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Ten years of rock bottom interest rates has cost savers £188bn

Tomorrow marks the 10-year anniversary of the Bank of England cutting interest rates to 0.5%.

And during that time, savers have collectively missed out on at least £188bn – the equivalent of £7,101 per household, according to investment platform Hargreaves Lansdown.

Sarah Coles, personal finance analyst at the firm, said: “We’ve lived through a miserable decade for savers. The Bank of England slashed rates from 4.5% to 0.5% between November 2008 and March 2009, and followed this up by offering enormous quantities of cheap money to the banks. As a result, banks lost interest in competing for savings, and savings rates collapsed.

“Over this lost decade for savers, when you compare rates before the cuts to the rates we saw throughout, we’ve missed out on at least £188bn.”

Making matters worse, money in non-interest bearing accounts has shot up from £47bn in September 2008 to £165.9bn today.

But luckily there are simple steps that savers can take to make sure they get a better rate of interest from their savings.

“While interest rates remain historically low, newer banks and building societies are competing for your cash. It means that by switching you could get a much better deal,” explained Coles.

“You can switch easy access funds earning just 0.25% and make 1.5% – six times the interest. The advent of online savings marketplaces also makes switching far easier, as you can move between accounts with different banks in just a few clicks,” she added.

Coles notes that savers can get more than six times their current interest rate in three easy steps:

1) Split your savings

The first step is to split your savings into different pots. Three to six months’ worth of expenses should be put aside in a competitive easy access account to use as an emergency savings safety net, with the rest freed up to work harder.

2) Fix

It is then a case of dividing out the money that isn’t required immediately into different pots, depending on when you’re likely to need the cash.

Each of the pots should then be fixed for various periods – between six months and five years – depending on what suits you best. If the money is not required for five to 10 years or more, Coles suggests considering stock market investments, which should offer superior growth over the long term as well as the prospect of outpacing inflation.

3) Shift

Coles acknowledges that this final step is the most challenging, which helps to explain why half of all savers haven’t shifted their money over the past five years.

The Financial Conduct Authority, the regulator, found that savings accounts that had been held for five years or longer paid an average of 0.82% lower rate than those opened in the previous two years. With this in mind, Coles says it is worth considering an online savings marketplace, which will make it easier to spot better interest rates available.

The outlook for interest rates

One of the biggest challenges that savers have faced has been the expectation that interest rates would return to more normal levels sooner. For example, at the end of 2009, markets expected interest rates to be back to 4% by the end of 2012.

However since the European Union referendum, expectations for interest rate hikes have been much less upbeat

Looking ahead, markets are forecasting that interest rates will be a little over 1% in three years’ time, with a 51.7% chance of an interest rate rise this year.

Source: Your Money

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London property market predictions over the next 12 months

It’s no secret that the London property market has been subdued recently, but the fact that, in spite of everything, it has refrained from crashing does highlight the fact that the market is underpinned by solid foundations. That said, the London property market in 2019 is likely to be characterised by overall caution and stability rather than growth. The team at property investment firm Hopwood House look ahead to what the next 12 months might have in store for the London property market with three specific predictions.

Sales volumes will slow as buyers wait to see what Brexit will bring

Even though Brexit itself need not turn out to be a complete catastrophe, the uncertainty around the form it will eventually take can, understandably, make buyers very nervous. In principle, this issue should be resolved, one way or the other, by the end of March. If that is the case, then growth may start to return to the market towards the latter end of 2019, once buyers have had a chance to adjust to the new reality. In practice, however, there is also a feasible possibility that the negotiating period will be extended beyond the given deadline, which could lead to a longer period of uncertainty and hence subdued activity in the London property market. On the plus side, this could ultimately be of long-term benefit to everyone if it results in a better deal for the UK.

House-price growth will remain subdued

Brexit is the most obvious reason why it is unlikely that there will be major house-price growth in London for the immediate future, however there are others. For example, the London authorities have made it a priority to address the chronic shortage of housing, particularly affordable housing, through a programme of home-building, which has had the (presumably intended) effect of helping to put a brake on house-price growth. It’s also worth noting that the last 10 years have seen certain parts of London benefit greatly from the regeneration brought about by the 2012 London Olympics and other, separate, infrastructure improvements, such as Crossrail, with the result that there was unusually high house-price growth in these areas. At the current time, no such major developments appear to be in the pipeline, hence it is only to be expected that house-price growth will proceed at a slower pace, although, as always, it is to be anticipated that some parts of London will perform better than others, for example, the Notting Hill market continues to be very robust.

