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Brexit and mortgages: how to protect your mortgage against interest fluctuations

What is happening with Brexit and mortgages, and is there a way you can safeguard yourself against the unpredictable effects of Brexit on your repayments? Moreover, given the latest projections of further interest rates cuts by the Bank of England, should you be looking at remortgaging to find the best mortgage deal?

For first-time buyers and those who are coming to the end of their fixed-term period, the announcement that interest rates are likely to remain low will come as a relief – a sudden hike in interest rates resulting in more expensive mortgages is highly unlikely at least in the next year. People remortgaging now are still going to enjoy historically record low interest rates on their mortgage repayments. However, do bear in mind that the rules for remortgaging still mean that you would have to be able to make the repayments if the interest rates were to rise.

The longer term prognosis for what’s going to happen to interest rates remains far less certain. There are two main scenarios you need to bear in mind as a mortgage holder: one is an economic recession, while the other is a strong economic recovery (following, for example, a successful Brexit deal negotiation or the UK revoking Article 50).

If the former were to happen, say as a result of the UK crashing out of the EU without a coherent deal (still a possibility despite the current delay), the pound could take a hit. While this would again mean low interest rates to try and stimulate the economy, it could also mean a loss of jobs – which, of course, would render low interest rates meaningless to someone who is unemployed.

To safeguard your mortgage against this case scenario, it’s a good idea to: 1) reduce your debt; 2) increase your savings; 3) consider income protection insurance that would give you a safety net for your mortgage repayments in case you were to be out of work or have to take on lower paid work.

In the case of an orderly Brexit (or no Brexit – who knows?) and the UK economy regaining confidence, we can expect wage growth. When that happens, inflation rises, which leads interest rates to rise too. Hopefully, in this case scenario, your salary will increase in line with interest rate rises, making mortgage repayments manageable. However, having a decent savings pot for this case scenario is still a good idea – as is being prepared to downsize in case you live in a property with a large mortgage.


Source: Real Homes

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Why the Bank of England should keep interest rates on hold

The Bank of England must leave interest rates on hold tomorrow and resist the urge to tinker until Britain’s economy is out of the General Election and Brexit fog, City A.M.’s panel of expert economists has said.

Much has changed in British politics since the BoE’s last monetary policy committee (MPC) decision in September. Prime Minister Boris Johnson failed to push his new deal quickly through parliament, leading him to request a Brexit extension and ultimately call a General Election, bringing yet more uncertainty to the economy.

City A.M.’s Shadow MPC today voted eight to one in favour of keeping the main interest rate on hold at 0.75 per cent. The consensus view was that with politics in flux, any move would be guess work and not grounded in any reliable expectations about the future.

Here’s what our Shadow MPC said:

Guest chair: Frances Haque – Santander

Hold: The bank rate should be kept flat. Inflation remains below the two per cent mark with economic growth data for the third quarter looking more positive than the previous quarter. And with real wage growth continuing, there is less of a rush required to create further stimulus. With the current political landscape now in General Election mode and further fiscal boosts on the cards, it seems prudent to wait and see the outcome of the election before making a change. However, if there is further Brexit delay leading to slower economic growth a cut may be required.

Jeavon Lolay – Lloyds Bank

Hold: There is a strong case for waiting for further news before any move. Brexit developments remain conditional on the upcoming election, adding another layer of uncertainty to the economic outlook.

Peter Dixon – Commerzbank

Hold: Economic conditions remain benign and inflation is contained. With the Brexit deadline merely having been postponed another three months, the prudent strategy is to keep the powder dry for now.

Vicky Pryce – CEBR

Hold: And be prepared to do more if needed. UK economy appears to be stagnating as world economy slows down, Brexit worries continue to dampen business and consumer sentiment and forthcoming general election is adding to uncertainty.

Mike Bell – JP Morgan Asset Management

Hold: With an election approaching that could potentially provide more clarity on what type of Brexit, if any, we are heading for, it makes sense to stay on hold for now.

