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Sterling falls against the dollar as UK economy slows but US picks up

The pound has fallen against the dollar as traders near the end of their week after survey data was better than expected in the US but painted a gloomy picture of the UK economy.

Sterling was trading 0.59 per cent lower against the greenback by 4.40pm, taking it to $1.283.

A falling pound alongside positive noises from China concerning a US trade deal helped the FTSE 100 end the day 1.22 per cent higher.

Traders sold off sterling following a worse-than-expected survey reading which showed that the UK private sector has suffered its biggest fall in output in over three years in November.

By contrast, US factory and services activity picked up pace this month, a survey from data firm IHS Markit showed.

The reading, which was better than analysts had hoped for, boosted the dollar. Against the euro, for instance, the dollar has risen 0.25 per cent to €0.906 by 4.40pm UK time.

Connor Campbell of trading platform Spreadex called the UK figures “nasty, nasty numbers”. He said they were “so bad that sterling was swiftly booted into the red”.

Andy Scott, associate director at risk assessor JCRA, said: “Sterling reacted negatively to today’s data which points to economic activity declining in November.”

He added that the reading supports the case made by the two Bank of England rate-setters who voted for a rate cut last month.

“The economy is clearly reflecting the strain placed on businesses from Brexit negotiations and the continuing state of flux,” he said, “added to which is a general election that includes one major party pushing for a relatively hard Brexit and radical socialist policy proposals from the other.”

Scott said the outlook for sterling “very much hangs on the outcome of the election, with the currency reacting positive to a number of voting intention polls that give the Conservatives a double-digit lead over the Labour party”.

A Tory majority is seen by most traders as a positive outcome for the pound as it increases the chances of Britain leaving the EU with a Brexit deal, which they hope would end some of the recent economic uncertainty.

By Harry Robertson

Source: City AM

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Proportion of homes bought with cash falls to record low

The proportion of homes in Great Britain bought without a mortgage fell to 28% in H1 2019, the lowest level since records began in 2007, Land Registry data shows.

This is significantly lower than the peak of 36% recorded in 2009.

Over the last two years the proportion of homes purchased across Great Britain with cash has fallen by a further 5%.

Aneisha Beveridge, head of research at Hamptons International, said: “The fall in cash purchases not only reflects tighter affordability, but also a decrease in activity amongst downsizers, the group of people most likely to have built up enough equity to purchase property with cash.

“It also reflects a drop off in the number of homes bought by investors, many of whom used cash to purchase their properties.”

The South West is the region with the highest proportion of cash sales; 34% of homes were purchased with cash in H1 2019.

Meanwhile London had the lowest proportion of cash sales – just 19%, which is 8% lower than 2009 when cash buyers in the capital peaked.

Every region in Great Britain recorded a fall in cash sales over the last two years.

The West Midlands recorded the biggest decrease in the proportion of homes bought with cash since H1 2017 (-9%), followed by London (-7%).

Scotland recorded the smallest fall, with the proportion of homes bought mortgage free decreasing 1% since 2017.

Source: Property Wire

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Buy To Let Repossessions Up In The UK

The number of buy to let repossessions of investment properties in the UK rose substantially in the third quarter of 2019.

Figures released this week from banking trade body UK Finance revealed a 40 per cent rise in buy to let repossessions on last year.

Around 800 buy to let repossessions were carried out in the third quarter of 2019, compared to 570 in the same quarter of the previous year.

However, there were 4,550 buy to let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the third quarter of 2019, five per cent fewer than in the same quarter of the previous year.

The number of buy to let investors in arrears of between 5 per cent and 7.5 per cent of the outstanding balance also fell by 21 per cent over the year.

In contrast, the number of buy to let investors in arrears of between 7.5 and 10 per cent grew by 9 per cent, while the number in arrears of over 10 per cent dropped just 1 per cent, according to the UK Finance figures.

However, the banking trade body has stated that it believes the large increase in buy to let repossessions due partly to a ‘backlog of historic cases’.

Rules were changed two years ago by the city regulator on how lenders have to calculate how much a borrower owes each month if they fall into arrears. This has led to lenders reviewing a large number of cases on an individual basis and applying for buy to let repossessions ‘only when all other options have been exhausted’ according to UK Finance.

