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More Competition For The Buy To Let Private Landlord

The private landlord has a hard time; whilst many are aware that tenants will seek private rented properties because of better standards, sometimes better areas, there will also be those who believe that private rented accommodation is the worst deal available for tenants and strive to persuade others of this stance. 

I wrote a little time ago of the encouragement that seems to be given to the corporate landlord, the large companies who build new properties in large numbers; they would make up the shortfall there is between what social landlords can provide. Easier to control perhaps than the small private landlord?

I was surprised to read recently that a number of private builders have decided that as they cannot make profitable enough deals with housing associations, they will register themselves as social landlords. Hopkins Homes has a turnover of £166 million; with concerns that the homes they are building will not be affordable without branding as a housing association, they have registered Peal Community Housing as a housing association.

Others have gone the same way; Larkfleet Homes opened Swift Homes as an association in 2018. The Chief Executive of Larkfleet, Karl Hicks, stated ‘It is becoming increasingly difficult for associations to obtain the funds to buy new homes. We have therefore set up Swift…to take on this role directly’.

It seems probable that if these housing associations, and the others like them, operate with success, there will be others that will swiftly follow. Chris Wakefield, a director of Park Properties which registered in September said that there were problems with bureaucracy (there’s a surprise) but echoing other private builder Housing Associations, that the original housing associations, had been known to offer ‘less than build cost’ for developments. Of all the people that should be working for charity and negative profit, it is not fair to expect private builders to join that number.

But are a housing association the way to ensure houses get built and a fair deal be found all round? I think it will be confusing for many people. Will the properties be offered on the same terms as a social property? Will the tenants appreciate the differences, if there are any?

Why is this challenge for the private landlord? Brand new properties will always seem more appealing to some than a characterful, and probably more spacious, older property. I think the grants that landlords used, having diminished, will disappear; the landlords that the Government will want are the corporate lettings. I hope it will work, but not to the detriment of the many caring and responsive private landlords that the local authorities have relied on.

I cannot fail to mention this week that Amber Rudd has had the courage to say that Universal Credit is not working and that more changes need to be put in place if it is to effectively provide benefits to those that need them. Well said, Ms Rudd. Is she making a place for herself as the landlords’ friend? There may be a general election before long – Amber Rudd as Prime Minister? Remember you heard it here first!

Source: Residential Landlord

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A Brexit-induced price drop won’t fix the housing crisis

The average home has leapt from £81,536 in 1988 to £473,882 in 2018 – that’s a 481 per cent increase.

If the cost of a pint of milk (26p in 1988) had jumped up at the same pace, it would now cost a whopping £1.52 – three times the current price.

Anyone who has watched the news or read the papers in recent years will know that we are neck-deep in a housing crisis, and it extends way beyond the capital. Half of young people in the country have no chance of ever buying a home, and private renters on lower incomes spend an average of 67 per cent of their earnings on rent.

Already the situation is out of control, and that’s before we factor in Brexit, the harbinger of economic instability.

Many have blamed Brexit for the recent slowing and occasional fall of house prices in London – but could this actually be a blessing in disguise?

Could falling prices mean that a few more young professionals will be able to climb onto the first rung of the housing ladder?

As they move into homeownership, will that free up rented homes, causing private rents to fall? Will those on lower incomes then be able to afford their rent again? Will the whole market become more affordable, suddenly meaning that – hallelujah – the housing crisis is over?

Alas, I’m afraid not. And here’s why.

First, falling house prices are often a symptom of an economic downturn or recession. This affects people’s spending power, whether they are first-time buyers saving for a deposit, or homeowners who see the value of their existing property stall or fall into negative equity.

That will make houses harder to either buy or sell in relative terms.

Second, inflation is expected to go up after Brexit, which means that people’s incomes will be squeezed regardless of their homeownership ambitions. And banks are generally less keen to lend when house prices are heading downhill.

And finally, house prices are still at historic highs. In London, the average property is 13 times the average wage.

House prices may fall, but it’s the fundamentals of the London market – volatility resulting from under-supply – that causes these problems.

