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Bank of England predicts 7.25% growth in economy as interest rates held at 0.1%

The UK’s economy could grow by more than 7% in 2021, according to the latest Bank of England forecast – the fastest pace since the Second World War.

Their projection is that the UK gross domestic product (GDP) – a measure of the size of a country’s economy – will rebound by 7.25% and mark the best year of growth since official records began in 1948.
This represents a sharper recovery than the central bank’s previous forecasts, with 5% growth previously expected.
It comes after the pandemic saw the UK suffer the biggest drop in output for 300 years in 2020, when it plummeted by 9.8%.

But the Bank’s quarterly set of forecasts showed it downgraded its growth outlook for 2022, to 5.75% from 7.25%.

The rosier view for the economy this year came as the Bank’s Monetary Policy Committee (MPC) held interest rates at 0.1%.

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The Bank kept its quantitative easing programme on hold at £895 billion, although one member of the MPC voted to reduce it by £50 billion given the brighter recovery prospects.
In minutes of the latest decision, the Bank of England said the lockdown is set to see GDP fall by around 1.5% – far better than the 4.25% drop first feared.

It also sharply cut its forecasts for unemployment over the year.

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The Bank said: “GDP is expected to rise sharply in 2021 second quarter, although activity in that quarter is likely to remain on average around 5% below its level in the fourth quarter of 2019.

“GDP is expected to recover strongly to pre-Covid levels over the remainder of this year in the absence of most restrictions on domestic economic activity.”

But it warned over “downside risks to the economic outlook” from a potential resurgence of Covid-19 and the possibility that new variants may be resistant to the vaccine.

Source: iTV

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LMS: Remortgage completions up 4.7% in March

Remortgage completions volumes rose by 4.7% in March, according to LMS’ Monthly Remortgage Snapshot.

In addition, instruction volumes continued to rise, up 17.2% in January.

The cancellation rate increased by 0.5% to 7.45% in March, and pipeline figures rose by 12.8%.

The average monthly payment decrease for those who remortgaged in January was £238.

A total of 43% of borrowers increased their loan size, and 54% of those who remortgaged took out a 5-year fixed rate product which was the most popular product length.

The most popular primary aim when remortgaging, at 33%, was to borrow more money.

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The average loan increase post remortgage was £22,999, whilst the average loan decrease post remortgage was £15,523.

Nick Chadbourne, chief executive of LMS, said: “Remortgage instructions grew by nearly a quarter in March as the stamp duty holiday extension increased industry capacity by taking pressure off the purchase market.

“March also brought the market right up to the five year anniversary of 2016’s stamp duty cut for buy-to-let purchasers, which will have contributed to the increase as many landlords begun the remortgage process as their 5-year fixes came to an end.

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“These factors are the most likely cause for the pipeline growth as cancellations remained fairly steady.

“The purchase market is likely to retain the lion’s share of mortgage business through Q2 as government support such as the 95% government-backed LTV scheme and SDLT holiday continue to prop up an already busy market, but this balance should shift as the incentives offered by the stamp duty holiday reduce at the end of June.

“Remortgage-focused businesses should prepare for a growth in enquiries but shouldn’t abandon the other business streams which many have explored while purchases were on top – growth at any time should be seized with both hands, but those who are still reliant on old processes will struggle.”

By Jake Carter

Source: Mortgage Introducer

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Record mortgage borrowing in March as owners move or improve

UK homeowners borrowed a record £11.8bn more on mortgages than they repaid in March, according to figures from the Bank of England.

This net borrowing level was the highest of any month since comparable data began in 1993.

The market was stoked up by stamp duty holidays and by low mortgage rates.

These factors encouraged some homeowners to move in time to beat the tax relief deadline or to borrow more to improve their current property.

Mortgage borrowing signals future demand to buy homes, and analysts have said that the UK housing market has been “on the boil” during the spring.

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On Friday, the Nationwide Building Society said the average property price had risen by £15,916 in the year to the end of April, to reach £238,831.

Gross mortgage borrowing hit £35.6bn in March as some people tried to beat the end of the stamp duty holidays, which were then extended in England, Wales and Northern Ireland.

Andrew Montlake, from mortgage broker Coreco, said stamp duty relief was having an “insane effect” on the property market.

