Monthly Archives: June 2018

Weekly Round-Up, 22/06/2018

No Change 6, Change 3

At its meeting ending on 20 June 2018, the Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6-3 to maintain Bank Rate at 0.5%. In the MPC’s most recent projections, set out in the May Inflation Report, GDP was expected to grow by around 1¾% per year on average over the forecast.
A key assumption in the MPC’s May projections was that the dip in output growth in the first quarter would prove temporary, with momentum recovering in the second quarter. This judgement appears broadly on track. A number of indicators of household spending and sentiment have bounced back strongly from what appeared to be erratic weakness in Q1, in part related to the adverse weather. Employment growth has remained solid. Although manufacturing output recorded a decline in April, and this was accompanied by a fall in goods exports. More broadly, the prospects for global GDP growth remain strong, and while financial conditions have tightened somewhat, they continue to be accommodative.
Consumer Price Inflation was 2.4% in May, unchanged from April. According to the Committee, inflation is expected to pick up by slightly more than projected in May in the near term, reflecting higher dollar oil prices and a weaker sterling exchange rate. Most indicators of pay growth have picked up over the past year and the labour market remains tight, suggesting that domestic cost pressures will continue to firm gradually, as expected.
The Committee’s best collective judgement remained that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon. For the majority of members, an increase in Bank Rate was not required at this meeting. All members agreed that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.

Protecting Tenants

The Ministry of Housing, Communities and Local Government has published new guidelines which aim to protect tenants from poor living conditions. Following the announced legislation on HMO minimum room size last month, any landlord who lets a property to five or more people from two or more separate households, must be licensed by their local housing authority.
The move, affecting around 160,000 houses in multiple occupation (HMOs), will mean councils can take further action to crack down on the small minority of landlords renting out sub-standard and overcrowded homes. Landlords will also be required to adhere to council refuse schemes, to reduce problems with rubbish. The guidance document includes further details on extending mandatory licensing to smaller HMOs and introducing minimum bedroom sizes as the Government continues to rebalance the relationship between tenants and landlords.
These new guidelines have also come alongside a government announcement reviewing how well selective licensing is working and how it is being used by councils. In areas where selective licensing has been implemented, landlords must apply for a licence to rent out a property. In doing this, councils can decide whether a landlord is a ‘fit and proper person’ using varying criteria. The licence fees are also an issue as landlords may need to pass these costs onto their tenants, which will place a greater burden on the most vulnerable people in the private rented sector (PRS).

Working Longer

The proportion of UK employees who say they will work beyond the age of 65 has remained at three-quarters (72%) for the second year running, significantly higher than in 2016 (67%) and 2015 (61%), according to the latest research from Canada Life. Nearly half (47%) of those who say they expect to work beyond 65 will be older than 70 before they retire, up from 37% in 2017, while almost a fifth (17%) expect to be older than 75. Workers aged 35-44 are most likely to say they expect to retire after their 75th birthday (27%).
A series of economic factors are driving employees to work for longer. Nine in 10 (90%) UK employees say that the rising cost of living is the main reason why they expect to work beyond 65 with 87% saying the same of poor returns on savings due to low interest rates, with consumers still yet to see last November’s interest rate rise passed on3, and 86% of employees point towards inflation. Opinions remain divided about the UK’s ageing workforce as it brings a new set of challenges for workers to contend with. Over a third (36%) believe that an ageing workforce might mean that older workers will have to re-train or learn new skills to stay in work, while three in ten (30%) think it could make it harder for young people to move up the career ladder. But more than two fifths (41%) are positive that a mix of older and younger employees creates a workforce with a wider range of skills, which is beneficial for employees and employers alike.
This comes as just 6% think the government is helping to promote older workers however, down from one in ten (11%) following last year’s announcement of an increase in the state pension age.4 So far, only 13% think that employers are encouraging older employees to stay in the workplace, and little more than a sixth (15%) believe that older people are appreciated and respected in the working environment. Support for older workers in the workplace can come in many different forms, but often the simplest are the most effective. Nearly half of employees (45%) think flexible working or part time opportunities are most important when it comes to supporting an ageing workforce. Out of those planning to work beyond state pension age, 60% say that they would be more likely to work for an employer that offered health and wellbeing benefits.