A drop in house prices is yet another symptom of the crisis, not a cure for it. We have a severe and worsening housing shortage in this country, and in particular a shortage of homes at the more affordable end of the market.

There are more than a million households on the social housing waiting list, but the government only delivered 6,000 new social homes in the whole of England last year.

The sadness we all feel at the number of rough sleepers on the streets turns to dismay when we realise that this is just the tip of the iceberg: almost 280,000 people in England are currently homeless.

To truly solve our housing crisis, we must build a whole raft of homes that are affordable to a whole lot more people. That is why Shelter is calling for 3.1m new social homes over the next 20 years.

Some naysayers will claim that it’s impossible to do, but we’ve done it before – after the Second World War – to great economic success and public acclaim. We can do it again.

Our vision for social housing would offer the chance of a stable home to millions of people who fail to qualify under the current system. It would provide much-needed security and a step up for younger renters desperate to get on in life and build a brighter future for themselves and their family.

The current housing situation amounts to a national emergency. Brexit-induced price falls won’t solve the problem. Building more will.

Source: City AM

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No-deal Brexit would take a chip off UK home values

Britain’s over-valued housing market will undergo a modest correction if the country leaves the European Union at the end of next month without a deal, a Reuters poll found, with London being affected to a greater degree.

Negotiators are still scrambling to reach agreement, and if they fail then home prices in the capital, which has long been a magnet for foreign investors, will fall 3 percent in the six months after the March 29 split.

Nationally, prices will drop 1 percent, the Feb. 13-20 poll found.

“There will be a palpable shock to the UK economy in terms of GDP, inflation, job creation etc,” said Tony Williams at property consultancy Building Value.

He says prices in the capital would fall 10 percent if there were no deal, the most pessimistic forecast.

“This will spill over dramatically to the residential market, with London bearing the brunt given the international catchment of prospective buyers.”

Since the June 2016 referendum decision to leave the EU, Reuters polls have consistently said a no-deal scenario would knock the economy, equities, housing market and sterling.

However, a dip in the currency – a recent Reuters poll said sterling would fall 5-10 percent if there was no agreement – would make property cheaper for foreign investors, likely offsetting some of the uncertainty.

If an agreement is reached, and most economists think it will be, house prices will rise 1.5 percent nationally and 0.5 in London in the six months after.

The wider poll of 25 market watchers said national home prices would rise 1.5 percent this year and 1.8 percent in 2020, both weaker than forecast three months ago. In 2021 they are expected to increase 2.3 percent.

In London prices are predicted to fall 2.0 percent this year, much sharper than in the last poll, and then rise 0.5 percent and 2.5 percent in the following two years.

“Prices have clearly come off the boil of late but on the assumption that the UK does not leave the EU without a deal, there is scope for the resumption of a modest upward trend,” said Peter Dixon at Commerzbank.

Reflecting the uncertainty, the range of forecasts for 2019 was wide, between a 3 percent fall and a 0.5 percent rise. Nationally, it was even wider – ranging from a 3 percent rise to a 3 percent fall.

OVERVALUED

With uncertainty still surrounding the Brexit outcome, nine of 16 respondents said they think turnover in London homes will fall this year while only two expected a rise. Nationally, 10 said turnover would stay the same, six said fall and two said rise.

“Sales levels will likely stay the same in 2019 as 2018 across the UK although this will vary across the regions,” said Leslie Schroeder at property consultancy Carter Jonas.

“We expect that London and the South East will see a slight fall in overall levels compared with 2018, again as affordability weighs heavily on the ability for average UK earners to move and buy houses.”

When asked to describe the level of London house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 8. Nationally they were rated 7, where it has been for a few years.

Those high ratings are unsurprising as the annual average British salary is around 30,000 pounds but the average asking price for a home in Britain was 300,715 pounds this month and more than double that in London, property website Rightmove said.

So although borrowing costs are currently very low and not expected to rise much in the coming years, prospective buyers trying to get on the property ladder will struggle as prices continue to rise, despite them increasing more slowly this year and next than wages and general inflation are predicted to.

“The fundamentals of the UK housing market remain as they are: lack of supply; a growing population; cheap money – a Brexit of any flavour will not dent those fundamentals,” said Russell Quirk at online estate agent eMoov.