“This mad March mortgage data highlights the frenzied rush of people to buy in the second half of last year and save thousands of pounds on stamp duty,” he said.

“But the celebrations surrounding the stamp duty holiday may soon ring hollow if the market cools off and people find their savings have been wiped out by the premium they have paid for property. When borrowing is as extreme as this, it never tends to end well.”

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New scheme

In April, some High Street lenders started selling mortgages to borrowers offering a deposit of just 5% under a new government guarantee scheme aimed at helping first-time buyers.

The new scheme will be available to anyone buying a home costing up to £600,000, unless they are buy-to-let or second homes.

The government is offering a partial guarantee, generally of 15%, to compensate lenders if the borrower defaults on repayments.

House hunters, particularly first-time buyers, might be helped in their quest to have enough for a deposit by families and individuals saving more. The Bank of England said deposits into accounts “remained strong in March”. Some £16.2bn more was deposited than withdrawn, the data shows.

Households also continued to pay back more than they borrowed on non-mortgage debt in March, the Bank said. A net consumer credit repayment of £535m was recorded, including people’s borrowing using credit cards, personal loans and overdrafts.

By Kevin Peachey

Source: BBC

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UK housing market: annual house price growth hits 7.1% in April

House prices in the UK have soared since the easing of the first lockdown. The boom in prices shows no signs of slowing down, with April 2021 seeing the highest monthly increase in average house prices, according to new data. Here’s why the UK housing market is booming and why the trend could continue for the next few months.

What is happening to the UK housing market?

According to new data from the Nationwide building society, annual house price growth in the UK rebounded to 7.1% in April, up from 5.7% in March.

The stats show that month-on-month prices rose 2.1% in April, which is the biggest monthly rise since February 2004.

According to the BBC, this sharp increase has prompted some analysts to suggest that the UK housing market is ‘on the boil’.

The average UK home is now worth £238,831. That’s 15,916 more than it was worth a year ago.

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What is causing the boom in housing prices?

Lockdown has caused many people to reassess their living arrangements with particular emphasis on extra rooms, space and gardens.

This has increased demand in the housing market. And since there are not nearly enough houses to match the demand, prices have shot up.

The stamp duty holiday has also played a role, albeit a smaller one, in house price growth. Some people are moving forward with their planned house moves in order to benefit from the tax break.

What does the future hold for the UK housing market?

According to the BBC, there is scope for annual house price growth to continue accelerating in the next few months as housing supply still does not match the demand.

And while many industry experts originally forecast that the UK housing market would decline in 2021 due to the end of the stamp duty holiday and the economic effects of the pandemic that would reduce affordability, many have revised their forecasts upwards.

The main house price forecast for 2021 now is that house prices will go up, with Knight Frank predicting a growth of 5% by the year’s end.

The revision comes in the wake of government support measures, anticipated relaxation of coronavirus restrictions and the successful roll-out of the Covid vaccine, all of which are expected to help mitigate any adverse effects of the pandemic.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

What do changes in the housing market mean for buyers?

The continued rise in house prices is generally bad news for aspiring homeowners, especially first-time buyers.

However, many people have been able to save money during lockdown. And since a good number of first-time buyers usually get some help from their families when it comes to raising a deposit, it means that a lot of them might actually be in a good position to purchase a home even as prices rise.

There are several government schemes currently available to help first-time buyers get onto the property ladder.

These include the Help to Buy: Equity Loan scheme and the 95% mortgage scheme. Both can help buyers secure a mortgage with just a 5% deposit.

Alongside these two, there are other options to help homebuyers.

Lifetime ISA

This is available to people aged between 18 and 39. You can save up to £4,000 a year in your account to be used for buying a home. The government will top it up with a 25% bonus each year. So if you save the full £4,000, the government will top it up with an additional £1,000.

Shared ownership

This is a scheme that lets you buy a 25% to 75% share of a property and then pay rent on the rest. You’ll have the option to buy a larger share later.

First Homes

A proposed new policy that will provide homes to first-time buyers at a discount of 30% on the market value.

Taking advantage of these schemes could help reduce the initial costs of owning a home. However, it’s always best to remember that a home is a long-term investment and focus on getting the right home for your needs and financial circumstances, both now and in the future.

