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House prices ‘slow modestly’ in June: Nationwide

UK house annual price growth “slowed modestly” to 10.7% in June leaving the average price of a home at £271,613, according to Nationwide.

This figure represents a fall from 11.2% in the year to May, says the mutual’s June House Price Index, although prices grew by 0.3% this month, the 11 monthly increase in a row. Average house prices have lifted by over £26,000 in the past year.

Across the country, annual house prices saw softening growth in nine of the UK’s 13 regions in the three months to June.

The South West overtook Wales as the strongest performing region in the second quarter, with house prices up 14.7% year-on-year, a slight increase from the previous quarter. This was closely followed by East Anglia, where annual price growth remained at 14.2%.

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Wales saw a slowing in annual price growth to 13.4%, from 15.3% in the first quarter. Price growth in Northern Ireland was similar to last quarter at 11%. Meanwhile, Scotland saw a 9.5% year-on-year rise in house prices.

London remained the weakest performing UK region, with annual price growth slowing to 6%, from 7.4% in the previous quarter.

Since the onset of the pandemic, measured from the first quarter of 2020, London remained the weakest performing region, with average house prices in the capital lifting by 14.9%, while all other regions, except Outer Metropolitan London, have seen at least a 20% jump.

The South West was also the strongest performing region since the health crisis, with a 27.7% increase, followed by Wales, where average prices rose 26.2%, while in the North West, prices lifted by 25.8%.

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Nationwide chief economist Robert Gardner says: “UK annual house price growth slowed modestly to 10.7% in June, from 11.2% in May. There are tentative signs of a slowdown, with the number of mortgages approved for house purchases falling back towards pre-pandemic levels in April and surveyors reporting some softening in new buyer enquiries.

“Nevertheless, the housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation, which has already driven consumer confidence to a record low.

“Part of the resilience is likely to reflect the current strength of the labour market, where the number of job vacancies has exceeded the number of unemployed people in recent months. Furthermore, the unemployment rate remains close to 50-year lows. At the same time, the stock of homes on the market has remained low, which has helped to keep upward pressure on house prices.

Glenhawk chief executive Guy Harrington, adds: “Another month of slowing growth is just a precursor to the sharp correction about to torpedo the UK housing market, caused by a perfect storm of record inflation, geopolitical turmoil, rising rates and a once-in-a-generation cost of living crisis. It’s absolute madness to think house prices will keep on rising. As caution grips the market, the outlook for 2023 looks increasingly ominous.”

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Quilter mortgage expert Charlotte Nixon says: “We are continuing to witness the impacts of soaring inflation which now sits at 9.1% and is expected to run into double figures later this year, the rising cost of living, increasingly high energy bills and minimal support from the government – all of which are causing people to tighten their purse strings. What began as a ‘pinch’ on people’s finances has fast become a heavy burden on an increasing number of households.

“What’s more, the Bank of England recently hiked interest rates to 1.25% and is expected to increase them further still to tackle inflation, which will reduce people’s spending power and cause the already dwindling number of cheap mortgage rates to quickly disappear.

“With wages failing to keep up, the high costs of moving home will put off prospective buyers and first-time buyers will see their hopes of getting a foot on the property ladder pushed further out of reach.

Hargreaves Lansdown senior personal finance analyst Sarah Coles says: “Annual house price growth hit a high point in March, but has been dropping back ever since. This isn’t coming as a shock to anyone, because we were just waiting for the huge challenges facing buyers to feed into the figures.

“Rocketing house prices themselves have taken a toll. Since the onset of the pandemic, every area apart from London and its immediate surroundings, has seen prices rise by at least a fifth. In the South West, growth over this period has hit an eye-watering 27.7%, and in Wales, it’s 26.2%. There comes a time when prices simply rise out of reach for anyone hoping to buy a first property or move significantly up the ladder.

“At the same time, inflation is inflicting incredible pain on buyers. They don’t just face the problem that the rising price of everything from energy to food and fuel makes it difficult to stretch to a bigger mortgage, they also face the concern of mortgage lenders, who feed these figures into affordability calculations and conclude that they can’t afford the move. It doesn’t help that wages have fallen so far behind inflation. Lenders prefer to take into account your usual salary – without bonuses – and after inflation these have dropped 2.2% in a year.

