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Mortgage rates halve in ten years

Mortgage rates are at historic lows, having almost halved in the past decade, according to Moneyfacts.

The Bank of England cut interest rates to 0.5 per cent in March 2009 in a bid to stabilise the UK economy amid the global financial crisis.

The average two year fixed mortgage rate was 4.79 per cent ten years ago, almost double the rate available today at 2.49. The same is true of the average five-year fixed rate which has fallen from 5.62 percent to 2.69.

Moneyfacts said the figures showed there was healthy competition between providers to attract new borrowers.

The drop in interest rates coincided with greater product availability at most loan-to-value (LTV) tiers. The number of LTV products available at 95% has increased 130 times in the past decade to reach 391 today, which should help first time buyers.

At the lower LTV tiers too the number of mortgages available has almost doubled. Borrowers with 40 per cent deposit or equity have 588 products to choose from today compared to 272 in March 2009.

Providers have adapted

Moneyfacts spokesman Darren Cook said: “A decade ago, providers did not seem to want to lend to borrowers who could only raise a small deposit. However, providers have since adapted to the new post-crisis mortgage environment.

“One figure that has remained fairly static over the decade however is the average standard variable rate, having only increased by 0.12% since 2009, from 4.77% to 4.89%. Meanwhile, both the average two- and five-year fixed mortgage rates have nearly halved during this time.

“During the past ten years, not only have the two- and five-year fixed mortgage rates dropped, but the gap between the two has more than halved, falling from 0.83% in 2009 to stand at a difference of only 0.4% today.

“This could be a significant factor for borrowers when considering whether to fix for the short or longer-term, especially with the current economic uncertainty.”

At the same time, Cook pointed out that the Financial Conduct Authority introduced clear affordability measures that mortgage providers are required to follow, meaning lending criteria is much stricter than it was before the financial crisis.

Written by: Max Liu

Source: Your Money

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Brexit set to hurt UK investment for years – BoE’s Haskel

British business investment will probably stay weak for the next few years because of uncertainty linked to Brexit, a Bank of England interest-rate setter said, calling into question suggestions of a Brexit deal “dividend” by the finance minister.

As Jonathan Haskel gave his first speech since joining the BoE’s Monetary Policy Committee in September, Prime Minister Theresa May’s Brexit strategy was in meltdown after her failure to win last-minute concessions from the EU ahead of a key parliamentary vote on Tuesday.

Haskel said a planned 21-month transition period that is supposed to come into effect when Britain formally exits the European Union on March 29 might run for longer than expected.

In the longer term, companies also need to know whether Britain will have a customs union agreement with the EU or strike a free trade agreement in order to have a sense of how high any new barriers to trade with the bloc will be, he said.

“The longer-term question is whether investment will eventually bounce back after uncertainty is resolved. The answer to this depends on what trade deal is struck,” he said in a speech at the Department of Economics at the University of Birmingham.

“At least for the next few years the prospect of low investment seems possible.”

Companies in Britain cut back their investment in each of the four calendar quarters of 2018 — the longest such run since the depths of the global financial crisis — as the country approached its departure from the European Union.

PRODUCTIVITY CONCERNS

Haskel said almost 70 percent of the slowdown in business investment in Britain since the Brexit referendum in June 2016 was linked to uncertainty over Brexit.

The BoE is concerned that weak business investment will aggravate Britain’s low productivity growth, holding down growth in wages and making the economy more susceptible to inflation.

With May facing the risk of another humiliating defeat of her Brexit plan in parliament on Tuesday, she has opened up the possibility of a short extension to the current negotiations.

Finance minister Philip Hammond, seeking to help May get parliament behind her deal, has said investment is likely to pick up once companies have more clarity that Britain can avoid an economically damaging no-deal Brexit.

Haskel declined to comment on the implications of weak investment for the BoE’s thinking on interest rates, saying that would be something for his next speech.

“Since this thing… is very hard to predict, that’s the way I would think about it. But that will be the next speech, to trace through the relative impact on the demand and supply,” he said during a question-and-answer session after his speech.

