Weekly update 24th June 2024

Thank you for being here and your continued support. I’m shocked at how many people subscribed in the first week of putting this on LinkedIn. I’ve been sending my weekly news updates for the past 2 years via email and it wasn’t until it was suggested by a leading industry figure that I should publish it on LinkedIn! And they were right, the number of positive messages I’ve received has been truly overwhelming and encouraging.

Despite the disappointment on the football field, there’s a silver lining in our economic outlook as the headline inflation rate has finally hit the 2% target.

 In this week’s update:

• Inflation & BoE rate Predictions (economists views)
• What are the main parties suggesting / promising for housing in next parliament?
• Other economic
• Mortgages
• General Insurance
• Pensions & Investments
• Commercial Banking

 UK headline inflation fell to 2% last week, behind BoE expectation of 1.9%. The bigger concern for the BoE is that services inflation only fell from 5.9% to 5.7%, proving sticker than what BoE had expected, they were forecasting 5.3%. The main question the MPC will be asking is... Is it annual price increase adjustments and increased minimum wage that is causing it to be stubborn, or is there an underlying driver such as pricing power by firms? The answer to this along with the data releases on wage pressures could be the deciding factor on whether we see an August cut or whether it’s held to later in the year. It’s reported that more MPC members are now looking at this data and if it comes in favourable, we could see a swing in the vote over the coming months. (Source, Capital Economics).

 Richard Howes Director at Paradigm Mortgage Club shared the below with me this week, as we know the election is in full swing, but what will it mean for the housing market? He has produced a summary so you can see what the main parties are suggesting/promising in order there is some context as to the future for housing in the next Parliament if it’s to be believed! As Richard says, people will make up their own minds about the aims each party is aligning to in terms of tackling the housing issues the country is facing. But, whilst the building of new houses, tackling the planning issues is very laudable who will build the houses and can people afford them.

 Two areas will give food for thought here he thinks: Reuters have recently done a poll with 65 economists which shows the: “The Bank of England will start cutting interest rates in August, according to all but two of 65 economists polled by Reuters, and most of them expect at least one more reduction this year despite persistently high pay and services inflation. If this happens, it will ease the affordability issues the market faces in getting people moving, and a recent survey by Fix Radio (The Builders Station!) reports to meet any growth, more than 251,500 extra construction workers are needed over the next five years, with construction employment rising to 2.75 million by 2028. Despite the industry recruiting around 200,000 people every year, in 2023, an average of 38,000 vacancies were advertised monthly. For almost a third (31%) of construction employers, finding suitably skilled staff remains their key challenge, particularly as more older workers retire and are not replaced, although the construction industry welcomed 200,000 new workers, it lost more (210,000)

 So, what are the main parties suggesting? Richard’s summary below:

 Labour

·         Creating 1.5 million new homes over the next parliament.

·         Immediately update the National Policy Planning Framework including restoring mandatory housing targets.  

·         Action to ensure planning authorities have up-to date Local Plans and reform.

·         Require all Combined and Mayoral Authorities to strategically plan for housing growth in their areas.

·         Reform compulsory purchase compensation rules to improve land assembly, speed up site delivery, and deliver housing, infrastructure, amenity, and transport benefits.

·         Work with local authorities to give first-time buyers the first chance to buy homes and end the position of entire developments being sold off to international investors before houses are even built.

·         Introduce a permanent, comprehensive mortgage guarantee scheme, to support first-time buyers.

 Conservative

·         Deliver 1.6 million homes in England in the next Parliament.

·         First-time buyers will pay no Stamp Duty at all.

·         Make permanent the increase to the threshold at which first-time buyers pay Stamp Duty to £425,000 from £300,000.

·         Launch a new and improved Help to Buy scheme to provide first-time buyers with an equity loan of up to 20% towards the cost of a new build home.

·         Continue with the Mortgage Guarantee Scheme,

·         Support more families to buy through shared ownership.

·         Pass a Renters Reform Bill that will allow court reforms to abolish Section 21 and strengthen other grounds for landlords to evict private tenants guilty of anti-social behaviour.

·         Ensure councils have the powers they need to manage the uncontrolled growth of holiday lets.

·         Introduce a two-year temporary Capital Gains Tax relief for landlords who sell to their existing tenants.

 LibDem

·         Increase the building of new homes to 380,000 a year across the UK, including 150,000 social homes a year, through new garden cities and community-led development of cities and towns.   

·         Banning no-fault evictions, making three-year tenancies the default, and creating a national register of licensed landlords.

·         Giving local authorities, including National Park Authorities, the powers to end Right to Buy in their areas.

·         Abolish residential leaseholds and capping ground rents to a nominal fee.

·         Help people who cannot afford a deposit to own their own homes by introducing a new Rent to Own model for social housing where rent payments give tenants an increasing stake in the property, owning it outright after 30 years.