By Sean LaPointe

Source: The Motley Fool

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Brokers warn of buy-to-let issues with new fire safety law

Mortgage brokers have warned of difficulties for buy-to-let landlords in selling and remortgaging flats, after a majority in the House of Lords voted against an amendment to the new Fire Safety Act.

The amendment sought to prohibit tenants and leaseholders from being liable for the remedial costs of meeting fire safety requirements if they exceeded £500, until a statutory scheme is implemented.

MPs disagreed to four versions of the amendment, as the issue of remediation costs was “too complex to be dealt with in the manner proposed” by the Lords.

The act, which clarifies where responsibility for fire safety lies in multi-occupied buildings in England and Wales, became law last week.

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Amid a ban on evictions, which is currently due to end on May 31, brokers have warned that without this amendment, the act will prevent buy-to-let landlords from refinancing – particularly if they are leaseholders in a block of flats.

Hiten Ganatra said this was particularly due to the fact many lenders now insist on an EWS1 form, which is an industry-agreed way for a building owner to confirm that an external wall system on residential buildings has been assessed for safety by a suitable expert.

Ganatra said: “This is an incredibly delicate situation, which will negatively impact many buy-to-let landlords who have invested in flats, especially if these landlords are already facing financial challenges from non-paying tenants as a result of the Covid eviction ban.”

He added: “Their investments could become unsellable and the problem could be exacerbated even further with tenants being worried about moving into flats in the absence of having confirmation that remedial works have been completed.

“This could also severely hinder buy-to-let landlords’ ability to refinance, as most buy-to-let lenders are insisting on EWS1 forms giving the building a clean bill of health, before allowing the mortgage to go through.”

Dominik Lipnicki questioned the fairness of buy-to-let landlords potentially being required to cover remedial costs of any affected leasehold properties.

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Lipnicki said: “How can it be right that innocent buy-to-let landlords who have invested in leasehold properties will now be responsible for a huge potential liability to correct fire and safety issues that they were simply unaware of, rendering many of these properties unsellable and impossible to remortgage?”

In February the government announced it would fully fund the cost of replacing unsafe cladding for all leaseholders in residential buildings in England that are at least 18m high.

Meanwhile, a scheme was announced to enable leaseholders of lower-rise buildings (between 11m and 18m) to pay for any necessary cladding removal through a long-term, low interest, government-backed financing arrangement.

But in a report published last week (April 29) the Housing, Communities and Local Government Committee said proposals to fund cladding remediation on buildings below 18m through a loan scheme should be “abandoned”.

It called for an “enhanced” fund open to all buildings with existing fire safety issues, without barriers based on height, types of tenure or the nature of fire safety defects.

By Chloe Cheung

Source: FT Adviser

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Stamp duty holiday extended in the Budget ‘re-accelerates’ house prices

House prices in April saw their biggest monthly rise in 17 years after the stamp duty holiday was extended in the Budget.

According to Nationwide’s house price index, published today (April 30), prices rose by 2.1 per cent in April, after taking account of seasonal effects, marking the biggest monthly rise since February 2004.

Annual house price growth rebounded to 7.1 per cent in April, up from 5.7 per cent in the previous month.

The average price of a property reached a new record high of £238,831 – up £15,916 over the past 12 months.

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Robert Gardner, chief economist at Nationwide, said: “Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.

“However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place.

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“For example, amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.”

Jason Tebb, chief executive of property portal OnTheMarket, described the monthly and annual rises as unsurprising, with most towns and cities seeing “critically low” levels of homes available for sale and buyer demand “continuing to surge”.

Tebb added: “We would certainly anticipate that the current buoyant market is likely to continue throughout the summer and there is an optimism that, with lockdown measures now beginning to ease, those who were previously concerned about listing their property for sale and accommodating viewings are now more confident, given the huge success of the Covid vaccination programme.”

By Chloe Cheung

Source: FT Adviser

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Buy to let – Rental yields reach three year high

During the first quarter of 2021 average rental yields have increased to 6.0%, the highest recorded in three years, research from Paragon Bank has revealed.

Rental yields have climbed by 0.2% from 5.8% in Q4 2020 to 6.0% in Q1 2021. This represents a year-on-year increase of 0.7% after landlords said they were able to generate average yields of 5.3% in Q1 2020.