However, David Smith of the Residential Landlords Association (RLA) said: ‘Repossessions for mortgage arrears take place for many different reasons.

‘Mortgage interest relief changes, which are now almost fully implemented, the increasing cost of regulation and the ever-increasing time to repossess a property are all major factors.’

‘Since most repossessions of this kind lead to tenants being evicted it is vital that the next government actively supports the majority of landlords doing a good job to provide the homes to rent the country needs.’

Source: Residential Landlord

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Labour housing policy: Social housebuilding, rent controls and action on leaseholds

The Labour Party has launched its manifesto, which pledges to vastly increase social housebuilding, introduce minimum standards in the private rental sector, and reform Help to Buy.

The manifesto has made the following pledges:

  • Spend £75bn on building 150,000 council or housing association homes a year, with 50,000 being “genuinely affordable” based on local incomes.
  • Set up a English Sovereign Land Trust, with powers to buy land more cheaply for low-cost housing.
  • Tax second homes used as holiday homes to help deal with homelessness.
  • Introduce rent controls capped by inflation. Cities would have powers to cap them further.
  • Bring in open-ended tenancies to stop ‘no fault’ evictions.
  • Introduce minimum standards in the private rental sector, enforced through nationwide licensing.
  • Toughen up sanctions for landlords who break the rules.
  • Fund renters unions to allow renters to organise and defend their rights
  • Get rid of the rules that require landlords to check people’s immigration status or that allow them to exclude people on housing benefit.
  • Give councils powers to regulate short-term lets, through the likes of Airbnb.
  • Reform Help to Buy to focus on first-time buyers on ordinary incomes.
  • Tax overseas companies buying houses.
  • Give locals the first option on newly built homes in the area.
  • Give councils powers to tax properties left empty, to bring new homes back into use.
  • End the sale of new leasehold properties, and allow leaseholders to buy their freehold ‘at a price they can afford’.

Reaction:

Brian Berry, chief executive of the Federation of Master Builders, said: “This country is in dire need of a housing revolution to address the critical lack of homes that is hampering the very fabric of our society.

“It is therefore pleasing that Labour are placing the delivery of housing at the forefront of their manifesto commitments.

“However, if supply is to meet demand, there needs to be a strong collaboration between the public and private sectors as neither can deliver the required upsurge in delivery alone.

“Labour’s manifesto places an overemphasis on the role of the state in supplying homes with very little detail on the role of the private sector in this endeavour.”

Joseph Daniels, founder of modular developer Project Etopia, said: “By going after landbanking developers and focusing on the crucial element of land supply, Labour have really shown they are determined to look properly at the real causes behind periodic declines in housebuilding.

“This is what the industry needs, far more than housebuilding pledges that lack any real roadmap for how they will be delivered, which is what we’ve seen from parties in the past. Talk is often cheap and the industry is crying out for meaningful change to allow developers to unlock land and bring it forward for development. If this is acheived the country could see a real turning point in public policy to help solve the housing crisis.

“These pledges have to be balanced with the commitment to cut carbon emissions and the Liberal Democrats’ proposal that all homes should meet the Passivhaus standard shows the major parties are becoming more creative when it comes to housing policy.

“A requirement to build to the Passivhaus standard would set a world-leading benchmark for housebuilding in Britain and send a strong message to developers about how quickly they need to make their construction process more carbon neutral.”

Source: Property Wire

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UK house prices won’t match low inflation until 2021

UK house prices will not match low inflation until 2021 and are set to fall in London this year as buyers are put off by continuing Brexit uncertainty, according to new research.

House prices in the capital will fall 1.5 per cent this year and only hold steady in 2020, a poll by Reuters found.

However forecasts for this year ranged from a drop of three per cent to no change, while in 2020 forecasts were between a two per cent fall to growth of five per cent.

“Until we have greater certainty regarding the political environment it isn’t possible to forecast what might happen in London with the greatest accuracy,” Rod Lockhart at property finance hub LendInvest told Reuters.

“We do not anticipate a material price rebound in London until at least 2022, although we may experience some recovery from 2021 – if and when the political ‘dust’ begins to settle.”

Last month, Foxtons, the London-focused estate agent, said revenue dropped in the third quarter as Brexit uncertainty continued to weigh on the residential property market in the capital.