The BoE has said it expects to resume raising interest rates if Britain can seal a deal to avoid a no-deal Brexit.

Governor Mark Carney and some other policymakers have said they think they would probably need to cut rates if Britain fails to secure a transition deal to ease the shock of its exit from the EU.

By Andy Bruce

Source: UK Reuters

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Scottish commercial property market outperforms UK in several sectors

SCOTLAND’S offices, retail and alternatives property markets all significantly outperformed the UK markets in 2018, according to data released by leading property consultant CBRE yesterday.

Their research revealed that the annual Scottish all commercial property total return for 2018 was 5.6%, only slightly lower than the UK all property return of 6%.

Industrials in Scotland also had a strong end to the year, achieving the highest return of the three main sectors.

Office and industrials returns in Scotland have increased year on year, with offices achieving 8.2% compared to 5.9% in 2017, with industrials increasing from 7.9% to 8.6%.

Offices were 2% ahead of the UK figure of 6.2%, while retail returned 4.7% compared to the overall UK figure of minus 1.1%.

Alternatives continued to be the best performing sector in Scotland, and the only one to achieve double-digit returns in 2018, with 10.6% compared to the UK’s 7.5%.

CBRE said that given the current challenges facing the retail sector, it is unsurprising that at year end the outlook remained subdued.

Compared with performance for the whole of the UK, Scottish returns have been more resilient in the final quarter of 2018. At the all property level, the picture is very similar –with UK returns down by almost 1.5% and Scottish returns unchanged.

During the last quarter of the year, £642 million of stock was transacted in Scotland, demonstrating a strong final quarter, and bringing the annual total to £2.49 billion in 2018. This is broadly in line with the £2.5bn achieved in 2017.

The retail sector total was boosted by the controversial sale of Fort Kinnaird Retail Park, located on the eastern edge of Edinburgh, which was acquired from The Crown Estate by M&G Real Estate for £167.25 million, with none of that sum accruing to the Scottish Government despite the Crown Estate being devolved.

David Reid, associate director of CBRE, said: “It’s great to see the industrial and logistics sector in Scotland performing strongly again during 2018 with sharpening yields and increasing rental and land values within prime locations.

“With this backdrop we are seeing increasing developer appetite for speculative schemes and there are a number of occupier pre-lets on the horizon during 2019.”

By Martin Hannan

Source: The National

uk property Market
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Property Market Steady in January as Wait for Brexit Decision Continues

The start to 2019 saw a continuation of many of the trends that were apparent towards the end of 2018, namely that there was still significant disaggregation between regional performance, and further nuances between price brackets in key conurbations. With values increasing slightly on a monthly basis in Wales, Scotland, the North East and East of England, and reports across our network of a busy month with buyer enquiries, we would suggest that there is plenty of steam left in the market in parts of the country, albeit that other areas are perhaps seeing some potential movers taking the ‘wait and see’ approach until there is more clarity around the current political situation.

This has led to reports of shortages of stock in some areas, as vendors who would like to move are also holding on until such time as the market in their area improves, providing a degree of insulation for values even where there are fewer buyers who are currently active. With many lenders entering the final quarter of their financial year in January, the market saw a raft of new and highly competitive rates released which added further support for the market as fixed-term product pricing fell to near-historically low levels.

Overall, it would seem that pent-up demand is building in many areas, due to the number of well intentioned buyers and sellers who had hoped that the political uncertainty would have abated by now. Therefore, whilst market sentiment may be one of caution in some areas for the short-term, the mid to longer-term view could well be more optimistic once we have a Brexit denouement.

