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November News

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Mon 03 Nov 2014

November News

Here's our general round-up and summary of the news this month...There's something for everyone.

 

House prices in biggest monthly fall in a year 

 

House prices in England and Wales fell by 0.2% in September - the biggest monthly fall in nearly a year, according to the Land Registry. Annual house price inflation also fell, from 8.4% in August, to 7.2% in September. That is the first time since May 2013 that the yearly rate has gone down, the Land Registry said. The largest monthly fall was in Yorkshire and Humberside, where prices declined by 2.2%. The average house price is now £177,299, well short of the peak of £181,324 in November 2007. However, average prices in Scotland have risen to £170,190, according to Registers of Scotland, the Land Registry equivalent. Most lenders now agree that the rate of house price inflation is slowing. But the figures from the Land Registry are particularly significant, as they are based on actual sales, rather than mortgages. They therefore include houses or flats that are bought for cash, rather than with a mortgage.

 

Rates can stay lower for longer - Bank of England exec 

 

Interest rates can be kept at their current record low level for longer than first thought, the Bank of England's Deputy Governor has said. Jon Cunliffe said weak pay and inflation together with slower UK growth and deteriorating prospects for the global economy meant the Bank of England should remain "cautious". he also warned the financial crisis may have permanently depressed pay. The Bank of England has kept interest rates at 0.5% since March 2009. "The softening in the pay and inflation data, together with the weaker external environment, for me implies that we can afford to maintain the current degree of monetary stimulus for a longer period than previously thought," Sir Jon said in a speech in Cambridge. Sir Jon is the latest in a series of Bank officials to suggest rates should stay low for now. Most economists are expecting the MPC to start raising rates around the middle of next year.

  

Half a million plan to use pension to repay mortgage 

 

More than half a million 40 to 70 year old in England plan to use part or all of their pension to repay their mortgage balance, new research from specialist insurer Partnership has revealed. While the majority of 40 to 70 year old with mortgages tend to take a more traditional approach to managing their mortgage - either making monthly repayments until it is paid off (58%) or making lump sum payments in addition to monthly contributions (22%) - some have other ideas. One in ten (389,483) intend to use their tax free pension lump sum to repay the outstanding balance on their mortgage and 5% (199,069) plan to use their pension to repay the outstanding balance on their mortgage. In addition, 7% (268,311) claim to have savings or investments set aside to meet this cost which suggests that they may hold one of the estimated 2.2 million interest only mortgages outstanding on lenders books. Worryingly, 6% (225, 035) will use an inheritance to repay their mortgage and 3% (112,517) will take in a lodger to help them meet this cost - neither of which are guaranteed sources of finance.

 

Take your mortgage to the grave, older borrowers told 

 

Banks will move some interest-only borrowers to 'lifetime mortgages' that they will never repay, as hundreds of thousands face a shortfall. Many borrowers will struggle to pay off interest-only mortgage debts after poor investment returns and a lack of planning. Older home owners will be told to take mortgages for life or leave their homes under plans to tackle Britain's interest-only mortgage crisis. Several major banks will propose "lifetime" contracts to borrowers in their 50s and 60s who face a shortfall when their mortgage ends. The lenders will allow customers to repay just the interest on their debts until they die, at which point the properties will be sold and a large chunk of the proceeds passed to the bank. Around 130,000 interest-only mortgages are due to expire every year until 2020, with half facing a shortfall of £71,000 on average, according to the City watchdog. One in 10 borrowers have no repayment plan in place at all.

 

Million pound home sales hit all-time high 

 

The number of property sales worth at least a million pounds is at a record high, with 6,143 transaction recorded in the first half of 2014. Research by Lloyds Bank shows that the figure is a significant increase of 46% compared to the same period in 2013 when sales of million pound properties numbered 4,198. The bank says that million pound home sales have grown by 345% since the first half of 2009, when sales in this market segment were at their lowest (1,382) point in the past decade. The increase in million pound home sales in the first half of the year significantly outpaced the 26% increase in the sale of properties below a million pounds over the period. However transactions over a million pounds account for just 1.3% of the national market. At an even higher end of the market, there were 1,360 homes sold for at least two million pounds in the first half of 2014; 43% higher than over the first six months of 2013 when the number of sales totaled 949.

