Bank of England Urged to Cut Interest Rates

The UK annual inflation rate is expected to drop to the Bank of England’s target of 2% in May, from 2.3% in April, when the latest data is released today.

In March, Bank of England Governor Andrew Bailey said “we are on the way” to interest rate cuts, and so does the anticipated fall in inflation mean rate cuts are imminent? Paula Higgins, chief executive of the HomeOwners Alliance, is among those that certainly hopes that is the case.

She offers this message for the Bank of England: “Stop holding homeowners to ransom and cut interest rates now.”

Higgins points to the fact that the hikes in the cost of borrowing is putting household finances under enormous strain. For those that are remortgaging, the best rate on a two-year fix this June is 4.82% – more than double the best rate on a two-year year fix that was available in June 2022, which was 2.34%.

For someone with a £250,000 mortgage over 25 years this means a monthly mortgage payment of £1,435 compared to £1,102. This is an increase of £333 per month or £3,996 a year.

Many households have found these increases impossible to afford: UK Finance figures show 870 homes were repossessed in the first quarter of 2024 – a 36% jump compared to the previous quarter. While 96,580 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance, during the same period – a 3% increase on the previous quarter.

The Bank of England has repeatedly argued that interest rates needed to increase or remain at 5.25% to fight inflation. They have raised rates 14 times since December 2021 to bring down inflation which went from 5.4% December 2021 to 11.1% in October 2022 and has now dropped back to 2.3%. This is just a fraction over the target of 2%.

But Higgins is concerned by speculation that a rate cut may not happen until at least September.

She said: “Inflation is no longer running at 10% – it’s almost at its 2% target. And yet the Bank of England continues to use it as an excuse to keep interest rates at the current 16 year high. We think it’s unacceptable that homeowners are held ransom by the Bank of England in this way.

“Signalling that rate cuts are on the horizon is not enough. We’ve been hearing that since March. Homeowners’ best-laid financial plans are on hold as they bear the brunt of the Bank of England’s monetary experiment. We cannot see any justification for this continuing.

“The burden is too heavily borne by mortgage borrowers. This is why we’re calling on the Bank of England to stop this attack on homeowners and drop the base rate this Thursday.”

Source: Property Industry Eye

Nearly Half of Landlords Plan to Invest in Property in the Next Year, Survey Reveals

A recent survey by specialist lender Landbay shows a significant rise in landlord confidence, with nearly half (44%) of respondents indicating their intention to buy property within the next 12 months. This marks a notable increase from Landbay’s last survey at the end of last year, where only 32% expressed plans to purchase property.

Drivers of Increased Investment

Among the landlords planning to buy, over 60% cited the primary reason as building their property portfolio. This desire for expansion reflects a robust confidence in the rental market’s potential for long-term returns. Additionally, nearly a third (31%) pointed to an increase in tenant numbers as a motivating factor, up from 26% in the previous survey. Another 12% of landlords are considering new purchases based on the anticipation of a potential drop in house prices.

Portfolio Landlords Leading the Charge

The survey highlights that portfolio landlords are the most active in the market. About 40% of those planning to buy own 11 or more properties, and 42% have between four and ten properties. Smaller landlords, those with one to three properties, also show interest, making up 19% of the prospective buyers.

Regional Confidence Variations

Confidence among landlords varies significantly across different regions. In the South East, 28% of landlords plan to buy another property in the next year, contrasting with only 13% in London. Confidence levels in the Midlands, East of England, and the North are similar, with just under a quarter of landlords in these areas indicating intentions to invest.

Uncertainty and Concerns

While a positive trend is evident, not all landlords share the same level of optimism. About 16% remain undecided about their future plans, a decrease from the previous survey’s 25%. Conversely, 40% of respondents are not looking to buy any property, and just under 30% are considering selling some of their properties over the next year. This group cited concerns over mortgage interest rate fluctuations, difficulties in evicting tenants, and landlord taxation as their main reasons for selling.

Landbay’s Perspective

A spokesperson from Landbay commented on the survey findings, stating: “Despite the various pressures faced by landlords, there is still an appetite for further house purchases. The increase demonstrates the continued attractiveness of buy-to-let as a long-term investment strategy, supported by the strong demand for rental properties.”

Survey Details Lacking

However, Landbay has not disclosed specifics about when the survey was conducted or the number of landlords contacted, which could be crucial for evaluating the robustness of these findings.

Conclusion

The survey by Landbay paints an optimistic picture for the buy-to-let market, with a significant portion of landlords planning to expand their portfolios in the coming year. This trend highlights a sustained confidence in the rental market’s profitability, despite ongoing challenges such as fluctuating mortgage rates and regulatory changes. As the market evolves, both prospective and current landlords will need to stay informed and strategically navigate these dynamics to capitalize on emerging opportunities.

Source: Property Notify

What Does a General Election Mean for the UK Housing Market?