“As the Bank of England raises rates to keep inflation under control, this also puts a dent in buyer enthusiasm. Mortgage rates are still low by historic standards, but they are rising every month, which raises the spectre of much higher payments further down the line.

“The question is whether we will see prices slow to a crawl, stagnate, or start to drop if we see a recession. An awful lot depends on things we don’t yet know – including how high interest rates will go, how deep any recession might be, the impact it could have on jobs, and whether this is serious enough to cause real damage to the property market.

“Certainly the risks on the downside are starting to build. We’re seeing the first predictions of price drops, and while these are currently a few voices in the crowd, they’re highly unlikely to be the last.”

By Roger Baird

Source: Mortgage Finance Gazette

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UK House Prices Forecast to Fall in H2 by Pantheon Macroeconomics

UK house prices will fall in the second half of 2022 as a surge in mortgage rates continues over the summer says Pantheon Macroeconomics.

Analysts at the independent research providers and consultancy say rising interest rates at the Bank of England mean monthly mortgage payments for the average borrow- er will be £300 higher in July than at the end of 2021.

In a new research note out June 27 Pantheon Macroeconomics says although house prices will continue be supported by the solid labour market and by savings build up during the pandemic, the hit from higher rates will dominate.

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“The recent surge in risk-free interest rates and mortgage rates has been so severe that we now doubt that a period of falling house prices can be avoided,” says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics.

The call comes amidst an ongoing rise in house prices with Nationwide’s House Price Index showing UK house prices posted a tenth successive monthly increase in May to keep annual price growth in double-digits.

Nationwide said prices were up 0.9% month-on-month and 11.2% year-on-year after taking account of seasonal effects.

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“The housing market has retained a surprising amount of momentum,” said Robert Gardner, Nationwide’s Chief Economist, but Nationwide nevertheless continues to expect the housing market to slow as the year progresses.

Pantheon Macroeconomics says the average quoted rate for a two-year 75% Loan to Value fixed rate mortgage rose to 2.63% in May, up from 1.53% in November which is the fastest six-monthly increase since 2003.

“This rate will rise considerably further over the summer,” says Dickens.

She notes the two-year overnight index swap rate has risen to 2.7%, from 2.2% at the start of May, “and mortgage rates hadn’t fully reflected the prior surge in OIS rates last month”.

Pantheon Macroeconomics calculates the equivalent mortgage rate likely will jump to around 3.2% in July, before reaching 3.8% by December.

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But even rates for 90% and 95% LTV ratio mortgages have risen, despite the continued tightening of the labour market.

“Changes in mortgage rates have been a good guide to changes in year-over-year growth in house prices in the past,” says Dickens.

She calculates year-over-year growth in house prices could decelerate by as much as 30 percentage points over the next year.

This would imply that UK house prices would fall outright by about 20%.

But there are further factors to consider that would cushion against such a fall, most notable the strong jobs market that conveys security to home owners and prospective buyers as well as changing work habits.

“We now expect house prices to fall by around 2% in the second half of the year, rather than just hold steady,” says Dickens.

By Gary Howes

Source: Pound Sterling Live

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As many as one in five homes selling within 14 days of being listed for sale

The latest data analysis by estate agent comparison site, GetAgent.co.uk, has revealed that stock shortages are seeing one in 10 homes (11%) get snapped up within 14 days of entering the market, although in some areas this climbs to as high as one in five, as the pandemic property market boom shows little sign of slowing despite a string of interest rates adding to an uncertain economic outlook.

GetAgent analysed the level of new properties hitting the market and what proportion of these were being sold (SSTC) within just two weeks, as the nation’s homebuyers continue to battle it out for what limited stock is available.

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It currently takes the average UK homeseller 97 days from the point they first list their home for sale until they find a buyer and the property is marked as SSTC.

However, the latest analysis by GetAgent shows that across the UK as a whole, 11% of all homes to be listed for sale are accepting offers and being marked sold subject to contract within just two weeks.

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Regionally, Scotland is currently home to the hottest market where the proportion of new homes sold within 14 days is as high as 18%.

In the South West, 13% of properties are being snapped up within two weeks, while in Wales, the West Midlands and East of England it’s 12%.