Simon Ward – Janus Henderson

Cut: The case for easing is at least as strong as elsewhere. Inflation is below target and falling while economic weakness has spread to the labour market, with unemployment and redundancies picking up.

Ruth Gregory – Capital Economics

Hold: The chance of a Brexit deal in January suggests a cut would be premature. But unless the headwinds of weak global growth and Brexit uncertainty fade, the next move in rates may be down.

Tej Parikh – Institute of Directors

Hold: With the upcoming election largely making calculations about Brexit and the future path of the economy moot, it’s best to hold interest rates for now.

Joshua Mahony – IG

Hold: Carney had his hands burnt by the mistakenly cutting rates immediately after the referendum. With Brexit and election uncertainty looming, now is the time to wait for the dust to settle.

By Harry Robertson

Source: City AM

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Brexit impasse ‘impacting Scottish commercial property market’

THE Brexit impasse is contributing to perceptions that the commercial property market in Scotland is in the midst of a downturn.

The latest Royal Institution of Chartered Surveyors commercial property market survey has found anecdotal evidence suggesting that the process to leave the European Union is having an increasingly detrimental impact on market activity, with inquiries from potential investors in the third quarter lower than during the previous three months.

The latest results show that half of respondents in Scotland sense the overall market is in the downturn phase.

The highest proportion of respondents in Scotland since 2016 in the investment market said that inquiries from potential investors were lower than in the previous quarter.

The net balance for overall investment inquiries in Scotland during the period was -34%, meaning that 34% more respondents said that investment inquiries fell than said they rose.

The retail sector continues to drive the overall decline, with the weakest reading since 2008, showing a net balance of -70%, which is the weakest across the UK.

Demand for office and industrial space in Scotland was reported to be broadly flat.

Interest in investing in retail was the weakest according to respondents, but investment inquiries were also reported to have fallen in the industrial, where there wasa net balance of -14%, and office, where it was a net balance of -20%, sectors.

In the occupier market, tenant demand reportedly fell at the headline level in Scotland for the fourth consecutive quarter, with the net balance slipping to -22%, from -3% previously, RICS said.

Scottish surveyors are cautious looking ahead about rents in over the next quarter. The overall net balance for three-month rental expectations is its weakest since the second quarter in 2016 at -23%.

However, this is driven by pessimism regarding retail rents, with a net balance of -65%. Expectations for office and industrial rents are broadly flat.

RICS said Scottish respondents are more positive about the value of industrial and office property, with the balance of respondents pointing to modest growth in capital values in both sectors in the near term.

Richard Smith, of Allied Surveyors in Inverness, said: “The market over the last three months has been affected by political uncertainty. Clients tell us that they will invest when the uncertainty is removed, regardless of how that is achieved.”

David Castles, of Ian Philp Glasgow, said: “Office and industrial sector capital values will improve but supply of prime office developments is restricted, and more investment is required which hopefully will improve once market uncertainty is reduced.”

Tarrant Parsons, RICS economist, said: “Although half of respondents in Scotland now perceive the market to be in a downturn, the fact that capital value expectations are still positive suggests a relatively soft landing for the commercial real estate sector is anticipated overall.”

Meanwhile, research from Grant Property has shown investors from South East Asia are cashing in on the opportunities provided by a drop in the value of the British pound and increasing yields and rents in the UK buy-to-let market, especially with student flats.

The firm reported a surge of interest from Hong Kong and Singapore as new and existing investors are purchasing more buy-to-let properties to add to their portfolios. An increase in rents as high as 15% over the last 12 months alone, combined with steady long-term capital growth on average 7% per annum, are factors which are making UK property an appealing investment prospect, it said.

Peter Grant, founder of Grant Property, said: “In the last year we have sold over £38 million worth of properties to overseas investors and we are currently dealing with 25% more enquiries than this time last year.

“Investors see the uncertainty of Brexit as an advantage and are capitalising on the opportunity to snap up traditional flats in UK cities, particularly where there is a student population.”