Source: UK Reuters

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House prices rise just £714 in a year, new study reveals

In a new study, Rightmove revealed that house prices rose just £714 in a year; something they haven’t seen happen in over a decade.

As the spring market approaches and people consider putting their house on the market, plus with Brexit looming, it’s a time of uncertainty for everyone — but what does it mean for buyers and sellers?

‘Longer daylight hours and green shoots appearing in gardens herald the start of the traditionally more buoyant spring market,’ Miles Shipside, Rightmove Director and Housing Market Analyst tells House Beautiful UK. 

‘Sellers’ subdued pricing is now being outstripped by higher average wage growth, meaning that buyer affordability is on the rise at the fastest rate in nearly eight years.’

What does this mean for first-time buyers?

Though it’s uncertain times for everyone, Shipside gives his advice on what this could mean for first-time buyers — and it looks like a promising season if you’re planning on buying your first property.

‘Buyers are being given the leg-up by cheap mortgage rates, if they can meet lenders’ criteria and lay their hands on a large enough deposit. In theory the scene would be set for an active spring if it were not for the uncertain political backdrop,’ explains Miles.

‘As it is, the extent of that activity will depend on the degree of hesitancy among sellers to try to sell and be realistic on price, and buyers overcoming short-term uncertainty and taking a medium-term view that this is a good time to buy. As always those decisions will also be influenced by local market dynamics.’

He goes on to say: ‘A first-time buyer in London recently enthused to me that she and several of her friends were now buying properties.

‘She was aided and abetted by a five-year fix of 1.7 per cent, meaning that she could live cheaper on her own than sharing a rented property, since she was fortunate enough to be able to find the money for a deposit. Sellers’ greater willingness to negotiate because of the political uncertainty also helped her cause.’

Source: House Beautiful

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Research reveals small and large UK property owners’ biggest concerns

Owning a property is an essential aspect for every individual. Wait, are we discussing purchasing a house in the UK? Of course, yes. Affordability of housing merely affects an individual’s condition- both mentally and physically. Did you know, 2/3rd of the UK residents are still living in the rented sector? Well, the reason is pretty visible- due to unaffordability factors in the locality, and the cost of the property. Well, location is another major concern for the majority of residents in the country.

Research says, nearly 12,000 tenants have chosen to live in the rented sector by their own choice and not due to the prices of houses. How about the rest? The remaining group of individuals has no options left but to live as a tenant. The current rent or tenant statistics is 5 million, and it is expected to be 5.80 million households in the next two years. Of course, the tenants would be elderly, retirees and the youngsters of the country. What are the reasons for rising prices in the real estate market?

Reasons for unaffordable growth in the housing sector

Well, here are some of the significant concerns that we need to look upon, and make it affordable for every individual though. Mentioned below are some massive factors:

  • The higher cost of living
  • The absence of rent control measures
  • Increase in Private Landlords
  • Too much of the wealth gap in the country
  • Non-diagnosing of the root causes from media and government

How can we make it affordable?

Well, this cannot be a single person’s thought or action. This needs many hands and brains to work upon and raise the concerns. The reasons are already known to most of us. Not only buying houses have become expensive, but even the roof repairs and maintenance also have been costly. Well, research says that owning a property in the United Kingdom is the most luxurious asset. To prevent the rise in prices, we can act upon some specific policies:

  • Why not free up those local authorities to invest or purchase in a new property?
  • Private landlords and their pricing modules need to be monitored and manage with necessary regulations.
  • Land and property taxations need to be reformed once again.
  • Land Hoarding can be replaced with Development in the sector.

However, acting upon being a single individual is nearly impossible. Did you know many of the individuals have started moving to other places leaving London altogether? Most of them are young buds. Approximately 7,000 people are homeless and are spending their cold nights on the busy streets. Not just the UK, many countries need to reform their real estate sector and housing policies. This will undoubtedly make the living of every individual better and improved. Well, as mentioned already some of the tenants have entered the rental sector with their own choice, may be due to their work, or other factors, but the majority of them have chosen to be a rented citizen due to their unaffordability.