The rental market will be highly competitive for tenants

On the one hand, you have people who need a place to live in London, but who do not wish to buy right now. On the other hand, you have a vastly reduced number of rental listings as compared to 2018. This obviously creates a challenging situation for tenants even before factoring in the likelihood that the opening of new tech hubs will draw even more people to the capital. It will be interesting to see if this imbalance in the rental sector will lead to the government looking to encourage buy-to-let investors to focus on the capital and, if so, what form this encouragement will take.

Source: London Loves Business

UK property holiday letting
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UK property: Why history proves this could be the best time for you to buy

  • New research proves how UK property investors who bought immediately following the global financial recession have made the most money on their investment in recent years
  • These “brave” investors made £93,378 in profit when selling their property in 2018, more than buyers in any other year over the last 14 years
  • Amid the wider economic uncertainty of Brexit, will those investors that buy now in 2019 make some of the highest returns over the next decade?

Does this prove that buying UK property now could help you to achieve the highest long-term returns?

Brexit, and the immediate uncertainty of the UK’s withdrawal from the European Union, means that some investors may be waiting until a conclusion is reached before entering the property market. However, the subsequent fall in the pound has also led many other investors to take advantage of this currency opportunity by buying property now.

And new data suggests that it’s the latter group of investors that could be about to achieve the biggest levels of profit over the next few years.

Published by Savills, new research shows that, between 2004 and 2018, it was investors that bought UK property in 2009, amid the fallout of the global financial recession, that achieved the biggest returns when selling their property in 2018.

On average, those buying UK real estate in 2009 made £93,378 when selling their asset last year. It underlines the importance of purchasing with the right market conditions – and taking advantage of wider economic uncertainty.

“Over the last 15 years it really has made a difference as to when and where you bought in terms of the profits you’ve made. It reinforces that it’s not a one-size-fits-all market,” said Lucian Cook, Residential Research Director at Savills.

“The mortgage markets (in 2009) were locked up, but I also suspect some of this is about whether people were brave enough to do it and whether some people in 2009 had enough accumulated equity at that point to be able to make the move.”

The UK is currently suffering a housing shortage. Housebuilding is significantly below the 300,000 new homes the government outlines is required each year. Regardless of wider economic concerns, this does not alter this supply and demand imbalance in the UK’s property market.

At the time of publication, the pound is 11% cheaper against the US dollar than it was on June 22nd 2016 (the day before the EU referendum), and many investors are taking advantage to ensure they can secure an asset with the best value and long-term growth prospects.

Source: Select Property

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UK firms report weakest growth since April 2013: CBI

British businesses reported their weakest growth in nearly six years during the past three months due to fears of a no-deal Brexit and rising global trade barriers, the Confederation of British Industry said on Sunday.

The CBI’s index of private-sector activity over the past three months dropped to -3 in February from zero in January.

This was its lowest since April 2013, when Britain was still recovering from the global financial crisis. Firms expected similar weakness in the three months ahead, when Britain is due to leave the European Union after over 40 years of membership.

Prime Minister Theresa May has yet to win parliament’s support for a Brexit transition deal although she has paved the way for a possible delay to Brexit beyond its scheduled date of March 29.

“More and more companies are hitting the brakes on investment and day-to-day business decisions are becoming increasingly problematic,” the CBI’s chief economist, Rain Newton-Smith, said.

A survey last week showed manufacturers stockpiled goods by the most on record for any big advanced economy as they prepared for the possibility of border delays after Brexit.

The Bank of England predicts Britain’s economy will grow by just 0.2 percent in the three months to March and growth in 2019 to be the weakest since 2009, even if Brexit goes smoothly.

Britain’s trading partners in Europe are facing weaker growth too, due to trade tensions between the United States and China that have hurt global manufacturers.

The CBI survey was based on responses from 650 businesses in retail, manufacturing and services.

Source: UK Reuters

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London is ‘dragging’ on average house prices across UK’s top 20 cities

UK city house prices rose by 2.9 per cent over the 12 months to January 2019 but London has become a “drag” on the housing market after slow growth in the capital.

The latest Hometrack Cities Index, which looks at house prices across Britain’s top 20 major cities, showed prices are rising fastest at six per cent in Leicester, followed by 5.8 per cent in Belfast and 5.4 per cent in Manchester.

