Category: JULY 2023

This morning’s announcement from ONS regarding inflation dropping to 7.9% in the year to June will be welcomed news following the recent figures.

It means the rate of price rises in the UK has slowed more than expected, down from 8.7% in May.

The latest figures exceeded the market forecasts of a reduction to 8.2% and core inflation a key influencer on swap rates was also down to 6.9%.

Core inflation remains close to a 30 year high, which is the area the bank of England are targeting to bring down so we can should still expect more rate rises in August and potentially September.

The UK has the highest inflation amongst the G7 countries, but hopefully this marks the start of a downward trend and towards the government target to half inflation to 5% by the end of the year.

While it’s difficult to pre-empt market reaction, this will hopefully have a positive impact on future market forecasts, and a calming to the recent volatility in fixed rates.

It will take a few months before we see any substantial decreases in fixed rate pricing, the advice will be for mortgage holders unsure on their next move to speak to broker or their lender, commented Nicholas Mendes, Mortgage Technical Manager at John Charcol.

Commenting on the today’s inflation figures, Kevin Pratt, personal finance expert at Forbes Advisor says:

“Hard-pressed consumers and mortgage holders will hope the larger-than-expected fall in the headline rate of inflation might enable the Bank of England to take its foot off the interest rate accelerator when it announces its next policy decision.

They might have heard the good news about the falling energy prices, seen reports that food inflation has peaked and watched the business secretary demand supermarkets cut the price of petrol and thought a corner has been turned. And in some ways it has.

But the Bank’s main focus is likely to be the measure of inflation that strips out food and energy costs because of their inherent volatility – and this core figure shifted more modestly in June, edging down from 7.1% to 6.9% on the back of wage increases.

This doesn’t auger well for the August Bank Rate call.

We’re going to see the cost of borrowing increase on 3 August – the question is whether it will be an 0.25 or 0.50 percentage point increase in the Bank Rate to 5.25% or 5.50%.

Either way, this will result in more expensive mortgages, stretched household incomes and continued financial misery for millions.”

Chris Druce, senior research analyst at Knight Frank, comments:

“13 consecutive base rate rises by the Bank of England since December 2021 to tame inflation has taken us to 5%, and pushed the cost of borrowing to a recent high.

This has reduced buyers’ spending power, weakened sentiment in the UK property market and acted as a drag on activity .

Nerves are unlikely to be calmed and the outlook improved until buyers’ can gauge where the new peak in the bank rate will be, allowing them to plan accordingly.

Today’s fall in inflation is therefore important but a step on a journey that’s not yet complete.”

Saxo UK CEO Charlie White-Thomson, comments:

“Today’s year-on-year UK inflation print of 7.9% is a step in the right direction and evidence that the significant financial medicine in the form of interest rate hikes is taking effect.

The big number of 7.9% is still well off the ‘no ifs or buts’ 2% target and the cost of living crisis remains painfully evident.

With this in mind, we should prepare for a 25bp hike by the Bank of England on August 03.

The war to defeat inflation is not over and the Governor has nailed his colours to the 2% target.

Motor fuel prices led the largest downward contribution to the monthly change in CPI while yearly food remains stubbornly high at 17.4% according to the Office for National Statistics.”

Stephen Bryson, Independent mortgage and protection adviser at IFO comments:

“Inflation rates have fallen faster than many of us expected which will be a welcome update to the UK housing market.

Recent inflation increases have caused upheaval across the UK’s housing market, with the supply now exceeding the demand.

For those looking to buy, prices may be negotiated down, but we’re not actually seeing many downward valuations.

Ultimately, people still need homes, but higher interest rates and the cost of living will shift focus towards what people need rather than what they want.

As a result, more expensive houses will take longer to sell compared to an average priced ones.”

deVere Group’s CEO, Nigel Green, warns that the Bank of England will still raise interest rates despite cooling inflation:

The warning comes as fresh figures reveal that UK inflation fell to 7.9% in June, from 8.7% the month before.

He says: “Despite the data showing that the battle against inflation in the UK is being won, we expect the Bank of England will confirm it’ll continue with its aggressive interest rate hiking agenda at the monetary policy meeting on August 1.

Although the consumer price index fell to 7.9% last month, amid lower petrol prices and a slowdown in the pace of growth for food, beverages and other basics, the central bank officials will likely argue that there is still work to be done.

We believe the Bank will insist that although inflation is certainly coming down, it is doing so very, very gradually.

It remains sticky – still the highest in the G7 – and a long way from the 2% target.

