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UK households gloomy for 2019, lower inflation eases near-term worries

UK households’ hopes for their finances over the year ahead remain near a five-year low, due to growing concern about job security ahead of Brexit, though easing inflation pressures have offered some short-term cheer.

IHS Markit said its monthly Household Finances Index picked up to a three-month high in January, on the back of households’ perception that their living costs were rising at the slowest rate since October 2016.

The official measure of consumer price inflation dropped to its lowest in nearly two years in December at 2.1 percent.

But households’ expectations for their finances over the year to come, when Britain is due to leave the European Union, remained close to their lowest level since early 2014.

“Political deadlock over Brexit merely adds extra uncertainty to an already unfavourable financial environment for UK households,” IHS Markit economist Joe Hayes said.

Prime Minister Theresa May suffered a historic parliamentary defeat over her Brexit plans last week, raising the prospect that Britain could leave the European Union on March 29 with no transition agreement to ensure trade continues smoothly.

Businesses have put investment on hold because of Brexit, and activity slowed towards the end of 2018.

“Job security perceptions deteriorated to a near one-year low, while there was no bounce-back from the stark drop in house price expectations seen in December,” Hayes said.

Figures from property website Rightmove earlier on Monday showed the weakest start to the year since 2012 for property asking prices.

However, most of the 1,500 adults surveyed by polling company Ipsos MORI for IHS Markit still expect the Bank of England to raise interest rates in the first half of 2019, while 73 percent expect an increase before the end of the year.

Economists polled previously by Reuters on average expect the BoE to raise rates once or twice in 2019, assuming Brexit proceeds smoothly.

Source: UK Reuters

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What buy-to-let landlords can expect in 2019

As 2019 gets underway, and economic conditions continue to be uncertain, it is important for buy-to-let investors to be on top of the market and its changes.

The past three years have seen the market face a host of new regulations and tax changes, and this year is set to be no different as buy-to-let landlords must brace themselves for further uncertainty. However, it’s not all bad news – some of the changes are set to have a positive impact on the market, and there are still plenty of landlords planning to increase their property portfolios over the coming 12 months.

Tax reforms have been unkind to the buy-to-let market, with landlords only able to claim 25% of their mortgage tax relief, when filing their taxes between April 2019 – 2020. This is down from 50% for the previous tax year. Not only will this increase tax bills, but it could also mean that some landlords who are currently paying basic rate tax find that they are pushed into a higher rate band.

The good news is that the slow market activity means lenders are offering rock-bottom mortgage rates to tempt landlords, following the Bank of England’s base rate decision last year. However, the low rates are unlikely to stay that way for long. Many mortgage lenders will continue to offer incentives, such as free valuations and cashback, to attract business from landlords.

From April, all lettings agents will be required to register with a Client Money Protection scheme (CMPS), which protects both landlord and tenant money. For example, deposits, rent or money for property maintenance – should the letting agent go into administration. Landlords can rest assured that even in an uncertain economic climate, their rental income will be protected.

The likely introduction of the Tenant Fees Bill will also offer greater peace of mind to tenants, although it could come at a detrimental cost to landlords. The bill will mean tenants will only be required to pay their deposit and rent when signing a new tenancy agreement. If letting agents increase charges in other areas to compensate for the loss of fees, and subsequently become too expensive for a landlord to use, they may have to pass the added costs onto tenants in the form of rent increases. Alternatively, more landlords may decide to self-manage their properties rather than go through an agent, however this may result in many landlords struggling to stay on top of ever-changing property rules and legislations.

Of course, depending on the outcome of Brexit, house prices in the UK could take a hit. Deterred by the uncertainty of the property market, an increasing number of individuals could be looking to rent property instead of buying, pushing up the demand for rental housing and the cost of rent. If you’re currently considering investing in buy-to-let property, it’s worth monitoring the property market, as house prices have the potential to drop significantly. However, you will need to be prepared to act quickly if you are hoping to invest in buy-to-let property, so getting your finances in order ahead of 29 March will make you are more attractive buyer. Alternatively, bridging loans and other alternative finance options can give landlords access to fast, flexible finance to secure property acquisitions in a competitive market.

