Weekly update 13th September 2024

It’s been a busy week this week splitting time between Manchester at a mortgage business principals event and then over to Skipton’s Head Office for 2 days and a full dairy of meetings. It’s also been a  busy week with interesting updates and developments within the market, full update below… but before we get to that you might want to check out our latest Skipton Talks video where our Head of Business Development Paul Fenn speaks with Richard Beardshaw, Chair of IMLA to get his thoughts on the importance of BDMs, AI, big upcoming changes to the market and more. Skipton Talks with Paul Fenn and Richard Beardshaw (youtube.com)

Bank of England - Mortgage Lenders & Administrators Statistics Q2 2024

The BoE has reported that the value of gross mortgage advances increased by 16.7% in Q2 2024 from the previous quarter to £60.2bn, the first increase since Q3 2023, and was 15.5% higher than a year earlier. The central bank also reported that the value of outstanding mortgage balances with arrears increased by 2.9% in Q2 2024 from the previous quarter, to £21.9bn, and was 32.0% higher than a year earlier. The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.29% to 1.32%, the highest since Q2 2016. Full report here Mortgage Lenders and Administrators Statistics - 2024 Q2 | Bank of England

Labour Market

The labour market data released on Tuesday highlights two contrasting trends. While employment grew strongly in the three months to July, with a rise of 265,000 surpassing market expectations, indicators like falling PAYE employees, job vacancies, and a drop in workforce jobs signal a loosening labour market.

Wage growth has also slowed. The three-month year-on-year growth rate of average earnings fell to 4.0% in July, below expectations, and private sector pay growth eased from 5.3% to 4.9%. The BoE will welcome the easing in wage growth as a sign that the labour market is cooling, but will remain cautious to inflationary pressures, particularly in light of recent public sector pay increases. The wage data is encouraging, but economists feel it’s unlikely to lead to an immediate rate cut, with the expectation the Bank will pause in September and consider another 25-basis point cut in November and or December.

GDP

The UK's GDP stagnated in July, falling short of the anticipated 0.2% growth, sparking concerns about a potential recession, particularly with three months of no growth in the past four. However, it is believed that the UK is not on the verge of recession, as the first quarter contributed the bulk of this year’s growth. July saw declines in construction and manufacturing output, following strong growth in prior months, with manufacturing output dropping by 1.0%.

Despite these challenges, there are some positive indicators. Output in services rose by 0.1%, driven by sectors such as accommodation, food services, and retail. However, doubts persist regarding the sustainability of this growth, as retail gains were partially fuelled by temporary events.

Economists suggest that a mild economic slowdown is more likely than a sharp recession. Forecasts for GDP growth in the third quarter have been slightly revised down from 0.5% to 0.4%. This data increases the likelihood of a rate cut, though market commentators still expect the BoE to maintain the interest rate at 5.00% next week.

Sources: Office for National Statistics (ONS) and Capital Economics.

Next week

We have inflation data due Wednesday 18th at 7am, MPC rate decision Thursday 19th, consumer confidence and retail sales data Friday 20th.

Nielsen Report Weekly Summary

Other Economic

The Bank of England could decide to increase the speed of its bond sales in September leading to the Labour Government possibly changing the debt measurement used in its fiscal target to exclude financial losses made by the central bank, according to the Times. Bank of England bond sales could free up billions for Labour (thetimes.com)

NatWest has reported that business activity increased universally across the UK in August 2024 for the first time in three months, with business activity increasing across all 12 nations and regions compared to 10 in July 2024. London led a broad-based increase in new business in August. It marked the first time in 16 months that all 12 nations and regions recorded growth on this front, with the East Midlands seeing a renewed upturn. Additionally, expectations towards growth prospects remained positive across the board in August and cost pressures generally weakened midway through Q3 2024, as highlighted by a slowdown in input cost inflation in nearly all areas. NatWest UK Regional Growth Tracker – August 2024 | NatWest Group

Bank of England's deputy governor for financial stability Sarah Breeden said in a speech in the US that the central bank is looking at plans to relax financial regulation to help drive economic growth. Financial stability at your service − speech by Sarah Breeden | Bank of England

Mortgages

Lloyds Banking Group and Barratt Developments have formed a joint venture called the 'Made Partnership' with the government body, Homes England, to deliver large-scale housing developments. The new partnership will build residential-led developments ranging from 1,000 homes to more than 10,000 homes, including community facilities and space for businesses. Barratt Developments, Homes England and Lloyds Banking Group launch joint venture, MADE Partnership - GOV.UK (www.gov.uk)

NRLA has reported that landlords are considering increasing rents by up to 10% to offset the potential impact of the Labour Government introducing no-fault evictions and flexible tenancies that allow tenants to walk away from signed contracts after two months. The Daily Telegraph has also reported that under the proposed legislation landlords will only be allowed to increase rents once a year, and to the market rate, under the proposed rent reforms. Rental reform needs to work for tenants and landlords | NRLA

Rightmove data has revealed a significant increase in larger properties being put up for sale in the South West and East of England, both of which are popular locations for holiday homes. The property platform has suggested the increase is being driven by second homeowners in areas like Norfolk and Cornwall looking to sell their properties in anticipation of the Chancellor Rachel Reeves increasing capital gains tax in the budget on 30 October 2024. Across the country, there was a 15% increase in larger homes for sale. Surge in larger homes listed for sale as Autumn statement looms - Rightmove Press Centre

Life, Pensions & Investments

IFS and the abrdn Financial Fairness Trust have warned that 2m self-employed workers need to urgently start to save more into their pensions to avoid a pensions crisis. According to the institute, 75% of the self-employed can expect to retire on an income, including the state pension, of less than £15,000 per annum. Private pensions for the self-employed: challenges and options for reform | Institute for Fiscal Studies (ifs.org.uk)

Money and Pensions Service survey found that only 50% of employed people aged between 18 and 25 are contributing to a workplace or private pension. One in three working young people have never contributed to a pension | Money and Pensions Service (maps.org.uk)

Henley & Partners has reported that the UK suffered a net loss of 4,200 millionaires in the period from January to May 2024, with a further 5,300 expected to go before the end of the year. The Times also reported that a company offering relocation services to high net-worth individuals experienced a 69% year-on-year increase in inquiries in August 2024. The news follows the Prime Minister Sir Keir Starmer warning that there will be tax rises in the budget on 30 October 2024 and that “those with the broadest shoulders should bear the heavier burden”. Rich ready to leave UK over budget tax threat (thetimes.com)

Nutmeg survey found that 37% of people would advise their younger selves to think about their future wealth in the same way as their future health. The survey also found that 42% of people are worried about their financial health and 48% are concerned about their physical health. On the investment front, 37% of people track 'their' steps compared to only 18% who track their investments and pensions. People prioritising future health ahead of future wealth | Money Marketing

Barclays has estimated that 13m UK adults hold £430bn of 'possible investments' in cash savings, with 21% of people who do not currently invest thinking they have insufficient knowledge to choose what to invest in. The bank also stated that current regulation limits how banks can support potential investors. Barclays analysis reveals £430bn investment gap - FTAdviser

Until next week….