Couples, Families and Singletons

The stereotype of students seeking out a chaotic existence in a communal house no longer typifies those renting a home from a private landlord, according to research from Nationwide – in fact they are more likely to be couples (47%), families (11%) or those living alone (30%), rather than young people living with university friends (7%). More than a third of men surveyed (35%) rent a home alone, compared to one in four (25%) women, with lack of affordability or a change in life circumstances most likely to be the cause.
The YouGov survey of more than 2,000 tenants renting from a private landlord provides a broad snapshot of diverse experiences and expectations depending on age, life stage, route to renting and location – as well as highlighting many everyday realities for renters across the UK. For almost half (46%) of those surveyed, their main reason for renting was that they could not afford to buy. However, for more than one in ten (11%) a change in circumstances, such as the breakdown of a relationship, leaves them renting – and the likelihood of this grows with age, with 15 per cent of over 55s citing this as their main reason for renting. Having to leave a previous home (6%) and lack of social housing (4%) also feature – while others rent because of the flexibility it provides (6%) or to have easier access to their work (5%). While more than three quarters (78%) of those surveyed, renting flats or houses, rent the whole property, one in five (19%) just rent a room – though this figure rises to more than a third (36%) of those renting in London, likely due to both affordability and availability.
Once in, UK tenants renting from a private landlord stay an average of four years and two months, though almost one in three (31%) stay for five years or more and one in eight (13%) stay for a decade or more – rising to almost one in five (19%) of those renting on their own. One in five (20%) of those staying put for a decade or more are 45-54 year olds and more than one in four (28%) are 55 plus. According to the study, the older the tenant, the longer they seem to stay, with average length of tenancy duration for 18-24 year olds at just over a year, 25-34 year olds at two years four months, 35-44 year olds at four years five months, 45-54 year olds at five years eight months and those 55+ staying six years nine months in the same home.
The average UK monthly rent is £562.05, though one in seven (14%) pay more than £800. After paying for food, rent and bills, the average Brit has £314.45 monthly disposable income left – though men are left, on average, more than one hundred pounds better off than women (£372.84 v £264.69).

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Positive headlines

According the latest research from the Royal Institution of Chartered Surveyors (RICS), the UK housing market saw a stable trend in new instructions in May, with the headline indicator turning positive for the first time in more than two years (27 months). However, although the numbers of houses coming on to the market has increased marginally, average stock levels on estate agent’s books across the UK was steady at 42.5, which is still close to an all-time low
Looking at demand from buyers, while the number of new enquiries fell overall, the decline was modest in comparison to the beginning of the year. Demand from new buyers was reported to have increased in London, the South West, Yorkshire and Humber, West Midlands, Scotland and Northern Ireland. In terms of agreed sales RICS suggest although sales held steady for the second successive month at the headline level (with the least negative reading for fourteen months), the regional breakdown suggests that activity is rising firmly in just four regions; the West and East Midlands, Scotland and Northern Ireland.
No change was seen for house prices in May (net balance -3%) following a marginal decline in April. However, as with the other indicators, there are large regional dimensions to this headline figure. London continues to show the most negative trends, with downwards movement also seen across the wider South East. Notably, after nearly three years of solid price growth, momentum also appears to have slipped across the South West, as the price balance remained in negative territory for the second month in a row. By way of contrast, house prices continue to rise in the Midlands, North West, Wales, Northern Ireland and Scotland.
RICS expect near term price expectations to decline marginally on a UK-wide basis, with the net balance coming in at -9%. That said, this is mainly driven by a negative outlook for prices across the south of England. For the lettings market, demand for rented properties remained unchanged (on a non-seasonally adjusted basis) extending a run of five consecutive reports where respondents have reported flat tenant demand. Alongside this, landlord instructions remain in decline. Given the lack of supply, rents are envisaged to increase further at the national level over the year ahead.