2019 is set to be an uncertain time for landlords and staying on top of the new regulations can feel like a full-time job in itself. The UK Adviser offers support to landlords of all portfolio sizes, ensuring that you remain fully compliant amid the economic and political market changes.

Source: Mortgage Introducer

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London needs micro-homes to solve the housing crisis

Everyday, thousands of city workers are forced into excruciatingly long commutes from the outskirts of London, because living in the city centre – and, frankly, most of the capital – is simply unaffordable.

Micro-housing would allow Londoners to commute less and live more. Never mind if that’s more time to join a gym class, meet friends at restaurants, catch a show or a Spanish class. What matters is that it’s more time for you, and less time stuck on the train or in a car.

Housing is the most crucial problem facing London.

In the past 20 years, London’s population has grown by 25 per cent, but the number of homes has only grown by 15 per cent. More people and not enough housing has pushed up prices, creating an affordability and ownership crisis.

The proportion of income spent on housing has grown from one fifth of incomes 15 years ago to one third of incomes today. If you’re among the city’s lower earners, it’s highly likely to be taking even more of your pay packet.

Because of high housing costs, many are forced to endure insufferably long commutes, live in overcrowded share flats or, most worryingly for the economy, leave the city altogether.

The loss of capable people has serious ramifications for Britain’s economic productivity. All too often people end up taking lower paid jobs elsewhere, which hold them back and mean that they are less productive.

Chang-Tai Hsieh and Enrico Moretti from the University of Chicago estimated that US GDP is 13 per cent lower than it otherwise would be because people are not able to live where they would be most productive.

The damage to the UK’s GDP from people living where they are not the most productive is likely to be even higher.

The housing crisis is not just an economic policy problem – it also has serious political ramifications.

Housing affordability issues, particularly among young people, are damaging trust in the entire free market system. This is driving young people into the hands of extremists like opposition leader

Jeremy Corbyn, whose interventionist policies would only make things worse.

Which is where micro-houses come in. Currently blocked by housing guidelines and local authorities in the UK, this creative solution could help ease some of pressure on the market.

As urban policy researcher Vera Kichanova makes clear in a new paper for the Adam Smith Institute, when it comes to housing, small is in fact beautiful.

Micro-homes are nothing like what you are imagining. They are not cramped sub-divisions of existing units. Rather, micro-houses are stylish, modern homes that use space intelligently. They win prestigious architectural awards. They often include shared game rooms, gardens, co-working spaces, living areas, and additional services. They help combat loneliness with group activities and communal spaces.

In short, they are perfectly suited to the fast-paced inner-city lifestyle craved by many millennials.

There is no standard definition of micro-homes, but they can perhaps be best understood as purpose-built homes that are below the existing 37 square metre space standards for an apartment.

Micro-housing projects have been a huge success in New York City, Hong Kong, Tokyo, and, in the few cases they have been allowed because of legal grey areas, London.

Carmel Place in New York City, which was completed in 2016, contains apartments that are just 24 to 33 square meters. The project won an award from the American Institute of Architects.

London is home to The Collective Old Oak, the world’s largest micro-apartment building, which offers 546 private units and a wide array of communal spaces.

Micro-housing is not a substitute for more fundamental planning reform, such as ending the prohibition on building out or adding extra storeys on famously short London buildings. And it goes without saying that nobody should ever be forced to live in a micro-property.

However, the choice should be available for those who prioritise living closer to work and entertainment over a large house in the suburbs.

These smaller properties would ensure that the land in the city centre is used more efficiently, providing an important piece of the puzzle to address London’s housing crisis.

It is the responsibility of local authorities, particularly in central London, to think more creatively about how to deliver more housing. They can start by abolishing arbitrary restrictions on room sizes, and declaring themselves open to micro-housing.

This would encourage architects and builders to propose such projects across the city.