Inevitably, the private rented sector will grow to enhance in the tenant demands, but is this working well for the whole industry? Don’t you think there’s a need to act upon these issues?

Source: London Loves Business

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Help to Buy sends number of first-time buyers into the 12-year record books

The number of first-time buyers reached a new high last year – with the catalyst being Help to Buy, the scheme that helps purchasers of new-build homes only.

According to trade body UK Finance, there were 370,000 new first-time buyer mortgages completed last year, some 1.9% higher than in 2017.

This is the highest number of first-time buyer mortgages since the pre-crash year of 2006 when the figure was 402,800.

In the last month of last year, there were 30,900 first-time buyer mortgages completed, up 1.6% on a monthly basis.

The number of home-mover mortgages was down in December, at 30,000. This was 1.3% fewer than in November. Altogether last year, there were 367,800 new home-mover mortgages, 1.9% down on 2017.

Buy-to-let purchase mortgages also dwindled last year.

In 2018, there were 66,400 new buy-to-let home purchase mortgages, or 11.5% fewer than in 2017.

Remortgaging in both home-owner and buy-to-let sectors rose – by 10.8% and 11.2% respectively.

Jackie Bennett, director of mortgages at UK Finance, said: “The mortgage industry helped 370,000 people buy their first home in 2018, the highest number in 12 years, as competitive deals and government schemes such as Help to Buy continue to boost the market.

“Home-owner remortgaging also saw strong growth driven by customers locking into attractive rates, a trend we expect to continue in 2019 as more fixed-rate mortgages come to an end.

“Demand for new buy-to-let purchases continues to be dampened by recent tax and regulatory changes.

“However, the number of buy-to-let remortgages reached a record high of almost 170,000 last year, suggesting many landlords remain committed to the market.”

John Phillips, operations director at Just Mortgages and Spicerhaart, said: “First-time buyers are holding up the purchase market, as incentives Help to Buy and the freeze on Stamp Duty, plus new mortgages like Lloyds ‘lend a hand’ 100% mortgage offering coming on to the market, are making it easier for them to make that first move on to the housing ladder.

“We are increasingly seeing people choosing to remortgage to free up cash to do work to their current homes rather than move, either because the Stamp Duty and other costs make it too expensive, or because they are unwilling to take the risk in an uncertain market.

“But post March 29 I think there will be a change in sentiment. No matter what the outcome, uncertainly will be taken out of the equation, and as a result, I think the purchase market will start to pick up. But overall, we will probably not see the effects of that until much later on in the year.”

Despite the surge in first-time buyers, the number of renters between the ages of 25 and 34 has risen 20% since 1998, according to the ONS.

Source: Property Industry Eye

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UK property transactions drop by a third over the past three months

Reapit research has found that UK property transactions have plummeted by a third in the past three months as Brexit uncertainty weighs on the market.

Reapit, the leading software platform for estate agents, compared its most recent three months of sales data with the five-year average for the same November-January period in order to gauge the impact of uncertainty on the property market across its measurable metrics.

By analysing data from thousands of estate agents’ offices, it found strong indicators of a stalled market across the board. Every data point was down on the five-year average, from the initial market appraisals, which are carried out by agents to give a likely asking price and property marketing strategy, through to exchange of contracts and ultimate sale.

Key results from the Reapit research are:

  • The average number of exchanges recorded per estate agent office dropped by 36% when compared to the long-term average
  • Properties under offer were down 8% on the long-term average
  • Instructions of new properties were down 10%
  • Viewings of properties were down 5%
  • Market appraisals of properties were down 2.5%

Gary Barker, CEO of Reapit, commenting on the data said: “Although house prices remain reasonably resilient, our research sheds light on the extent to which Brexit uncertainty has affected property transactions in the past three months. Our data reveal that property sales per estate agent have dropped by a third when compared to the long-term average.

“This 36% drop in sales represents an unprecedented five-year November-January low. It’s doubly concerning for estate agents because seasonally, this is a quieter period for transactions compared to the summer months.

“It’s fair to say that the housing market is holding its breath as we await the Brexit outcome. Nobody wants to risk being on the wrong side of a potential house price crash, so the market sentiment is to wait and see.