Nielsen Report Weekly News Summary:

Economic

 Bank of England's latest 'Inflation Attitudes Survey' for May 2024 found that the UK public's expectation concerning the rate of inflation over the next 12 months is 2.8% compared to 3% in February - the lowest level in three years. Additionally, 64% of respondents said that interest rates on things such as mortgages, bank loans and savings had risen over the past 12 months, down from 69% in February 2024. Meanwhile, 6% of respondents thought that interest rates had fallen over the past 12 months, unchanged from 6% in February 2024.  Bank of England/Ipsos Inflation Attitudes Survey - May 2024 | Bank of England

 Manufacturers expect a surge in orders and output in the second half of 2024, but the next government must address the critical skills shortage to sustain growth, according to a Make UK survey.UK manufacturers expecting boost in second half of 2024 | Manufacturing sector | The Guardian

 Insolvency Service has reported that the number of corporate insolvencies fell by 6% month-on-month in May 2024 to 2,006 and down 21% year-on-year from 2,547 in May 2023. Company insolvencies in May 2024 consisted of 271 compulsory liquidations, 1,590 creditors’ voluntary liquidations (CVLs), 126 administrations and 19 company voluntary arrangements (CVAs).  Company Insolvency Statistics, May 2024 - GOV.UK (www.gov.uk)

 UK Finance has reported that in March 2024 the outstanding balances on credit cards increased at an annual rate of 9.9%, with 49.8% of the accounts incurring interest charges. According to the FT, mortgage brokers are reporting that potential borrowers' high levels of unsecured debt is impacting their ability to take on a mortgage. Separately, the TUC has warned that unsecured household debt is set to increase by 9.4% in 2024.  Card Spending Update - March 2024.pdf (ukfinance.org.uk)

 Nationwide’s Spending Report, which analyses current account and credit card spending, has highlighted that its customers spent £420,341 in Germany at the weekend (15/16 June 2024) – a 140% increase when compared to the same weekend in May 2024. Overall, the Society's customers spent £7m more at supermarkets over the weekend compared to the same weekend the previous month. The £87m total equated to a 9% month-on-month increase.  Home and away footy spend soars as Euro's kick off in Germany, Nationwide customer data shows (nationwidemediacentre.co.uk)

 GfK's Consumer Confidence Index rose by three points overall to -14 in June, its highest level since 2021. UK Consumer Confidence up three points in June to -14 (gfk.com)

 Mortgages

 British Property Federation has claimed that SNP rent controls had made Scotland a 'no-go' area for property investors, amid fears that the Labour Party might introduce similar controls in England and Wales if it forms the next Government. According to Savills, investment in build-to-rent properties in Scotland fell by 71% in 2023.  Scotland a 'no-go' zone for investors under SNP rent controls (telegraph.co.uk)

 ONS has reported that 45.7% of the local areas in England and Wales had average homes that cost five times or less the gross annual household income for the same local area in the year ending March 2020. Of the 50 local areas that were most affordable, 21 were in the Northwest, 17 were in the Northeast, 6 were in Wales, 5 were in Yorkshire and The Humber, and 1 was in the West Midlands. All 50 of the least affordable local areas were in London.  Housing affordability for local areas in England and Wales - Office for National Statistics (ons.gov.uk)

 Skipton International's mortgage range, including buy-to-let products, are now live on Iress’s mortgage sourcing software Xplan Mortgage and Trigold.  

 Lloyds Bank analysis of conveyancing scam reports made by its own customers found they increased by 29% in H2 2023. On average victims lost £47,000, while around 45% of victims were aged 39 or under, so first-time buyers may be at particular risk.Lloyds Bank warns of worrying rise in conveyancing fraud - Lloyds Banking Group plc

 ONS has reported that UK average house prices increased by 1.1% year-on-year to £281,000 in April 2024, with prices in England up 0.6% to £298,000, 0.4% in Wales to £208,000 and by 4.5% in Scotland to £190,000.  UK House Price Index summary: April 2024 - GOV.UK (www.gov.uk)

 General Insurance

 Age UK survey has found that nearly half of over-50s are concerned about how difficult it is to access their GP alongside fears over their ability to get hospital appointments and emergency care.  Over 50s concerned about struggles in accessing healthcare, charity says | The Independent

 Pensions & Investments

Aviva has released research on retirement to coincide with the launch of the Euros that claims most people understand and can explain key football rules better than they can the rules around retirement. According to the research, 59% of people can confidently describe football’s offside rule; and 53% know what VAR stands for; while 53% know that 30 minutes of extra time could be played if the result of a match is still a draw after the usual 90 minutes. But, only 46% of UK adults are confident that their retirement plans are on track and this confidence appears to decrease with age and only 40% correctly recognised 66 as the age that UK residents are currently eligible to claim the state pension. A further 18% thought the earliest age they can access their private pension was between 40 and 54 years old – not 55, which is the correct age.  Many Brits know the rules of football better than the rules of retirement - Aviva plc

 MPs have been accused of double standards over their own pension scheme after accounts from the Parliamentary Contributory Pension Fund revealed that only 1% of the parliamentary retirement fund is invested in UK equities, despite politicians talking up the case for investing in Britain.  MPs accused of double standards over pension scheme (thetimes.com)

 Natixis survey found that Gen Xers globally who said they prefer digital advice to in-person advice has increased from 35% to 49% over the past five years. In the UK a preference for digital advice increased from 33% to 53% between 2019 and 2023, while North America saw the preference for digital advice falling from 33% to 21%. The research also found that 48% of Gen X believe it will take a “miracle” to retire securely with 50% stating they try to avoid thinking about it. Generation X Report | Natixis Investment Managers

 FCA has issued a new warning over stock trading apps' use of game-like design features to influence trading behaviour. Based on an online experiment with 9,000 consumers, the watchdog noted that these game-like digital engagement tactics included push notifications and the offer of prize draws. The regulator said such techniques could increase trading frequency and risk taking among consumers.FCA keeps trading apps under review over gaming concerns | FCA

 Commercial Banking

UK Finance has reported growth in business lending to SMEs from high street banks with lending increasing by 15% to just over £4bn at the end of Q1 2024 compared to Q4 2023. Additionally, SMEs continued to reduce the stock of cash deposits, with deposits 4.5% lower at the end of Q1 compared with Q4 2023.Lending to SMEs by high street banks grew in Q1 2024 | Insights | UK Finance

Until Next week...