In designing housing guidelines, local authorities should remember: it’s not the size of your home that matters, it’s how you use it.

Source: City AM

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Small business confidence falls to lowest level since financial crash

Small business confidence has fallen to -9.9, the lowest level since the wake of the financial crash in 2011, according to the latest Federation of Small Businesses (FSB) Small Business Index.

The data revealed that 67% of small firms do not expect their performance to improve this quarter.

The index revealed that 58% of businesses say the domestic economy is a significant barrier to growth, up from 55% at this time last year.

Access to appropriately skilled staff (36%), lack of consumer demand (29%) and labour costs (21%) are also frequently flagged as primary barriers to growth.

Small businesses in the accommodation and food services (-48%), retail (-44%) and manufacturing (-16%) sectors report some of the lowest index readings.

FSB national chairman, Mike Cherry, said: “How have politicians allowed it to come to this? Two and half years on from the Brexit vote and small businesses are looking ahead to Brexit day with no idea of what environment they’ll be faced with in less than ten weeks’ time.

“The current uncertainty is making it impossible for firms to plan, hire and invest. That’s feeding into wider concern about the economy at large. We won’t see GDP growth pick-up again until there’s some certainty about how the business environment will change in the coming months.

“Come the beginning of April, small firms will not only have Brexit day to worry about but also Making Tax Digital, a higher living wage, rising auto-enrolment contributions and further business rates hikes. This will be a flashpoint for a lot of businesses, threatening the futures of many.”

The index also shows borrowing costs for small businesses soaring. The proportion of successful credit applicants being offered a borrowing rate of 5% or more has hit a record-high (74%).

The proportion of small firms applying for external finance remains low at 13%.

Cherry added: “With Brexit taking up all of the government’s bandwidth there are a huge number of domestic business issues that are not being addressed. They include the long-standing barriers small firms face when trying to access new finance, and the sky-high borrowing rates they’re often offered if an application is successful.

“This is another issue that will be exacerbated by a chaotic no-deal Brexit. When times are tough, big lenders often put supporting small businesses on hold.”

Source: Talking Retail

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Landlords to feel effects of buy-to-let changes

The private rental sector may be approaching a “watershed” moment as landlords begin to feel the effects of recent tax changes reflected in their tax bills for the first time this month, a trade association has warned.

The Intermediary Mortgage Lenders Association (Imla) warned the introduction of various tax and regulatory changes since 2015 would begin to have an effect on property availability and tenant choice in the rental sector.

The body expects policies to contribute to higher rents for tenants, which would in turn make it harder for those who are trying to save for deposits to buy their own homes.

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

Imla believes this year’s tax return will be the first time many landlords will see the effects of these policies on their earnings.

Kate Davies, executive director of Imla, said: “These measures continue to erode the buy-to-let sector, and in turn the whole private rental sector.

“In fact, we may be approaching a watershed, as landlords will only be starting to feel the adverse effects of income tax changes when these are reflected in their tax bills for the first time this month.”

Ms Davies suggested a recent period of subdued rental price increases may be disguising the true effect of these changes on the rental market.

She said a report published by IMLA in early 2018 had shown the “continued erosion” in buy-to-let, with net investment in rental property “collapsing” by 80 per cent over the course of two years.

She added: “It is no coincidence that, despite a growing contribution from build to rent, 2017 brought an abrupt reversal to 16 years of uninterrupted growth in the stock of private rental dwellings.”

Ms Davies said: “Buy-to-let landlords represent a key element of the private rental sector, providing homes for a very wide spectrum of households and including many benefit claimants who would in the past have had access to social housing.

“We consider it vital that no additional measures should be introduced which could risk further eroding the health of the private rental sector or the well-being of those who rely upon it.”

David Hollingworth, associate director of communications at London & Country Mortgages, said: “The raft of change to the buy-to-let market, which includes stamp duty and tighter criteria as well as the reduction in tax relief on mortgage interest, was always going to hit the market hard.”

Some landlords will have already factored the tax changes into their calculations but some may still face a nasty shock when they submit their returns, said Mr Hollingworth.