But house price inflation in London was virtually flat at 0.2 per cent, showing the second slowest growth of the 20 cities outside of Cambridge.

Aberdeen was the only city where prices fell, as they dropped 1.6 per cent. The average house price in the Scottish city is down £34,000 from mid-2015, at the time of the collapse in oil prices.

The data showed how the weakest housing markets have the longest sales periods and largest discounts, which is currently Aberdeen and inner London, where discounts on asking prices reach seven per cent on average, with it taking 16 weeks to sell, on average.

Of the 20 cities, three of the bottom four for growth did have the highest average house price still, with London, Cambridge and Oxford all above £400,000, while no other city averaged more than Bournemouth’s £287,700, among the UK’s average of £216,600 in these cities.

“This price growth continues to be driven by affordable locations at the bottom end of the house price ladder and in these slower market conditions, it’s only natural that the more desirable UK cities will see prices growth flatten and the time to sell extend, due to the already inflated price of getting a foot on the ladder there,” said Marc von Grundherr, director of Benham and Reeves.

“Of course, the commitment of investing in the inner London market at present is likely to take a bit more thought than it may have previously, but to label London as a ‘drag’ and to liken the market strength to that of Aberdeen is a tad misleading,” he added.

“Prices are holding firm, transactions are steady and London remains the pinnacle of the UK housing market, having emerged from the negative price trends of the previous year.”

Source: City AM

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A long stagnation could kill off Britain’s obsession with house prices

House prices are still struggling in the UK.

According to the latest Nationwide report, prices rose by 0.4% in February, compared to the same month last year.

The average UK house price is now around £210,000, reckons the building society.

Not much change then since last time.

The big question is – what’s next?

People only care so much about house prices because they have to

House prices are a bit of an obsession in Britain.

This is not because the British are born with some sort of property-fetish gene. It’s because houses are both economically significant and the cause of a great deal of insecurity.

It’s similar to the way that parents with school-age kids in this part of the world obsess over catchment areas and exam results. They didn’t care when they were single and childless, and they won’t care once their kids have got into school. But try getting them to talk about anything else when they’re in the midst of the fraught school-hunting process – no chance.

So this obsession with property is simply a result of the fact that houses hang over us. This is made clear by the fact that this “national obsession” is in fact, not really national at all. You only see it in areas where houses are expensive – in the 20-odd years of my life I spent in and around Glasgow, I don’t think I had a single conversation about house prices (lots about the rain, though).

Since maybe the mid-1990s, the UK property market has been gripped by  slow-motion FOMO (“fear of missing out”). You stayed off “the ladder” to your cost.

Say that, as a young person without much money and a desire to maintain geographic flexibility, you didn’t fancy taking a huge leveraged punt on an asset of often-questionable quality. Well, that was a mistake. That property you passed up back then has probably “earned” more money each year than you ever got paid.

The old saying “you can’t go wrong with bricks and mortar” has been hammered home to the last couple of generations with brutal efficiency. If you are in the core wealth-planning target market (around 40-60 odds) then more than anything else, your present level of household wealth almost certainly depends on how much property you owned and when.

It could make all the difference between whether you are now able to think about jacking it all in for a portfolio career with a heavy dollop of golf and city breaks on the side; or whether you are looking down the barrel of another 25 years of back-breaking mortgage payments that could rocket to unaffordable, lose-your-home-at-age-65, levels on the whim of Mark Carney.

Anyway…

What if this is the “new normal” for house prices?

The question for me now is – how long will this obsession persist?

A flat or falling market doesn’t breed the same level of FOMO. There is still a big psychological hangover from the boom period. Prices in many parts of the UK are still gobsmackingly high. And there’s an assumption that prices will, at some point, renew their astonishing ascent.

But what if they don’t? On the one hand, I still can’t see an obvious trigger to turn the current slow grind lower into a full-blown crash. If interest rates stay roughly where they are for a while and people hang on to their jobs, then they’ll be able to pay their mortgages.

That means there won’t be a wave of forced selling, which is what you really need to get a full-on crash, as happened in the 1990s. (In 2008, the problem was more about credit drying up – buyers were effectively shut out of the market.)

Equally though, if you don’t get an epic crash, you don’t get an epic buying opportunity. You might just get a slow stagnation, which gradually returns prices to just about affordable levels.