London is home to the slowest market in this respect, with just 7% of all homes sold within two weeks.

At city level, Scotland remains top of the table, with Edinburgh (23%) and Glasgow (19%) seeing the highest proportion of for-sale stock selling within two weeks of being listed for sale.

Bristol also ranks within the top three at 16%, while Portsmouth and Birmingham are also amongst some of the most likely to see a home sell almost immediately.

Just Belfast ranks lower than London, where not a single home currently listed for sale on the market has sold within two weeks of first being put up for sale.

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Co-founder and CEO of GetAgent.co.uk, Colby Short, commented: “Since interest rates have begun to climb, the nation’s property prophets have been out in force to once again call the demise of the UK property market.

“However, we’re simply not seeing this on the ground and while there has certainly been a return to normality where mortgage approval levels and the rate of house price growth is concerned, buyer demand remains extremely high and property values are yet to show any signs of decline.

“In fact, the balance between supply and demand is so out of kilter that homes are selling subject to contract at pace and in many areas, with one in five doing so within just two weeks in some cases.

“Of course, this doesn’t make the protracted process between accepting an offer and completing on a sale any quicker, but it does cut a considerable amount of time from the overall selling timeline.”

By Brandon Russell

Source: IFA

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UK leads Europe in mortgage market might but sits at bottom for share of population that owns home

While the UK may trail other European nations when it comes to the total proportion of the population that own their own home, it does lead the way when it comes to the might of the mortgage sector and the number of properties purchased by borrowing.

At 65.1 per cent, the UK sits well within the bottom 10 when it comes to the total share of the population that own their own home.

Only those in just France, Sweden, Denmark, Turkey, Austria, Germany and Switzerland are less likely to own their own home, while at 95.8 per cent, Romania is home to the highest level of homeowners as a percentage of the total population.

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Home ownership
When it comes to the proportion of these homeowners that have borrowed in order to buy, Iceland ranks top, with 63.9 per cent of all homeowners having a mortgage, according to data by real estate agency Henry Dannell, which analysed property market data across European foreign nations.

At 37.5 per cent, the UK ranks 10th in this respect, however, in terms of the sheer volume of homeowners financed via the mortgage sector, the UK sits top of the table by far.

In fact, over 25.2m homeowners in the UK have currently climbed the ladder with the help of the mortgage sector. Just Germany and France come close to this level, with an estimated 21.5m and 21m respectively.

Spain (13.5m) and the Netherlands (10.5m) are the only other nations where the number of mortgage-backed homeowners exceeds the 10m mark.

At the other end of the table, just 0.5 per cent of all North Macedonian homeowners have a mortgage, equating to just 10,353 of the homeowning population.

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“Despite being home to some of the most notoriously high house prices in the world, homeownership remains the predominant strain in the UK property market’s DNA.” said the director of Henry Dannell, Geoff Garrett.

This is despite the fact that property values have spiralled in recent years and we’ve seen a greater acceptance of long-term renting as a lifestyle choice from younger generations.

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“The ability to buy with the help of a mortgage has been vital in helping many homebuyers realise their aspirations of homeownership and while mortgage-backed homeowners only account for just shy of forty per cent of the total market, this equates to a huge 25.2m people,” he said.

“This makes the UK mortgage sector by far the most pivotal and influential in Europe where the provision of finance in order to purchase a property is concerned,” Garrett concluded.

By MICHIEL WILLEMS

Source: City A.M.

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Scrapping the mortgage market affordability test ‘is not as reckless as it may sound’

The Bank of England (BoE) announced yesterday that its Financial Policy Committee (FPC) will withdraw the so-called mortgage market affordability test, designed to avoid another 2007-style credit crunch.

Introduced in 2014, the test specifies a stress interest rate for lenders when assessing prospective borrowers’ ability to repay a mortgage.

“Following its latest review of the mortgage market, the Financial Policy Committee has confirmed that it will withdraw its affordability test Recommendation,” the BoE said in a statement.

The move means that lenders will no longer have to check whether homeowners could afford mortgage payments at higher interest rates.

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The decision to withdraw the affordability test comes despite the Bank of England having raised interest rates for a fifth time in a row to 1.25% last week as part of efforts to tackle soaring inflation, meaning some mortgage borrowers could be in line for higher repayments.

