Weekly Round-Up: 11th January 2019

Paying their way

London Financial DistrictThis year’s Total Tax Contribution Study for the UK banking sector, commissioned by UK Finance and based on analysis by PwC, found that banks now pay £1 in every £8 of corporation tax in the UK. Total revenue raised by corporation tax for the sector, including the banking surcharge, has increased by 13.6 per cent since last year and is now over four times higher than the levels seen in 2014, despite the UK’s main corporation tax rate falling in that time.

The banking sector’s total contribution to the public finances has risen by £5.4 billion since 2014, while overall banks are now paying the equivalent of over half (50.4 per cent) their total profits in taxes. This is partly a result of sector-specific taxes such as the bank surcharge, which generated £1.8 billion in the 2017/18 tax year, and the bank levy, which raised £2.8 billion over the same period.

This year’s report also includes separate analysis by PwC on the comparative total tax rates faced by a typical corporate and investment bank in five leading global financial centres including London. This research finds that such a bank would face the highest total tax rate in London, reflecting sector-specific taxes in the UK.

As they expected

English. HousesAccording to the Halifax, In December the average cost of a home was £229,729 and annual house price growth stood at 1.3%, a stronger monthly growth figure for December which was an improvement from a weak November. Overall, house price growth in 2018 was within the range of 0-3% as the Halifax forecasted at the start of the year.

In 2019, the Bank is expecting continued stability in house prices with between 2% and 4% price inflation. This is slightly stronger than 2018, but still fairly subdued by modern comparison. However, the Bank has tempered its overcast suggesting that this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of their forecast.

Of course, there are a number of other factors that will impact the market in 2019. The need to raise a significant deposit still acts as a restraint for those looking to buy a new home, limiting the number of potential purchasers. This year, the Bank has highlighted mortgage payment affordability as more difficult to predict. There are competing pressures with signs of positive annual pay growth supporting affordability, but risks associated with the potential for higher interest rates are pulling in the other direction. On balance the Halifax do not see affordability pushing house price growth significantly in either direction.

The shortage of homes for sale and continuing low levels of housebuilding both constrain the supply of houses, and in turn support current high prices, which the Bank suggests will continue to inhibit demand in 2019.

Funeral costs

funeralsNew data obtained by Royal London reveals nearly a third of public health funerals carried out were as a result of bereaved families being unable to afford the cost of a funeral. A public health funeral is held by a local authority if the deceased has no family or the family are unable or unwilling to cover the cost of the funeral. The data is based on Freedom of Information (FoI) requests submitted by Royal London to 390 local authorities in the UK.

The data shows nearly a third (31%) of families who turned to their local council for a public health funeral did so because they were unable to pay for the funeral. A basic funeral costs on average £3,757 according to Royal London’s National Funeral Cost Index, which also found one in 10 (12%) went into debt to pay for a loved one’s funeral. Other reasons for public health funerals included the deceased having no family (31%) and families unwilling to pay for the funeral (10%).

Local authorities spent almost £5.4 million on public health funerals in the financial year 2017/18 which is a 3.5% increase on the previous year (2016/17). More than 3,800 public health funerals were carried out across the UK last year, costing councils an average of £1,403. Local councils in the West Midlands spent a staggering £1.3 million on public health funerals, followed by London councils, who spent more than £800,000 and carried out the highest number of funerals (654).

Birmingham City Council in West Midlands spent the most, with public health funerals costing them £990,437. Armagh Banbridge and Craigavon Borough Council in Northern Ireland had the lowest spend on funerals at £275.

Take no Prisoners

mortgage lenderIn a letter to the Treasury Committee the Financial Conduct Authority’s chief executive Andrew Bailey has indicated that they are planning a change in their rules that could lower the housing costs of thousands of “mortgage prisoners”.

Research indicates that over 140,000 homeowners are trapped on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal. The Financial Conduct Authority (FCA) has now said it is considering a change to its affordability checks for those who are looking to switch.

Current rules mean that these homeowners are unable to move due to the strict affordability criteria when they apply for a new fixed deal, introduced in 2014. The change would apply only to those in this situation who are not seeking to borrow more on their mortgage, but just want to reduce their costs. Banks and building societies still need to agree to take on these customers.

The FCA said it had identified about 150,000 such customers, about 30,000 were with authorised mortgage lenders, while about 120,000 had mortgages held by non-regulated firms, which include for example Northern Rock and Bradford & Bingley customers. 10,000 mortgage prisoners are with lenders who are still actively operating in the mortgage market. These customers will have received letters during the latter half of last year outlining some of the alternative mortgage deals available from their existing lender.

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