Overall, we don’t see the election having as big an impact on the housing market as previous years. This is due to there not being a huge divide in policy between the two main parties, with neither having many specifics on housing other than a focus on reforming the private rental sector and boosting housing supply. However, the number of completed sales may now fall slightly short of the 1.1m we expected for 2024.

Businesses and landlords will want to see that political parties have concrete plans – namely for boosting housing supply across all tenures and getting the right reforms to the private rented sector. This will ensure that supply is maintained while giving renters more protections.

As we run up to summer and the slower period in the housing market, the election announcement is likely to stall the pace at which new sales are being agreed to in the coming weeks.

Most buyers who are close to completing on a house will ideally want to push through and agree a sale now. Those who are earlier in the process may look to delay decisions until the autumn after the election is over.

The housing market has been recovering with more homes coming to the market for sale, and an increased volume of sales overall. This is a sign of growing confidence amongst sellers, even though mortgage rates remain at 4.5% to 5%.

Currently, there are 392,000 homes in the sales pipeline that all working their way to completion over 2024. This is 3% higher than this time last year, and we don’t expect to see buyers already in the process of working toward sales to pull out.

The incentive to move remains for many households – in particular for first-time buyers who are escaping rapid growth in rent costs, and upsizers who delayed moving last year when mortgage rates increased.

Source: Zoopla

Labour Calls for Suspension of the Right to Buy Housing Scheme

Labour’s Andy Burnham is calling for a suspension of the Right to Buy housing scheme, claiming it exacerbates the housing crisis by reducing the stock of social homes. He argues that the scheme results in a net loss of social housing each year, hindering efforts to address the shortage of affordable homes.

Burnham, who was recently re-elected as Mayor of Greater Manchester, aims to build 10,000 homes across the county, with a focus on social housing. He believes that by suspending Right to Buy for new homes, local authorities can retain more social housing stock and address the housing crisis more effectively.

The Department for Levelling Up, Housing and Communities (DLUHC) defends the Right to Buy scheme, stating that it has enabled over two million social housing tenants to become homeowners. They emphasize the role of local authorities in managing the scheme and using proceeds from sales to fund new housing projects.

Mark Slater from Greater Manchester Tenants Union supports Burnham’s plan to suspend Right to Buy, highlighting the urgent need for more homes in the region. He argues that Right to Buy has significantly reduced the stock of social housing, contributing to the housing crisis.

In addition to addressing the shortage of affordable housing, Burnham aims to improve standards in the private rented sector by introducing a Greater Manchester Good Landlord charter. This initiative would give residents the right to request property checks if they have concerns about the safety or condition of their homes.

As Mayor of Greater Manchester, Burnham holds significant powers over various areas, including public transport, housing, and policing. His proposals reflect a commitment to tackling the housing crisis and improving living conditions for residents across the region.

Source : Property Notify

Taxes are Forcing up Rents

The rise in private rents across England, Wales, and Scotland over the past year has been attributed to various tax and regulatory changes affecting landlords, according to Propertymark, the letting agents’ trade body.

One significant factor contributing to the increase in rents is the tax relief reduction on mortgage interest costs initiated by Chancellor George Osborne in 2015. This measure, along with the removal of the 10% allowance for fully furnished homes, has led to decreased profitability for many landlords. These tax changes have made it challenging for landlords to operate profitably, prompting some to exit the sector altogether.

In addition to tax changes, landlords have faced increasing costs due to regulatory changes and expensive local council licensing requirements. The reduction in Capital Gains Tax allowances has further impacted landlords who choose to sell their properties.

Propertymark has highlighted the perspective of landlords, emphasizing that they feel unfairly targeted as the reason for rent increases. Landlords argue that government support, such as tax relief or relaxed thresholds, would be beneficial. They also call for greater recognition of the positive role landlords play in providing accommodation and urge the government to address biases towards tenants’ issues.

Propertymark’s data, along with insights from private landlords, indicates a decline in the volume of private rental properties available, leading to a shortage in supply. This scarcity, combined with increased demand, has contributed to rising rents as tenants compete for limited housing options.

To address these challenges, Propertymark is advocating for the UK Government to create an economic environment that benefits both tenants and landlords. This could involve implementing policies that support landlords while also ensuring affordability and access to rental housing for tenants.

Source : Property Notify

Interest Rates Held at 5.25%

Andrew Bailey, the Governor of the Bank of England, has signalled that interest rates will likely need to be cut in the coming quarters to maintain inflation at the 2% target. Despite policymakers voting to keep interest rates steady at 5.25%, Bailey emphasized the need for rate cuts, possibly exceeding current market expectations.

Money markets had anticipated two rate cuts by the year’s end before Bailey’s remarks. He stated that a rate reduction in June was not definitively ruled out nor guaranteed.

Bailey expressed optimism regarding falling inflation in the upcoming months, attributing it to encouraging economic indicators. He emphasized the necessity of observing sustained low inflation before implementing rate cuts.

Sir Dave Ramsden, the Bank’s deputy governor, supported calls for reducing borrowing costs, citing signs of inflation’s descent.