The Bank of England, which originally consulted on the changes in February, confirmed that it would scrap the affordability test after determining that other rules, including those that cap mortgages based on the income of borrowers, were “likely to play a stronger role” in guarding against an increase in household debt.

Some experts yesterday described the rule changes as “baffling” in light of rising interest rates. But Mark Harris, chief executive of mortgage broker SPF Private Clients, believes the move could prove sensible.

He said: “Scrapping of the affordability test is not as reckless as it may sound.

“The loan-to-income framework remains so there will still be some restrictions in place; it is not turning into a free-for-all on the lending front. Lenders will also still use some form of testing but to their own choosing according to their risk appetite.

“It could have a positive affect on certain borrowers who have been disadvantaged when it comes to getting on the property ladder. For example, first-time buyers who have been affording rents far in excess of actual mortgage payments but have failed affordability assessments regardless.

“The rate environment and expectations have changed significantly since the rules were introduced when borrowers were tested to ensure that mortgage repayments could be met should rates be in the region of 6% to 7%.”

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Lawrence Bowles, director of research at Savills, believes that from a market perspective, removing the current stress testing “could mitigate some of the impact of higher interest rates”.

He commented: “In theory, at least, it should open up a little more capacity for house price growth than is currently looking fairly constrained in the mainstream housing market.

“This said, a fairly high proportion of recent buyers have worked around the “standard variable rate plus 3%” stress test by locking into five-year fixed rates, meaning it will only preserve or open up additional borrowing capacity for part of the market. Lenders will still stress test applicants to reflect where they expect interest rates to be five years from the start of the loan, following the Mortgage Conduct of Business rules.

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“Improved capacity for growth would also be dependent on how far lenders are prepared to push loan to income multiples under responsibly lending rules and caps on what they can lend at high loan to income ratios. It is unlikely to open up the mortgage-credit floodgates.

“It should allow lenders to be slightly more flexible which will come as welcome relief to some would-be-buyers struggling to keep up with current criteria because of significant price growth of the past two years – but saving for a deposit will remain the most significant barrier to home ownership.”

By Marc Da Silva

Source: Property Industry Eye

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UK house prices rise to record highs for fifth month in a row

House prices in the UK have hit record highs for a fifth month in a row.

Across the country, the average asking price in June stands at £368,614, Rightmove said.

Prices edged up by 0.3% or £1,113 on average month-on-month as the pace of price growth is slowing, the property website said.

Despite a string of interest rate rises and the increasing cost of living, buyer demand for available properties remains very strong, it said.

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But it added that following a very strong first half of the year, it is likely that affordability constraints will have a greater influence on market behaviour in the months ahead.

This, alongside more choice coming onto the market for buyers and the usual seasonal variations, means there are likely to be some month-on-month price falls during the second half of the year, Rightmove predicts.

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Tim Bannister, Rightmove’s director of property science, said: “Entering the second half of the year, we anticipate some further slowdown in the pace of price rises, particularly given the worsening affordability challenges that people are facing.

“We expect this to bring the annual rate of price growth down from the current 9.7% towards the 5% increase that Rightmove predicted at the beginning of the year.”

Rightmove said it currently takes around 150 days to complete a purchase on average after agreeing a sale – 50 days longer than at this time in 2019.

There are more than 500,000 homes that are currently sold subject to contract it added, which is 44% higher than it was at this time in 2019 and 39% higher than the pre-pandemic five-year average.

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Rightmove’s report was released as the EY ITEM Club said it expects UK house prices to rise 8% over the course of 2022, followed by a growth of 1.8% in 2023 and 1.2% in 2024.

Peter Arnold, EY UK chief economist, said: “In previous economic cycles, a house price contraction would be on the cards with incomes squeezed and a high chance of a market correction after two years of out-sized growth. Instead, house prices are set for a softer landing.”

Nitesh Patel, economist at Yorkshire Building Society, said: “Demand for housing has far outstripped supply for years, but it’s not just the quantity of houses we’re lacking, but the type and suitability of properties coming to market – be that new or existing homes.”

