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Mon 01 Sep 2014

September News

House prices edge up in August claims Nationwide

House prices edged up in August, according to the UK's biggest building society, the Nationwide.
Prices increased by 0.8% over the month in August, compared with a 0.2% rise in July, when house prices moderated.

Monthly figures can be volatile, but the annual figure also rose in August, from 10.6% to 11%.

The average house price across the UK is now £189,306. The figure has not been seasonally adjusted.

The annual pace of house price growth is still below the 11.8% recorded in June, but 'continues to outpace earnings by a wide margin', said Nationwide chief economist Robert Gardner.
Average wage growth has been running at less than 1% in recent months, he said.'Nevertheless, at a national level, housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage ranges,' he said.

Mortgage lenders say 'prepare for a rate rise'

The Council of Mortgage Lenders said that it would welcome Bank rate rises only in "baby steps".

"Rates will rise at some stage, of course, and borrowers should be planning for that now," said Paul Smee, director general of the CML.

"We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of 'baby steps', matched to a careful assessment of the ability of households to deal with higher borrowing costs.

"Any borrower anticipating payment problems should talk to their lender as soon as possible" he states.

BCC warns of 'flash in the pan' UK recovery

The British Chambers of Commerce (BCC) has upgraded its UK GDP forecast for 2014 but cautioned the recovery may be short-lived unless exports bounce back.

In its Q3 update, the BCC said it expects the UK economy to grow 3.2% this year and by 2.8% in 2015, up from forecasts of 3.1% and 2.7% three months ago.
However, those figures, driven by higher consumer spending, were accompanied by a halving of its forecast for export growth, to 0.8%.

The Bank of England by contrast, continues to predict 2.25% growth for the export sector this year.
'The task at hand is to ensure that the stellar 2014 growth is not a flash in the pan,' said BCC Director-General John Longworth. 'A strong international trade performance is key if we are to steer away from a reliance on consumer spending.'

Five-year mortgage interest on the increase

There has been an increase in borrowers taking out five-year terms, increasing from 24% in the fourth quarter last year to 28% in Q1 2014 and up to 30% in Q2, according to buy-to-let lender Paragon Mortgages' quarterly intermediary survey.

The poll found that for initial product periods, two-year terms continue to be the most popular among borrowers, accounting for 49% of all fixed rate and tracker mortgage cases, although that figure was down from 53% from Q1.

Elsewhere, the proportion of fixed rate products processed during the second quarter rose to 80% of intermediary mortgage business, from 77% in Q1.

In the second quarter there was also a 4% reduction in the number of tracker products being processed by intermediaries, a second successive fall in numbers for this interest rate type.'

Data reveals 80% of First Time Buyers seek financial advice

82% of first time buyers are already planning or would consider seeking professional financial advice to help them secure the best mortgage deal, new data revealed.

A survey commissioned by Unbiased earlier this month among 2,006 UK adults found that 78% of first time buyers are confident they can get on the housing ladder within the next 12 months.

The adviser search web site suggested that first time buyer confidence levels are rising because of how the current generation are approaching the way they finance their first home and how open they are to seeking advice.

The research also found that 29% of Londoners are looking to buy their first home within the next year, compared to only 10% of all UK adults.

Nearly one in three forced to borrow from family

Nearly a third of UK adults have been forced to borrow money from family members and one in 10 families are skipping meals and selling valuables as a result of higher household and living costs, research from Scottish Widows shows.

With the average amount borrowed by individuals standing at £2,123 the collective family lending economy is now worth around £31bn.

Family Generations & Financial Pressures, the new report from Scottish Widows think tank the Centre for Modern Family, shows that 23% of family borrowers need this support just to cover day to day household costs.

And as well as borrowing from family members, more than a quarter (26%) of people have raided their savings in order to cope with higher living costs and the same percentage has cut back on saving for the future. showing no improvement on 2012 levels, almost one in ten (8%) people were found to be skipping meals just to keep on top of household costs. The same number were also selling valuables in order to get by.

MPC minutes reveal two members voted for August rate hike

Two members of the Bank of England's Monetary Policy Committee voted for a 0.25% rate hike this month, latest minutes how - the first call for a hike in over three years.

The vote to hike the Bank of England interest rate was divided for the first time since July 2011, with seven members voting to keep rates on hold and two voting for a small increase.