As part of a survey of just under 900 landlords, carried out by BVA BDRC on behalf of Paragon Bank, landlords were asked what rental yield they currently receive, taking into account rental income as well as any mortgage, maintenance and other costs associated with running their letting portfolio.

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The highest average rental yields are currently achieved by those managing lettings businesses in the South West (6.7%) and North East (6.6%). Landlords with property in Central London continue to achieve the lowest yields at 5.4%, due to higher average property prices in the capital.

Correlation between typical yields generated and portfolio sizes were also identified after single property landlords recorded average yields of 5.7%, while landlords who operate portfolios containing 20 or more properties responded saying they are able to generate average yields of 7.1%.

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Richard Rowntree, managing director for nortgages at Paragon said: “Rental yields are a key measure for landlords so it’s encouraging to see them indicate being able to generate average yields of 6.0%.

“The fact that this is a 3-year high and is being reported alongside continued high levels of tenant demand suggests that the private rented sector has bounced back well from the Covid-19 pandemic and is actually stronger as a result of providing stable homes for tenants during the challenges of the past year or so.”

Source: Mortgage Introducer

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BoE: Mortgage borrowing up by record £11.8bn in March

Mortgage borrowing saw a net increase of £11.8bn in March, the strongest since the Bank of England started publishing mortgage approval data in April 1993.

Lenders approved 82,735 mortgages in March which was down by 5,000 on February’s figure.

Mark Harris says: ’The strength of the runaway housing market is being reflected in the mortgage data, with strong levels of borrowing in March.

“With homeowners borrowing an additional £11.8bn, taking net borrowing to its strongest level since the series began in 1993, those who are not moving are taking the opportunity to improve, with cheap mortgage rates helping them make this decision.

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“With the stamp duty holiday originally expected to end in March, this focused borrowers’ minds and helps explain the uplift in lending. Now that this has been extended we expect activity to continue to be brisk over coming months, particularly as mortgage rates are likely to remain low and with increased availability of high loan-to-value deals.

“The trend to save continues with households depositing an additional £16.2bn in March, despite savings rates at historically low levels. This is an encouraging trend although it will be interesting to see whether it continues to the same extent as lockdown eases further.”

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Richard Pike, sales and marketing director at Phoebus Software, added: “We’re getting used to seeing these types of figures for mortgage approvals. The stamp duty holiday lit the fire and will continue to drive the market until it comes to an end. It is good to see the housing market as buoyant as it is, but it’s also causing some consternation.

“House prices are being driven up, with estate agents reporting many buyers offering over the asking price to secure their preferred property. How sustainable this is, when lenders are tied by strict affordability guidelines, is debatable.

“If the housing market is helping to drive the nations’ recovery in an unsustainable manner, will we be generating problems further down the track? Even with 95% mortgages available again the chances for many younger people, trying to get onto the property ladder, are becoming fewer as prices spiral upwards. At the moment it looks like we’re creating an unlevel playing field, especially for first-time buyers.”

Source: Mortgage Introducer

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House prices up by greatest margin since 2004

House prices rose by 2.1% in April 2021, representing the greatest monthly increase since February 2004, according to the Nationwide house price index.

House prices have reached a new record average high of £238,831, up £15,916 over the past 12 months.

On an annual basis, house price growth rebounded to 7.1% in April, from 5.7% in March.

Nationwide suggested that annual growth in house prices could reach double digits in June if prices are flat over next two months.

Robert Gardner, chief economist at Nationwide, said: “Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.

“However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place.

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“For example, amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.

“Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic.

“With the stock of homes on the market relatively constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “The bounce-back highlighted by the Nationwide figures, which we have also seen on the ground, should be sufficient to ensure there is no price correction when the stamp duty holiday starts to taper off at the end of June.

“Continuing shortage of stock, as well as the new government-backed 95% mortgage and furlough support, are providing further assistance for the market.

“Broader rollout of the vaccine and easing of lockdown restrictions is increasing confidence in the economy.

“This economic recovery is giving an additional boost to housing market activity rather than the housing market supporting the economy, which was the case when the pandemic first struck.”