By Joshua Searle

Source: The Herald

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Property industry reacts to fifth consecutive interest rate increase

Interest rates have gone up again for the fifth time in just a matter of months.

Mortgage holders, house hunters and savers will be affected by the Bank of England’s decision to increase the rate from 1% to 1.25%.

Homeowners on Standard Variable Rates or tracker mortgages will be hit the hardest in the short-term by the latest interest rate increase.

Industry reaction:

Grianne Gilmore, head of research at Zoopla, said: “This rise in rates will translate into higher mortgage costs for those looking to buy a home. For buyers with a 30% deposit buying an average priced home of £250,00 in the UK, a quarter point rise in mortgage rates this will add hundreds [£264] to their annual mortgage bill. Most homeowners will be protected from the current raft of interest rate rises as three quarters of those with outstanding mortgages are on fixed-rate deals.

“Even with five base rates since December last year, buyer demand in the housing market has remained strong all through the start of this year, and is still 50% above the five-year average – so those looking to sell should consider making a move while demand is at this level. With further interest rate rises on the cards in the coming months, and a cloudier economic outlook, buyer demand will ease through the rest of 2022.”

Lawrence Bowles, director of research at Savills, said: “Further increases to interest rates, combined with the strong price growth experienced over the past two years and the cost of living squeeze, will combine to limit the capacity for growth over the next few years. But rates are still low in a historical context, so it remains difficult to see the trigger for a meaningful house price correction. Mortgage rules in place since 2014 mean that buyers have had to show they can afford their repayments at interest rates 3% higher than expected, which means they are likely to be able to weather these increases in the base rate.

“These changes are less likely to have an impact in the prime residential markets. Most buyers in these markets are less reliant on mortgage finance when buying a home. Given the recent negative performance in equities markets, we may see a flight towards safe haven assets such as housing.

“Savills latest market forecast projects that price growth in the next four years (2023-2026) will average a total of 5.1% across the UK as a whole. This may be of some relief to many would-be buyers, many of whom will feel they have been chasing the market over the past two years.

“However, it’s clear that the Bank of England intends to act forcefully in the face of further persistent inflationary pressure, which could reduce capacity for price growth in markets where borrowing is already high relative to income

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Iain McKenzie, CEO of The Guild of Property Professionals, said: “Hot on the heels of the US Federal Reserve, and its greatest rise in almost 30 years, the Bank of England has today prioritised curbing inflation by raising interest rates by 0.25%.

“Getting inflation under control will aim to improve the cost of living and help people to keep up with their mortgage and rent payments.

“Homeowners are facing increases at all angles and many will still be worried about the effects that a fifth straight hike could have on their mortgages.

“People on tracker mortgages or with a variable rate could see their repayments increase again which will be unwelcome at a time when everything from energy and fuel to food and drink is going up in price.

“Homeowners on fixed-rate mortgages are currently in the safest position, as this interest rate rise won’t affect them for the time being. It is important to keep track of when your fixed rate is up for renewal and be ready to secure a new deal.

“Our research indicates that around 1.5 million fixed-rate mortgages will end this year and next, so these interest rate rises will soon affect you when the time comes to renew.

“Homeowners should sleep soundly though that the value of their property is still very robust. The increasing demand to buy which we have seen in the last two years will continue to ensure that any short-term issues in the economy won’t cause your home to lose value.”

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Richard Davies, MD at Chestertons, stated: “Anyone who has been following the news would have been likely to have expected the Bank of England’s decision to increase the bank rate. In anticipation, many house hunters were rushing to seal a deal on their property purchase last month and lock in a more favourable fixed rate. According to the Bank of England, 81% of outstanding mortgage loans are now on a fixed rate with an average rate of 2.06%.”

“We expect the new rate rise to impact particularly on new home owners whose mortgage loan to value is above 75%, those on a variable rate as well as property buyers in London, where the average mortgage value has surpassed £392,000. If we take that average and consider the recent rate increase, London homeowners could be facing an annual increase in mortgage payments of almost £600. A big addition to the already rising cost of living.”

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Jason Tebb, CEO of OnTheMarket, commented: “This latest rate rise was factored in by the money markets, given continued high inflation, but we don’t expect it to quash the remarkable buyer and seller sentiment in the housing market.