Supermarket Sweep

New research from Lloyds Bank has found that living near a local supermarket can push up your property’s value by £21,500 compared to homes in nearby areas without a supermarket chain. The report also reveals that having a premium brand on your doorstep means buyers typically need to pay top prices. Homes in areas with a Waitrose, Marks & Spencer or Sainsbury’s are most likely to command a higher house price premium when compared to the wider town average. The “Waitrose effect” commands the biggest cash premium – costing £43,571 (12%) more than average house prices in the wider town (£420,112 v. £376,540), followed by properties close to a Marks & Spencer with a premium of £40,135 and Sainsbury’s (£32,707). Homes within easy reach of all three supermarket chains are trading at an average premium of 12%.
In the past year the premium attached to living within walking distance to a Marks & Spencer has grown by £10,143 (from £29,992 to £40,135) the largest rise amongst the supermarkets chains. By comparison, the price premium near a Waitrose has grown by a relatively modest £7,000 in the past year. Homes close to a Tesco, the UK’s largest supermarket, are also worth over £21,000 (£21,369) more than other properties in the nearby area (£278,647 v. £257,278); closely followed by Co-Op (£21,020) and Iceland (£17,445) stores.
Interestingly, smaller local stores like a Little Waitrose, Sainsbury’s Local or Tesco Extra attract a higher average premium of £58,109 compared with a larger superstore (11%, or £30,580). But it’s homes near to budget supermarkets which were found to have seen the biggest house price rise: properties near to Lidl, Aldi, Morrisons and Asda have increased 15% (£29,316) over the past four years. This is a faster increase than for all supermarkets (10%). Showing houses near discount stores can also be popular and the cheaper supermarkets are catching up fast. Over the past four years average house prices in localities with an Aldi grew by a fifth (20%, from £178,809 to £213,765) a much faster increase then then the rest of the town (16%, from £182,395 to £211,463). Other areas with a supermarket chain to record the fastest price growth in the past four years include those with a Co-Op (up 16% from £224,679 to £259,969) and Morrisons (up 14% from £203,756 to £233,261).
In addition, in 2014 property prices close to an Aldi traded at a discount of -£3,586 than the wider town. In 2018 house prices in areas with this “discount” retailer now fetch a higher price premium, compared to the rest of the town, at an average of £2,301. Homes near a Lidl are also worth £5,411 more than other properties in the nearby area.

Times they are a’changin

As the traditional 9-5 working day becomes less and less common, the times at which people want to go to the pub, grab a meal or work out at the gym are changing. A new report from Barclays shows that although over a quarter of hospitality and leisure businesses recognise this growing demand, opening hours are not keeping up with changes to modern working lives.
Since our leisure time has shifted, a quarter of workers would now like to go to a museum in the evening (between 6pm-11pm), over one in ten (13%) film fans would choose to go to the cinema in the small hours (11pm-5am), and almost one in five (19%) late-night diners would choose to get a takeaway after closing time (11pm-5am). The new Barclays Corporate Banking Hospitality and Leisure report, Open All Hours? finds that only a third (37%) of British workers now work traditional 9-5 hours, with over a fifth of British workers (22%) saying they need different opening hours. The report also finds that a similar number (19%) expect 24-hour hospitality services. By responding to this demand, restaurants (£2.2bn per annum), takeaways (£2.1bn), and pubs, bars and clubs (£1.2bn) could benefit the most.
As Britain becomes more health conscious, gyms and sports clubs have been quick to adapt, with almost one in five (18%) hospitality and leisure business leaders surveyed already changing their opening hours.
Takeaway services, on the other hand, have left nearly a third (32%) of workers hungry for more, having been unable to order a takeaway as the business was closed. While digital food delivery services have provided customers and restaurants with an easy to use platform for home delivery, almost a third (32%) have been unable to get a takeaway. This desire to order a takeaway at unusual hours is even higher among young workers (18-24 year olds), with (37%) keen for delivery between 11pm and 5am.

Unhappy Father’s Day?

