Weekly Round-Up, 13th July 2018
According to the latest research from the Halifax, house prices continue to remain broadly flat, with the annual rate of growth marginally slowing from 1.9% in May to 1.8% in June. Activity levels, like house price growth, have softened compared with the final months of last year and mortgage approvals have been in the low range of 63,000 to 67,000 since the start of the year, whilst home sales have remained flat so far this year. This is in contrast to the continuing strength of the UK jobs market with job creation still strong and pressure on household finances easing as real income growth edges up.
Figures suggest, at the half way stage of the year, the annual rate is within the Bank’s forecast range of 0-3% for 2018 and they continue to see very positive factors of continuing low mortgage rates, great affordability levels and a robust labour market. The continuing shortage of properties for sale should also continue to support price growth.
UK home sales grew by 1% to 99,590 in May but in the three months to May sales were 4.8% lower when compared to the same three months a year earlier. This weakness reflects the slowdown seen in mortgage approvals over the past year. Completed sales since December according to HMRC seasonally adjusted figures have held steady, averaging close to 99,000 per month.
After falling for 26 months in succession, new instructions edged up in May. Furthermore average stock of homes for sale on estate agents’ books held broadly steady, albeit close to historic lows. On the demand side, new buyer enquiries fell again, although the pace of decline has slowed since the start of the year.
Here Comes The Sun
In its latest report on the Mortgage Market, UK Finance have reported that the mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity. There is also a particularly encouraging increase in homemovers, after a period of relative sluggishness in this important segment of the market.
The statistics indicate that there were 32,200 new first-time buyer mortgages completed in the month, some 8.1 per cent more than in the same month a year earlier. The £5.4bn of new lending in the month was 12.5 per cent more year-on-year. The average first-time buyer is 30 and has a gross household income of £42,000. For Homemovers, there were 31,100 new mortgages completed in the month, some 4.4 per cent more than in the same month a year earlier. The £6.6bn of new lending in the month was 4.8 per cent more year-on-year with the average homemover being 39 with a gross household income of £55,000.
Completed remortgages totalled 36,000 in the month, some 7.1 per cent more than in the same month a year earlier. The £6.3bn of remortgaging in the month was 6.8 per cent more year-on-year. There were 5,500 new buy-to-let home purchase mortgages completed in the month, some 9.8 per cent fewer than in the same month a year earlier. By value this was £0.7bn of lending in the month, 22.2 per cent down year-on-year.
There were 14,600 new buy-to-let remortgages completed in the month, some 15 per cent more than in the same month a year earlier. By value this was £2.3bn of lending in the month, 21.1 per cent more year-on-year.
Affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples, Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.
One Claimed Every Minute
The Association of British Insurers (ABI) has revealed that the number of travel insurance claims made in 2017 increased by 30,000 year-on-year to 510,000, costing £385 million and amounting to one claim every minute throughout the year. This is the highest amount paid since the £455 million Icelandic ash cloud pay-outs of 2010 and was largely driven by a significant rise in cancellation claims.
After a slight (£2 million) increase, medical expenses still make up a majority of the £385 million claims paid, despite an 11% increase in the value of claims for trip cancellations from £130 million to £145 million. Medical expense continue to be the most expensive type of claim, with an average of nearly £1,300 and many claims climbing to the tens of thousands of pounds.
The significant increase in cancellation claims was driven by notable airline disruption, restrictive bad weather at home and abroad, as well as the cost of the average family holiday increasing by more than £500 in 2017 according to estimates from Travelex. This further highlights the importance of buying travel insurance as soon as the holiday is booked – not at the last minute. Travel insurance acts as a guardian angel when overseas and should be an essential element of a holiday shopping list. Insurers are paying out £1 million every day to cover the unexpected costs of illness, injury or cancellation. Medical expenses can often cost tens of thousands of pounds, whilst the large increase in cancellation claims shows just how important it is to purchase cover as early as possible.
Changes to State benefits covering mortgage payments during prolonged loss of income due to sickness will not lead to a mortgage protection pay-out being means-tested against any benefit entitlement, a request for clarification from the Department for Work & Pensions (DWP) by the Building Resilient Households Group has revealed.
The introduction of a Support for Mortgage Interest Loan (SMIL), which came into effect on 6 April 2018, increased the need for mortgage holders to consider protection in order to protect payments in the event of long-term sickness absence or due to other causes. SMIL is help towards paying the interest payments on your mortgage or other loans for home purchase, repairs and home improvements. This help is in the form of a loan. Before 6 April 2018, SMIL was paid in the form of a benefit. However, now it is paid as a loan. Until now there was uncertainty as to how a received insurance pay-out would be treated under the new system. According to Building Resilient Households Group, the DWP has confirmed that any income received from an insurance policy specifically intended to cover mortgage payments will be disregarded when entitlement to means-tested benefits is assessed. This applies to both legacy benefits and Universal Credit.
The DWP also pointed out that two provisos should be noted. Firstly, if insurance pay-outs are restricted to the payment of a mortgage (direct to lender) they will be fully disregarded, but if the claimant has choice over how to spend the payments then any portion which DWP judge to be intended and used for mortgage cover will be disregarded.
Secondly, if a claimant applies for a SMIL their insurance pay-out will be taken into account when their offer of a loan is considered – however this is unlikely as people receiving an insurance pay-out covering mortgages would generally have no need for a loan.