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

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