Even with another quarter-point rise, interest rates remain relatively low. We are gradually moving towards a more rebalanced market in terms of supply and demand, with evidence emerging of a rise in the number of new instructions. Yet this will take time and until then, the ‘new normal’, an elevated version of the pre-pandemic market continues. Regional differences are also a consideration, with ‘one size does not fit all’.

As long as buyers remain confident about obtaining the mortgages they need and being able to afford them, modest increments in rates, while unwelcome, are unlikely to result in a slamming on of the brakes. It remains the case that many buyers simply need to move.”

Dominic Agace, chief executive of Winkworth, remarked: “We are beginning to see a divergence in the impact of the cost of living and interest rates and their impact in the property market. Country markets, where there have been rapid price increases since the pandemic, are now cooling in terms of demand. Although demand is easing in London where prices have remained fairly static, it still remains ahead of 2021.

“We expect the interest rate increase and wider economic concern to impact on demand, but expect London markets to outperform this trend, remaining positive through the autumn market. In both cases, there is sufficient underlying demand, headroom in interest rates and a strong enough labour market to allow several more rises before there will be concerns about price corrections. So far, we are seeing an easing rather than seeing a cause for concern. We would expect the slow trajectory of interest rates with five year mortgages cheaper than two year fixes to lead us this way.”

By MARC DA SILVA

Source: Property Eye Industry

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Base rate increased to 1.25%

The Bank of England (BoE) has increased the base rate by 25 basis points to 1.25%.

The Monetary Policy Committee (MPC) voted by a majority of 6-3 to increase the bank rate by 0.25 percentage points, to 1.25%. The members in the minority voted to increase the bank rate by 0.5 percentage points, to 1.5%.

The increase marks the fifth base rate rise since December 2021 after a decade of historic lows.

The MPC minutes say that UK GDP was weaker than expected in April, partly reflecting a further decline in Test and Trace activity.

The BoE now expect GDP to fall by 0.3% in the second quarter, which is weaker than anticipated at the time of the May report.

The committee expects inflation to be over 9% during the next few months and to rise to slightly above 11% in October. The increase in October reflects higher projected household energy prices following a prospective additional large increase in the Ofgem price cap.

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Just Mortgages national operations director John Phillips says the increase “feels like rates are on the upwards swing of a pendulum which is rapidly gaining momentum”.

“Although this increase will translate into higher mortgage rates, the housing market remains resilient and feedback from our brokers across the country tells us that activity for purchases and re-mortgages remains high.”

Commenting on the rise, Quilter mortgage expert Karen Noye says: “The last time interest rates were above 1% was back in 2009 and Gordon Brown was trying to shore up the economy following the financial crisis. While we are now living in very different fiscal times, interest rates have once again risen past 1% and it could spell the start of a difficult period for the economy and particularly for house prices.”

“Further rate hikes are certainly not out of the question, and this could start to impact house prices. The housing market is already showing signs of a slowdown and how well it can weather further rate rises, alongside raging inflation, is yet to be seen but the prognosis is not good.”

“Once again, the biggest losers are first time buyers. They face a steep uphill battle to get on the housing ladder having to contend with rising interest rates, which make mortgages less affordable, inflation eating away at their deposits and the rest of the cost-of-living pressures. With wages failing to keep up with runaway house prices this is likely to be one of the most difficult times in the last few decades, if not longer, to be trying to get your foot on the housing ladder,” Noye adds.

Yesterday, the US raised key interest rates by three quarters of a percentage point to a range of 1.5% to 1.75%, the third increase since March.

Forecasts after the announcement in the US showed officials expect the Federal Reserve rate to be 3.4% by the end of the year.

At the start of May, the BoE increased the base rate by 25 basis points to 1% after MPC voted by a majority of 6-3 with the remaining three saying they would prefer to increase the bank rate by 0.5 percentage points, to 1.25%.

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Previous expectations were that inflation would peak at “around” 7.25% in April but were revised upwards prior to the MPC meeting in March because of the Russian invasion of Ukraine and its attendant effect on commodity prices alongside further supply chain disruption.

Data from the Office for National Statistics (ONS) showed that inflation in the UK had climbed to 9% in April.