By Brian Donnelly

Source: Herald Scotland

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Brexit and mortgages: what next for interest rates and repayments?

What’s next for Brexit and mortgages? Will mortgages become more expensive, and should you remortgage now?

What’s going to happen now with Brexit and mortgages, since the EU has agreed to grant Britain a three-month extension? How does this decision affect potential and current home owners, up to January and beyond? Will we see much of a fluctuation in the Bank of England’s base interest rate, and with it, cheaper or more expensive mortgages?

Martijn Van Der Heijden, Chief Strategy Officer at online mortgage brokerage Habito, comments on the implications of the Bank of England’s decision last month not to raise interest rates:

‘Interest rates remain relatively low which will be welcome news for those looking to get a good deal on their mortgage. This “wait and see” approach from the MPC (Monetary Policy Committee) is something we also see reflected in our own data with a surge in buyers choosing fixed deals for five years or more as they try to “Brexit-proof” their mortgage and lock in the same rate until 2024 and beyond.’

Basically, whether you are first-time buyer or remortgaging, now is the time to lock in a good fixed rate mortgage deal – if you don’t mind losing out somewhat in case the interest rates fall even lower than the current level. Why might that happen? It all depends on how the final Brexit deal is negotiated, and how smoothly it is executed. In the still possible event of Britain not securing a deal, the pound is likely to fall, and inflation will rise, which could lead the Bank to slash the interest rates even further. If this happens, and you are on a variable rate mortgage, you could see your repayments fall.

On the other hand, in the event of an orderly Brexit and a strengthening economy, interest rates could rise, which would be good news for your savings and wages, but not so good news for your variable rate mortgage repayments. A fixed rate deal would protect you from any significant interest rate spike, at least for a few years.

Which scenario is more likely? The truth is, nobody knows. We would say, though, that taking out a variable rate mortgage might not be worth the gamble under current uncertain circumstances – you could win a little, or lose big, so a good fixed rate deal will at least allow you to relax a little, for a while.


Source: Real Homes

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UK house prices: Growth ‘subdued’ in wake of Brexit slowdown

House price growth remained below one per cent for the 11th consecutive month in October, as hopeful homeowners sat tight amid Brexit uncertainty.

House prices in the 12 months to October rose 0.4 per cent to £215,368, according to the new figures from Nationwide.

On a monthly basis, house prices climbed 0.2 per cent.

Robert Gardner, Nationwide’s chief economist, said: “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensifying of Brexit uncertainty.

Gardner added: “To date, the slowdown has centred on business investment, while household spending has been more resilient.”

According to Nationwide, solid labour market conditions and low borrowing costs
seem to be offsetting the drag from the uncertain economic outlook.

“The question is whether this pattern will continue,” said Gardner.

No immediate recovery in sight

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that there was “no immediate recovery in sight”.

A slowdown in hiring by companies, which has been primarily driven by uncertainty over Britain’s imminent departure from the EU, will “also likely ensure that demand remains week”, Tombs forecasted.

The latest modest rises underline concerns over a slowdown in activity in the UK’s housing market, particularly in London and the South, despite a recent improvement in earnings and employment.

“It’s hard to see the market emerging from this sub-one per cent annual growth rut until there is clarity on Brexit,” said David Westgate, chief executive of Andrews Property group.

“The sheer level of political uncertainty has left the property market in a protracted limbo.”

Data released by Rightmove earlier this month found that the price of property coming to market has endured its weakest month-on-month rise at this time of year in over a decade.

Prospective home buyers have been undeterred by the approaching Brexit deadline, while sellers have been put off by ongoing uncertainty over UK house prices, according to to the real estate platform.

North London estate agent and former Rics residential chairman Jeremy Leaf said that the data confirms “that we are not seeing or expecting to see any fireworks in the market over the next few months or at least until the smoke from the political situation begins to clear.”

Guy Harrington, chief executive of property lender Glenhawk, said that the recent news of a potential general election has added to market jitters, creating “a near perform storm of unsupportive conditions for growth”.