He added: “Demand for rental property is likely to remain strong and whilst there was a feeling that the buy-to-let market may have been growing too rapidly there’s equally a risk if it contracts too far.

“If supply dries up then rents will inevitably rise, especially with tighter lending criteria in play. Nonetheless where there’s demand there will still be investors and many established landlords are likely to retain an interest in adding to portfolios where the numbers stack up.”

Source: FT Adviser

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Brexit can be a success if Britain remains open for business

Amid the legion of uncertainties surrounding Brexit is there much that can be said with some degree of confidence? Economic forecasts are hardly renowned for their accuracy, but they provide a starting point for thinking about the potential economic effects of Brexit.

Among think tanks, private sector groups and international organisations there’s a broad consensus that a no-deal exit would hit growth hard this year. But most forecasters think that even with a no deal the UK would probably skirt a serious recession, with its growth rate dropping from a lacklustre 1.4% in 2018 to around just 0.3% this year.

At this point the consensus breaks down. Some forecasters think after the initial shock activity would bounce back in 2020. Others believe the damage would be longer lasting  and would keep growth around the 0.3% mark in 2020 too. The ratings agency S&P is the most pessimistic of the forecasters we’ve seen. It thinks a no-deal Brexit would generate a “moderate recession lasting four or five quarters”.

If the UK avoids a no-deal Brexit most forecasters think growth would hold up this year and next.  The forecasts we’ve looked at imply that exiting with a deal, remaining in the EU or protracted delay under the current rules would leave the UK growing at 1.5% in 2019 and 2020, marginally above last year’s 1.4%.

The range of conceivable outcomes for GDP growth this year, from close to zero to almost 2.0%, mirrors the range of possible Brexit outcomes. Helpfully, economists publish forecasts showing what they consider most likely to happen, as opposed what they consider could happen.

On this front I was struck by the divergence between last weeks’ Brexit news and economists’ fairly sanguine central view on growth. Last week the publication Consensus Economics reported that, on average, the 31 economists they poll forecast the UK to grow by 1.5% this year and 1.6% next . These are not strong numbers. But against a backdrop of Brexit and an expected slowdown in the US and euro area they’re not bad either.

The fact that average forecasts for growth are far in excess of the ‘no deal’ estimates shows that economists see a deal, a soft Brexit or no Brexit as more likely outcomes.

Some commentators have suggested that UK equities, which are currently deeply unloved by investors who fear a chaotic Brexit, are under-priced. Believing that something is unlikely to happen is different from investing on the basis it won’t – the latter requires an altogether higher degree of conviction. Over coming weeks the path of domestically faced UK equities, the likes of retail, leisure, house-builders and the banks, will give clues as to which way investors think Brexit is going.

All of this considers the short-term effects. But what would be the long-term impact of Britain leaving the EU?

The UK’s National Institute for of Economic and Social Research (NIESR) and HM Treasury think that long-term growth would run lower outside the EU. In NIESR’s forecasts lower migration slows workforce and GDP growth. Greater friction in trade, reduced skilled migration and lower foreign direct investment also dampen productivity.

My sense is that whatever happens on Brexit the rapid growth of the non-UK born workforce in the last 20 years, well in excess of the UK born workforce, is unlikely to be sustained (partly because the effects of EU expansion into Central Europe were one-off, albeit a prolonged one; but also because of domestic UK politics).

Forecasting anything in the long term is a highly speculative business. But were Brexit to mark a move to a significantly less open economy, competitiveness and growth would surely suffer. As ever, it all depends – on the deal, the response of the private sector, domestic policy and the global backdrop.

Since the 1980s the UK has been seen as offering a stable, open, pro-business environment. The question is whether Brexit changes that, and, in doing so, pushes the UK onto a permanently lower growth path.

Whatever happens on Brexit much will remain the same. Inside or outside the EU the challenges for the UK economy – above all how we raise productivity growth – are wearily familiar.