The latest figure is driven by increases in fuel prices, energy and food costs. The ONS reported that energy prices rose by 46.5% on the month, with electricity up 40.5% and gas 66.8%, as the Ofgem price cap was increased.

In May, MPC member Michael Saunders said that, in his opinion, inflation may exceed the 10% peak forecast for Q4 2022 in the latest monetary policy report (MPR).

Saunders explained that the MPR forecast assumes several economic factors, including weakness in spending, cuts in employee hiring – with unemployment rising – and supply chain problems easing.

The report forecast expects inflation to fall to “slightly above” 2% two years later.

However, Saunders details a belief that demand will be more resilient than the MPR forecast calculates.

Phoebus Software sales and marketing director Richard Pike says: “Today’s increase is one that most people were expecting and, hopefully, preparing for. The thing to understand is that this is a global problem, just yesterday the US increased its interest rates by the biggest percentage in 30 years, we are not alone in having to deal with spiralling inflation. Covid and the war in Ukraine have both taken a huge toll and the knock-on effect will be long lasting.”

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“In this rising inflation and interest environment, even though the increments are small, real wages are reportedly already struggling to keep pace. So it is inevitable that some households will be starting to feel the pinch. It is encouraging, therefore, to read that the FCA has today reminded lenders of their responsibility to provide help to customers struggling with payments. However, this does of course mean that lenders will need the resources to identify vulnerable borrowers at an early stage to be able to offer the help that is required.”

Air Mortgage Club chief executive Stuart Wilson adds: “Today’s interest rate rise of 1.25% marks the next instalment of the Bank of England’s attempts to counter rising inflation – now well above official targets, surpassing 9% in May. In the face of rising inflation and a steadily increasing base rate, older people – especially those on fixed incomes – are increasingly considering all their options.”

By Bek Commane

Source: Mortgage Finance Gazette

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House prices in Scotland rise by 7.6% in April: Walker Fraser Steele

Scottish average house prices lifted by 7.6%, in the year to April with rises in all 32 local authorities, according to the Walker Fraser Steele Acadata House Price Index. This left the average price for a home in Scotland at £218,394.

The last time prices rose across all local authorities was last March, the final month of the land and buildings transaction tax holiday. This average rise in April is equal to around £15,500.

On the mainland, the highest increase in average prices over the year was in Argyll and Bute, at 22.7%. The highest local authority property price rises came in the Orkney Islands, where values jumped by 30.4%, but the report points out that the small number of transactions on the Islands – just 17 recorded in April – tends to result in volatile movements in average prices.

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On a weight-adjusted basis, taking in price changes and transactions, five local authority areas in April accounted for 44% of the £15,500 increase in Scotland’s average house price over the year – Edinburgh (17%), Fife (10%), Glasgow (8%), Argyll and Bute (5%) and North Lanarkshire (4%).

On a monthly basis, Scotland’s average house price in April rose by some £1,100, or 0.5%, which is a third less than the near £3,000 increase seen in March.

On the mainland, the largest monthly increase in prices in April was in East Dunbartonshire, at 5.4%, where values rose across all property types except for semi-detached homes. Sales in the area in the month included a £2.2m detached home in Bearsden, which is a town located approximately six miles to the northwest of Glasgow.

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Walker Fraser Steele regional development director Scott Jack says: “Records were made to be broken as the saying goes and the evidence of this month’s data supports that. All 32 local authority areas in Scotland have seen property prices rise on an annual basis. The last time we witnessed this was in March of last year – a month before Holyrood withdrew the land and buildings transaction tax holiday it had introduced to support the market in July 2020.

“While that support was rightly targeted at keeping the housing market functioning during the early months of the pandemic, what is evident now is that people are still looking to move but that a lack of the right kind of stock is supporting prices across the country.

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“Our index shows that the average house price in Scotland has increased by some £15,500 – or 7.6% – over the last twelve months, to the end of April. This is a £2,400 increase over the revised £13,100 growth in prices seen in the twelve months to the end of March 2022.

“The average price paid for a house in Scotland in April of this year is £218,394, setting yet another record price for the country – the tenth occasion that this has happened in the last twelve months. This price is some £15,500 higher than that seen in April 2021, meaning that prices have risen by 7.6% on an annual basis. This annual growth rate is the highest recorded to date in 2022.”