By Sebastian McCarthy

Source: City AM

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UK mortgage approvals hit six-month low in September – UK Finance

The number of new mortgages approved by British banks hit a six-month low in September, according to a survey that adds to signs the housing market is slowing again ahead of the October Brexit deadline.

Industry body UK Finance said banks approved 42,310 loans for home purchase in September, compared with 42,527 in August, according to seasonally-adjusted data. However, the number of approvals for remortgaging rose to the highest level since November 2017 at 32,649.

UK Finance said annual growth in consumer credit rose to a 19-month high of 4.5%, driven by personal loans and overdrafts rather than credit card lending.

Reporting by Andy Bruce, editing by David Milliken

Source: UK Reuters

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Will house prices crash after Brexit?

Home owners and prospective buyers alike want to know: will house prices crash after Brexit? With the huge 20 per cent house price fall prediction continuing to circulate on the web, is it really true that there will be a property market crash once we’ve left the EU?

As we’ve reported in our in-depth analysis of Brexit and house prices, while Brexit undoubtedly has affected the property market, the effect has not been uniform across the UK, and Brexit is not the only factor affecting property prices. If we ignore some of the hype that has surrounded discussions of Brexit and house prices, we can start looking at the bigger picture, with more endemic problems surrounding property and the economy coming to the fore.

By far the biggest problem with the UK housing market right now (and for quite some time past) is one of insufficient supply and growing demand. This has been exacerbated by Brexit, with home owners anxiously holding on to properties, reducing the available number of properties further still.

The UK is still massively behind new build targets, which is deepening the housing crisis. For illustration’s sake, the UK has twice the population of Canada, but is building half the number of new homes. So, while house prices are unlikely to crash as such after Brexit, the reasons behind this are not a strong economy, but the economy of scarcity.

The other growing problem with housing is yet another growing borrowing bubble, with some economists already predicting a 2008-style recession in the near future. Property economist Andrew Burrell points to an overinflated property market which is at capacity in terms of growth: ‘It’s just a matter of 30 years’ of falling interest rates, people taking out bigger and bigger mortgages – you’ve now reached the size where it’s probably about as big as we can manage.’

A combination of high levels of debt at low interest rates with stagnant incomes sounds uncomfortably familiar. However, there is one important difference: the UK economy is not currently ‘booming’, as was the case prior to 2008, so any property market slump is unlikely to come in the form of a spectacular crash. What we’re most likely to see is a sluggish property market with slow growth in most areas of the country, and perhaps some further price falls in premium property segments (e.g. central London).

Are you planning on buying or selling a house? Don’t think about Brexit too much and stick to your plans.


Source: Real Homes

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One in four UK households now predict the Bank of England to cut interest rates

The number of households expecting the Bank of England (BoE) to cut interest rates has risen to its highest level since the Brexit referendum, survey data showed today, as Britons remain downbeat about their financial health over the coming months.

Households are pessimistic despite wages rising at a fast pace and unemployment close to record lows. Brexit uncertainty has been one factor dampening the mood, and there are signs that Britain’s jobs boom is slowing down.

The UK household finance index – a gauge of people’s perceptions of financial wellbeing by data firm IHS Markit – edged up to 44.4 in October from 43.1 in September.

The figure was the gauge’s highest mark since January but nonetheless signalled pessimism among households about their finances. A score of under 50 is considered a negative reading.

IHS Markit economist Joe Hayes said the “latest survey results from UK households continue to show how economic and political uncertainty is holding back what could have been a more resilient growth period for the UK economy”.

“These concerns, coupled with the uncertain economic outlook, have led to an increased proportion of UK households expecting the Bank of England to cut interest rates.”

At the start of the year over 70 per cent of UK households through the BoE would hike rates when it went to change them. That number has now fallen to around 58 per cent, its lowest level in two years.

A growing number of households – 25 per cent – now expect the Bank’s next move to be a cut, the highest proportion since October 2016.

Hayes said: “Negative job security perceptions and a pessimistic financial health outlook have led UK households to delay spending, with major purchases suffering as a result.”