Elsewhere in the UK, house prices are predicted to rise one per cent this year, 1.5 per cent next year and 2.3 per cent in 2021, according to the poll of 27 property market analysts.

Meanwhile, inflation is forecast to be 1.9 per cent, 1.9 per cent and two per cent respectively.

“Regardless of what happens with Brexit in the months ahead, a revival in the housing market is unlikely,” said Hansen Lu at Capital Economics.

“Indeed, even if a Brexit deal is implemented soon, we expect to see only a small improvement in housing market transactions and house price growth over the next two years.”

By Jessica Clark

Source: City AM

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UK Finance: Strong remortgage activity in September

Remortgage activity was strong in September – with volumes outstripping last year, UK Finance data shows.

There were 17,740 remortgages with additional borrowing, an increase of 5.9% on September 2019.

Meanwhile there were 19,140 remortgages with no additional borrowing, 8% more than the same month last year.

Nick Chadbourne, chief executive of conveyancing solutions provider LMS, said: “Overall remortgage activity is steady, with a slight bounce due to a peak in ERC expiries, but we are starting to see a shift in the balance of power within this market.

“Lower rates on 2-year deals have sparked competition between lenders, aiming to turn the heads of remortgagers, and borrowers have been taking advantage.

“Recent LMS data shows that although 5-year fixes remain the most popular product, purchases of 2-year deals have surged and closed the gap to just a few per cent.

“It’s tough to call whether this will continue as we move into the new year, but with low rates and slow price growth set to stay, we can be sure that the remortgage market is in good health.”

The number of first-time buyer and homeomover mortgages also rose year-on-year, by 1.6% and 1.8% from September 2018.

Buy-to-let activity was down however, as there were 3.5% fewer purchase mortgages year-on-year.

John Phillips, national operations director, Just Mortgages, said: “This is a strong set of figures, with both new loans and especially remortgages showing a big improvement on the same time last year.

“The 8% rise in pound-for-pound remortgages in particular is a welcome reversal of recent trends, where the increased prevalence of longer-term fixes has been driving down volumes.

“This is somewhat offset by the quite steep fall in new buy-to-let mortgages – more than 11% by value.

“There have been a number of changes to regulations in recent years, not to mention the impact of the stamp duty surcharge for buy-to-let.

“It would not be surprising if this was deterring landlords from expanding their portfolios and putting new entrants off altogether.”

Source: Property Wire

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Property market rebounds as buy-to-let purchases slide

Mortgage lending grew by 4.6 per cent to £21.4bn year-on-year in September, driven by an energetic remortgage sector, while buy-to-let (BTL) cooled, according to UK Finance data.

In the new loans market, the volume of first-time buyer mortgages grew 1.6 per cent to 291,000 in September 2019 over the same month in 2018. The value was up five per cent to £5.1bn, the banking trade body revealed.

The volume of homemover mortgages rose 1.8 per cent to 29,050 and value grew 5.4 per cent to £6.6bn.

In remortgages, the volume of loans with additional borrowing was up 5.9 per cent to 17,740 and value increase 5.1 per cent to £3.3bn, with the average additional amount borrowed was £50,000.

Remortgages with no additional borrowing grew eight per cent to 19,140 by volume and 9.4 per cent to £3.4bn by value.

However, the BTL sector dragged behind. The number of purchase mortgages dropped 3.5 per cent to 5,500 and the value was down 11.1 per cent to £800m.

BTL remortgages were flat at 12,900 by volume and by value at £2.2bn.

Strong set of figures

Industry watchers welcomed the generally positive picture.

Nick Chadbourne, chief executive at LMS, the conveyancing provider, said: “We’re starting to see a shift in the balance of power within this market. Lower rates on two-year deals have sparked competition between lenders, aiming to turn the heads of remortgagers. Our recent data shows that although five-year fixes remain the most popular product, purchases of two-year deals have surged.”

John Phillips, national operations director at broker Just Mortgages, said: “This is a strong set of figures, with both new loans and especially remortgages showing a big improvement on the same time last year.

“The eight per cent rise in pound-for-pound remortgages in particular is a welcome reversal of recent trends, where the increased prevalence of longer-term fixes has been driving down volumes.