By Roger Baird

Source: Mortgage Finance Gazette

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Property market investment is crucial to economic recovery

The past two years of economic uncertainty, induced by the global pandemic, have impeded strong performances across most industries. Certainly, all will be glad to see the back of the restrictions and lockdowns that strained growth as businesses seek to recover.

Yet, amongst the volatility, the UK property market once again flourished, highlighting the sector’s reliable reputation in such times.

This resilience was likely made possible by investors seeking financial opportunities that have been historically more reliable during a period where other potential assets have not looked as secure.

What’s more, there appears to be no slowing down, with buyers snapping up property faster than ever, twice as quickly as they did in 2019, according to data from Rightmove.

Alongside thriving market activity is the rise in house prices that continued surging even throughout the pandemic. According to Nationwide’s April House Price index, average house prices have reached £267,620, with price rises increasing higher than 10 per cent in each month but one in the past year.

Despite positive growth, the industry must remain prepared for potential challenges ahead. The rate of buying is a consequence of a shortage of property, a situation that cannot continue forever. And pundits have predicted house prices to be pulled back down by the cost of living squeeze and rising mortgage rates.

This is why many will be hailing the return of international investors since the end of Covid restrictions at the start of the year.

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Why is overseas investment important?
The health of the economy and the health of the property market are closely linked. Consumer spending and borrowing are affected by house price increases or dips. As such, receiving overseas investment will be crucial for maintaining the growth of the market and, in turn, the UK’s economic recovery.

And judging by the figures, this is anticipated to be the case since travel restrictions into the country were dropped in February.

According to Knight Frank’s City Wealth index section of their 2022 Wealth Report, in 2021 London saw more cross-border private capital in real estate than any other city in the world, with more than $3bn (£2.39bn) invested. Their forecasts estimate this trend to continue over 2022, with a further $24bn expected to be invested in the capital.

When taking into account the ongoing housing crisis that desperately needs to be tackled, a significant boost in investment would be welcomed in order to address the vast undersupply in housing.

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To offset the shortage, the UK needs to be building 340,000 new homes a year, of which 145,000 should be affordable. However, only approximately 216,000 new homes were supplied in 2020-21.

More often than not, news of international investment flows into the UK property market is met with some disdain due to negative connotations linked to the housing shortage. However, foreign investment can ensure the commencement of property development by buying new residential units off-plan and funding development schemes.

This is a huge positive when considering the slowdown of construction activity due to problems associated with the pandemic.

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It is not just the capital where these projects are taking place. International investors are placing bigger bets on areas outside of London such as the West Midlands and the North of England, with the likes of Manchester, Leeds and Newcastle becoming recognised as better value for money investments.

At the same time, investment in regional areas has been bolstered by a change in homeowner preferences. Many households are now seeking bigger homes outside of the city, suited to home-working needs, and increased investment flow has the potential to boost their development of new housing for years to come.

Could external factors delay international investment flows?
While the return of international investment is certainly promising for the property market, it is important to recognise the wider macroeconomic headwinds that have the potential to slow down the market’s growth outlook.

For one, the steady climb of interest rates poses added challenges to investors.

The base rate, which recently rose to 1 per cent, influences the interest rates that many lenders charge for mortgages, loans and other types of credit. For investors, this means taking into account higher mortgage rates in line with rising interest. This in turn poses risks to the pace of real estate development.

Elsewhere, there is soaring inflation and a cost of living crisis to contend with. The Bank of England has warned that prices might rise to 10 per cent this year, a 40-year high, and this jump in inflation coupled with the rising interest rate could erode rental returns and devalue property if house price growth slows, which commentators are anticipating.

However, despite the above, UK property has long been considered a safe bet for international investors, and it is unlikely this will change any time soon. Capital from areas such as Hong Kong, China and the US remains strong. Also, the drop in the pound since Brexit has allowed for more favourable exchange rates that stretches investors’ money further.

Looking ahead, it becomes essential, then, that the expected return of global investment flows is used to its full potential. Doing so will be key to ensuring the continued strength of the property market and, ultimately, the pursuit of a steady economic recovery.

Jamie Johnson is chief executive of FJP Investment

By Jamie Johnson

Source FT Adviser