Here's our round up and summary of this month's mortgage and finance news
U.K. Housing Market Defies Drop in London's Priciest Districts.
House prices in England and Wales posted a modest rebound in January amid evidence that the London property market is continuing to slow, according to LSL Property Services and Acadata. Average values rose 0.3% to £277,857, the groups said in a report on Friday. It followed a 0.3% decline in December and took the annual growth rate to 7.5%, the least in 10 months. London prices fell 1.1% in December, the latest month for which data is available. The report adds to recent data from the Royal Institution of Chartered Surveyors showing prices in the capital have lost ground after double-digit increases in recent years. Buyers may continue to hold off until after the May general election, which polls suggest is too close to call. "All the evidence points to a cooling in the market centred on London, but then slowly rippling out from the capital," Peter Williams, chairman of Acadata said in the statement. A recovery in the second half of 2015 is "the track we seem to be on" he said.
Next Bank of England move likely to be a rate hike - Shafik
The Bank of England's next monetary policy move is likely to be an increase in interest rates because the factors that have pushed down inflation sharply are largely transitory, a policymaker at the bank has said. "It seems to me that the most likely next move in monetary policy will be a gradual and limited increase in interest rates," Deputy Governor Minouche Shafik said in a speech. "The underlying picture is one in which domestic demand is expected to continue growing robustly, facilitating a pick-up in wage growth, which we are starting to see, and a return of inflation to target."The comments echoed the views of other top bank officials who have spoken recently, including Governor Mark Carney. British consumer price inflation fell to 0.3% in January, pushing back expectations for when the BoE might start to raise interest rates prompting some discussion that a rate cut might be necessary. In her speech, which mostly focused on the BoE's relationship with financial markets, Shafik said the bank could raise rates more quickly than markets expect if spare capacity in the economy is run down sooner than anticipated, or cut them if low inflation threatens to become self-reinforcing.
Tight mortgage rules squeeze the old and the self-employed
Customers are increasingly struggling to find loans if they have unusual requirements, thanks to tougher rules on lending quality, the Intermediary Mortgage Lenders Association (IMLA) warned recently. Those borrowing into retirement are struggling to find products, as are the self-employed and house buyers on lower incomes indicating a widespread issue. Tougher assessments on customers' income and expenditure is having an impact, with extra evidencing requirements, hitting lending the report concludes. Interest rate stress tests on individuals is also having an impact.
Gross mortgage lending declines in January
The Council of Mortgage Lenders estimates that gross mortgage lending reached £14.3 billion in January. This represents a 14% decrease from December's gross lending total (£16.6 billion) and is 11% lower than the £16.1 billion lent in January last year. Commenting on market conditions, CML chief economist Bob Pannell says: "The softer pace of approvals through the second half of last year contributed to the relatively weak pace of mortgage lending in January. Although seasonal factors will continue to weigh on activity levels for a while longer, we expect the underlying picture to pick up over the coming months, in line with stronger earnings and employment, gentle interest rate trends and recent stamp duty charges." "As we forecast at the end of last year, gross mortgage lending remains on course to reach an expected £222 billion this year."
First-time buyer deposits hit 18-month high
First-time buyers put down larger deposits in January as stamp duty savings put more money into their pockets. The average first-time buyer deposit was £29,127, up 7% on December and 15% on one year ago. And the average first-time buyer house purchase price topped £160,000 for the first time on record. Yet first-time buyer completions fell 19% on a monthly basis, due to a dip in applications over Christmas, according to the latest First Time Buyer Tracker report from estate agents Your Move and Reeds Rains. Revisions to the stamp duty slab system have cut upfront costs for many first-time buyers, allowing them to divert the savings into a deposit fund. The average first-time buyer would have been liable for stamp duty fees of around £1,600 under the old system, but this now has been reduced to £700, saving £900. This has driven first-time buyer deposits to an 18-month high and lifted purchase prices to a new record. New buyers paid an average of £160,304 in January, 12% more than the £143,343 paid one year ago. First-time buyer purchasing power is also increasing, as wages finally pick up in real terms, the report said.
Mortgage-free households on the rise in England
More properties were owned outright than with a mortgage among households in England for the first time in 2013-14, figures show. Of the 22.6 million households in England, 7.4 million owned their property outright, and 6.9 million had a mortgage, the English Housing Survey showed. The rest rented their homes. This marked a shift from an equal level among owners a year earlier. The data also shows that the younger generation are struggling to own. In 2013-14, some 48% of households made up of 25 to 34-year-olds rented their home from a private landlord. This had risen from 45% a year earlier, and from 21% in 2003-4. Over the same 10 years, owner occupation in this age group dropped from 59% to 36%. Campbell Robb, chief executive of Shelter, said: "The shortage of affordable homes is leaving young adults with no choice but to remain stuck in their childhood bedrooms, or face decades paying out dead money to landlords."