 

 

New house building figures released by NHBC show that new home registrations have hit their highest level since 2007 

 

The figures for Q3 2014 reveal that overall new home registrations have increased 8% on the same period last year with the private sector continuing to be the main driver of growth. These figures represent the highest year to date figures and the highest Q3 figures since 2007. In total, 36,343 new homes were registered with NHBC between July and September this year (28,468 private sector; 7,875 public sector), compared to 33.573 (24,984 private sector; 8,589 public sector) for the same period in 2013. This represents a 14% increase for the private sector, with the public sector still under-performing when compared to last year's figures. However, NHBC anticipates that public sector registrations will begin to grow again as the next phase of the Government's Affordable Housing Programme has recently been allocated.

 

FOS: Mortgage complaints rise 8% in Q3 

 

Mortgage complaints rose 8% year-on-year in the third quarter, according to the latest figures published by the Financial Ombudsman Service. The FOS received a total of 3,333 mortgage complaints between July and September, up from 3,090 in Q3 2013. Mortgages were the third most complained about financial services product during the quarter, with 33% of complaints upheld. Total complaints fell 39% as the number of complaints about payment protection insurance halved. The data shows there were 88,038 new complaints in the third quarter of 2014, compared to 143,177 in the equivalent period in 2013. The FOS received 57,094 PPI complaints between July and September, down 50% year-on-year. It upheld 49% of the complaints. PPI cases accounted for two thirds of complaints received between July and September. 

Current accounts was the second most complained about product with 3,622 complaints in Q3 and an uphold rate of 38%, although the number of complaints is down 2% year-on-year.

 

UK unemployment falls below 2 million

 

The number of jobless people fell by 154,000 to 1.97 million in the three months to the end of August, the Office for National Statistics said. The drop, which is bigger than analysts expected, took the unemployment rate to 6%, its lowest level since late 2008. In total, there are now 30.76 million people in work. Chancellor George Osborne said the fall in unemployment was 'evidence that our long-term economic plan is working' 

 

 'I'm the first to say there are still too many people out of work. We need to make further reforms to our welfare system so that people have a life of work, rather than a life on the dole,' he added. 

 

The proportion of people aged between 16 and 64 in work is now 73%, close to its all-time high of 73.2%. The number of people in employment rose by 46,000 over the three months, which was the weakest quarterly gain since May last year. Economists said this suggested the economic recovery could be slowing. 

 

'The UK labour market remains strong. However, there are some areas of concern such as the slowest increase in employment for 15 months, which suggests that the pace of economic growth is easing,' said British Chambers of Commerce (BCC) chief economist David Kern.

 

 

UK inflation tumbles to lowest level in five years 

 

UK CPI inflation has fallen to its lowest level in five years, undershooting estimates as the impact of falling petrol prices dragged the headline level down to almost 1%. 

 

The release from the Office for National Statistics (ONS) revealed Consumer Prices Index (CPI) inflation fell from 1.5% in August to 1.2% in September, well below the dip to 1.4% which was expected. 

 

The ONS said a combination of falls in transport costs (notably sea and air fares) and prices for a range of recreational goods helped drive down the headline figure sharply. 

 

The latest drop also bolsters the case for the Bank of England's Monetary Policy Committee to hold off on raising interest rates, appearing to take a 2014 hike off the table for now. 

September's figure is the lowest rate of inflation since September 2009, when CPI stood at 1.1% 

 

The ONS said if falling food and motor fuel prices were excluded, inflation would be a third higher thanks to soaring utility bills. 