Source: Reaction

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London house prices fell 1.5 per cent in December as Brexit bites

The average asking price for London houses fell 1.5 per cent in December compared to the previous month as Brexit uncertainty continued to dampen the capital’s property market, according to figures released today.

Figures from the latest Rightmove House Price Index showed the average asking price for a London home is now just under £594,000. Nationally, asking prices increased by an average of 0.4 per cent in December.

“Given the current market backdrop and ongoing political turmoil, it’s not surprising that the more challenging conditions in London and its nearby regions mean that they appear to have had a slower start to the year,” said Miles Shipside, Rightmove director and housing market analyst.

The average time taken to sell a home in London in December was 82 days, up from 78 days at the same time last year. London houses took almost two weeks longer to sell than the national average of 70 days.

Brian Murphy, head of lending for Mortgage Advice Bureau said: “It’s no surprise that today’s report suggests that the northern regions of the UK appear to have had a brisker start to 2019 than London and the south, as this is a continuation of the disaggregated picture we saw last year.”

Despite the sluggish market, Rightmove reported that visits to its website in the first two weeks of 2019 were up five per cent on last year.

Murphy said that “regardless of the ongoing Brexit-driven headlines, this perhaps highlights that regardless of geopolitics, people both need and want to get on with their lives”.

Source: City AM

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What does 2019 hold for UK house prices?

Last year was a good one for anyone who’d like to see some sanity injected into the UK’s housing market.

By the end of the year, house prices had risen by about 2.8% if you go by the Office for National Statistics data to November. Or 1.3% if you use the Halifax price index for the year. Or just 0.5% if you use Nationwide.

With inflation (as measured by the Retail Price Index) at 2.7%, and more importantly, wages at above 3%, this means that house prices are flat or falling in “real” terms – ie, after inflation.

That’s good news. But will it continue?

Why gently falling house prices are a good thing

British property owners have enjoyed a couple of decades of boom time. Using borrowed money to buy a property in Britain – ideally London – in the mid-to-late 1990s was a life-transforming financial decision for many people.

Every year, your house made much more money than you did. And if you were reasonably careful, that gain was tax-free, unlike your pay packet.

So some people will question why it’s good news that prices are now flat or falling. I’ll explain quickly.

A house is not an especially productive asset. If we all spend our time fretting about how on earth we’ll ever be able to afford to live in a moderately acceptable dwelling place at a humanly bearable distance from our place of work, then that’s a terrible waste of energy.

It’s also become a big political issue. Young-ish people are fed up with being unable to afford to buy a place of their own, or having to live in fear of the whopping amounts of debt they need to take on to do so. Therefore, there’s a lot of anger, and a lot of desire for the government to “do something”.

As a result, we’re in danger of misallocating a lot of resources badly to sort out a problem that has ultimately been caused by overly loose monetary policy interacting with pro-housebuilder government intervention, bad incentives for banks (it makes more sense for them to give you a loan to buy a house than to start a business, for example), and a government dependent on the tax take from the housing market.

The solution here is for house prices to come down. The problem is that house prices have a big impact on lots of things that go well beyond the property market.

A slide in house prices will hit the tax take. It will hit banks’ balance sheets. It will make people who own houses feel poorer and spend less. It will decrease labour mobility even further because people can’t move when they are in negative equity (ie, they owe more than their house is worth).

What’s the painless way to boost affordability and defuse the justified anger? It’s for wages to go up while house prices stay static. That way, balance sheets don’t get slaughtered, but the problem gradually goes away.

That’s why it’s good news that house prices are finally lagging wages. The question is: will it continue?

Estate agents are feeling very gloomy

Estate agents and surveyors questioned by the Royal Institute of Chartered Surveyors (RICS) certainly think so, at least for now. Their expectations for house sales over the next three months are the worst they’ve ever been since the RICS survey began in 1998.

Bear in mind that this includes the 2008 financial crisis period. That’s quite a striking statistic. Is Brexit really as grim a prospect as the banks shutting down? Obviously not.