New House Builds up 10% in 2014
The number of new houses that were built in England last year rose significantly, Government figures show. A total of 137,000 homes were started in 2014, a rise of 10% on the previous year, according to the Department of Communities and Local Government (DCLG). The number of homes being completed rose to 118,760 - up 8% on 2013. The industry welcomed the rise, but said it was still "way short" of what the country needs. However the figures also show that the number of homes being started declined sharply in the final quarter of the year. In 2014 house-building was still 25% below the peak reached in 2007.The housing charity Shelter said it was particularly concerned about the number of affordable homes being completed."While a small increase in the number of homes built might be heralded as a success, the real story here is the shocking fact that we're building just half the homes we need in England," said Campbell Robb, the chief executive of Shelter. The Home Builders Federation said that more than 100,000 extra people were now employed in house building, providing a boost to the economy.
UK unemployment falls to six-year low
The UK's economic recovery appears to be on track as UK unemployment dropped to a six-year low to hit 5.7 per cent in the three months to December. Data from the Office for National Statistics shows that 30.9m people were in work over the period, marking an increase of 608,000 from a year earlier. Some comparatively decent wage growth has also come through as average weekly earnings rose by 2.1% including bonuses and by 1.7% excluding bonuses over the final three months of 2014. Given that CPI has fallen to a record low of 0.3% and is set to drop further, households should hopefully feel less of a financial squeeze. IHS Global Insight chief UK and European economist Howard Archer says: "The prospects for real earnings growth look bright for the coming months, with earnings growth likely to rise and inflation set to dip even further from just 0.3% in January - indeed mild deflation is possible for a while over the coming months." Presently the Bank's monetary policy committee is under little pressure to raise rates given that inflation is forecast to drop below zero in the coming months, and stay close to that level for the rest of the year. Bank governor Mark Carney suggested last week that he would consider cutting rates further if deflation persisted.
2014 repossessions down 26%, says CML
The number of repossessions fell to 21,000 in 2014 - 26% fewer than the 28,900 in 2013, and the lowest number since 2006, according to the latest data from the Council of Mortgage Lenders. At 0.19%, the repossession rate was lower in 2014 than at any time since 2006. Out of the total 21,000 total number of repossessions, 16,100 were on owner-occupied properties, and 4,900 were on buy-to-let properties. Repossession is only ever a last resort. No-one should be lulled into a false sense of security that the current low interest rates we are experiencing will last forever, though. Rules are in place to ensure lenders assess future affordability, but these are not a substitute for careful borrowing. It's essential for borrowers themselves to have one eye on the future. Think through any borrowing taken on now to ensure it will be still affordable if and when the rates rise.
Will pension freedoms spark buy-to-let boom?
Brokers say improving market conditions, regulatory shifts and new pension freedoms have combined to make the buy-to-let sector the most attractive lending proposition in 2015. A string of new entrants have either already joined the UK buy-to-let market in recent months or are planning to do so in the coming months. Council of Mortgage Lenders data shows it is a market in the midst of resurgence. Since 2009, the market has grown each year up to 2013, when a total of £20.7bn was advanced to landlords. Tighter regulations placed on residential lending by the Mortgage Market Review have squeezed lenders' margins, forcing them to consider other sources of revenue such as buy-to-let. The new regulations were blamed for a dip in mortgage approvals over the summer, while British Bankers' Association figures published in December showed year-on-year lending by the UK's six largest lenders fell 12% to £10bn.
Cost of home insurance falls 4.1pc
The cost of home insurance fell by 4.1% in 2014 compared to the year before, the British Insurance Broker's Association and Acturis Insurance Price Index has revealed. The combined cost of home and motor insurance has also dropped by 5.5% from quarter one 2013 to quarter one 2014. Graeme Trudgill, BIBA's executive director, said: "The insurance industry is very competitive and has also committed to a number of initiatives to reduce insurance costs for families and businesses. Customers should see these reductions in the premiums and if in any doubt about the cost of coverage of their insurance should speak to an insurance broker." Steve White, BIBA's chief executive, added: "We are now a year on since we launched the index. The data has proven invaluable when speaking to the government and other external stakeholders about the industry and the role that insurance brokers play within it."
Study finds 5.2m people in protection 'gap'
Research from Royal London suggests 5.2m mortgage holders who earn an income have no plan or protection cover in place to cover their mortgage repayments if they become too ill to earn. The provider commissioned YouGov to survey 2,208 UK adults last week - 750 of whom were mortgage-holders and 443 earned their income. In UK population terms this equates to 10m UK adults and data from responses was extrapolated accordingly. The study found 5.2m have no cover in place and that 2.6m mortgage holders did not know how long they could survive financially if they were too ill to earn. Half of relevant respondents estimated it would be six months or less. Some 1.8m admitted they have not given thought to protection, while 1.1m said they wouldn't know where to turn for financial advice if they hit trouble. When asked who they would turn to for financial advise if they became too ill to earn 36% would consult friends and family, but 21% said they would not seek advice. The majority (56%) would turn to non-profit/charity or government body, while only a minority (15%) would consult a financial adviser.
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