House prices are generally “still very high relative to incomes”, as Capital Economics points out. But with prices in the most expensive areas (ie, London) falling hardest, and wages gradually ticking higher, that might be rectified more quickly than you’d think.

So do we end up with a “new normal” for the housing market? Unfortunately, property is still a hideously distorted market. We have the stupid Help-to-Buy scheme, which will be causing problems well down the line from here (it’s a profoundly immoral scheme, as my colleague Merryn has just written in an excellent piece, which we’ll send to you early next week).

And can “build-to-rent” create a more attractive market for renters in the UK than “buy-to-let”? That remains to be seen.

But if house prices cease to surge every year, then that in itself would make a big difference. While the last few generations learned that “you can’t go wrong with bricks and mortar”, the next few might learn the precise opposite – that a home which fails to rocket in value can actually be an expensive headache relative to other asset classes.

Source: Money Week

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UK house prices: Housing market ‘on its knees’ amid Brexit uncertainty

UK house price growth remained sluggish in February, as property experts warned the housing market is “on its knees”.

Prices rose just 0.4 per cent year on year compared to January’s 0.1 per cent rate of growth, new data published today reveals.

But prices actually slumped month on month, falling 0.1 per cent from January to an average of £211,304, down from £211,966, Nationwide’s house price index found.

“After almost grinding to a complete halt in January, annual house price growth remained subdued in February,” Robert Gardner, Nationwide’s chief economist, said, with experts attributing the lack of action to extended political uncertainty surrounding Brexit.

Pointing to “softened” market sentiment, he added: “Measures of consumer confidence weakened around the turn of the year and surveyors reported a further fall in new buyer enquiries over the same period.

“While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months.”

Gardner said that despite a slow influx of new properties onto the market, momentum is firmly on the side of buyers after consumer confidence weakened in the new year.

Property experts said market confidence had “shattered” despite a strong employment rate, ultra-low borrowing rates and below-target inflation.

The latest English Housing Survey showed a slight rise in the home ownership rate last year to 63.5 per cent, up from 62.6 per cent in 2017.

March madness?

But property lender Octane Capital’s chief executive, Jonathan Samuels, warned “the UK property market remains firmly on its knees”.

He added: “The home ownership rate may have improved but the relationship many people have with bricks and mortar is changing irreversibly.

“March could be the month the property market finally succumbs to madness.”

All the ingredients for success

Andy Soloman, chief executive of business growth expert Yomdel, blamed the approach of Brexit uncertainty as a deal looks unlikely to be approved by parliament.

But he added: “With unemployment falling and wage growth on the up, we have all the ingredients required for a buoyant housing market, it’s just a case of sitting tight and waiting for the clouds of uncertainty to lift.”

Status quo until we leave the EU

Lucy Pendleton, founder director of independent estate agents James Pendleton, warned the current uncertainty clouding the market will be the norm until after the UK leaves the EU on 29 March.

“Assuming there’s no delay to Article 50, this is going to be the mood music until we get through to April,” she said.

“The market is falling in real terms but in the more expensive parts of the country, particularly London, it’s going to take a more significant retreat in prices to pull first-time buyers to the table in significantly greater numbers.”

Source: City AM

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Ipswich cuts buy-to-let rates and launches later life product

Ipswich Building Society has reduced the rates and fees on its existing buy-to-let 5-year fixed rate products and launched a product to its existing range of later life mortgages.

Both buy-to-let rates are a 5-year fix. There’s a 3.75% at 80% LTV, with a completion fee of £950 and an expat buy-to-let at 3.99% and 75% LTV with a completion fee of £999.

There’s also a 5-year fixed later life fixed rate at 3.50% and 75% LTV with a £500 completion fee and minimum loan of £25,000.

Richard Norrington, chief executive at Ipswich Building Society, said: “By recognising buyers’ demand for longer term mortgage products at this time, and adjusting our rates to reflect this, we are pleased to offer our borrowers stability with regards to their monthly mortgage commitments.

“Landlords, including those based overseas, and older borrowers often have an unusual set of circumstances or changing lifestyles and incomes.

“Our manual underwriting approach, which sees real people making the decisions about affordability, allows us to assist borrowers who may otherwise be denied access by the automated approach deployed by some mortgage lenders.”

All deals are available from five to 40-year terms up to a maximum loan of £500,000 and have an application fee of £199, CHAPs fee of £35 and a tiered valuation fee based on property value.