 

Meanwhile RPI dropped from 2.4% to 2.3%, in line with expectations the ONS said.

 

 

Mobile transactions on the rise 

 

More than 2 in 5 (42%) online users search users search for and complete financial transactions on mobile devices such as smartphones and tablets, Unique Digital/YouGov research has revealed. 

 

In comparison just 37% use mobiles for research alone. 

Mobile advertising spending has increased rapidly over the last year, as the latest Internet Advertising Bureau figures states that mobile advertising has grown by 68% - from £429.2m to £707.1m. 

 

Unique Digital called for firms to design apps to streamline payments and completions, as the top two reasons for downloading apps to complete purchases are ease of use (44%) and speed of use (33%).

 

 

Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion 

 

The Bank of England's Monetary Policy Committee at its meeting on 8th October voted to maintain Bank Rate at 0.5%. The Committee also voted to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.

 

 

Scottish Budget: Boost for first-time buyers 

 

Homebuyers in Scotland will pay no tax on properties costing less than £135,000. Finance Secretary John Swinney has announced. And a 12% marginal rate for houses costing more than £1m will come into force next April, when stamp duty is replaced in Scotland. Mr Swinney's plan came in his budget proposal for the year ahead. Opposition politicians said the finance secretary had failed to live up to his promise of protecting health spending. 

 

Under the Government's new Land and Building Transactions Tax, a marginal tax of 2% would apply to the proportion of a transaction between £135,000 and £250,000, while a 10% rate will apply to those between £250,000 and £1m. 

 

Mr Swinney told MSPs: "As a result of the rates I have announced today, nobody will pay tax on the first £135,000 of their house purchase. 5,000 more transactions will be taken out of tax, supporting first-time buyers and those buying properties in the affordable market."

 

Mortgage approvals drop 

 

Mortgage approvals fell to 64,212 in August compared to 66,100 in July, while remortgage approvals decreased from 32,880 to 32,273 as momentum slows, Bank of England statistics have revealed. 

 

Despite the drop lending secured on properties accelerated by £2.3bn in August compared to an average increase of £2.1bn over the last six months. 

 

Gross lending secured on dwellings was £17.5bn in August while repayments stood at £15.6bn. 

 

David Newnes, director of Your Move and Reeds Rains estate agents, said: "A cloud is momentarily dulling the view of the mortgage market, after a sunny few months for lending. But from a first-time buyer's perspective the borrowing outlook hasn't been this bright for years."

 

Bank of England asks for extra powers over housing market 

 

The Bank of England has asked formally for new powers to prevent a housing boom and bust. 

Under the powers, the Bank would be able to limit how much people can borrow to buy a home, according to their financial circumstances. 

 

The Bank has also given a clean bill of health to the Government's Help to Buy mortgage scheme. 

Its Financial Policy Committee (FPC) can already make recommendations about loan amounts. 

 

Earlier this summer the FPC recommended that banks and building societies restrict lending of large loans - by which it meant loans greater than 4.5 times income - to 15% of mortgages. 

 

In June, George Osborne promised that the Bank's powers to "recommend" would be beefed up to powers to "direct", in order to prevent a dangerous bubble developing. 

 

But the Bank said it wanted its new powers to cover both residential and buy-to-let mortgages.

 

And finally...

 

One million Brits would consider leaving UK if could buy a home 

 

According to Santander Mortgages 1 in 10 British adults would consider relocating to a less desirable part of the UK just to get a foot on the housing ladder, while a total of 1.1m people would think about leaving the country completely. 

 

Younger people - those aged between 18 and 24 - are willing to go further than their older and more established counterparts . Some 11% of young people would withdraw money from a pension pot to boost their deposit, compared to just 5% of all age groups, while 30% would use an inheritance as a down-payment. Just 5% of all age groups said the same. 

 

Regardless, 49% of all non-homeowners never expect to own a property of their own.