“There is a silver lining we can be more confident about: once we have clarity, the pent-up demand of people waiting to buy, and supply of people waiting to sell, will see an upswing in activity for the housing industry.  Regardless of politics, life goes on and people need to move homes. Agents need to be prepared when the floodgates are opened.”

Source: Property118

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Scotland has second-highest growth in UK, analysis suggests

Scotland’s economy grew by 1.7% in 2018, according to academic estimates, compared with the UK average of 1.4%.

Scotland’s economic growth in 2018 was the second-highest of any UK region, with only London growing more, according to academic estimates.

Although the UK’s economy grew by just 1.4% in 2018 – its lowest rate in six years – Scotland’s economic growth of 1.7% meant it bucked the national tend, new estimates show.

Regional estimates, by academics at the Economic Statistics Centre of Excellence, suggest Scottish growth was up from 1.6% on 2017, while average UK growth fell from 1.8% in the previous year.

SNP MSP Gordon Macdonald welcomed the figures and said: “This analysis shows that the fundamentals of the Scottish economy are strong.

With economic growth rising in Scotland and falling elsewhere across the UK, Tory claims that Scotland is somehow uncompetitive have been thoroughly debunked

Gordon Macdonald MSP

“With economic growth rising in Scotland and falling elsewhere across the UK, Tory claims that Scotland is somehow uncompetitive have been thoroughly debunked.

“But Brexit continues to be an enormous threat to jobs and businesses across Scotland – and the public will be concerned at the complete lack of clarity this close to leaving the EU.

“The SNP in government are offering stability and certainty through our budget which supports jobs and businesses.

“The UK Government must do the same by ruling out a no-deal Brexit that would be economically disastrous.”

London continues to far outperform the rest of the UK, with estimated growth of 2.9% in 2018.

In addition to Scotland, the North West, South West and East Midlands saw growth estimates for 2018 slightly higher than the UK as a whole.

Substantially behind the UK average were Wales, Northern Ireland and the East of England.

Source: Express and Star

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First-time buyer activity reaches pre-crisis levels

The number of first-time buyers (FTBs) in 2018 reached its highest level since before the global financial crisis, UK Finance’s latest Mortgage Trends update has shown.

Last year, 370,000 new FTB mortgages were completed, a 1.9 per cent increase on 2017 and the highest number since 2006 when it was 402,800.

In the year FTBs accounted for £62bn of new lending, with £5.2bn of that taking place in December 2018.

Meanwhile, the data showed 30,000 home mover mortgages were completed in the final month of last year, as well as 34,000 homeowner remortgages.

Jackie Bennett, director of mortgages at UK Finance said: “The mortgage industry helped 370,000 people buy their first home in 2018, the highest number in twelve years, as competitive deals and government schemes such as Help to Buy continue to boost the market.

“Homeowner remortgaging also saw strong growth driven by customers locking into attractive rates, a trend we expect to continue in 2019 as more fixed-rate mortgages come to an end.

Ray Boulger, senior mortgage technical manager at John Charcol, said: “These figures confirm that virtually all the growth in mortgage lending in 2018 came from remortgaging and FTBs, with the lion’s share from remortgaging.

“Although we don’t have comparative 2017 figures for product transfers the likelihood is that product transfers also increased in 2018.

“Housing transactions last year fell below 2014 numbers and are likely to fall again this year. UK Finance is forecasting mortgage lending will be flat in 2019 and so with lower housing transactions and prices flat remortgaging will need to increase just to maintain gross lending levels.”

He added the end of the government’s Help to Buy equity share second charge scheme, which allows buyers to e-mortgage to pay off the Help to Buy equity loan, could have a “major impact” on the volume of mortgage lending post-April 2023.

This was “unless before then the private sector steps up to the plate with viable alternative lending options for FTBs with only a small deposit”, he said.

Elsewhere, December saw a 12.5 per cent year-on-year fall in new buy-to-let home purchase mortgages, with a value of £0.7bn for the month.

The fall was also evident for the rest of 2018, where new buy-to-let home purchases were 11.5 per cent lower than in 2017.