They will say prices are still far too high and rising at a quicker pace than they have done in the past.

In addition, they are likely to cite strong wage growth in the three months to May.

Against this backdrop, we expect the Bank of England to increase interest rates for a 14th consecutive time at its next policy meeting – and we wouldn’t be surprised if there were a second consecutive 50 basis point hike.”

Another interest rate hike could “pile on more misery” for households, homeowners, and businesses.

Higher interest rates lead to increased borrowing costs, making mortgages more expensive. Homeowners with variable-rate mortgages are likely to face higher monthly payments.

Rising interest rates will also reduce disposable income as loan repayments increase, affecting household spending and overall economic activity.

Businesses reliant on borrowing may face higher interest expenses, which can affect their profitability and ability to expand or invest.

In addition, higher interest rates can reduce consumer spending, affecting businesses dependent on consumer demand.

Hiked interest rates typically negatively impact the value of existing fixed-income investments, such as bonds, as newer issuances offer higher yields.

The higher rates also historically lead to stock market uncertainty and increase volatility, as investors reassess the attractiveness of different investments.

Sectors sensitive to interest rates, such as housing, cars, and financial sectors, could experience greater impacts than others.

Green concludes: “We believe that although the battle to tame inflation seems to be being won, with the lowest reading in 16 months, the Bank of England is highly unlikely to be dissuaded from its course of rate hiking action for the time being.”

The looming threat of the abolition of Section 21 is raising questions over the future shape of the UK’s rental market.

National law firm Dutton Gregory Solicitors fears the change is already deterring swathes of private landlords, with Build to Rent giants coming out on top.

Dutton Gregory’s Landlord and Tenant department is processing an unprecedented number of Section 21 notices, which have been issued to tenants since the announcement of the planned abolishment.

The Ministry of Justice also recently reported that no fault evictions were up by 15.8% in the three months to March.

The Hampshire-headquartered law firm notes that this workload increase could be due to fear and uncertainty felt by private landlords.

A Section 21 notice, commonly known as a ‘no fault’ eviction notice, allows landlords to evict tenants without declaring a reason.

This is currently carried out through the accelerated possession process and does not generally require a hearing to be listed by the courts.

It gives landlords an automatic right to regain their property and an order can be obtained in a matter of 6-8 weeks in most courts outside of London.

As a result of the proposed abolition, the Government has said the grounds of Section 8 will now be strengthened, to allow landlords to recover their property. However, this hasn’t offered peace of mind to many buy-to-let owners.

Source: Property Notify

With parliament’s summer recess rapidly approaching, the upcoming parliamentary schedule does not have room for the second reading of the Renters (Reform) Bill, when MPs will be able to make amendments and ask questions to Housing Minister Rachel Maclean MP.

Scrutiny

While the Bill has not returned to the Commons for a second reading, the Levelling Up, Housing and Communities Committee has seized the opportunity to question Housing Minister Rachel Maclean and her team from the Department for Levelling Up, Housing & Communities (DLUHC) on the details of the Bill.

The expectation is that these policies will be added as amendments during the second reading, but there is concern from the industry that it will not leave enough time for proper parliamentary scrutiny of these important policies.

Bill’s provisions already filtering through

Meanwhile, there has been some movement from the government on some aspects of the Bill. Originally, a tenant that challenged a Section 13 rent increase in court could either be ordered to pay the new rent or get it decreased, whereas tenants could now face the prospect of the courts further increasing the rent.

This could help put off spurious challenges and reduce the potential number of court cases.

Also, under questioning from the committee, the DLUHC team gave new details on the proposed Ombudsman, including that it would operate as a non-profit and that they had not ruled out a combined agent/tenant/landlord redress scheme.

Agents need their say

“A lot of the important details are still up in the air,” says Neil Cobbold, Managing Director, PayProp UK, “And with the Bill not getting its second reading until at least September, this gives agents the summer to get organised and share their views with their MPs.”

As part of PayProp’s push to promote the views of lettings professionals as the government reforms the industry, the company hosted an informal roundtable discussion with Andrew Lewer MP, member of the Levelling Up, Housing and Communities Committee, and senior representatives from Belvoir, Dexters, Foxtons, Knight Frank, Leaders Romans Group, LSL Property Services, Savills, and The Property Franchise Group.

PayProp is also asking for the views of all letting agents in their survey, Life after the Renters (Reform) Bill, promising to present the results to the government, MPs and peers, to highlight the issues letting agents feel this Bill will create.