As the nation celebrates Father’s Day this Sunday, peace of mind may not be the obvious gift choice, but it’s clear that financial protection is something which millions of fathers in the UK, and their families, could benefit from. Research from Scottish Widows reveals that more than half (58%) of men in the UK with dependent children have no life insurance, meaning that just over 4.5 million dads[1] are leaving their families in a precarious situation if the unforeseen were to happen. Worryingly, this has increased by five percentage points compared with 2017, a year-on-year increase of around 542,000 individuals.
And despite a fifth (20%) of dads admitting their household wouldn’t survive financially if they lost their income due to long-term illness, only 18% have a critical illness policy, leaving many more millions at risk of financial hardship if they were to become seriously ill. If they were unable to work due to serious illness, 16% of fathers say they could only pay their household bills for a minimum of three months. More than two-fifths (45%) say they’d have to dip into their savings to manage financially, but 17% admit that their savings would last for a maximum of just three months and 12% say they have no savings at all.
On top of this, many fathers are leaving themselves and their families unprepared for other aspects of illness or bereavement. Sixteen per cent of them aren’t sure who would take care of them if they fell ill, and more than two fifths (42%) don’t have the protection of a will, power of attorney, guardianship or trust arrangement in place for their families. This is an especially risky position for the two thirds (66%) of UK fathers who are the main breadwinner in the family, and it’s clear that many are in lack of a ‘Plan B’.

Subdued

According to the latest House Price Index from Halifax, house prices grew by 1.5% on a monthly basis, in contrast to a decline seen by the lender in April. The month on month figures are, on the face of it, more volatile than the quarterly or annual measures. In the three months to May house prices were 0.2% higher than the previous quarter and on an annual basis they are 1.9% higher. Both of these measures have fallen since reaching a recent peak, in the final months of last year.

Halifax suggest that these latest price changes reflect a relatively subdued UK housing market. After a sharp rise in January, industry data mortgage indicates that approvals have softened in the past three months, whilst both newly agreed sales and new buyer enquiries are showing signs of stabilisation having fallen in recent months.

Halifax highlight that the continuing strength of the labour market is supporting house prices. In the three months to March the number of full-time employees increased by 202,000, the biggest rise in three years. Halifax are also seeing pay growth edging up and consumer price inflation falling, and as a result the squeeze on real earnings has started to ease. With interest rates still very low Halifax see mortgage affordability at very manageable levels providing a further underpinning to prices.  The average house price is now £224,439

Almost Critical?

The Association of British Insurers (ABI) has published a new Guide to Minimum Standards for Critical Illness Cover following an extensive consultation and review of the Statement of Best Practice for Critical Illness Cover through 2017/18. The review was one of the most comprehensive to date, and has seen the Guide redesigned to ensure greater clarity and understanding for customers when comparing critical illness products. The ABI has also developed an accompanying consumer guide to provide people with clear information on what critical illness insurance is and the questions they might ask themselves before purchasing this insurance product.

The new Guide to Minimum Standards was put to public consultation in November 2017 with the consultation process concluding in late January 2018. The ABI received a strong response from insurers, advisers, charities and other interested organisations. Respondents to this consultation supported the proposed changes to the Guide, which has seen an enhanced minimum standard definition in several areas, and other changes to definitions reflecting the evolution of medical understanding and treatment for a number of serious illnesses.

The revised version was drafted through the work of the ABI Critical Illness Working Group and the ABI Protection Committee, before being approved by the ABI Board earlier this month. To view the new Guide to Minimum Standards, please click here. To view the new Consumer Guide, please click here.

Helping drive the economy

Research from Santander reveals the drivers behind today’s “pocket money economy” and illustrates the ways in which the UK’s children are learning about earning money, paying taxes and receiving fines in their own homes.  While 77 per cent of parents provide their children with a basic amount of pocket money, Santander’s data also showed that ‘extra’ money is being given by a third of parents for a range of activities including helping around the home, behaving well and performing well in sports. The average amount earned in a month for these activities is £7.70 with the highest earning activity being getting to school or college on time.

But for those who step out of line and fail to carry out their duties, financial ‘fines’ can be expected with 18 per cent of parents taking money away for failing to complete household chores and 15 per cent for behaving badly at school. Meanwhile 13 per cent of enterprising parents are applying ‘tax’ to children’s earnings to support the running of the home. A further 42 per cent of parents who pay pocket money would consider ‘taxing’ their children and believe this to be a great way to prepare them for the real world.