Buy-to-let remortgage completions in December 2018 however, rose 25.3 per cent when compared with December 2017, with a value of £2bn.

Matt Andrews, managing director of mortgages at Masthaven, said: “It is interesting to note the continued downturn of buy-to-let activity across the market.

“From tax alterations to regulatory updates, it seems the sector is really feeling the effects of these changes.

“In order to keep the market attractive to buy-to-let investors and to avoid further market uncertainty, greater incentives and lending products will be paramount.”

But Kevin Roberts, director of Legal & General Mortgage Club, said the data demonstrated a resilient mortgage market.

He said: “The number of mortgage products available are at some of the highest levels we’ve ever seen and combined with competitive rates, this is continuing to entice borrowers, particularly first-time buyers.

“For any borrowers unsure of how the current climate will affect them or how they can potentially take advantage of it, speaking to a mortgage adviser is a great place to start.

“Through their extensive knowledge and access to the whole of market, these experienced professionals will be able to match a borrower’s unique circumstances with the right mortgage product.”

Source: FT Adviser

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Inflation pulled down by falling energy prices

Inflation fell to a two-year low in January according to the Office of National Statistics (ONS).

The 12-month CPI (Consumer Price Index) inflation rate was 1.8% in January 2019, down from 2.0% in December 2018. This drop is largely a result of falling energy and fuel prices.

Between December 2018 and January 2019 consumer prices for gas fell by 8.5%, the biggest fall in three decades. This coincided with energy regulator Ofgem’s implementation of their energy price cap which, after coming into effect in January, helped drive down inflation according to ONS.

Mike Hardie, ONS head of inflation, said: “The fall in inflation is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time last year.”

This latest reduction marks the end of a long run of CPI inflation sitting above the Bank of England’s 2% target. The Brexit referendum caused the value of the pound to fall, which pushed inflation higher. Increasing costs of imported goods meant that Brits’ household disposable income shrank. Inflation peaked at a five-year high of 3.1% in November 2017, when households faced much greater price increases than the EU average.

Stephen Clarke, senior economist at the Resolution Foundation, reported that this drop in inflation should lead to a  “welcome boost to people’s spending power” and “that next month we’re likely to see real wage growth of around 1.5%, the fastest since mid-2016”.

He added “This cannot come too soon for households, with average earnings yet to be restored to their pre-crisis levels.”

Tej Parikh, senior economist at the Institute of Directors, said the lower inflation was a “boon” for the economy as it attempts to weather the effects of Brexit fueled uncertainty: “For the past two years, households have been squeezed between high prices and weak wage growth. With inflation now at a two-year low and growing upward momentum in pay packets, consumers are likely to feel less of a pinch on their wallets.”

Mr Parikh continued, “This easing in the cost of living should provide some uplift for the High Street just as consumer confidence appears to be waning”.

Ian Stewart, chief economist at Deloitte, suggested that the changes should also provide relief for high street retailers. He said falling inflation alongside rising earnings was “delivering a powerful uplift to spending power” and added “Brexit dominates at the moment but were Brexit risks to ease, consumers would be well placed to hit the High Street”.

Due to falling crude oil prices, petrol prices have also fallen by 2.1% per litre between December 2018 and January 2019, which should also come as a pleasant surprise for motorists.

The question now is, will inflation continue to decrease in the future?

Ofgem’s cap is a ceiling that can move up and down twice a year depending on the costs facing energy firms. That cap will be raised this April and this is likely to feed into future CPI figures.

On Wednesday 13th February, npower became the third of Britain’s six major energy providers to say it would raise prices from April following E.ON and EDF which raised their prices on Monday and Tuesday.

Howard Archer, chief economic advisor to the EY Item Club, has said that inflation is largely going to depend on the course of Brexit negotiations in upcoming months.

“Domestic inflationary pressures are expected to pick-up only modestly over the coming months amid likely limited UK growth,” said Mr Archer.

With a Brexit deal, he said inflation could stay below 2% this year – and even dip to 1.6%.

Without a deal, Mr Archer said the Bank of England could cut interest rates as “economic activity would likely take a significant hit”, suggesting a totally different outcome.

Source: Money Expert