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In early October, the Bank of England’s Monetary Policy Committee held its monthly meeting and voted by eight to one to keep interest rates unchanged at 0.5 per cent. Ian McCafferty was the dissenting voice who voted for a quarter-point rate rise for a third month in a row.

Shortly after, the Office for National Statistics (ONS) announced that construction output fell by 4.3 per cent in August – its sharpest drop since late 2012 – while house-building fell by 3 per cent from July. An ONS official said that the weak construction figures for August may have been linked to wet weather during the month.

In the middle of October, the ONS reported that inflation, as measured by the Consumer Prices Index (CPI), fell to minus 0.1 per cent in September. The chief contributors to negative inflation were falling motor fuel prices and a smaller than usual rise in clothing prices. The Retail Prices Index (RPI) measure of inflation fell to 0.8 per cent in September from 1.1 per cent in August.

More recently, ONS statistics showed that the UK’s Gross Domestic Product (GDP) grew by only 0.5 per cent in the third quarter of 2015, compared to 0.7 per cent in the preceding quarter, and lower than analysts’ predictions of 0.6 per cent. This slowdown in the UK economy resulted largely from a fall of 0.3 per cent in the output of the manufacturing sector in the three months to September; the manufacturing sector has now experienced a decline for three consecutive quarters. Another contributing factor was the biggest downturn in construction output in three years, a drop of 2.2 per cent; nevertheless, the services sector grew by 0.7 per cent.

The maintenance of inflation well below the Bank of England’s target of 2 per cent, coupled with the slowing down of growth in the economy, may suggest that a hike in UK interest rates in the near future is retreating. According to a recent poll of economists by the news agency Reuters, their average forecast of when the Bank of England will start to raise interest rates has been pushed back to the second quarter of 2016 from the first quarter. Meanwhile, the October monthly meeting of the US Federal Reserve has also voted to keep its interest rates unchanged.


LAND REGISTRY DATA: SEPTEMBER 2015 (released 28 October 2015)

The September 2015 Land Registry data showed a monthly increase in average house prices across England and Wales of 1.0 per cent. In London, prices increased by 1.8 per cent, well ahead of all other regions; the North East experienced a fall at minus 0.3 per cent.

The overall annual price change now stands at 5.3 per cent, making the average house price in England & Wales £186,553 and in London £499,997. London saw the highest annual change in prices at 9.6 per cent, followed by the South East at 8.5 per cent and the East at 8.3 per cent; the North East was the only region to see a fall at minus 0.3 per cent. By property type, flats and maisonettes showed the highest annual increase at 5.6 per cent; the lowest was seen in terraced properties at 5.2 per cent.

In greater detail, 12 counties and unitary authorities saw an annual fall in prices, the greatest being Darlington at minus 5.1 per cent; Reading continued to experience the highest annual rise at 15.3 per cent. The strongest monthly growth was seen in Newport with an increase of 2.2 per cent, while Merthyr Tydfil had the most significant monthly drop at minus 3.3 per cent. Only two counties and unitary authorities saw no monthly price change.

Of the metropolitan districts, Sandwell again showed the largest annual price increase at 9.1 per cent; three districts saw a fall, the greatest being South Tyneside at minus 2.7 per cent. Knowsley experienced the highest monthly price increase at 2.5 per cent, while South Tyneside and Sefton both saw the greatest monthly price fall with a movement of minus 1.3 per cent.

Of the London boroughs, Newham once more had the highest annual price rise at 13.6 per cent, while only Hammersmith & Fulham saw a fall at minus 0.5 per cent. On a monthly basis, Hounslow showed the highest increase at 2.1 per cent, while Hackney experienced the only fall at minus 0.3 per cent.

The volume of properties sold in July 2015 was 4 per cent lower than a year earlier in England and Wales and 10 per cent lower in London. Over the same period, properties sold for more than £1 million across England and Wales as a whole fell by 9 per cent and in London by 16 per cent. In England and Wales and in London, volume falls were also seen across all price brackets under £250,000.

Month on month, the total number of properties sold across England and Wales rose from 70,404 in June to 81,696 in July – an increase of 16 per cent. The number of property transactions from April 2015 to July 2015 averaged 71,766 per month, compared to 78,330 over the same period a year earlier.


95% Normal

The launch of the government’s Help To Buy Guarantee scheme in late 2013 gave much-needed help to buyers with small deposits.

The scheme gives an insurance policy to lenders (paid for by the government), to protect them against potential losses in the event of repossessing a high loan-to-value mortgage: with relatively little equity at the outset, the lender risks a much greater loss if things go wrong, and after the credit crunch they were naturally wary.