For standard buy-to-let and later life remortgage applications, there is a free valuation up to property value of £1m and fee assisted legals.

During the fixed rate period the products offer fee-free overpayments up to 50% of the original loan amount.

Source: Mortgage Introducer

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House prices fall by 0.1% month-on-month in February

House prices were just 0.4% higher in February than a year earlier amid signs that the housing market has shifted more in favour of buyers rather than sellers in recent months.

In January, property values had been 0.1% higher than in January 2018 – which was the weakest annual growth in nearly six years, Nationwide Building Society said.

Across the UK, the average house price in February was £211,304 – a 0.1% month-on-month fall.

Robert Gardner, Nationwide’s chief economist, said: “After almost grinding to a complete halt in January, annual house price growth remained subdued in February, with prices just 0.4% higher than the same time last year.

“Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchase, have remained broadly stable in recent months, but survey data suggests that sentiment has softened.

“Measures of consumer confidence weakened around the turn of the year and surveyors reported a further fall in new buyer inquiries over the same period.

“While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers in recent months.”

Mr Gardner also said a supportive labour market and some recent tax changes have improved the bargaining power of people buying a home to live in relative to investors.

Tax changes which have affected landlords include a stamp duty hike for people buying second homes.

Meanwhile, first-time buyers have been helped by schemes such as Help to Buy, Mr Gardner said.

Howard Archer, chief economic adviser at EY ITEM Club, said February’s figures show “another weak performance” for house prices.

He said: “If Brexit is delayed for a few months, ongoing uncertainty is likely to weigh down on the housing market and could well see house prices stagnate over the year or even fall slightly.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We still expect the official measure of house prices to rise by 1.5% over the course of 2019, though most of that increase likely will be concentrated in the second half of this year.”

Jeremy Leaf, a north London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors (RICS), said: “The 2019 housing market clearly hasn’t quite taken off in the way many hoped or expected.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The spring-like weather has not quite filtered through to the housing market with price growth remaining subdued.

“Uncertainty over Brexit continues to have an impact and is likely to for the next few weeks at least.”

Mr Harris said several mortgage lenders continue to trim loan rates in an effort to encourage more business “while innovative tweaks here and there are increasing as an alternative to offering the cheapest rate in the market”.

Source: Express and Star

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Mortgage approvals hit record highs in UK regions despite property market lull

Banking trade body UK Finance has unveiled lending data showing how well first-time buyers, home movers and those remortgaging fared during 2018 in the UK regions of London, Scotland, Wales and Northern Ireland.

Despite concerns about the property market stalling, the data shows some regions had record levels of approvals for first-time buyers and home movers.

Approvals for first-time buyers in Northern Ireland hit a 14-year high last year at 10,600, up 9.4% annually.

Similarly, approvals to first-time buyers in Wales hit their highest level for 12 years at 16,900, up 4.3%.

There were 42,800 new first-time buyer mortgages in London during 2018, 0.5% more than in 2017, but Scotland recorded a 3.1% annual drop to 34,100.

In the home mover market, Northern Ireland recorded the highest number of approvals since 2007 at 6,600, up 6.5% annually.

The number of home mover mortgages approved in Wales was at its highest level for 11 years at 15,800, a 0.6% annual increase.

However, home mover mortgage approvals fell by 5% annually in the capital to 28,800 and declined 0.9% in Scotland to 34,300 during 2018.

Meanwhile, all four regions had record levels of remortgaging approvals during 2018.

Remortgage approvals hit decade-highs in London and Wales.

There were 60,400 remortgages in the capital, a 6.2% annual increase, while Wales recorded 20,100, 12.3% more than in 2017.

There were 9,500 remortgages in Northern Ireland, up 11.8% year-on-year and remortgage approvals in Scotland hit a seven-year high at 35,400, up 11% on 2017.

Commenting on the figures, Jonathan Harris, director of mortgage broker Anderson Harris, said: “First-time buyer numbers across the country have risen on the back of cheap mortgage rates and Stamp Duty exemptions.

“The much-maligned Help to Buy scheme is also playing a large part in helping first-time buyers on to the housing ladder, while more lenders are offering high loan-to-value deals.

“In London, despite recent price falls, affordability remains an issue with the deposit the biggest barrier to home ownership.

“The Bank of Mum and Dad is being called upon more than ever before, but those who don’t have this resource are finding it very difficult.”

Source: Property Industry Eye