However, you can see why the existence of the 29 March deadline might well have encouraged a lot of people to delay (although I strongly suspect that it’s going to be moved further out).

Just like stock pickers, potential homebuyers all want to time the market. They are now aware that prices are falling or growth slowing. No one wants to buy before they’ve hit the bottom. So holding to see what happens with Brexit is likely to appeal to more people this close to the deadline than it might have a year ago.

Thing is, this will either leave pent-up demand for later in the year, or the deadline will get pushed back and people will just have to make decisions. So while I can agree that Brexit might be having an effect just now, it’s more about timing than fundamentals.

So what can we expect this year? Really, I think it’s more of the same. The crackdown on landlords is not ending any time soon, and I think that’s one of the key drivers of the shift in the market. Essentially, a big chunk of demand has been knocked out of the market which should make life that bit easier for standard residential buyers.

And with borrowing costs unlikely to fall any further, it’s hard to see where the impetus for prices to rise could come from. Equally, without a surge in borrowing costs or a nasty, job-shredding recession (which I suspect is still a bit away), then there won’t be a spike in forced sales. So that indicates that price falls will be gentle.

Odd as it might seem, the biggest risk to the housing market this year could be that Brexit goes well. In this context, “going well” probably merely means reaching a deal of any kind that puts us on a clear, moderately predictable road to an outcome. At this point, I think the more objective observers (international investors) would just like to know what’s going to happen.

On the one hand, you would see an improvement in risk appetite; no doubt about it. If you have foreign investors who have been contemplating exploiting the weak pound to buy, then they would have to move fast. So you might get a rally there.

On the other hand, it would make life a bit harder for the Bank of England. Interest rates are still extraordinarily low. If the Brexit uncertainty lifts, interest rates might have to head at least a bit higher from here. I wouldn’t expect anything drastic (rising sterling would keep a lid on inflation for a bit). But it certainly wouldn’t make mortgages cheaper.

Overall, maintaining our current course – with house prices flat or gently falling, while employment remains strong and wages rise – is still the least painful way to get a correction in the property market. And looking at the variables, it still seems to me to be the path of least resistance.

Let’s hope it continues.

Source: Money Week

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Brexit sees mortgage lenders retreat from market

Increased competition and growing concerns over the economic climate could see specialist mortgage lenders reassess their approach to new business in 2019.

The start of the New Year saw the announcement by two lenders that they would cease new mortgage lending.

Secure Trust Bank began consultations with staff to cease new lending based on the current economic climate on January 7, while Fleet Mortgages withdrew its entire range on January 8 as the lender waits for its next funding line to be made available.

Paul McGerrigan, chief executive officer at Loan.co.uk, said: “The continued political uncertainty will present challenges for the smaller mortgage lenders.

“The fear that Brexit’s impact will drag on has led to increased diligence when obtaining funding lines.

“Anyone with this model will be working a lot harder to secure ongoing funding in the short term and we could see more product lines being withdrawn temporarily in the first quarter.

“Newer entrants to the mortgage market and smaller lenders will be nervous, continually assessing their positions in the early part of 2019.

“The challengers are always at a significant disadvantage to the big mortgage lenders due to their funding structures and cost of funds. Brexit is placing more pressure on them.”

According to Paul Lynam, chief executive of Secure Trust Bank, which listed on the stock market in 2016, it had “been a difficult decision to take” to consider pulling the plug on new mortgage lending.

There will be no impact on existing mortgage customers or new applications in progress during the consultation period, which is to be concluded in February.

While Fleet Mortgages does expect the funding issues to be resolved before the end of January, it has stated that all decisions in principle and applications received on January 8 will be declined.

David Hollingworth, associate director, communications at L&C Mortgages, said: “Although these announcements came in swift succession the action taken by Secure Trust and Fleet seems to be quite different.

“Fleet suggests that it’s a victim of its own success in the speed with which it’s used its funding and hopefully we will see a quick return to market.

“Secure Trust in contrast seems to be taking a longer-term approach to its withdrawal from mortgage lending but leaves the door open to a return in the future.