“We’ve already seen the government make changes based on feedback from the industry, so the more voices we have, the better the chance lettings professionals will be consulted on this bill and future changes to the industry,” concludes Cobbold.

Source: Property Notify

The homebuying process has come to be seen as one full of hidden costs, some of which people believe are unnecessary, designed only to line the pockets of the property professionals you meet along the way.

Surveys, however, are a worthy expenditure and one that we would always encourage homebuyers to consider money well spent. Better to spend £1,000 now than discover a property issue later down the line and end up spending £10,000 to fix it.

A study by the Royal Institute of Chartered Surveyors (RICS) revealed that 80 percent of homeowners bought a property without having a survey. This resulted in an average bill of £5,750 for unexpected repair work.

What is a property survey?

A property survey is a detailed assessment of a property conducted by a qualified surveyor.

As a homebuyer, surveys are designed to give you as much information as possible about the home you are buying, including any issues or defects.

The surveys will then offer possible solutions for the problems, alongside an estimated cost for the required work.

For the most part, surveys take place during the conveyancing portion of the homebuying process.

Do I actually need these surveys?

When you’ve already committed to a large spend for your house or flat, further expenses can feel difficult and unnecessary.

Property surveys are optional. You can go ahead and buy a home without them, but this could be a costly mistake. Surveys exist to help you avoid any unexpected or unwanted surprises that could require great expense to fix or could severely damage your enjoyment of living in the home.

So, while surveys do come at a price, they’re more than worth the cost because they help you make sure that the price you’re paying for the home is fair and reasonable.

Surveys are particularly important if you’re buying an old property, a property that hasn’t been on the market for a long time, or a property that has a thatched roof, timber frames, or is listed.

If major problems are uncovered, you may be able to use the information in the survey to negotiate with the seller. The most common type of property issues are as follows: –

1. Asbestos
2. Structural Movement
3. Damp
4. Japanese Knotweed
5. Electrical Issues
6. Faulty Drainpipes
7. Roof Issues
8. Woodworm and Beetle Infestation
9. Insulation
10. Flat Roofing

If your survey finds that you’ll need to carry out repairs costing £5,000 you could ask for a reduction on the property price to reflect this, or ask the seller to carry out the necessary repairs before you exchange contracts.

The three basic types of survey

Homebuyer Reports

This is a detailed survey and visual inspection of the home. It includes insights into the overall condition of the property from top to bottom and will highlight any clear and obvious problems.

Building Survey

This is a more comprehensive survey than the Homebuyer Report. It contains everything the Homebuyer Report does but then takes a deeper dive into the true condition of the property. This is the best survey to commission if you’re buying an old or unusual home.

Mortgage Survey

If you’re using a mortgage to buy the property, your mortgage provider might arrange for their own survey to be conducted.

This is not a true survey, rather a brief overview of the property and how much it is worth.

The lender wants to know that, should you default on the loan, the property is valuable enough to cover the money you owe them. Despite this survey being requested by the mortgage provider, there is still a good chance that you will have to pay for it.

A comprehensive guide to all surveys

RICS Home Survey Level 1 – Cost: £300-£900 – Takes around 1 hour to complete

This is the most basic and cheapest survey, perfect for those who are buying a conventional property in decent condition and constructed from common materials.

It will give a very simple overview of the property’s condition and highlight any glaring issues while suggesting how vital it is that each issue is addressed.

As with all surveys, the time and cost will vary depending on the size and type of the property.

RICS Home Survey Level 2 – Cost: £400-£1,000 – Takes around 3 hours to complete

This is the survey that most homebuyers choose. It’s a more detailed version of the above, containing everything from a Level 1 survey but also considering the roof and cellar.

The surveyor will also make recommendations for any further investigation if it’s required and provide advice on how much repairs should be expected to cost

RICS Home Survey Level 3 – Cost: £630 to £1,500+ – Takes up to one full day to complete

This is a full structural survey and the most thorough survey that RICS offers. This is a good choice if you’re buying an old property, 50+ years old, or if the home has an unusual design or is constructed using unusual methods and materials. It is the most expensive of the three RICS Home Surveys.

RPSA Home Condition Survey – Cost: £400-£900

This is the same as a RICS Home Survey Level 2 but is conducted by the Residential Property Surveyors Association (RPSA) instead of RICS.

Both bodies are fully qualified and accredited. It will also include information like broadband speed, damp assessment, and boundary issues.

RPSA Building Survey – Cost: £630-£1,500+

This is the RSPA equivalent of the RICS Level 3.

Source: Property Notify