So before the launch of the Help to Buy scheme, borrowers with only a 5% deposit had very few options indeed. By bringing the guarantee into play, much bigger names were happy to join in with Halifax being both the biggest and the first out of the blocks but most of the high street soon joining in.

Nationwide has been a notable absentee in this, only offering 95% products to existing borrowers moving home. Until now.

In early September Nationwide finally launched a range of 95% products. They’ve always had a very strong reputation for movers and first time buyers, and the new deals are well placed compared to the other big names so this – coming with a £1bn lending commitment – is very welcome news.

And interestingly they’re doing it outside the government’s Help to Buy scheme. That’s due to finish at the end of 2016 anyway, but it’s encouraging that Nationwide feels confident enough to take 5% deposits with no extra security. They’re not the first to do this (Yorkshire BS and TSB, for example, both operate outside the guarantee) but are certainly the biggest.

At the same time, Santander have announced they’re taking their 95% mortgage products out of the guarantee, though this will be phased over time.

But with the end of the scheme still over a year away, it’s a very good sign that lenders are feeling confident enough to return 95% mortgages to a more normal footing.


Guild Mortgage Service, Provided by London & Country Mortgages



Buy to Let continues to grow

The popularity of the Buy to Let market shows little sign of slowing.  According to the Council of Mortgage Lenders’ (CML) figures for July, lending to Buy to Let landlords saw an increase of nearly 12% on the previous month and 52% year on year.

Demand for good quality rental property remains high, particularly as first time buyers continue to grapple with the need to pull together substantial deposits.  With low rates available on savings accounts, investors are attracted by the income that a Buy to Let property could generate after taking account of all running costs.  In addition there is potential for capital growth if house prices rise over the longer term.

Any aspiring Buy to Let investors will typically need a deposit of 25% or more and will need to demonstrate that the rental income will be adequate to cover the mortgage interest by an adequate margin, typically 125%.

Bank of England Base Rate is currently at a record low and more lenders have entered the Buy to Let market in recent years, which has heightened the level of competition.  As a consequence mortgage rates are very attractive at the moment.

The CML figures also highlight that it’s not just new landlords that have created the growth in Buy to Let but also existing investors remortgaging their properties.  In fact remortgage lending for Buy to Let rose by 69% year on year.

Many landlords are reviewing their mortgage deal to see if they can cut the cost of their borrowing.  There are plenty of options available but it’s crucial to shop around for the right all round deal, taking account of criteria and the fees involved as well as the initial rate.

Getting the right combination could make it possible to not only reduce the level of interest on the mortgage but also to lock into a rate and protect against any potential increase in Base Rate in the short to medium term.

Guild Mortgage Service, Provided by London & Country Mortgages


The FCA does not regulate most Buy to let mortgages.


Economic News 24 September 2015

At its meeting in early September, the Bank of England’s Monetary Policy Committee (MPC) voted to hold interest rates at 0.5 per cent by an eight to one majority; Ian MacCafferty was the dissenter who voted for an increase in the interest rate by 0.25 per cent. Andy Haldane, the Bank of England’s economist and another of the nine MPC members, voted to maintain the interest rate but has recently been expressing concerns about the disinflation and deflation recorded around the globe and has suggested that a cut in interest rates may be needed to combat low inflation. Other members, however, including Martin Weale and Kristin Forbes, have indicated their belief that interest rates will need to rise sooner rather than later.

Just a few days after the MPC meeting, the Office for National Statistics (ONS) announced that the UK’s inflation rate fell to zero per cent in August, down from July’s rate of 0.1 per cent, apparently due to a smaller rise in clothing prices from a year ago and cheaper fuel prices. The Retail Prices Index (RPI) measure of inflation rose to 1.1 per cent from 1.0 per cent in July.

Hard on the heels of that news, the ONS further reported that the unemployment rate for the May to July quarter was 5.5 per cent, unchanged from the previous quarter but down from 6.2 per cent last year. It also announced that average earnings grew by 2.9 per cent between May and July compared with the same period last year – some analysts have speculated as to whether this news might bring forward a hike in the interest rate.

Meanwhile, The British Bankers’ Association (BBA) reported a pick-up in mortgage activity in August, believed to be due to expectations that an interest rate rise was in the offing. 80,221 home loans were approved by the major High Street banks of which more than half were for house purchases, while remortgaging accounted for 32 per cent of the loans, the highest level for four years.

Seasonally adjusted figures from HM Revenue and Customs (HMRC) show that 106,480 homes were sold during August, more than in any month since February 2014; it is the third month in a row that sales of more than 100,000 were recorded.