“Mainstream lenders are likely to consider how to broaden their proposition in a bid for improved volume, especially when pricing is so competitive.  However, I don’t think we should expect there to be a flurry of withdrawals and many of the specialist lenders already have well established brands and know their market well.”

Shaun Church, director at Private Finance, agreed: “From our perspective, whilst it doesn’t look great that they happened it quick succession it isn’t something that is going to continue to happen.

“Secure Trust Bank’s withdrawal from the market based on increased competition and a difficult economic climate highlighted the importance for new entrants to have a strong, niche product that stands out from the crowd.

“When you look at the number of new entrants to the market and niche areas being serviced, this is bound to happen once or twice.

“Not everybody can make a success of what they are doing, as in the case of Secure Trust. Coming into that market is not easy so you have got to stand out.”

Mr Hollingworth added: “With more lenders now looking to make their mark it does raise the question of whether the growth in lender numbers is hitting the high point and whether there could even be some contraction if lenders find it harder to find their niche.”

Mr McGerrigan, however, suggested more effort is made to ensure the continued success of smaller, niche lenders.

He said: “It is important throughout this that every effort is made to ensure smaller niche lenders continue to increase their market share for the long term good of borrowers.

“Short term uncertainty aside the UK mortgage market is incredibly robust and I expect it to bounce back strongly once clarity returns.”

Source: FT Adviser

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Rics Housing Market Outlook is Worst for 20 Years

The outlook for the UK housing market over the next three months is the worst its been for 20 years, according to a recent report from the Royal Institution of Chartered Surveyors.

Total sales are expected to be flat or negative over the next quarter, with uncertainty over Brexit one of the main factors. The market is also being negatively affected by a lack of supply and low affordability, an ongoing trend throughout 2018.

Statistics from the report show that a net balance of 28% of RICS members expect a fall in sales over the following three months, which is the worst reading since the series was established in 1999. A net balance of 19% of surveyors saw house prices fall in December rather than rise, higher than the balance of 11% shown in November. New buyer inquiries also declined for the fifth month in a row. The number of new properties entering the market also fell in December, continuing a six-month trend.

“We experienced a slowing down in the local property market from last summer onwards with a lot of it down to the Brexit unknowns,” said David Knights, an estate agent at Knights of David Brown & Co in Ipswich. “Uncertainty causes people to sit on their hands. When buyers don’t know what’s going to happen you can understand them being careful about how much they’re prepared to offer.”

Simon Rubinsohn, chief economist at RICS, said: “It is hardly a surprise with ongoing uncertainty about the path to Brexit dominating the news agenda, that even allowing for the normal patterns around the Christmas holidays, buyer interest in purchasing property in December was subdued. This is also very clearly reflected in a worsening trend in near-term sales expectations.”

According to data from the Office for National Statistics, in October last year the average house price in the UK was £230,630, a fall of 0.1% from the previous month.

Surveyors were a little more optimistic about the long-term prospects for the country’s housing market, suggesting that after Britain’s planned departure from the EU at the end of March the market should react positively and start growing again.

“Looking a little further out, there is some comfort provided by the suggestion that transactions nationally should stabilise as some of the fog lifts, but that moment feels a way off for many respondents to the survey,” said Rubinsohn.

David Knights said: “We’re not going to see an instant rebound once Brexit is out of the way, but I think we’ll see progression over the year. There are really no signs that we are going to have similar problems that we experienced in 2007 and 2008.”

The level of stock on estate agents’ books are almost at a record low, with a current average of only 42 properties per branch. Additionally, landlord instructions had declined in every month last year. Rubinsohn believes that once the supply increases, the difficulties seen in the market should start to subside.

“It is hard to see developers stepping up the supply pipeline in this environment,” said Rubinshohn. “Getting to the government’s 300,000 building target was never going to be easy but pushing up to anywhere near this figure will require significantly greater input from other delivery channels including local authorities taking advantage of their new-found freedom.”

Source: Money Expert