On a topline basis data for Wales is as follows:   

Wales Average Statistics –January 2019 data Purchase Mortgage Remortgage
Average LTV % 77% 62.5%
Average loan size £133,484 £125,808
Average age 36 42
Average income £30,788 £32,152
Average property value £172,460 £201,293

Richard Hullin from Mortgage Advice Bureau in Swansea comments:

“We came back to work in January expecting a quiet couple of weeks, but instead hit the ground running with the phones ringing non-stop on the first day back!  It would seem that a lot of our clients had been out viewing properties over the Christmas holidays, and as a result wanted to formalise their offers early in the new year.  This meant that the majority of mortgages we arranged last month were for clients moving home, either due to a change in circumstances – for example, a few divorce cases which were quite complex to navigate – as well as growing families for whom the festive period had highlighted that they needed more room.  As a consequence of this level of activity, prices locally remained steady in January on the previous month.

We also assisted a substantial number of clients with their remortgages in January, many of whom wanted to take the time to review their borrowing and get their finances in order for the new year.  In addition, we worked closely with a few of our professional investor clients who required specialist Buy To Let mortgages, as they have large portfolios owned by limited company structures. Overall then, it was very much business as usual for us, despite the Brexit headlines which don’t seem to be causing much – if any – concern to buyers in our local area.” 

By Chris McColgan

Source: Business News Wales

Construction
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UK Construction Set for Growth Amid Brexit Uncertainty

The annual Construction Skills Network (CSN) report, which issues a five-year forecast into the skills requirements for the industry, anticipates a 1.3% growth in construction across the UK, which is one-third of a percent lower than last year. The forecast is based on the premise that the UK has an exit deal with the EU.

Public housing is the largest anticipated increase- it appears to be moving steadily ahead as infrastructure declines. Financial support from the local and national government is supporting a growth rate of 3.2% in public housing, which is up by half a percent since the forecast last year.

Infrastructure is expected to increase by 1.9%, which is down from last year’s forecast of 3.1%. This sector has been heavily impacted by Brexit uncertainty and last month’s stalling of Wylfa, the Welsh nuclear power plant.

Commercial construction is going down significantly due to investors being overly cautious in the face of Brexit. The forecast anticipates that the sector will decline sharply in 2019 and level out by 2023, with no growth expected overall.

Despite this outlook, the housing repair and maintenance industry appears to be profiting from a more subdued property market, as homeowners cancel plans to sell and improve their current properties. This sector is expected to grow by 1.7% by 2023.

Although the wider economic outlook remains uncertain, more construction workers will be needed over the coming five years. An estimated 168,500 construction jobs will be created in Britain during that time, 10,000 more than the 2018 forecast. Employment in construction is expected to reach 2.79 million in 2023, which is only 2% lower than its 2008 peak.

CITB Policy Director Steve Radley said that the forecast reflected the uncertainty across the wider economy, primarily due to Brexit.  Concerns about Brexit are weighing on investors and clients at present, which is affecting contractors and their ability to plan for the future.

Mr. Radley said that if a deal is agreed regarding the UK departure from the EU, low but positive growth is expected for the construction industry. Even as infrastructure slows down, public houses and repair and maintenance are showing signs of strengthening. This should result in the number of construction jobs increasing over the next five years, creating more opportunities for construction careers and heightening the importance of tackling the current skills pressures.

Source: CRL

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No-deal Brexit could damage Scotland’s housing sector, minister warns

A no-deal Brexit could cause serious problems for Scotland’s housing sector, the housing minister has warned.

Kevin Stewart will say that leaving the EU without a deal could damage investor confidence in residential assets and the build-to-rent market when he writes to housing organisations and stakeholders next week.

He will also say that inflation and interest rate fluctuation could affect rents, the financial health of Registered Social Landlords (RSLs) and the availability and cost of finance for new-build homes.

There are also concerns that house-building materials such as timber, prefabricated concrete and boilers could be more expensive and less available.

The extent to which we depend on EU relations cannot and should not be underestimated

Kevin Stewart MSP

Speaking ahead of Scotland’s Housing Festival 2019, Mr Stewart said: “The UK’s exit from the EU has the potential to impact the housing sector in Scotland and therefore our housing ambitions.

“As we strive to provide stability and certainty, our efforts are being compromised by the UK Government’s failure to acknowledge our concerns or discuss compromise alternatives.