“This is somewhat offset by the quite steep fall in new BTL mortgages – more than 11 per cent by value. There have been a number of changes to regulations in recent years, not to mention the impact of the stamp duty surcharge for BTL. It would not be surprising if this was deterring landlords from expanding their portfolios and putting new entrants off altogether,” Phillips added.

Written by: Liz Bury

Source: Your Money

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UK home prices to lag inflation on Brexit uncertainty

Annual home price rises in Britain won’t keep pace with already-low inflation until 2021, a Reuters poll found, and will fall in the capital London this year as uncertainty around the country’s departure from the European Union continues to deter buyers.

Britons voted in a June 2016 referendum to leave the EU but there is still no clarity about how, when or even if the two sides will finally part ways.

That uncertainty is likely to continue even if Britain leaves by Jan. 31 as is currently scheduled as there is another tight deadline – by the end of 2020 – for both parties to hammer out a new trade deal, though many doubt that target can be met.

Prices in London, for decades a magnet for foreign investors and speculators, will fall 1.5% this year and only hold steady in 2020, the Nov. 5-18 Reuters poll found.

But highlighting the ambiguity, forecasts for this year ranged from -3.0% to no change. For 2020, the range was even wider, from -2.0% to +5.0%.

“Until we have greater certainty regarding the political environment it isn’t possible to forecast what might happen in London with the greatest accuracy,” said Rod Lockhart at property finance hub LendInvest.

“We do not anticipate a material price rebound in London until at least 2022, although we may experience some recovery from 2021 – if and when the political ‘dust’ begins to settle.”

London-focused real estate agent Foxtons Group (FOXT.L) reported a fall in third quarter revenue late last month and said ongoing political uncertainty continued to weigh on volumes and prices in the London residential sales market.

Nationwide, home prices will rise 1.0% this year, 1.5% in 2020 and 2.3% in 2021, the poll of 27 property market specialists predicted. Inflation is forecast for those years at 1.9%, 1.9% and 2.0% respectively. [ECILT/GB]

“Regardless of what happens with Brexit in the months ahead, a revival in the housing market is unlikely,” said Hansen Lu at Capital Economics.

“Indeed, even if a Brexit deal is implemented soon, we expect to see only a small improvement in housing market transactions and house price growth over the next two years.”

Based on recent public opinion polls, British Prime Minister Boris Johnson looks set to win a Dec. 12 election and secure the backing in parliament he needs to get his new Withdrawal Agreement passed and take Britain out of the EU on Jan. 31.

Johnson’s Conservative Party has extended its lead over the opposition Labour Party during the past week, an opinion poll by ICM for Reuters showed on Monday.

BREXIT DEAL BOUNCE

Economists in another Reuters poll last week overwhelmingly said Britain would eventually strike a free-trade deal with the EU. The second-most likely resolution was Britain remaining a member of the European Economic Area. [ECILT/GB]

But third most likely in the poll of economists was the country leaving the EU without a deal and trading under World Trade Organization rules – something the housing market experts polled by Reuters said unanimously would have the most deflationary impact on home prices.

Economists said the least likely outcome was Brexit being cancelled. Housing watchers – again, unanimously – said that outcome would be the most inflationary for house prices in the coming year.

Rising prices would not be welcomed by first-time buyers struggling to get on the property ladder since, despite very low borrowing costs, scraping together the minimum 10% deposit demanded by most lenders poses a huge challenge.

The average asking price nationally for a home was 302,808 pounds ($391,652) this month, property website Rightmove said, around ten times the average British salary. The average price was double that in London.

When asked to describe the level of London house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response was 8. Nationally they were rated 6.

FILE PHOTO: Estate agent’s signs hang from houses in the Selly Oak area of Birmingham, Britain September 25, 2018. REUTERS/Darren Staples
“While house prices in London and the surrounding regions have been falling over recent months, prices are still significantly higher than elsewhere in the country, making buying a property in the capital unaffordable for many people,” said Jamie Durham at PwC.

“But this affordability problem is not constrained to just the capital, and house prices are high relative to wages right across the country.”

Polling by Sarmista Sen and Khushboo Mittal; Editing by Ross Finley/Mark Heinrich

Source: UK Reuters

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Long-term fixed savings rates drop to levels last seen before 2017 base rate rise

Longer-term fixed savings rates have plummeted to levels not seen since the Bank of England base rate rose in November 2017, according to Moneyfacts UK Savings Trends Treasury Report.