The Bank’s recent economic assessment revealed a 0.4% growth in the UK economy during the first quarter, marking a recovery from recession. It projected inflation to have eased back to the 2% target in April from 3.2% in March, with food prices stabilizing around this level for the remainder of the year.

Investors have adjusted their expectations, bringing forward predictions for rate cuts from August to June, with rates potentially dropping to 4.75% by year-end.

Source : Property Notify

The Mortgage Mistake Costing the Average Homeowner £3,000

New research by the personal finance comparison site finder.com shows that almost a third (31%) of homeowners have let their mortgage slip into a higher rate for at least 1 month after their fixed-rate deal has ended. The total amount of time during which people had let their mortgage revert to a higher rate was an average of 10 months over the course of their mortgage, according to the survey.

Someone paying off the cost of the UK’s average house, worth £281,913, on a competitive fixed 3-year rate* of 5.5% would pay £1,361 per month during those 3 years.

But if they didn’t remortgage immediately at the end of the initial fixed term, the interest rate would revert to the lender’s standard variable rate, which is typically around 7.5% at the moment. This would cost them £1,661 per month, which is an extra £300. The average person paying 10 months of this would therefore part with an extra £3,000 to pay the extra interest.

While the average time that homeowners in the survey had left their revert rate going was 10 months, over 1 in 10 (11%) had paid a higher revert rate for more than 1 year. Worryingly, 3% said they’d paid a revert rate for over 5 years. This would cost over £30,000 in extra interest.

To see the research in full visit: https://www.finder.com/uk/mortgages/mortgage-rate-change-calculator

Source : Property Notify

Only 1 in 10 Homebuyers Instruct a Home Condition Survey in Q1 2024

Countrywide Surveying Services (CSS), one of the leading suppliers of valuation panel management services, has released findings from its inaugural Home Survey Trends Index for Q1 2024 which found that fewer than 1 in 10 homebuyers instructed a home survey with their recent property purchase.

This worrying statistic of 9.7% includes those who took out a RICS Home Survey Level 2, RICS Home Survey Level 2 with Valuation and RICS Home Survey Level 3 and is applicable for purchases completed over the course of Q1 2024 in England, Wales, and Northern Ireland. 

In terms of a survey split, the Index shows that 61% of buyers commissioned the RICS Home Survey Level 2, with a third (33%) taking out a RICS Home Survey Level 2 with Valuation and 6% opting for a RICS Home Survey Level 3.

For those homebuyers electing for a RICS Home Survey Level 2 or a RICS Home Survey Level 2 with Valuation, the average property price for both survey types was £283,000 with an average £403 fee and £439 respectively. For those homebuyers selecting a RICS Home Survey Level 3, the average property price was £407,000 with an average £854 fee for this survey type.

On a regional basis, the largest uptake in a RICS Home Survey Level 2 and RICS Home Survey Level 2 with Valuation was evident in the North West at 15.5% and 15.6% respectively. While the largest uptake for a RICS Home Survey Level 3 was in the South East at 14.7%.

In contrast, the lowest uptake for a RICS Home Survey Level 2 was in the North East (5.7%), with the fewest for a RICS Home Survey Level 2 with Valuation being reported in East Anglia and Wales – both regions registered 6.5%. The lowest uptake for a RICS Home Survey Level 3 was in the North at 3.3%.

The RICS Home Survey Level 2 was previously known as the HomeBuyer Report and the RICS Home Survey Level 3 offers a more comprehensive structural overview which is ideal for old and more complex buildings, listed properties, houses with obvious defects, and unconventional homes.

Source : Property Notify

Housing Market Continues Spring Revival

The average asking price of property coming to the market increased by 1.1%, or £4,207, this month to hit £372,324, just £570 short of the record in May 2023, according to new data from Rightmove.

A key factor behind this growth towards a near-record average price is the largest homes, top-of-the-ladder sector, which is seeing its strongest start to the year for price growth since 2014, with the annual rate of price growth is now stood at 1.7%, the highest level for 12 months.

However, the market remains price-sensitive, and operating at different speeds, with prices and activity rising more slowly in the more mortgage dependent first-time buyer and second-stepper sectors.

The number of new sellers coming to the market is up by 12% compared to this time a year ago, and the number of sales being agreed is up by 13% as both seller and buyer activity rebound from last year’s much more subdued Spring.

The biggest growth in activity is taking place in the largest homes, top-of-the-ladder sector, with the number of new sellers up by 18% compared with last year, and the number of sales being agreed up by 20%.

Rightmove says homeowners are springing into action, with Thursday 28 March seeing the highest number of new sellers coming to the market in one day so far in 2024, and the third largest since August 2020.

There appears to be a window of opportunity for those considering a move to act, with a busy summer of sporting events, followed by a likely general election, creating more home-mover distractions than usual, according to Rightmove’s Tim Bannister.

Source : Property Industry Eye

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