By Harry Robertson

Source: City AM

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UK Inflation Continues its Downward Trend and is Unlikely to Pick Up Anytime soon

The Consumer Prices Index measure of inflation in the UK showed prices increased by 1.7% year-on-year in September, unchanged on the previous month but a shade below the market’s expectation for a more robust reading of 1.9%, as a trend of steadily declining price pressures on the UK consumer extends.

According to the ONS, the softer-than-expect inflation reading was driven by downward pressures to the costs of motor fuels, second-hand cars, and electricity, gas and other fuels.

However, increases in the cost of furniture, household appliances, hotel overnight stays, and from recreation and culture items limited the decline in the prices consumers are paying.

The data confirms a steady trend of declining cost pressures in the UK, with prices moving steadily lower from the multi-year peak of 3.1% measured in November 2017.

The movement in prices will almost certainly only add to the perception that there is little reason for the Bank of England to raise interest rates anytime soon.

Yesterday’s labour market data confirmed the jobs market is softening, and combined with the downward trend confirmed by today’s inflation data, the Bank of England could in fact see scope for an interest rate cut as being their next move.

Such an outcome would likely weigh on Sterling’s outlook, as currency’s tend to fall when their central bank signals it is about to enter a rate cutting cycle.

Of course, it it is too soon to speculate on Bank of England policy moves, as it will be heavily Brexit dependent. But, strip out Brexit and we see the pressures to raise rates that were in place at the start of 2019 have now certainly evaporated.

And, cost prices are only likely to stay lower for longer, according to economists.

“Absent hard Brexit and a significant decline in Sterling inflation are likely to keep undershooting BoE’s 2% target. Meanwhile, the decelerating global demand could act as another deflationary impulse as Chinese goods blocked by tariffs in the US are likely to make their way towards Europe. BoE is likely to stay put for a while as, considering how fragile the UK economy is at the moment, a policy mistake would be disastrous,” says Artur Baluszynski, Head of Research at Henderson Rowe.

Written by Gary Howes

Source: Pound Sterling Live

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Market slows as Brexit uncertainty continues

The UK property market has continued to slow in the face of Brexit uncertainty – except for an 8% increase in first-time buyers exchanges – the TwentyCi Property & Homemover Report for Q3 2019 has shown.

The report found that whilst property exchange volumes held up with 966,464 homes exchanged in Q3 (marking a 2.2% growth year-on-year) there was a decline of new properties coming on the market.

Q3 saw a total of 1,715,395 new instructions, 212,319 fall throughs and 801,013 withdrawals in the market, to change agent, or withdraw in this quarter.

Properties valued at £300k and below sold best in Q3, with exchanges up across all property price bands to this value compared to the same period last year.

More properties were also exchanging from lower income household bands from £15,000 upwards. Overall households with income bands of £20,000-£50,000 were proportionally buying and selling more properties covering a total of 126,941 exchanges.

Colin Bradshaw, chief customer officer at TwentyCi, said: “Consistent to our previous reports, this last quarter has again shown an overall slower moving market, reflecting the current unpredictable trading environment.

“Consumers are showing caution when it comes to both buying and selling property. With the likely outcome of Brexit still unclear, the uncertainty over both the economy, consumer confidence and the housing market will persist at least in the short-term.”

Nationwide, there is a clear North-South divide with any growth in average asking prices across the North of the UK and the Midlands, while London and the south show a small percentage reduction in average asking prices.

The figures reveal a 7% growth in Scotland, 5% in North East, 4% in Yorkshire and the Humber and 2% in the North West and East Midlands.

However there was a fall in asking prices of -3% in London, -2% in South East and -1% in South West.

But across the UK’s major cities average asking prices have been more resilient overall with more major cities reporting an increase for example, Leeds (7%) and Nottingham (5%) or holding steady – with the exceptions being Birmingham (-1%), London (-3%) and Southampton (-3%).

By Ryan Fowler

Source: Mortgage Introducer