The research found that the average longer-term fixed bond rate (1.54 per cent) fell to its lowest point since July 2017 (when it stood at 1.49 per cent) and the average longer-term fixed ISA rate (1.35 per cent) fell to its lowest point since October 2017 (when it stood at 1.32 per cent).

Meanwhile, the average one-year fixed bond rate (1.28 per cent) is at its lowest level since June 2018 (when it also stood at 1.28 per cent), and the average one-year fixed ISA rate (1.21 per cent) is at its lowest level since May 2018 (when it stood at 1.19 per cent).

Rachel Springall, finance expert at Moneyfacts, said: “It will be disappointing news for savers to find the positive impact of both competition among challenger banks and two base rate rises over the past two years has unravelled in such a short space of time. Indeed, this year both the longer-term fixed bond and ISA average rates hit their highest peak since the 2017 base rate rise.

“In March 2019, the longer-term fixed bond rate hit 1.89 per cent, and the average longer-term fixed ISA rate had reached 1.62 per cent, meaning they have dropped by 0.35 per cent and 0.27 per cent respectively over the past eight months.”

Moneyfacts blamed the rate cut on savings providers not wanting to risk paying out an inflated rate to consumers if they feel interest rates are expected to fall over the next few years.

On the opposite side, savers may not want to invest in a longer-term fixed bond or ISA, and are instead opting to keep their cash close to hand. Pensioners may also be using easy access accounts instead of fixed while they decide what to do with their pension freedoms cash.

“The economic uncertainties could well be the cause as to why the amount invested within interest-bearing sight deposits more than doubled in September year-on-year, one month before the UK was due to depart the EU. In comparison, money continued to flow out of interest-bearing time deposits in September 2019, according to Bank of England statistics,” said Springall. “Savers are also still playing it safe by placing their cash within the high street banks, even though they do not pay the best interest rates on the market. The biggest banks are more robust than during the financial crash as they have had to amass more capital reserves.”

Written by: Emma Lunn

Source: Your Money

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General Election Uncertainty Keeping Homes Off the Housing Market

The amount of properties entering the UK housing market is falling at its fastest rate in ten years, as sellers are being put off by the upcoming General Election.

According to Rightmove, the number of new properties on the housing market fell by 14.9% this month compared to November 2018, the largest annual drop since August 2009. In London, the drop in new homes put on sale was even more pronounced, with a fall of 26.9% recorded in the capital.

The property website also revealed that average house prices in the UK fell by £3,900 in November, a 1% drop compared to October. In London, average prices fell by £8,926, or 1.4%, compared to the previous month. The average asking price for a property in the UK now stands at £302,808.

Rightmove said that although asking prices tend to drop slightly before Christmas, this latest slump is more to do with sellers waiting until the uncertainty surrounding the upcoming General Election, and of course Brexit, subsides. It also warned that the housing market could be subdued throughout next year if sellers’ reluctance to sell doesn’t ease up.

“I’ve seen lots of unusual events affecting the property market in my 40-year career, but a Brexit deadline followed by a snap general election six weeks later is obviously a new combination for me and for many thousands of buyers and sellers,” said Miles Shipside, director and housing market analyst at Rightmove.

“Elections normally dampen activity as uncertainty causes a degree of hesitation, but this one is being called to try to break the deadlock after three years of uncertainty. A more certain outlook, whatever it may be, would be a welcome change for those who are contemplating moving.

“Our monthly poll of the housing market shows a clear swing towards hesitation for prospective sellers, with buyers losing the extra choice that thousands more newly marketed properties would bring. In spite of this, buyers are continuing with their purchasing plans, with the number of sales agreed only marginally down on a year ago.”

Glynis Frew, chief executive of Hunters estate agents, said: “The reality is that the market will continue to experience the Brexit jitters until the impasse in Westminster comes to an end. Nobody really knows what’s around the corner so it’s understandable that some buyers have been sitting tight and sellers haven’t been itching to bring their properties to the market.

“The general election has now been thrown into the mix too so that will add another layer of uncertainty, or even opportunity for the more audacious buyers.”

Source: Money Expert