Differences in ‘income’ were clear across the UK with children in London being given an average of £26.70 basic pocket money against a national average of £18.36. And when it came to earning extra money, boys on average will get 33 per cent more than girls (£6.99 vs £4.67) for carrying out household chores and 50 per cent (£8.28 vs £4.18) more for good behaviour at school.

When children were asked what motivated them to complete household chores, money (43 per cent) is by far the biggest incentive with other motivators such as being given chocolate and crisps registering with just 24 per cent of children and being told they are good or getting to stay up longer appealing to only 23 per cent. When asked about saving, 84 per cent of children who get pocket money said they like to save the money they receive from their parents (89 per cent boys vs 77 per cent girls).

Record breaking

The so-called Beast from the East and Storm Emma that caused widespread disruption in late February and March led to property insurers paying out a record breaking amount in burst pipe claims in the first quarter of the year according to figures out today from the Association of British Insurers (ABI).

In the first quarter of 2018, in total, £1.25 billion was paid by insurers under domestic and commercial property insurance policies – the highest quarterly figure for two years

Insurance pay-outs to homeowners and businesses for storm, flood and burst pipe damage jumped to £361million, a massive 290% rise on the £93 million paid in the previous quarter. Some 86,000 claims were handled, compared to 29,000 in the previous quarter.  £194 million was paid to help homeowners cope with the misery of burst pipes which was the highest amount ever paid in a single quarter and compared to only £4 million paid out in quarter 4, 2017.

On commercial insurance, weather damage and escape of water claims also rose, up to £188 million, compared to £107 million in the previous quarter.

Weekly Round-Up: 1st June 2018

Small fall

According to the Nationwide Building Society UK annual house price growth slowed modestly in May to 2.4%, from 2.6% in April. House prices fell by 0.2% over the month, after taking account of seasonal factors. Annual house price growth has been confined to a fairly narrow range of c2-3% over the past 12 months, suggesting little change in the balance between demand and supply in the market over that period. The Society suggests that there are are few signs of an imminent change with surveyors continuing to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.

Looking further ahead, Nationwide highlight that much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low. Overall, they continue to expect house prices to rise by around 1% over the course of 2018.

In the report, data from the Ministry of Housing, Communities and Local Government shows that, over the last 20 years, the total housing stock in England has increased from 20.6 million to 24 million dwellings, a rise of 16%. There have been significant shifts in the ownership of the stock, which in turn has influenced trends in property type over time with the most striking shift being in the proportion of the stock owned by private landlords. While last year’s data showed a small decline in the stock of privately rented dwellings, they still account for 20% of the total stock, double the proportion in 1997. The counterpart of this shift has been a decline in the proportion of homeowners (from 68% to 63%) and social landlords (from 22% to 17%).

Outdoor Living

Britain is a nation of green-fingered gardeners, who invest significant time and money in private outdoor spaces, according to new research from Lloyds Bank.

More than nine in ten (92%) of the population have access to a private outdoor space such as a garden, allotment or balcony, and almost eight in ten (79%) have their own private garden. People are proud of their patches, spending an average of five and half hours per week on maintenance. The north east of England is Britain’s most green-fingered region, committing an average of seven hours per week to garden maintenance, while those in the south west with a private garden dedicated just five hours per week in the summer of 2017.

Unsurprisingly, those over 55 spent an average six hours a week in the garden last summer while those under 34 spent less than four hours per week tending to their turf. Gardens come at a cost, with Brits spending an average £170 on their outdoor spaces during British Summer Time (April – September) and, interestingly, taking the time to shop in store more often than online. Of those surveyed, 8 in 10 (79%) opted to purchase outdoor plants and seeds in store, 7 in 10 opted to purchase tools and equipment (70%) and house plants (68%) in store, and more than half (52%) headed to a store to choose their fencing, decking or garden buildings.

Almost a third (32%) of those with a private garden paid for garden maintenance services last summer, spending on average £195. This figure is higher for those aged over 55, who spent on average £207 on maintenance services. Two fifths of Brits fund the cost of their gardens from regular income while a further 15% make use of a credit card or loan.