“Some 60% of the UK’s building material imports come from the EU and we have a particular reliance in Scotland on imported timber for house building.

“Many of those employed across the housing sector are EU nationals. The extent to which we depend on EU relations cannot and should not be underestimated.”

Mr Stewart said that the Scottish Government is committed to delivering more affordable homes and is on track to deliver its 50,000 affordable homes target by 2021, backed by its investment of more than £3 billion.

It is also investing in energy efficiency improvements to existing homes, making them warmer and cheaper to heat.

He said: “We must not allow the UK Government’s approach to Brexit to jeopardise these commitments which also supports our aims to end homelessness, and reduce fuel poverty.”

Scotland’s Housing Festival 2019 takes place in Glasgow on March 12-13.

A UK Government spokesman said: “An orderly Brexit is in the UK’s best interests and the best way to achieve that is for MPs of all parties to support the Prime Minister’s deal.

“The deal is a good one for Scotland, Wales and the whole of the UK – it delivers the result of the referendum, gives us a close future partnership with the EU, and guarantees citizens’ rights.

“Refusing to support the Prime Minister’s deal simply makes a damaging no-deal more likely.”

Source: iTV

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Buy To Let Investors Contribute £16.1 Billion To Economy

Buy to let investors in the private rental property sector contribute a huge £16.1 billion to the UK economy.

Through their spending over the year, landlords in the UK contribute towards thousands of jobs from builders and tradesmen through to accountants and letting agents. This figure has nearly doubled from £8.5 billion a decade ago, following the long-term expansion of the rented sector and rising costs per property.

Property maintenance and servicing represents the largest running cost for landlords across the private rental sector (PRS), totalling £5.8 billion. The next largest outlay is for those landlords that use a letting or management agent and contribute a collective £5 billion.

Investors spend a total of £567 million on accountancy and legal fees, £341 million on administration and registration costs, contributing an additional £908 million of spending solely dependent on the PRS’ existence.

Landlords also contribute £2.3 billion on service charges and ground rents, £848 million on utilities, £791 million on insurance, and £618 million on other associated costs of running a property.

The average landlord now spends £3,571 per property in annual running costs, before tax or mortgage interest – equivalent to 32.9 per cent of rental income. These costs have risen by 5.6 per cent in the last two years without factoring in increasing taxes. Since the start of 2009, costs have jumped by 28 per cent, a rise of £771.

£1,086 is currently spent on maintenance, repairs and servicing, and £935 spent on letting agent fees per property. A typical landlord spends £426 per property each year in ground rents and service charges. Insurance typically costs £149, and legal and accountancy fees £107, while administrative and license fees add another £64 per year.

A further £528 is lost in void periods each year, a figure that has climbed in recent years as a result of higher rents, and a slightly longer gaps between tenancies.

Faced by rising costs, and higher tax bills following the recent changes to mortgage interest tax relief, landlords are now looking to cut the amount they contribute.

36 per cent of landlords, surveyed by BVA BDRC on behalf of Kent Reliance, are already reducing or planning to reduce their spending. Overall, a typical landlord reviewing their outlay would cut spending per property by around 6 per cent. If replicated across the PRS, this would reduce their total spending by nearly £1 billion each year, reducing the revenues of the industries that depend on the PRS.

Sales Director of OneSavings Bank, Adrian Moloney, commented: ‘The political discourse around the private rented sector has been one-sided to say the least. Overlooked is the significant economic contribution landlords make, supporting thousands of jobs through their spending and housing a large portion of the country’s workforce. Instead, landlords have faced punitive tax and regulatory changes, at a time when running costs are climbing.’

Source: Residential Landlord

Second charge Brexit
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More brokers searching for adverse second charge lenders

Second charge criteria searches on Knowledge Bank for people with debt issues accounted for four out of every five for the first time last month.