Tomer Aboody, director of MT Finance, said: “With continuous government support and stimulus, particularly the extension of stamp duty relief, house prices shot up in April.

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“Added to this the growing availability of 95% mortgages, and money being cheaper to borrow than ever, it is hard to see what is going to stop the housing market in its tracks this year.

“What the end of the stimulus will bring, we are not certain yet, but with economic uncertainty on the horizon, this artificial bubble could slowly deflate. That is the best-case scenario.

“The biggest factor is the lack of properties to buy, which is creating and overwhelming the pursuit of houses with gardens, which in turn is pushing up pricing.

“Will the government look to modify the stamp duty for downsizers in order to release more properties onto the market?

“This, along with the changing social environment with more flats being built in the centre and city of London, means a big cultural shift in society is on the horizon.”

By Jake Carter

Source: Mortgage Introducer

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Stamp Duty Land Tax transactions in Q1 up 48% annually

The total number of Stamp Duty Land Tax (SDLT) transactions in Q1 2021 was up 48% annually, according to HMRC data.

On a quarterly basis, the number of transactions was up 1%.

The increase in transactions in the last three quarters has likely been impacted by the introduction of the SDLT holiday for residential properties, helping offset the decrease caused by COVID-19.

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Residential property transactions in Q1 2021 were 2% higher than in Q4 2020, and 53% higher than in Q1 2020.

Non-residential property transactions in Q1 2021 were 7% lower than in Q4 2020, and 6% higher than in Q1 2020.

Total SDLT receipts in Q1 2021 were 8% lower than in Q4 2020 and total SDLT receipts in Q1 2021 were similar, up 1%, to those in Q1 2020.

The change in receipts has mainly been caused by the introduction of the SDLT holiday.

Residential property receipts in Q1 2021 were similar, within 1%, to both Q4 2020 and Q1 2020.

Non-residential property receipts in Q1 2021 were 24% lower than in Q4 2020, but 4% higher than in Q1 2020.

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Up to Q2 2020 there were 540,900 claims that have benefited from the relief, and the total amount relieved by these claims is £1,294m over the period.

An estimated total of 65,300 transactions were liable to HRAD in Q1 2021, with the 3% element generating £285m in receipts, an decrease of 16% from the previous quarter, and a fall of 15% compared to Q1 2020.

The percentage of residential receipts from HRAD transactions has dropped slightly by 3% to 46% when compared to both Q3 2020 and Q4 2020.

Vikki Jefferies, proposition director at PRIMIS Mortgage Network, said: “Today’s figures show a clear increase in Stamp Duty Land Tax transactions over the first quarter, underscoring the fact that the mortgage industry is continuing to recover from the impact of the COVID-19 crisis.

“There is no doubt that the Chancellor’s decision to extend the stamp duty tax break in his Budget announcement helped to fuel this activity by stimulating buyer appetite and boosting demand.

“As we approach the tapered extension of the stamp duty holiday, the priority for the mortgage market will be processing cases quickly and efficiently so that borrowers are able to benefit from the tax cut.

“In order to achieve this, key players in the market, including lenders, advisers, distributors, housebuilders, surveyors and conveyancers should work collaboratively to ensure that clients are best supported during this period and that the application process is as smooth as possible for all involved.’’

Cloe Atkinson, managing director at Mortgage Engine, added: “Today’s figures show once again just how frenzied activity in the housing market is.

“The release of pent-up demand for property has been super-charged by the stamp duty holiday extension.

“The tax holiday has certainly been a success by any metric and current activity levels are further proof of the resilience of brokers, lenders and borrowers alike.

“Over the last year, the virus has forced the industry to re-shape the way consumers buy property and led to a great deal of adaption and innovation to overcome the difficult conditions caused by the pandemic.

“Technology has been important for all parties in transitioning to this new way of completing purchases and the industry has seen a large increase in the use of tech solutions, such as remote viewings and automated valuation models.

“As the UK looks forward to the return of some pre-pandemic normality, tech-driven solutions will continue to be a vital part of the success of the mortgage market.

“A lot of progress has been achieved in the last year when it comes to tech adoption, but the industry needs to be ambitious and continue to build upon this momentum to provide better outcomes for its consumers.”

By Jake Carter

Source: Mortgage Introducer

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