High Cost

The Financial Conduct Authority (FCA) has announced new proposals designed to protect millions of people who use overdrafts and high-cost credit. The changes the FCA are consulting on follow an in-depth review into the high-cost credit market and are expected to reduce the costs for consumers and give them greater control over their finances. These changes are wide-ranging and some specific proposals are being consulted on from today. In addition, the FCA will gather additional evidence and carry out further analysis before any formal decisions can be made on a number of other issues.

High-cost credit is used by over three million consumers in the UK, some of who are the most vulnerable in society and the FCA have proposed a significant package of reforms to ensure they are better protected including the possibility of a cap on rent-to-own lending. Overdraft costs will be made more transparent and prevent people unintentionally dipping in to an overdraft in the first place. In 2016 firms made an estimated £2.3 billion in revenue from overdrafts; 30 per cent of this was from unarranged overdrafts. The majority of unarranged overdraft charges are paid by only 1.5% of customers, who pay around £450 per year in fees and charges./p>

The FCA is also consulting on mandatory rules to make it easier for customers to manage their accounts which include mobile alerts warning of potential overdraft charges and stopping the inclusion of overdrafts in the term ‘available funds’.

As part of the review the FCA looked closely at the rent-to-own sector. Costs for the 400,000 customers can be high – sometimes exceptionally. The FCA has seen examples where people have paid over £1,500 for essentials like an electric cooker, which could be bought on the high street for less than £300.

The FCA will now carry out the detailed assessment of the impact that a cap could have on the rent-on-own sector and how it might be structured. Additionally, the FCA intends to strengthen protections for vulnerable users of high-cost credit in stores and at the door, by introducing new requirements to raise standards in disclosure and sales practices.

The FCA has already transformed some high-cost sectors, with firms making substantial improvements and paying more than £900 million in redress to customers across consumer credit. The series of measures announced today builds on this work./p>

Not to me

The results of Royal London’s second State of the Protection Nation report reveal that the top reason people gave for not taking out protection was that they think premiums are too expensive (69%). They also believe they won’t get ill and they don’t need insurance. Despite this many people want to protect their lifestyle and loved ones from the financial impact of dying or becoming seriously ill. Nearly half of advisers (49%) feel that consumer inertia is one of the greatest barriers to people buying protection, sending out a clear message that education is key to removing the barriers.

Nearly half of the people surveyed (46%) felt they were unlikely to go on sick leave for three months or more, 44% thought they were unlikely to have an accident that meant they were unable to work and a third (34%) felt it was unlikely they would contract a serious health condition or illness. Research from Pacific Life Re1 shows that the chance of being off work for two months or more before age 65 is 26% for males and 37% for females. Even if illness struck nearly half (43%) felt they could manage for a year if they were unable to work due to serious illness or injury, 55% said they would manage for six months and 71% would manage for three months. Yet the reality is only 2 in 5 could survive financially for more than six months if they were unable to work.

Despite only a small percentage of consumers saying they had life insurance (3%), critical illness cover (3%) and income protection (5%) through their employer, the majority of people felt they didn’t need income protection (58%), critical illness cover (47%) and life insurance (34%). The industry and advisers believe in the value of products available, but consumers are still reluctant to buy insurance.

The results revealed inertia plays a part in people’s decision not to buy, as 20% of full-time working people recognise they need income protection but don’t have a policy. Over a third (38%) of people working full-time feel they don’t need income protection, but just 8% said they didn’t need it because they had cover with their employer. Royal London’s figures show that 58% of people with a mortgage have life cover in place if the home owner dies, leaving 42% unprotected. But worryingly 71% of people with a mortgage would have no protection in place if they were diagnosed with a critical illness, and 81% of mortgage owners have no income protection in place. The reason this is concerning is that people are far more likely to be diagnosed with a critical illness or have an injury that stops them working than to die before retirement age so more people should consider critical illness or income protection.

A quarter (25 %) of people who don’t own any life insurance, critical illness cover or income protection said they were confident that this lack of cover was in line with their needs. This figure doesn’t get much better when they look at those in full time employment (30 hours a week or more) with 27 % saying they were confident.