughout 2017. This was in line with their expectations and broadly consistent with the 3-4% annual rate of increase which the Building Society expects to prevail over the long term which aligns with their estimate for earnings growth over the coming years.
This figure though marked a modest slowdown from the 4-6% rates of house price growth recorded in 2016. Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices. However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed.
For Buy to Let the impact of previous policy changes such as additional stamp duty on second homes, changes to tax deductibility of landlord expenses and tighter lending criteria meant that demand from investors remained subdued in 2017.
Rates of house price growth in the south of England has moderated towards those prevailing in the rest of the country with London demonstrating a particularly marked slowdown. Prices in the capital fell in annual terms for the first time in eight years, albeit by a modest 0.5%. London ended the year the weakest performing region for the first time since 2004.
Research from the Halifax suggests that more than one in three of us in the UK received at least one Christmas gift they didn’t like but three quarters (76%) say that they would never tell the person who gave it to them. Scots are the most reluctant to speak up with 82% saying they wouldn’t let on, but one third (33%) of those in North East England would say something. The over 55s are also more likely to hold their tongue (84%) than 18-34 year olds (64%).
And only one in fifteen (7%) Brits return or exchange Christmas presents they didn’t want with almost a third (31%) preferring to store them, 28% gifting them to a charity shop or jumble sale and 23% re-gifting to someone else. Embarrassingly, one in seven (15%) have actually been re-gifted a present from the person they originally gave it to.
When it comes to the sales, many are also taking the opportunity to prepare for Christmas 2018. More than one-third (36%) say they will buy next year’s Christmas cards in this year’s sales, with a third (33%) looking to pick up discount wrapping paper and almost a third (32%) even picking up presents to put under the tree in 2018.
And with the growth of Christmas jumper days in workplaces all over the country, one in seven (15%) will buy a Christmas jumper now for next year, with more than a quarter of 18-34s (28%) leading the way. 27% of those in the North East said they’d buy a Christmas jumper now for next year, but only 8% of Scots and 9% in the East Midlands said the same.
A Liverpool car park fire is likely to result in claims worth £20 million being paid out to motor insurance customers, the Association of British Insurers (ABI) estimated today. Payments have already been made to some of the hundreds of people who lost their vehicles in the blaze on New Year’s Eve, with a number of insurers bringing in extra staff to ensure claims are dealt with as swiftly as possible. Emergency claims lines were open on New Year’s Day.
As well as getting the money to replace their vehicles, customers have also been making claims for the value of belongings which were inside them. Depending on the cover they had, some people will also be able to get money back for other transport costs.
The motor insurance industry paid out £33 million in claims every single day in 2016 but it is highly unusual to have so many vehicles destroyed at the same time at a single location.