The minutes show that MPC members Ian McCaffery and Martin Weale both argued for an immediate increase in the bank rate from record low level of 0.5%

However, the majority of members, including governor Mark Carney, remain cautious, saying there is insufficient evidence of inflation to justify an immediate hike in rates.

Average retirement now lasts 20 years

People turning 65 in 2014 should expect to live on average until nearly 85, analysis from Prudential reveals.

Its analysis of the ONS estimated life expectancy data shows that someone who celebrates their 65th birthday in 2014 can expect to live to nearly 85 years of age.

Earlier this year, Prudential's Class of 2014 retirement research identified that people retiring in 2014 have an average expected retirement income of £15,800. Prudential has estimated that someone qualifying for the full State Pension will need a pension pot of approximately £121,000 to secure a total annual retirement income of £15,800 for 20 years, made up of a combination of 'income drawdown' and the State Pension.

However, with a 20 year retirement now the average, a significant number of retirees may live for many years longer. Prudential has calculated that someone who qualifies for the full State Pension and expects a total annual income of £15,800 will need an estimated pension pot of approximately £139,000 to fund their retirement through drawdown and State Pension for 25 years. Using the same assumptions, someone retiring in 2014 and living for another 30 years will need a pot of around £154,000.

UK economic growth revised up to 3.2%

The UK economy grew by 3.2% according to the latest official data, slightly higher than the original 3.1% estimate.

The Office for National Statistics second estimate of growth in the three months between April and June, left the monthly growth figure of 0.8% unchanged.

The construction sector performed better than previously assumed.

The figures confirm the UK economy saw its best economic performance for six years and has passed its 2008 peak.

The services sector - which accounts for around 78% of UK economic activity - contributed 1% to overall GDP in the second quarter, the ONS added.

In June alone the services sector expanded by 0.3% compared with May. The annual growth rate in the sector, 3.6%, was also its best performance in just over six years.

Output in production contributed 0.3% to economic growth but agriculture contracted 0.2%.

Construction was flat in the quarter but this was an improvement on the original estimate that it had contracted by 0.5%. On an annual basis construction was estimated to have expanded by 4.8%.
Construction accounts for 6.3% of economic activity in the UK.

Rent rises edge above inflation

Private sector rents are back on the increase in real terms for the first time in more than a year.

The average monthly rent across England and Wales increased by 2.0% in the 12 months to July, edging higher than the 1.9% rate of Consumer Price Index (CPI) inflation, according to LSL Property Services.

Rents first dipped below inflation in June 2013 and continued on a trend of below-inflation increases up until last month, LSL said. The average monthly rent now stands at £753.

David Newnes, director of LSL, said rent rises are still "modest" when it is borne in mind that this is usually a busy time of year as the market gears up for the rush of students in the autumn.

The findings coincide with several recent reports into the housing market which have pointed to the pace of activity cooling off slightly.

The Royal Institution of Chartered Surveyors (Rics) said yesterday that the number of potential home buyers coming into the market fell back in July for the first time in a year and a half.

More than a third of brokers expect base rate rise this year.

More than a third of brokers believe the Bank of England will raise base rate before the end of 2014, according to research from the Intermediary Mortgage Lenders Association.

A survey of 398 mortgage brokers, published this month, shows just 2% believe base rate will rise before the end of the third quarter, while 34% expect an increase in Q4.

A quarter of respondents say the Bank will not increase the benchmark interest rate until the first quarter of 2015.

IMLA also surveyed its 22 lender members, with 44% saying they expect a rise in the first three months of 2015.

The research also shows 56% of lenders feel existing homeowners will be most affected by an increase in base rate with 28% saying aspiring first-time buyers will be worst hit.

However, some 72% of brokers feel that existing homeowners or recent first-time buyers will be the most affected

Markets nervous as Obama authorises Iraq air strikes

Stock markets have been rattled, while the prices of oil and gold have risen, as worries grow about the impact of conflicts in Iraq and Ukraine.

Markets were hit by news that US President Barack Obama had authorised air strikes against Islamic militants in northern Iraq.

The UK's FTSE 100 dropped 1% in early trade before recovering slightly, while other European indexes also fell.

But US markets got off to a positive start, with the Dow slightly up.

The Nasdaq and S&P 500 were also marginally ahead in early trade.

Earlier, Japan's Nikkei index fell nearly 3% to close at 14,778, a two-month low.