Knowledge Bank has the largest database of mortgage lending criteria held anywhere in the UK. Its criteria activity tracker found brokers searched for lenders who would allow debt or income issues, unsatisfied county court judgements, ongoing debt management plans, adverse credit repair or borrowers on benefits with no earned income.

Nicola Firth, chief executive of Knowledge Bank said: “Once again the criteria index allows us to get ahead of the market and understand the cases that brokers are actually trying to place rather than just those that make it through the lending net.`

“An increase in the number and complexity of products can be seen in each and every lending sector and so the challenge for brokers to find the right home for their clients’ loan becomes more and more onerous. With new lenders entering the market and existing lenders expanding their product options.

“We also constantly hear from brokers that criteria searching, in addition to helping them save time in placing cases, vitally enables them to evidence and document their process should their advice be questioned at any time in the future.

“Borrowers and regulators alike simply aren’t concerned how difficult it is to keep abreast of all available product options, just that it is done.”

The top search for residential was maximum age at end of term, followed by self-employed, one-years accounts while the top search for equity release was property with an annex, outbuildings, land or acreage, followed by freehold flats.

The main focus for brokers researching the buy-to-let sector in February was on finding lenders who would lend to first time landlords.

This criteria search has placed in the top five for the past six months and so the desire for borrowers to secure their first buy to let could, and should rightly, be classified as a trend rather than a passing fad

The top search for self-build was conversion, regulated bridging for bridging, applications paid in a foreign currency for overseas and maximum LTV for commercial.

By Michael Lloyd

Source: Mortgage Introducer

UK house prices
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UK house prices: Experts cast doubt on ‘volatile’ Halifax price hike figures

House prices rose almost three per cent at the start of 2019 compared to the same period last year, new figures revealed today.

Annual house price growth hit 2.8 per cent in the three months to February compared to the corresponding time in 2018, Halifax’s house price index said today – much higher than the 0.8 per cent growth in January.

The value of UK homes rose 5.9 per cent month-to-month, Halifax added, seeing the average UK house price hit £236,800.

Measured on a quarterly basis, growth hit 1.8 per cent as a lack of homes on the market buoyed prices.

Halifax managing director Russell Galley said: “The shortage of houses for sale will certainly be playing a role in supporting prices.

“Annual house price growth at 2.8 per cent is within our expectations, but is fairly subdued compared to 2015 and 2016, when the average growth rate was 8.3 per cent.

“People are still facing challenges in raising a deposit which means we continue to expect subdued price growth for the time being. However, the number of sales in January was right on the five-year average and, at over 100,000 for the fifth consecutive month, the overall resilience of the market is still evident.”

Unreliable indicator?

However, Howard Archer, chief economist to the EY ITem Club, said Halifax’s February jump was “completely off the radar” after Nationwide warned growth was at an anaemic 0.4 per cent.

“The Halifax house price measure has been particularly volatile in recent months and the sharp monthly movements have been out of kilter with other measures,” Archer added.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, agreed, calling Halifax’s jump “implausible”.

“We have little confidence in Halifax’s index as a reliable indicator of the housing market. Its extreme volatility … undermines its validity,” he added.

Lucy Pendleton, founder and director of independent estate agents James Pendleton, called the market volality “a ricocheting bullet”.

“At first glance this monthly surge could be a bout of pre-Brexit confidence but nothing has changed,” she added.

“The more likely answer is that in key areas low supply is squeezing those buyers who have a need, rather than just a desire, to move and just can’t put it off any longer.”

“There is no doubt that the shortage of supply is a significant factor in the uplift,” said Jeremy Leaf, north London estate agent and a former Rics residential chairman.

Will UK house prices rise after Brexit?

Tombs said that while a Brexit deal would revive the housing market, it would only work as a short term fix, warning that it would also lead to a rise in interest rates.

“With loan-to-income ratios at a record high, even modest increases in mortgage rates will greatly dampen house price growth,” he predicted.

“As a result, we still expect the official measure of house prices to rise by just 1.5 per cent over the course of 2019.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said that a Brexit decision will spur sales – but won’t bolster prices.

‘Brexit has created some pent-up demand and when we get a decision, whichever way it goes, we expect to see a spike in activity, not prices,” he said.

Leaf said he hopes for a “more balanced market” if Brexit negotiations make more progress, saying: “The reasons behind [the drop] are certainly not just to do with Brexit as we consistently hear on the doorsteps – affordability and tough lending criteria as other factors.

“Local factors are also highly relevant and activity varies quite a bit from area to area.”

By Joe Curtis

Source: City AM

unemployment
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Unemployment would rise after no-deal Brexit, top economist warns

A no-deal Brexit would be a “sharp shock”, increase unemployment and could shrink the Scottish economy by 7%, Scotland’s top economist warned MSPs.

With just three weeks until the UK is due to leave the EU, the Scottish Government’s chief economic adviser said that they would not be able to mitigate all the damage caused by a no-deal Brexit.

Giving evidence about his report into the economic impact if the UK leaves without an agreement in place, Dr Gary Gillespie told MSPs the Scottish economy would be between 2.5% and 7% lower compared with remaining.

He said: “Despite the best government mitigation, a no-deal would impact a short, sharp shock to the economy.

“With that kind of shock, you would see it manifest in the labour market.

“You would see unemployment – from its record-low level at the moment – beginning to rise as firms respond to the challenge of reduced demand, supplies and cash flows.”

MSPs questioning the economist came away from the Europe Committee no clearer about what plans are in place for a no-deal Brexit.

There’s no published plan as of yet but there’s no published plan at the UK level either

Dr Gary Gillespie

After six questions by Tavish Scott, trying to elicit details about whether the government had a plan for no-deal Brexit and how it would respond, Dr Gillespie said it had not been made public but insisted there was one in place.

He stressed the complexity of response required across all government departments and businesses, saying: “There’s no published plan as of yet but there’s no published plan at the UK level either.”

“There’s a plan in place but the key thing about the plan is that the plan can’t mitigate across all the areas.”

Dr Gillespie added: “What we’ve heard from the UK is that the Bank of England will bring forward particular measures but we haven’t heard much else about what a plan would be.”

MSPs also questioned Dr Gillespie and the Scottish Government’s deputy director of economic analysis Simon Fuller about the impacts of Brexit on people coming to work in Scotland.

Highlighting the damage to tax revenues of reduced immigration, Mr Fuller said: “If you had a 50% fall in EU migration, Scotland’s economy would be about 6% smaller by 2040 than would otherwise be the case if migration continued at the levels we’ve seen over the last five to six years.

“That would mean GDP of £6 billion to £7 billion lower and feeding through to tax revenues of about £2 billion to £3 billion lower.”

Following the committee meeting, Economy Secretary Derek Mackay said: “As a responsible government we have to prepare, as best we can, for all scenarios.

“The Cabinet Secretary for Government Business and Constitutional Relations has confirmed in his detailed statements to Parliament that planning for a no-deal outcome is continuing and intensifying across the organisation, with the Scottish Government Resilience Committee meeting weekly to manage and escalate matters as required.

“A no-deal exit would severely disrupt the flow of goods at UK borders and our preparations include working with transport operators, suppliers and retailers to safeguard as far as possible the continued supply of medicines and food, and engaging with exporters to help manage disruption.

“However, there is only so much we can do and we will not be able to mitigate all of the impacts of a ‘no-deal’ exit in Scotland.”

Scottish Liberal Democrat Europe spokesman Tavish Scott MSP said: “We’re well into March and a no-deal Brexit is a terrifying but genuine possibility. It’s unbelievably frustrating to have to draw information out of government officials like blood from a stone.

“Planning is difficult because no-one knows what a divided Tory government is going to do. But the bottom line is pretty simple. We need to have a plan and it should be publicly available. Available for Scottish business, residents and European citizens who live and work here.

“That is the only way worried citizens can be reassured the government has a grip on what may happen across the Scottish economy.”

Source: Express and Star